Steel prices and materials shortage testing construction industry: Hansen Yuncken

The worst materials shortage in four decades and skyrocketing steel prices are providing a debilitating downside to Australia’s economic resurgence.

With steel prices up 15 per cent and materials shortages pushing out lead times to up to 18 months, accurately costing projects is becoming more challenging.

National construction company Hansen Yuncken says the worst materials shortage in four decades and skyrocketing steel prices are providing a debilitating downside to Australia’s economic resurgence.

The combination of a surge in housing construction and renovation driven by the federal government’s HomeBuilder scheme, environmental factors such as extreme rainfall and flooding impeding suppliers’ movements and strained global supply chains have forced the company to adapt the way it does business.

Construction manager Scott Brumfield said steel prices had increased by 15 per cent and with materials shortages pushing out lead times to up to 18 months, accurately costing projects was becoming more challenging.

“In terms of our large-scale projects like Adelaide’s SkyCity casino expansion, which used 2200 tonnes of steel, and the redevelopment of Her Majesty’s Theatre, which used 950 tonnes, the rising price of steel has significantly lifted overall project costs,’’ Mr Brumfield said.

“Testament to the Hansen Yuncken team however, we were able to carry out these project works while remaining under budget.

“The main tactics used to mitigate the crisis is by incorporating ‘shop drawings’, or design intent plans, as early as possible to try and give clients an idea of costings and timings to the best of our ability.

“It is almost inevitable this will be an ongoing issue so addressing it now will actually benefit the industry, and therefore Australia’s economy, long term.

“Australia’s best insurance is providing support for local capacity of steel production which the Federal and State Governments have been doing well to promote – more efforts toward supporting local producers would certainly help.’’

Hansen Yuncken construction manager Scott Brumfield.

Mr Brumfield said there had not been much relief on the client side in terms of contractual obligations, so the organisation has had to be nimble.

“What we are doing is we’re trying to lock our subcontractor pricing as long as we can when we get those offers.

“We’re procuring steel and anything we think has a risk of escalation very early on in the process.

“Immediately we’re awarded a contract we’ll go and award our steel fabricator a contract so that they can lock in their pricing.’’

Mr Brumfield said another example was that while carpets were the last thing to be installed, they were now often among the first purchases on a project.

“That’s not just a cost factor, we’re seeing shipping times double in certain cases.

“You’re looking at probably a lead time of 16 weeks on shipping where it was eight. You’ve got to be pretty organised.’’

Mr Brumfield said electrical components were also more expensive, with cost increases of about 30 per cent year on year, with steel, copper and freight prices weighing in.

Hansen Yuncken operations manager Max Baroni said tiles, vinyl, glass and aluminium were also potentially challenging to source.

“We experienced issues in sourcing bricks from Spain, for example, which took about nine months longer than usual.

“Some tiles that were meant to come from Dubai were unavailable, in which case we had to change the design and source locally-made tiles instead.

“Another way we’ve been navigating the situation is by sourcing from several suppliers instead of one. In many cases, suppliers have been able to break up bulk orders to tide us over.’’

Mr Brumfield said the strong pipeline of work was encouraging however.

“This is possibly the most challenging period the sector has seen since Australia’s pre-Olympics construction boom in the 1990s but there are ways around it,’’ he said.

“Testament to the dedicated workers across Australia’s construction sector, we will continue to find innovative ways to keep working.’’

Originally published as Steel prices and materials shortage testing construction industry: Hansen Yuncken