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Rising Raw Materials Threaten The Construction Sector

The rise in the price of materials is affecting 75% of companies in the construction sector . A study by the National Construction Confederation (CNC) finds that the shortage already affects three out of every four companies and that the cost of the works has shot up 22.2% this year. Four out of 10 companies have canceled or paralyzed their works due to the rise in the price of raw materials.

The National Construction Confederation (CNC) ensures that the rising cost of raw materials has caused four out of ten companies (39.5%) have been forced to cancel or stop their work, the study ‘Impact of rise of raw materials in construction ‘, which has had the participation of more than 300 companies.

With the implementation of the rehabilitation aid programs, the Recovery Plan, the employer considers it crucial to have a budget that will not be increased during the administrative procedures for obtaining the funds. The rising cost of raw materials threatens the viability of many of these housing construction projects, since it has increased the total cost of the works, on average, around 22.2%. CNC warns that this amount, in many cases, exceeds what the company must assume if it decides to abandon the project, since the penalties can be 0.02% of the contract or between 1,000 and 2,000 euros per calendar day.

The materials that have become more expensive in the last three months have been wood (125%), stone (68%) and copper (63%), according to CNC data.

The employer’s association defends the establishment of an automatic rebalancing system that makes it possible to deal with this extra cost and, therefore, takes into account price changes after the submission of offers, both upwards and downwards, seeking to provide stability to the contract. Another study carried out by the employers’ association Pimec points out that the rise in the price of metals is the most alarming, along with that of energy, wiring and microprocessors.

The employer’s association defends that any company affected by the unusual increase in the price of raw materials can request the contracting party to extend the term, modify the contract or compensation for breaking the contractual economic balance.

The study shows that the majority of contract cancellations or work stoppages have not had economic consequences for companies, since only 24% have suffered some type of penalty. However, CNC highlights that 75.6% of the companies operating in the sector have suffered unusual shortages or delays during the last three months in the delivery of essential materials such as wood, steel or aluminum.

The study shows that the shortage of materials in the course of the works has caused that in more than half of the cases there has been a delay in the execution of the work units without affecting the deadline; 21.8% of the companies have opted for the work stoppage or 12.3% have been delayed in the completion deadlines, among others.

According to the president of Construction (CNC), Pedro Fernández Alén, “the rise in raw materials is one of the main threats to the implementation of European funds. There is a danger of indigestion, since the delay in its management and execution, together with this increase in cost and the lack of manpower, will cause bottlenecks that may end up slowing down the pace of recovery. “

The National Construction Confederation (CNC) is the business organization that groups together practically all of a sector that represents almost 10% of Spain’s GDP and employs about 1.3 million people. The CNC offers a unique and consensual voice before the public powers or other national and international entities, also in the private sphere, in defense of a sector that has the levers of competitiveness in digitization, sustainability and improvement of the qualification of its employees necessary to be decisive in the social and economic recovery of Spain.



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