According to suppliers, the price of polyvinyl chloride (PVC) has surged by over 30% as a result of the ongoing conflict in the Middle East, leading to significant shortages of this essential material for the construction sector and agricultural irrigation.
Industry leaders and business owners are concerned that these rising costs and supply chain disruptions could severely affect the construction industry in the near future.
The escalating cost of PVC, widely employed for pipes and various construction materials, poses another challenge for Australia’s construction sector, which is already under pressure to meet growing demand.
The Loxton Irrigation Centre, located in South Australia’s Riverland, has been compelled to reduce its operations and cancel orders due to these challenges. Co-director Tom Drakopoulos reported that many suppliers are retracting quotes for upcoming orders, highlighting the dire situation. “It’s not just about the price hikes; there are significant concerns regarding supply,” he stated.
Will Frogley, the chief executive of Master Builders SA, expressed his worries about the situation, noting that the industry has already faced substantial increases in operating costs in recent years and will inevitably have to pass these new costs on to consumers. “The implications extend far beyond just high fuel prices,” he remarked, adding that uncertainty about construction costs and the duration of the conflict in Iran complicates planning for builders. “Delays in receiving essential materials can halt projects entirely,” he emphasized.
The impact of rising costs extends to farmers as well, particularly those looking to shift away from less viable crops, such as wine grapes. Michael Jungfer, owner of Berri Irrigation and Plumbing, indicated that he would also have to pass on the increased costs to his clients, which could lead to significant financial strain for many. “These increases are quite substantial, and they will affect numerous people,” he noted, suggesting that cost-cutting measures, including potential staff reductions, may become necessary.
Drakopoulos criticized the expectation that farmers should simply adapt to these challenges, stating, “It’s unreasonable to ask farmers to manage a budget that could expand by 30 or 40 percent due to unforeseen circumstances.” He pointed out that without timely access to materials, farmers cannot meet seasonal demands.
Beyond PVC, other construction materials, including polyethylene, concrete, and steel, have also been affected by the ongoing international conflict. Frogley raised concerns that builders might struggle to fulfill fixed-price contracts if material costs continue to rise. “If materials become significantly more expensive, it can be challenging for builders to avoid financial losses,” he warned, noting that apprentices could be particularly vulnerable during economic downturns.
While the full implications of these increased costs are yet to be fully understood, Andrew Clarke, chief executive of Master Plumbers SA, stated that most operations would persist as usual for now. “At this time, everything remains stable. Homes will continue to be built,” he affirmed, although he acknowledged the strain on subcontractors with fixed prices due to PVC cost increases. He estimated that the added costs for new home sewer piping systems could amount to around $400 to $500.
Clarke drew parallels to the COVID-19 pandemic, which resulted in unprecedented demand for construction materials and subsequent price increases. Frogley also recalled the pandemic’s impact on the sector, emphasizing the importance of implementing rise-and-fall clauses for long-term government contracts to mitigate risks associated with fluctuating material and labor costs. “Such clauses effectively reduce market risk,” he stated, urging the ACCC to monitor supplier price increases closely.
A spokesperson for the state government confirmed that it is actively observing global economic conditions, including supply chain challenges and input costs. While considering feedback from Master Builders SA regarding the reintroduction of rise-and-fall loans, no decisions have yet been made.
SA Housing Minister Nick Champion expressed his belief that national accord targets should undergo reform to encompass areas like retirement living and student accommodation. He remarked that, although ambitious targets are beneficial, the federal government must continuously assess and adjust them to facilitate achievement.
The National Housing Accord, established by federal, state, and territorial governments in August 2023, aims to facilitate the construction of one million well-located homes over five years, starting mid-2024. Frogley noted that the target is indeed ambitious, with South Australia projected to be short by approximately 17,000 homes over the next four to five years.
