Time to rethink construction supply chains?

Things cost more and getting them here costs more

As people transitioned from experiences to things during the pandemic the demand for materials increased. At the same time, the ability to produce those materials and the ease of moving them decreased. A bit of a perfect storm.

There are different ways to substantiate those impacts, but the following charts from the ABS (materials) and Drewry's (shipping) should be sufficient to illustrate the general direction of travel:

This is an acceleration of an existing trend

This is not a new issue. There has been an evolving issue around skills shortages and rising materials costs for some time in the construction sector. Many people, including Allens, have reported on these issues:

These issue are unfolding against the backdrop of a significant decline in local manufacturing:

And stagnant or declining real productivity in the sector.

Does this present an opportunity?

This may present an opportunity. It certainly raises a few questions:

• Is there a case for investment in local green steel manufacture (as part of the necessary government investment in hydrogen and net zero planning) and/or in other high-end lower carbon materials?
• Is there an opportunity to increase off-site fabrication (and move from traditional 'building' to a 'fabricate' and 'assemble' model where appropriate - with a view to improving productivity and safety outcomes and reducing disruption)?
• Should Australian governments be supporting the above initiatives (beyond local content requirements - effectively broadening 'social procurement' policies to 'ESG procurement' policies and making the market for other principals)?
• Should the risk allocation around materials costs and supply chains be revisited?

As I've said in the past, 'if you’re going to spend this inter-generational money … you need the benefits to be very broad'. There may be an opportunity to think big in the current environment and tackle a few macro trends as part of a once in a lifetime spend.