Construction Cost Impacts Report - April 2023

These changes have led some to assume that construction costs and completion times must also have improved. Unfortunately, this is not the case for many projects, materials, and subcontractors. Russia’s ongoing attack on Ukraine and Western sanctions against Russia have disrupted production and transport of dozens of commodities. China’s prolonged attempt to control the spread of COVID has also affected production and shipping. The economic slowdown is expected to continue in 2023. Inflation slowed to 6.0% in February but will remain higher than normal. The 2023 CPI is expected to average 4.3% and will lead to a push for higher wages.

Primary Causes

The primary underlying causes of these issues include:

• Labor shortages – continuing issue of attracting and retaining workers
• Raw material shortages – shortage of one ingredient can stop or limit production.
• Transportation issues – demand for container shipping and trucking have outstripped supply, together with truck driver shortages.
• Production times – just-in-time production has been severely impacted.
• Energy disruptions – the rapid rise in the cost of diesel fuel.
• Ukraine/Russia War – both countries are major suppliers of base metals to the world market and the supply of these metal has been severely disrupted.

Supply Chain Impacts (as of March 2023*)

There are signs that portions of the supply chain has improved, but there are still products that are in short supply, cement and electrical transformers as two examples. Even if materials are available, subcontractor bids are still short-lived. Managing supply chain has now become routine on project sites.

Read the full report here: XL Construction_Construction Cost Impacts_April 2023_Issue 20