Falling oil and steel prices are having a dramatic impact on the wider economy, but the cost of materials in the interiors sector is failing to match a drop in commodity prices and fuelling concern among specialist contractors. Steve Menary investigates for SpecFinish.
A major component of interior contracts, plasterboard, went up by 4 per cent in January according to pricing information obtained by SpecFinish. CPI annual inflation stands at 0.2 per cent.
Andrew Measom, managing director of Measom Dryline, said: “These prices are not fixed. It’s not justified. They are just putting the price up and it could go up again next month.”
While steel has not gone up, there has been no reduction, even though the international price of raw steel is so low that UK manufacturers are unable to compete.
Angela Mansell, operations director at Mansell Finishes, commented: “Historically, there were points in the recession where rises were justified. The suppliers will never admit it, but we’re paying inflated costs and it renders our installation uncompetitive.
Prices have gone up 4 per cent in boards but not in metals, yet commodity prices are crashing around the world. We’re closing steel plants. I don’t see the steel price going down. It’s not gone up, but where’s the real price?”
With UK steel plants such as Redcar closing due to cheap imports flooding the market, the cost of coiled steel is now around £600 per tonne and specialist contractors are concerned that prices could soon rise.
“Plants closing down doesn’t overly help us to be more competitive because we are all buying from the same place,” said Paul Little, managing director of fit-out group Coen Building Solutions. “The fear we’ve all got is that with all these steel plants closing, the cost of steel will become more expensive as we have taken capacity out of the UK. We’re losing the skills.”
The latest Construction Products Association (CPA) trade survey said a decline in global oil prices had “filtered through into lower fuel and energy costs” with just 14 per cent of heavy side manufacturers and 8 per cent of light side firms reported an increase in costs in Q4 .
The CPA’s economics director, Professor Noble Francis, commented: “Overall, the direct short-term impact of commodities price falls is positive, but there may be a negative medium-term impact.
“The benefits of the commodities price falls have been on the input cost side. These have been especially welcome in keeping construction inflation relatively subdued during a period in which labour costs have been rising as a result of a recovery in construction activity, especially in the house building sector.”
In the drylining sector, discounts to the quoted rates are rife according to specialist contractors, who suggest that a 24 tonne delivery of standard eight by four board costs between £10,000 and £12,000. The same board is sold for £6.50 a sheet to consumers by high street outlets such as B&Q. At that rate, a 24 tonne delivery of board – excluding haulage rates – should be around £7,000. That suggests that the difference is delivery costs.
The Road Haulage Association says that hauliers forward-buy fuel but will not say by how much. But with oil prices plummeting and set to drop further as Iranian oil re-enters the market, the price of fuel could fall further.
“With the fall in fuel costs it’s got to be cheaper to move board around,” added Mr Measom.
Many suppliers are reticent to discuss pricing. CCF, Knauf, Metsec and Tata all declined to comment.
British Gypsum marketing director Sarah Brook said: “All manufacturers face the challenge of dealing with fluctuations in the price of materials and running costs. At British Gypsum we review this regularly and negotiate price adjustments directly with customers, while ensuring a strong focus on continued investment into new products and systems.”
Siniat managing director Neil Ash said: “Whilst key commodity prices are falling, we have faced increasing cost pressures on other key raw materials, gypsum in particular. This is because the progressive closures of the UK’s coal fired power stations have led to falling gypsum output and, as a result, increased cost.”
For specialist contractors, the knock-on impact of pricing could be on quality.
“The logistics and prelims are being squeezed, particularly supervision,” added Ms Mansell. “If we were paying the right price for metal there would be more float in the main contractor’s price to make sure the supervision was better and to check quality because people out there are cutting corners.”