Building materials prices affected by Red Sea vessel attacks, reducing availability

Building materials have seen declining availability due to the ongoing attacks on vessels in the Red Sea disrupting trade routes.

According to government figures the average cost to build a house rose 0.8% from February to March whilst repair and maintenance costs rose 0.6%.

A reason for this rise was attributed to the ongoing vessel attacks in the Red Sea by the Houthis, a rebel group backed by Iran, controlling a part of Yemen. These attacks disrupt trade routes to Israel, particularly following their public support for Hamas and Palestine.

Here we take a look at the latest updates and statistics to see how it might affect how much it costs to build a house.

Building material prices affected by due to ongoing conflicts

In a statement, John Newcomb, CEO of the Builders Merchants Federation and Peter Caplehorn, CEO of the Construction Products Association, revealed reports of price volatility for timber-related products and PIR (polyisocyanurate) insulation boards.

This was caused by a lack of chemical deliveries to PIR suppliers resulting from disruption to trade routes in the Red Sea by rebels stopping trade routes in the Suez Canal due to ongoing conflict between Israel and Palestine, which has caused significant problems to housing output.

Hundreds of shipping containers have been forced to change shipping routes due to the rebel threats.

However, the statement also revealed "good levels" of supply for most other products as they stated: "Throughout the year sales through builders’ merchants have shown a direct relationship between the weather and construction activity. Inclement weather dampened demand for landscaping and groundworks throughout the first quarter, but more recent spring-like conditions have driven an improvement in demand.

"While the group does not anticipate a dramatic uplift in activity, optimism is increasing as we move into the summer. Many say they are now planning for an uptick at the year end and into 2025, which will necessitate careful planning to ensure adequate lines of supply."

Brick and block deliveries continue to decline

Other key products have also seen a decline in availability, according to April's Building Materials and Components Statistics.

In March 2024, brick deliveries saw a decline of 7.4% compared to March 2023, while block deliveries experienced a modest increase of 4.9% during the same period.

Material price indices showed mixed trends from March 2023 to March 2024 with new housing prices decreasing slightly by 0.2% and repair and maintenance costs decreasing by 0.9%. 

Ready-mixed concrete sales also decreased by 3.1% in Q4 2023 compared to Q3 2023, representing an annual 8.1% decline.

Seasonally adjusted data revealed that sales of sand and gravel increased by 1.2% in Quarter 1 2024 compared to Quarter 4 2023. However, there was a slight decrease of 1.4% in Quarter 4 2023 compared to Quarter 3 2023.

Homebuilding construction down 30% in some areas

The Bank of England released its Agents’ Summary of Business Conditions up to March 2024 showing construction output has continued to fall.

It revealed house building has fallen markedly over the last year, although the pace of decline is reducing and is anticipated to improve later in the year if the Bank Rate declines.

Despite there being a rise in the number of completed projects, new orders remain weak for the homebuilding sector with homebuilding significantly decreasing over the last year, although the rate of decline is slowing. 

It has been revealed that increasingly complex planning applications and approvals could hinder the pace of growth.

Private and social homebuilding activities have also slowed down, with some areas seeing a 30% decline, which has been attributed to an increase in mortgage rates and declining self build mortgage options.

How else could your project be affected?

The Federation of Master Builders (FMB) State of Trade Survey has revealed builders have experienced a decline in demand for their services.

In the fourth quarter of 2023, 63% of members noted a rise in material costs, a slight decrease from the previous quarter's 71%. The resulting financial strain has prompted 66% of members to raise their prices.

However, nearly half of respondents expressed concerns about potential losses or falling below expected profit margins. Additionally, one in five members stated that they are limiting new staff hires due to increased expenditures.

In the private housing sector, there are signs of a cooling housing market as new inquiries decrease and house prices drop and the housing sector faced a sharp decline of 14.9% in 2023, but is projected to recover with a 5.5% increase in 2024 and a 7.0% increase in 2025.

The State of Trade Survey also revealed a slight improvement in recruitment challenges, but a significant portion of members still face difficulties.

Over a quarter of respondents noted a decrease in their number of employees. Specifically, 36% of members are finding it challenging to recruit carpenters, while 34% are encountering similar issues with hiring bricklayers.

Around a quarter of respondents also reported difficulties in hiring general labourers whilst nearly half of FMB members stated that project delays are occurring due to struggles in hiring skilled workers.

This is corroborated by the ONS who reported that 25% of construction businesses in the UK were experiencing skilled labour shortages.

There are roughly now 244,000 fewer workers in the construction sector compared to three years ago, the ONS says, attributable to workers returning to the EU and early retirees. 

This shortage is particularly affecting SME (small and medium-sized enterprises) builders since it can take a minimum of three years to train up a skilled tradesperson. 

Tim Balcon, CEO of the Construction Industry Training Board (CITB), claimed: "The greatest challenge UK construction faces over the next five years is recruiting the number of people required to fill the growing number of vacancies."