VMRG sees price adjustments in facade industry as inevitable

There are growing concerns within the facade construction industry about rising costs and delivery times with serious consequences for cash flow and fears of bankruptcy. All this is due to the unexpectedly sharp increase in costs and increasing delivery times of building materials, including aluminum and steel. These materials account for a significant share of the cost price of façade applications, such as the curtain wall or element façade.

The trade association for metal facade construction, the VMRG, sees that companies are faced with rapidly succeeding double-digit price increases in the past year and extra investments from their own capital to cope with the crisis. Hans Zwaanenburg, director of the VMRG: "These developments mean that facade builders have less and less financial room to absorb this themselves. Not only price increases for upcoming projects but especially price adjustments for projects already under construction are therefore unavoidable."

Explosive price increases in aluminum and steel

Steel prices have skyrocketed recently and have now more than doubled compared to the mid-2020s. It is no different for aluminum with prices now at their highest level in 10 years. "A serious problem for facade construction," said Zwaanenburg, "especially for projects already licensed and under construction with a longer lead time where insufficient account has been taken of these explosive price increases. In 2020, the share of aluminum or steel in the facade made up about 25% of the cost price. Meanwhile, that is almost double and the end may not yet be in sight."

Putting project interests first

The cold comfort is that the facade construction industry is not alone in this. The entire raw materials market is currently unstable, facing upward price pressure and increasing delivery times. These are partly due to supply chain problems and have their roots in the pandemic. And this is affecting the aluminum and steel markets more than average. In this, Zwaanenburg emphasizes that it is important to put the project interests of both new and ongoing projects first and to stay in dialogue with each other. "Agreed terms such as between contractor and facade builder can certainly help in this regard. Particularly when, in addition, there is also an understanding of reasonableness and fairness and thus the common project interest."

Cost-effective solutions

The market is becoming increasingly transparent, bringing parties in the construction process and the end user closer together. For the end user, operating costs of a building are becoming more and more decisive, making the lowest price less decisive. The trend is, to choose the most economically profitable and sustainable solution and this will happen more and more in the future. "After all, a sustainable and low-maintenance product delivers significantly higher cost savings in the operating phase than making any concessions to still mainly stick to the lower purchase price," Zwaanenburg said.

Different approach

Innovations and future-oriented developments require additional investments from the facade industry. It is no longer enough just to supply a product. "More and more, the industry is expected to contribute knowledge in the design phase and to help think about more efficient and sustainable solutions. The façade industry is thus increasingly becoming a partner in the process and thus this way of doing business requires a different approach," Zwaanenburg knows. "Producers and suppliers are becoming chain partners, not just delivering a product, but contributing knowledge and experience from the design phase onwards. This requires not only 'innovative and financial' efforts to realize the required low-maintenance and life-cycle-resistant facades, but above all intensive cooperation between parties. The common project interest should therefore be paramount in this, with parties also receiving an adequate reward for the performance delivered. Ignoring this damages the continuity of the companies. Not only of the facade construction, but also of the contractor. And with that, it's important to keep talking to each other." Discussing interim necessary adjustments in price or delivery date is part of that, according to Zwaanenburg.