Construction material costs set to rise if Strait of Hormuz blockade continues
The continued blockade of the Strait of Hormuz could push up prices of building materials, including steel and cement, a study by global construction consultant Linesight has warned.
If disruption continues in the Strait of Hormuz – a narrow waterway between Iran and the UAE – the construction industry should prepare for higher prices for aluminium, steel, copper and cement, the report states.
Iran is currently restricting access to the waterway used to ship a fifth of the world's oil supply following US and Israeli strikes on the country creating a bottleneck for the oil and gas trade.
The blockade is pushing energy and shipping costs higher, which is expected to have a knock-on effect on the production and transport costs of construction materials.
According to Linesight, this crisis exacerbates the ongoing impact of conflict in the region, including disruption to the Red Sea-Suez trade route.
"Recent disruption is not about a single event, it is the accumulation of energy volatility, constrained logistics and geopolitical risk across multiple routes," said Linesight's vice president Derek McNamara in the report.
Blockade could have greatest impact on aluminium
In its analysis, Linesight said the chokepoint could have an especially large impact on the cost of aluminium, the second most widely used metal in construction after steel.
This is largely due to Gulf countries producing approximately nine per cent of the global supply, predominantly for export, while relying on imports of bauxite and alumina to produce it.
Suspended gas supplies also caused a smelter used to make aluminium in Qatar to stop operations on 3 March, while the Aluminium Bahrain smelter has also halted shipping, according to the report.
Steel is also likely to be impacted by escalating energy prices and tighter supply, as steelmaking is energy‑intensive and furnaces rely heavily on fuels such as gas.
Similarly, rising energy costs are feeding through into higher cement production costs due to the material's energy‑hungry manufacturing process. Cement is also heavy to transport, meaning an increase in shipping costs from disrupted and diverted routes is expected to drive the material's price up further.
"A short‑lived disruption may be absorbed, but a prolonged period of elevated energy and freight costs would reset cement price baselines across regions," the report states.
While the Gulf region doesn't produce much copper, it is a leading supplier of sulphur, a byproduct of oil and gas production that is essential for sulphuric acid used in copper ore processing.
Linesight said the war has put "nearly half of global sulphur exports at risk", meaning copper smelters face potential shortages of acid, hastening the rise of copper prices.
US-Israeli strikes have damaged over 40,000 civilian buildings
In a report by the BBC, the effective closure of the Strait of Hormuz by Iran has hiked the price of a barrel of oil to above $100 (£74.87) this morning.
The concerns in Linesight's report are echoed by UK building material supplier Travis Perkins, which has said it is considering raising prices.
"In the last week or so, we've had communications from various manufacturing suppliers of ours saying they're looking at energy surcharges or they're looking at price increases to counteract energy rises," said Travis Perkins CEO Gavin Slark.
The current wave of US-Israeli strikes on Iran began on February 28, killing Iranian supreme leader Ali Khamenei. Iran has retaliated with missile and drone strikes on Israeli and US-allied countries and bases across the Middle East.
Analysis by the humanitarian group Iranian Red Crescent Society has found that 42,914 civilian buildings in Iran have been damaged by US-Israeli airstrikes. Iranian strikes have also caused damage to notable buildings across the Middle East.
The famous Dubai landmark Burj Al Arab was damaged by Iranian strikes earlier this month, with videos showing flames and smoke billowing out from the base of the 321-metre-tall hotel.
The main image is courtesy of Shutterstock.
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