Global supply chains are starting to feel the impact of factories closing in China, the source of many of our building materials.
The traditional closure of factories for Chinese New Year has extended with many factories remaining closed or on skeleton production. China is a significant supplier to the Australian building industry with up to 20% of the total costs of building reliant on China supplied products. These include, but far from limited to, steel, cabinet joinery, tapware, light fixtures and facades.
Low stock levels
Electricians have already been warned that suppliers stock levels of many day-to-day cables are nearly exhausted – with the next deliveries a month away. We can expect more trade supply issues across the market.
The fundamental supply and demand economics will possibly lead to the next phase of increased pricing. The impact of this can be financially crippling.
The initial impact will be supply related issues that push out completion dates for projects. Disruptions to manufacturing and other logistical issues will occur with workers unable to return to work in certain areas of China. They are expected to remain closed for some time.
Many the products that can be supplied are being subjected to minimum 14 day quarantine periods on Australian Ports.
Additional Logistical issues
Even if the factories were cleared for a resumption of works there is the knock-on effect of restrictions on the logistical movement of products between Chinese provinces. Additionally, there will be backlogs of orders that will take increased time to clear from shipping ports.
When will this end?
The truth is, no-one knows. Until the coronavirus is brought under control the impact on Australia’s economic growth will get worse until it gets better.
But it is not all doom and gloom. in 2004 the SARs virus caused a drop in Australia’s GDP for a quarter, but it improved the following quarter as the Chinese Government instigated economic reforms to kick start their economy. The optimists see a stronger second half of the year as China has previously introduced stimulus packages in response to shocks to its economy.
How does this affect the homeowner?
It is difficult not to find a ‘Made in China’ label on many items, in part or full. Australia remains heavily dependent on China for building products, textiles, electronics etc. Shortages of supply will likely lead to an impact on prices. It is still early days and the effects of this are not known at this time.
HIREtrades – what can we do to help?
HIREtrades cannot solve viruses or fix the global economy – we wish we could. But what we can do is to help you get competitive pricing with up to three free quotes from local tradies.
With uncertainty it may be advisable to look at getting those jobs done around the home. As tradies could soon be faced with the prospect of delay or increasing costs.