CLC: Energy prices to send material costs soaring in 2023

Material prices could face double-digit hikes next year, the Construction Leadership Council (CLC) has warned.

Concerns centre in particular on the second and third quarter, when energy prices are expected to be “considerably above” the levels seen prior to the Ukraine war, especially without government support.

That is set to put “significant upward pressure on prices in the New Year”, especially on energy-intensive products such as bricks, cement, plasterboard and insulation, CLC co-chairs John Newcomb and Peter Caplehorn said.

Some materials, including plaster, plasterboard and insulation, could face double-digit inflation later in 2023, they added.

But product availability, for now, is “good and returning to pre-COVID levels”, with timber prices falling due to the large stock already in the UK and reduced shipping costs.

The only timber stock facing disruption is birch plywood, according to the CLC, much of which used to come from Russia and is now sanctioned.

“With limited supplies available from Latvia and Finland, we advise speaking to plywood suppliers regarding alternatives,” Caplehorn and Newcomb said.

Contractors are also facing a “new area of concern” in solar and environmental products, as it is proving difficult to ensure products coming from Chinese manufacturers have the correct accreditation.

“This is a growing product area with increasing demand, so the UK construction industry is challenged to ensure such products are of the proper standard and quality,” Caplehorn and Newcomb said.

Looking ahead, the CLC warned that shipping lead times could face more bottlenecks as China faces a hike in coronavirus infections, though schedules have improved in recent months.

However, there is still much improvement on the former situation, with container rates down by 80 per cent from their peak and a surplus of containers in China, the CLC said.

Product availability should also stay strong with demand slowing and set to slow further in 2023, according to the CLC assessment.