Pandemic recovery efforts threatened by soaring material costs, European body warns

The body representing the European construction industry has written to the European Commission expressing "alarm" at soaring material costs and asking for help, warning that the issue could derail economic recovery efforts across the bloc if not managed better.

The European Construction Industry Federation ("FIEC" is the French acronym) notes that between November 2020 and March 2021, the price of rebar rose by some 110% in Italy, more than 70% in France and Germany and about 64% in Spain. 

Bitumen has risen around 15% between November 2020 and February 2021, while the price of cement was up 10% in January 2021 on the month before.

Wood products are up 20%, polyethylenes more than 40% and copper more than 17%, FIEC said.

It blamed the pandemic in part, but said other factors were exacerbating the crunch including a widespread infestation of bark beetles affecting timber, steel hoarding, US tariffs on Canadian lumber, a "malfunctioning international supply chain", and China "hogging resources".

Writing to EU commissioners in charge of trade, competition and the internal market, FIEC president Thomas Bauer complained that companies carrying out public sector infrastructure projects were unfairly bearing the brunt of these cost hikes, which jeopardises national recovery plans across the union.

"Construction companies’ involvement in public contracts is also being severely hampered," Bauer said.

"Price increases are rarely taken into account once work has already started. Contracts either exclude clauses of price revision or they are inadequately applied, or applied too late in the execution of the contract, the duration of which can be many years. This means that contractors bear the burden of the price increases in the meantime. This risk is not adequately compensated."

He added that as well as price increases, companies are experiencing delays in the delivery of products.

"Suppliers are often reluctant to agree to a specific delivery deadline," he said. "With the constantly changing market conditions, this means that suppliers are therefore also unable to specify a final delivery price for basic materials. Consequently, construction companies cannot confirm the final price for their completed works and services."

He called on EU member states to implement "sensible price revision mechanisms" in contracts, and for the Commission to enforce EU industrial policies.

Top image: The price of rebar rose by some 110% in Italy, more than 70% in France and Germany and about 64% in Spain, FIEC said (Useradd/CC BY-SA 3.0)

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