Issue 320 | 14 March 2022 - Turner & Townsend alinea

Economic Week In Review | Issue 320 | 14 March 2022

Materials, markets, and currencies

Nickel | Trading was suspended due to a short squeeze: a significant volume of short positions held by Tsingshan Holding Group Co. (the world’s largest nickel producer) pushed nickel prices to a record high of more than $100,000/tonne before trading was suspended. The events have led many to question how the market managed to get into such a position without regulators stepping in.
Steel billet shortages are arising because of the war in Ukraine. Russia and Ukraine are key suppliers of billet to European mills.
British Steel announced its largest instant price hike of £250/tonne citing an extraordinary level of volatility in commodity and energy prices and significant disruption in international trade. It also announced that it would only be releasing capacity for booking in the first two weeks of April, for production up to 16 April.
Timber | The Programme for the Endorsement of Forest Certification (PEFC) has announced that all timber sourced from Russia and Belarus will be considered as “conflict timber” and therefore cannot be used in PEFC-certified products.

CLC Product availability update

A mild winter kept construction output levels higher than average
Supply challenges continue to affect bricks, aircrete blocks, roof tiles, steel lintels, cable tray and trunking, manhole covers, gas boilers, and some electrical products. These shortages are expected to persist through the spring.
Price inflation is currently being caused by a shortage of raw materials, rising energy, freight, and labour costs.
Labour shortages are still impacting all corners of the industry and show few signs of abating.
The CLC is to liaise with Government to identify areas affected by sanctions and impacts to construction.

UK construction and property news

New work | The volume of new construction work slowed slightly but total work reached a new post-pandemic high, supported by repair and maintenance work. The largest falls in new work were seen in the public other new (non-housing) work and infrastructure sectors.

UK economy

GDP increased 0.8% in January pushing the quarterly figure to 1.1%, ahead of expectations. On the monthly measure, GDP is now above pre-pandemic levels however, the ONS warns that the recovery is uneven with healthcare 15% higher than in January 2020 and the services sector still significantly smaller.
Warnings | Economists have warned that the war in Ukraine could worsen the squeeze on the cost of living in the UK and reduce growth as commodity prices surge. Goldman Sachs expects inflation above 9%. Before the war in Ukraine, the Bank of England had forecast inflation to peak at 7%.
National Insurance | Sir Charlie Bean, who recently left the Office for Budget Responsibility, has suggested that the Government could, and should, postpone the upcoming increase to National Insurance. Conservative MP Sir John Redwood has also voiced concerns that the increase could “sandbag” the recovery.

Global news

Lockdown | Shenzhen has been put into lockdown as China attempts to contain its largest outbreak since the pandemic began with 1,800 new cases recorded in a day. Factories in this important manufacturing hub (including Apple’s Foxconn) have stopped production.

Tender Price Index

Published every six months, our Tender Price Index is an analysis of inflation price deviation in construction prices. Click on the link above to view our most recent Index.

Friday to Friday

	Price / Index	Week % change	Annual % change
FTSE 100	7,155.64	2.41	5.83
FTSE 250	20,206.61	4.22	-6.04
Nikkei	25,162.78	0.16	-15.33
CSI 300	4,306.52	-4.22	-16.32
S&P 500	4,204.31	-2.88	6.62
Nasdaq	12,843.81	-3.53	-4.14
CAC 40	6,260.25	3.28	3.53
Dax	13,628.11	4.07	-6.03
$ per £	1.3062	-1.13	-6.18
€ per £	1.1941	-1.39	2.52
Gold £/oz	1,525.13	5.89	22.94
Brent Oil $/barrel	112.67	-4.61	62.77

Weekly Summary

Material issues are coming into sharper focus as a result of continued coronavirus-related issues, as well as direct and indirect impacts of the invasion in Ukraine. The challenge for the construction industry is that the UK has few direct connections to Russian production lines, but numerous indirect ones and, as the war in Ukraine drives commodity markets higher, it will be felt throughout the global economy.

With so many unknowns and many more to be uncovered, we have to be increasingly vigilant and open in tracking the variables and their impacts.