Rising from the Ashes

The prospect of large dollops of egg on face is always a risk, hence the wariness on display by cost and economic experts over future material costs. Volatility is the key word with regards to fuel and steel costs, which have experienced dramatic rises in recent times.

One can fully understand the hesitancy by our industry experts (see news page 7). Who could have predicted the tragic consequences of Hurricane Katrina in the Southern US at the start of the week, which has led to a significant loss of life as well as further highs in crude oil prices being recorded? This only adds to the present volatility that has fed through to the UK through the cost of raw materials. One QS reports this week that the second quarter of this year saw material costs up over 6%. And a joint report issued by the Construction Products Association and the Construction Confederation last month showed that half of manufacturers were seeing their unit costs jump by 5% in the same period, which were feeding through to price rises.

As far as steel is concerned the picture is less clear-cut. The Chinese effect (the country’s unprecedented demand for steel last year followed by a cooling off this year) has held a great deal of sway on world prices, given its massive use of the material. This led to prices surging by a half in 2004 but a drop in rates is now expected in the autumn. Followed by, er, another rise at the end of the year.

Uncertainty appears a constant in the current economic climate. Just such uncertainty and unpredictability may make for much excitement when it comes to this summer’s Ashes but is little comfort for the QS drawing up his latest cost plan.