Rising Metal Costs to Hit Data Center and Life Science Projects, Says Linesight | News
Data center and life sciences construction projects are set to feel the impact of the war in Ukraine as the price of steel soars, according to a report by consultancy Linesight.
The Dublin-based construction and property company forecast a price increase stemming from soaring energy costs following the Russian invasion in February.
Linesight’s Q1 2022 Outlook and Commodity Report Forecasts Steel Rebar Price to Rise 23.8% and Steel Flat Products Price to Rise 25.4% by the end of the year.
The increases will compound existing challenges for data center projects, including long-term equipment supply bottlenecks, material shortages and availability of skilled labor, as well as increased transport costs and logistical problems.
Copper prices rose sharply last year, and while the analyst said they will remain high in 2022, there will likely be enough supply to meet increased demand from electric vehicle investments.
Linesight, which was acquired last fall by a US investment firm, has also warned of increased volatility in timber and concrete prices. This would affect the residential and commercial construction sectors.
Rising demand in residential construction led to a compression of lumber inventories last year, and in 2022 high transportation costs will offset downward pressure from market fundamentals.
The price of concrete blocks and bricks is also expected to remain high, given forecasts of inflated energy costs. Domestic production is currently at full capacity, according to the CLC, which means the UK will remain dependent on imports.
Three new production plants are expected to come on stream in 2023 and 2024, which should increase UK capacity by around 150 million bricks per year.
Linesight UK managing director Michael Riordan said the current market disruption was due to a range of factors. “These include tender price inflation – which we expect to reach, on average, between 4.5% and 5% in 2022 – due to supply chain issues, ‘a recalibration of project priorities, an increase in labor costs and a shortage of skilled labour,’ he said. added.
He urged project managers to adopt a “strategic approach to procurement management and a transparent approach to risk sharing with contractors”, incorporating quantitative risk analysis, a relational approach to supply chain management sourcing and value engineering best practices.