Companies are being hammered by soaring freight and material costs as the supply chain crisis worsens. Photo / NZME
Companies are being hammered by soaring freight and material costs as the supply chain crisis worsens. Photo / NZME
Companies are being hammered by soaring freight and material costs as the supply chain crisis worsens.
Unpredictability in the supply chain continues to cause havoc as businesses struggle to price jobs, while one exporter has an 18-month backlog of machinery sales they cannot put a cost on.
Plumbers are tellingcustomers to lock in prices for work on new builds and that they will have to pay upfront months in advance, and store vanities, toilets and showers themselves or accept the volatile marketplace. Smaller businesses on the edge were also expected to go under as the cost of some materials had risen by 40 per cent.
Hayes International general manager Nick Looijen said the company was getting slammed with tens of thousands of dollars in additional freight charges on top of skyrocketing material costs.
Hayes International general manager Nick Looijen said the company is getting slammed with tens of thousands of dollars in additional freight charges. Photo/ Andrew Warner.
He said due to delays at the Port of Los Angeles, and containers being waitlisted, it had been charged an extra US$20,000 to $30,000 on some shipments.
Steel prices had jumped by 35 per cent in two years and traditional quotes and pricing agreements were out the window.
''All supplier pricing continues to rise. We are now quoting ex-works with a freight estimate. Once the equipment is ready to ship we provide a firm quotation.''
Looijen said the price of its equipment had needed to rise alongside the component prices to avoid running at a loss.
''With such a large backlog of sales stretching out to 18 months, it is difficult to predict the cost of our finished machinery that far out. We cannot base a build cost on current market rates.''
Master Builders Association national vice president Johnny Calley, of Tauranga-based Calley Homes, said the industry was ''flying blind'' because merchants could not confirm freight costs for materials until they landed.
That meant the price of building a new home was constantly moving.
Master Builders Association national vice president Johnny Calley of Tauranga-based Calley Homes. Photo / Supplied
''I sympathise with the merchants to some degree ... a lot of those costs are now on invoice as opposed to quoting. That stems from shipping through to trucking and rail and those costs including labour and fuel have increased big time.''
''We are hearing that truck drivers are as scarce as builders at the moment.''
Calley said the situation was stressful.
''There is anxiety for everyone involved in the industry whether you are the client, the business owner and all trades.''
Almost no one was committing to fixed pricing as that ''would be a fatal exercise'', especially if on delivery ''you are 20 to 30 per cent out on your pricing''.
He feared for smaller businesses and said without a doubt some would go bust.
Master Plumbers, Gasfitters and Drainlayers NZ chief executive Greg Wallace said fixed pricing on new build products was difficult unless clients were willing to buy now and install later.
''You are talking six to nine months ahead of when they are required. This puts a lot of pressure on clients around financing but it is the only way to secure the pricing. They need to pay for fixtures and take ownership of them on delivery.''
Wallace said the rising costs were ''staggering'' and suppliers told him it was ''only going to get worse''.
Plumbing products had increased by 30 to 40 per cent due to raw material increases alongside freight and he said ''some major suppliers are expecting more increases to come''.
''Some manufacturers are running 24-hour shifts six days a week but still can't get on top of the back orders and demand.''
He said plumbers would definitely run out of some products as 95 per cent were imported and was concerned about China's tough stance on Covid that could affect manufacturing.
Rotorua businessman Nathan Shaw said his steel prices had doubled in the last 12 months.
''That is a reflection of the freight industry. It cuts into your margin but you still have to raise your rates. We have got no choice or else we'd go under.''
''The building company is thriving but the material issues are becoming a bit of a pain.''
Rotorua businessman Nathan Shaw. Photo / NZME
Shaw said he was also having to bulk order in advance.
A Fletchers spokeswoman said the NZ industry was operating well above capacity and it was the same in Australia.
Winstone Wallboards, the manufacturer of GIB plasterboard, was operating 24/7, producing plasterboard at record levels.
It was dispatching enough for 1000 houses per week. ''Despite this, demand continues to outstrip production capacity.''
''With most domestic building material manufacturers operating at capacity and issues with overseas supply chains, we are experiencing stock constraints on several product lines. This includes plasterboard, structural flooring, structural timber and cladding.''
Go Logistics and president of the Customs Brokers and Freight Forwarders Federation Chris Edwards told the Herald recently that before Covid, the supply chain cost portion of the total cost of landing goods for a company would be around 5 per cent, depending on the value of goods.
Now the logistics cost is 25-40 per cent, he said. The federation also estimates importers and exporters using Auckland's port have paid around $146 million to shipping lines in container congestion surcharges - and counting.
