BUSINESS New Zealand's construction sector threatened by broken supply chain: industry federation

BUSINESS

New Zealand's construction sector threatened by broken supply chain: industry federation

Xinhua

09:32, August 09, 2021

WELLINGTON, Aug. 9 (Xinhua) -- New Zealand has been dropped off the global supply chain by many construction material suppliers in the wake of COVID-19, threatening to stall the building sector here.

Workers operate at the site of the Christchurch Cathedral reinstatement project in Christchurch, New Zealand, Feb. 22, 2021. (Photo: Xinhua)

New Zealand Building Industry Federation chief executive Julien Leys said on Monday that post-pandemic business model reviews by global shipping and building supply companies has meant New Zealand is no longer included on their supply routes, with supplies getting only as far as Australia.

That puts additional costs on building supply companies here, to try to get what they need into the country, and Leys said he has spoken to one New Zealand company spending as much as 65,000 New Zealand dollars per week on shipping costs.

The broken supply chain is just one of several unique challenges facing the construction sector, threatening its ability to capitalize on a pipeline of projects, including the government's shovel-ready infrastructure projects and affordable housing targets.

Other hurdles include a skilled labor shortage, rising prices of materials, and reduced margins.

A Statistics NZ report in September 2020 estimated that the average delays to commercial building projects caused by Alert Level 4 lockdown was about 30 working days (33 for residential), or six to seven weeks.

Leys estimated some projects may now be facing delays as long as eight months.

"Before COVID the supply chain appeared to be fine, but the pandemic exposed the fact it was a lot more fragile than anybody realized. We have to find a way to manufacture things ourselves and fill those supply gaps," he said.

Trina Farr, business manager for New Zealand construction market intelligence company Pacifecon said the sector is seeing flow-on effects of supply issues.

"Businesses that manufacture in New Zealand have seen increased demand where otherwise there might have been more overseas competitors supplying."

Farr said supply chain disruption has forced many businesses to adapt their processes to ensure they can meet project timeframes.

"Some are ordering stock as soon as they've won a job, despite the project not commencing for some time. Some businesses have completely reviewed their purchasing and project management systems," she said.

Leys said the labor supply issue must also be addressed, with closed borders compounding a pre-COVID skills shortage.

"With Australia announcing its own programme of infrastructure across multiple states, companies here are starting to worry the few staff they do have will be drawn across the Tasman," he said.

The government opened the doors to 300 migrant construction workers earlier in the year, but Leys estimated the labor shortfall is about 60,000. A 2019 report by quantity survey company Rider Levett Bucknall forecast a construction labor shortage of 57,600 by 2026.

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