Business Commercial Property

Tuesday 22 August 2017

Housebuilders suffer in insulation supply crisis

Small builders being hit hardest as price of scarce materials jumps

The shortage of insulation material has its roots in a blaze at a key plant in Germany
The shortage of insulation material has its roots in a blaze at a key plant in Germany

Fearghal O'Connor

Smaller construction companies and housebuilders are struggling to source supplies of insulation for new projects, according to a number of sources in the construction industry.

The shortage, which was originally brought about by a major fire at an insulation factory in Germany last year, is understood to have worsened for many contractors in recent weeks.

Prices are rising and supplies are becoming increasingly hard to source without pre-existing contracts.

Industry sources said that the insulation drought was particularly impacting upon smaller players after the bigger operators moved to ensure their own supplies of the material.

Last October, a huge explosion at a chemical plant in Ludwigshafen, Germany caused a shortage of MDI, which is a key ingredient in the production of Polyisocyanurate (PIR) insulation boards.

Subsequent production issues at a number of other MDI-producing plants globally have further tightened the supply to insulation manufacturers.

One well-informed source said the cost had jumped by at least 10pc over recent months.

He explained: "The cost has risen by that and even more but the real problem for smaller builders and people building one-off houses is that they are not even able to buy the insulation at the moment because it is out of stock. The bigger guys have ensured their own supply."

The three main suppliers in the Irish market are Kingspan, Quinn International Holdings (QIH) and Navan-based Xtratherm.

A spokesman for QIH said: "Given continuing supply constraints of MDI, QIH, in common with the broader industry, continues to adopt a managed approach in customer allocations."

The biggest supplier to the Irish market did not take the opportunity to comment but it is understood that notwithstanding some industry-supply constraints, Kingspan is meeting client requirements.

Efforts to contact Xtratherm were unsuccessful.

Prices have been going up in the last few weeks and it has been biting a lot more on the one-off housebuilder, said one industry source.

"The big guys have their contract in at a set price for a certain project but the guy looking to build a small project is going to have to pay through the nose to get this material," he said.

The sharp rise is coming at a time when there are also increases across other supply chains and further increase in the cost of insulation or other materials will have a serious impact on the cost of house building, said the source.

"If there is any further disruption to the supply of this material, it will be a very serious issue for anyone who has bought forward and has long-term costs associated with big developments," the industry source added.

The problems in the MDI market have seen prices for other types of insulation rise too as demand for alternatives rise.

A chemical-industry report earlier this month said that contracts in June in the European expandable polystyrene (EPS) market increased by up to €40 per tonne.

Big customers involved in the European MDI market have moved towards the EPS market, with one buyer quoted as saying that demand was 10pc to 20pc higher year-on-year due to the MDI shortages.

Sunday Indo Business

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