Skyrocketing commodity prices have left Australians struggling to make ends meet, with thousands of businesses at risk of collapse.
Supply chain issues and shortage of stocks from national and international sources led to an increase in the demand and prices of the material, for which the trades had to bear the brunt.
The cost of metal ores, plastics and wood has been rising steadily over the years, but the pandemic in particular has forced factories to close for extended periods.
The trickle-down effect of these rising costs means Australian workers are forced to cover the gap, with the country on the verge of a major crisis.
‘I don’t think a lot of companies are taking cost escalation seriously. “It’s a perfect storm,” said Matthew McKay, executive director of engineering company Arcadis.
‘Small businesses don’t have the cash flow, they don’t have the same safety net. They are going to feel the pain very quickly and very hard.’
The skyrocketing prices of commodities have left Australians struggling to make ends meet with thousands of businesses at risk of ending up
The most significant increase is in the prices of materials, including steel and wood, due to a lack of international demand and supply. Electrical products, PVC and roofing materials are also getting more expensive.
While large companies handle large orders, small to medium businesses are struggling – with extended waiting periods for content affecting jobs.
Margins are also shrinking significantly, with the construction industry generally making profits of only between two and four percent.
Material prices have been rising steadily since the start of the pandemic, but exploded in April and May last year (average prices of commodities – Arcardis data)
Mr McKay said contractors were feeling the pinch after locking themselves into agreements months before material costs soared, so they had to bear the weight of the difference and make only razor-thin profits, if not total losses.
“Some people are blaming the pandemic, some are blaming the increase in material costs, but there is a bigger issue, and it will affect big companies as much as it affects small businesses,” Mr McKay said.
‘The market is trying to respond to volatility. It’s less about supply availability now, but energy costs are going through the roof, commodity prices continue to rise, material costs are still rising.
‘Contractors, especially traders, are going to struggle. If they’ve already signed a contract that doesn’t allow for material fluctuations, they’re going to be stuck with those prices.
‘If the costs have gone up in six months, they have to wear up those costs, and that’s the point.’
Mr McKay said the rising cost of structural steel has had a massive impact on the market and means inflation is narrowing in Australian trades.
“If iron ore goes up, it directly affects the cost of steel. It is given to the person who is providing the material and the same is given to the contractor,’ he said.
While large companies are managing with large orders, small to medium businesses are really struggling – with extended waiting periods for materials affecting jobs.
The director of Arcadis also said that the effects of the blockade of the Suez Canal, where the 400-metre, 20,000-container Ever Given was stuck for six days, was still affecting the market.
‘You wouldn’t believe that a ship blocking a river would create such a shortage. This affects the transport cost,’ he told Daily Mail Australia.
Rising costs are believed to have fueled the collapse of major construction firm ProBuild, as the company owed workers $14 million for its ruined 443 Queen Street project in Brisbane.
The chief executive of South African parent company Wilson Bailey Holmes-Ovcon, the owner of ProBuild, said there were ‘red flags’ years ago.
Wolfgang Neuf told an interim results presentation last week that the last time operations in Australia would have been abandoned long ago.
“If we knew everything we know today, we would have pulled the plug years ago,” said the chief executive. hear the herald,
The owners of major construction company ProBuild have admitted that the troubled firm should have been shut down years ago (pictured, construction workers in Darling Harbour)
The reality of this was that exposure in the matter of guarantee facility in the last 18 months had restricted this decision. Risk versus reward became volatile.’
Earlier this week, it was revealed that ProBuild owed $14 million to 786 employees across 19 projects, and more than 2,300 of its creditors.
WBHO told the Johannesburg Stock Exchange this week that it could no longer build apartment complexes profitably.
As a result administrators were assigned to ProBuild after the parent company refused to throw any more money at the failing construction firm.
The decision to detonate the bombing would endanger the livelihoods of 18 building and civil engineering projects and around 800 workers around Australia.
The group’s project for 264 high-quality residential apartments in Brisbane has resulted in material losses of $223 million.
Earlier this week, it was revealed that ProBuild owes $14 million to 786 employees across 19 projects, and even more to 2,300 creditors (pictured, a construction site in Darling Harbour).
Victoria has been the most affected state in terms of rising material prices, with the average cost of building a new home rising faster than anywhere else in the country.
Master Builders Victoria CEO Rebecca Casson outlined Mr McKay’s fears for the trades, telling Daily Mail Australia she fears it will send many businesses into bankruptcy.
‘Locked up in construction contract prices, the large and unexpected jump in the price of many construction items such as wood and steel-based products meant that some builders were finding the cost of completing the work more expensive than expected. In many cases, this can lead to loss of projects,’ she said.
‘MBV has said the labor shortage will also affect building and construction bankruptcies in Victoria in the coming months.’
Australian Council of Trade Unions secretary Sally McManus said rising costs were seeing workers’ wages ‘going backward’, pointing the finger at Prime Minister Scott Morrison for failing to address the escalating crisis.
“The Morrison government is nowhere to be seen when it comes to fixing wage growth and this inaction is now a major weakness for the entire economy,” he told Daily Mail Australia.
The pandemic is not to blame. With the cost of living rising and wages going nowhere, an employee who earned $68,000 last year received a pay cut of $832.
‘As one of the largest employers in the country, the prime minister could have acted on this immediately by sending signals to other employers and giving pay increases to his own employees, but instead gave them an actual pay cut.’