Rising Material Costs Threaten Project Feasibilities
The construction industry is bracing for further challenges as the cost of energy-intensive material continues to escalate, according to Altus Group’s latest forecasts.
The Australian Construction Material Price Outlook—Q1 2024 report reveals that prices for several key construction materials are expected to rise, putting additional pressure on project feasibilities in the near term.
GALLERY
Of the eight construction materials monitored, half have experienced price increases over the past quarter, a trend that is likely to persist. While steel prices have dropped by over 11 per cent in the past 12 months, other materials such as bricks and plasterboard are anticipated to see significant price growth. The report attributes the stabilisation of steel prices to sluggish demand from China and slowdowns in major steel-consuming sectors like industrial and logistics. Despite this, the World Steel Association predicts a 1.7 per cent rebound in steel demand over the course of 2024.
Energy price hikes have already driven up the cost of bricks and concrete in the past quarter, though a forecasted dip in demand for concrete is expected to stabilise prices in the short term. However, as building approvals increase to meet housing demand, early-stage materials like concrete, steel, and timber are likely to face strong demand, potentially pushing prices higher once again.
Plasterboard prices are also on the rise, driven by increased manufacturing costs and high demand, with this trend expected to continue amid a robust pipeline of ongoing projects. Meanwhile, prices for structural timber have declined due to poor market demand, but with less structural timber being produced domestically than 15 years ago, the industry faces growing pressure to import, heightening long-term price sensitivities.
The report also highlights copper’s fluctuating market position. Although copper is trading at a two-year high, low demand has led to a drop in prices. However, BHP’s $39-billion takeover bid for copper miner Anglo American underscores the enduring confidence in copper’s role in the clean energy transition.
In addition, ongoing conflict in the Middle East is impacting diesel prices, though some larger construction firms are beginning to transition to biodiesel as an alternative.
As these material costs continue to climb, project feasibilities will be further tested, making cost management a critical focus for the industry moving forward.
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