Raw material pricing in Australia has been a moving target for some time. Steel, crude oil, copper, iron, aluminium, coal, chemical materials and timber continue to fluctuate, with significant impacts felt across the civil and construction sectors.
Australia, which supplies an estimated 60% of China's imported iron ore, has historically been a major beneficiary of price rises in that market, despite various trade tensions around agricultural products such as barley and seafood.
That said, in the civil and construction industry, everyone has felt the pinch. Steel is an essential material for almost every business, from cars to buildings and everything in between — it is a valuable resource that touches nearly every project.
So, what has shifted in the industry to see these prices climb?
The COVID-19 pandemic boosted construction across the globe, and stimulus measures like the federal government's HomeBuilder Scheme have at times placed extreme pressure on building supplies.
Australia has also experienced critical timber shortages caused by surges in demand following the bushfire and pandemic disruptions. These shortages have pushed timber prices sharply higher.
For a manufacturer-operator like Rentafence, that produces a significant portion of its own product domestically, the reliance on imported raw materials such as steel introduces real exposure to overseas market conditions.
The priority for the industry has been keeping stock levels replenished to meet supply and demand. At various points, manufacturers across the sector have reported stock levels at historic lows, while still working hard to maintain output — running production lines for mesh fencing panels at pace just to keep up.
The challenge for hire businesses is keeping costs down, which has at times been close to impossible as input pricing continues to climb.
Long-term steel trading partners have reported that part of the price increase is the result of slow production and delays in shipping.
At points during the pandemic, Chinese steel mills producing the pipe used for fencing manufacture were running at only around 15% capacity. Many banks took losses through investments during the pandemic and reduced lending to the mills, leaving them able to produce only what they could self-fund.
Shipping costs compounded the problem, in some cases increasing by over 200%. Delays were driven by mandatory staff testing for COVID in all Chinese ports, with wait periods stretching to 35 days at the worst point.
While these pressures have forced some price increases through the supply chain, the long-term loyalty, trust, and relationships built between hire companies and their customers are what keeps the industry moving.