Two years of the pandemic, followed by the conflict in Ukraine, have put the global economy and the commodity trading market under severe pressure. Interruptions in the supply chain, commodities shortages, crisis of ocean freight, and, without forgetting, rising energy costs, have all caused a surge in the prices of certain materials essential to the construction industry.
From January 2020 to March 2022, the price of bitumen (70/100) has more than doubled! As for the price of reinforcing steel, it increased by 150% between January 2020 and May 2022. Finally, during 2022 stone wool sheets (for isolation) prices peaked at an increase of +30%. As a result, the already low margins of companies in the construction sector have been further reduced, insofar as such increases could not impact the end customer in most cases, as contracts had already been concluded at locked-in prices.
The responsibility of the commodity trading sector in finding new supply chains
The industry's umbrella organizations, like the SSE Genève, have relentlessly interfered with public and private contractors so that these unseen price increases on materials are considered in tenders and company contracts.
Moreover, in this context of unprecedented volatility of commodity prices, construction companies have also been confronted with the practice of suppliers no longer guaranteeing the price of certain products beyond 24 hours. Companies have thus had to assume financial risks that are completely unrelated to the very nature of their business activity which is the construction industry.
They have also suffered from being at the end of an often-chaotic supply chain, making them dependent on various players acting upstream. While it is true that many of these players have strategies that are often supra-regional, construction companies are very local.
It should be remembered that the construction sector contributes to around 10% of Switzerland's GDP. It employs more than 8% of the workforce in Switzerland and is an essential player in the local economy. However, the sector is, due to its nature, subject to numerous constraints linked in particular with the need to recruit local workforce and to have a stable supply chain to bring materials and commodities on site.
In conclusion, the exceptional circumstances we have been experiencing for the past 3 years highlight our dependence in regard to various traditional supply chains. They also highlight the importance of the role and the responsibility of the commodity trading sector in finding new supply chains at competitive prices, notably when the doors of traditional markets are closing.
