The cost of polyvinyl chloride (PVC) plastic—the essential material for piping and building infrastructure—has surged by more than 30 per cent as conflict in the Middle East continues to disrupt global energy and chemical supply chains. The price spike is creating a critical bottleneck for the Australian construction industry, which is already grappling with high demand and fragile margins.
For many builders and farmers, the volatility is no longer just a line item in a budget; it is a threat to operational viability. Because PVC pipes must be laid before a concrete slab can be poured, any delay or price surge at the start of a project can grind an entire construction site to a halt. This ripple effect is putting immense pressure on subcontractors and developers who are locked into fixed-price contracts.
The disruption is particularly acute in South Australia’s Riverland region, where irrigation specialists and plumbing firms are reporting a chaotic market. Some suppliers have reportedly begun cancelling quotes entirely, unable to guarantee pricing for more than a few weeks at a time.
Tom Drakopoulos says irrigators are looking at delaying projects because of the increased cost of PVC. (ABC Riverland: Jackson Byrne)
A ‘dire’ outlook for supply and pricing
The instability is driven by the interdependence of petrochemicals and geopolitics. PVC production relies on chlorine and ethylene, the latter of which is derived from natural gas and petroleum. As the war in the Middle East impacts gas supply and shipping routes, the cost of these raw inputs climbs, and PVC prices soar amid petrol and gas supply issues as Iran war continues.
Tom Drakopoulos, co-director of the Loxton Irrigation Centre, describes the current environment as “dire straits.” He notes that suppliers are cancelling existing quotes for the coming month due to the unpredictability of the market. According to Drakopoulos, the crisis is twofold: the sheer cost of the materials and the growing uncertainty over whether the materials will arrive at all.
Will Frogley, chief executive of Master Builders SA, warns that the implications extend far beyond the gas pump. “The ramifications are so much greater than just paying an annoyingly high amount for petrol at the pump,” Frogley said. “If you can’t lay the pipes at the start of the job you can’t lay the slab, and that can really grind things to a halt.”
Will Frogley says productivity issues due to the shortage of supplies could create a backlog for the building industry. (ABC News: Lincoln Rothall)
Farmers caught in the crossfire
The crisis is hitting the agricultural sector with particular force. In the Riverland, farmers attempting to transition away from struggling crops, such as wine grapes, are facing thousands of dollars in unexpected overheads for new irrigation systems. Michael Jungfer, owner of Berri Irrigation and Plumbing, stated that he has no choice but to pass these costs on to his clients.
Jungfer warned that the financial strain could lead to a reduction in staff and a broader necessitate to cut costs to stay afloat. For farmers, the timing is critical; failing to secure materials before the season begins can jeopardize an entire year’s yield.
It is not only PVC under pressure. Polyethylene, used extensively in the production of water tanks, has also seen price increases of more than 30 per cent. Other core materials, including steel and concrete, are showing similar vulnerabilities to global supply chain shocks.
The cost of polyethylene, used to make water tanks, has risen by more than 30 per cent because of supply issues. (ABC Riverland: Jackson Byrne)
The risk to fixed-price contracts
The primary concern for the broader building industry is the prevalence of fixed-price contracts. When material costs jump 30 per cent after a contract is signed, the builder often absorbs the loss. Frogley noted that this puts apprentices and small subcontractors at the highest risk during a sharp downturn.
Andrew Clarke, chief executive of Master Plumbers SA, believes the industry will push through, but acknowledges the pressure on those with fixed agreements. While he suggests the cost increase for a standard new home’s sewer piping system might only be around $400 to $500, the cumulative effect across multiple materials can be devastating for a builder’s bottom line.
The current instability has drawn comparisons to the COVID-19 pandemic, which saw similar unprecedented demand and price volatility for building supplies. In response, Master Builders SA has requested that the South Australian government re-implement “rise-and-fall” clauses for long-term infrastructure projects. These clauses allow contract prices to be adjusted based on the actual fluctuations in labour or material costs, shifting the risk away from the builder.
Pipes must be laid at the beginning of the construction process. (ABC News)
Housing targets and government response
These supply chain shocks approach at a time when the government is pushing for record housing growth. The National Housing Accord, agreed upon in August 2023, aims for the construction of one million well-located homes over five years starting from mid-2024.
Yet, industry leaders argue the target is overly ambitious given the current constraints. Frogley estimates that South Australia alone is roughly 17,000 homes short of its targets over the next four to five years. SA Housing Minister Nick Champion has suggested that these national targets may need reform to include retirement living and student accommodation to be more realistic.
A state government spokesperson confirmed they are monitoring global economic conditions and supply chain pressures, though no decision has been made regarding the implementation of rise-and-fall clauses in state contracts.
Nick Champion says the federal government needs to be more hands-on if housing targets are to be met. (ABC News: Briana Fiore)
Disclaimer: This report involves financial data regarding commodity pricing and construction contracts. It is intended for informational purposes and does not constitute financial or investment advice.
Industry stakeholders are now awaiting further guidance from the ACCC regarding price increases from suppliers and a formal response from the state government on contract flexibility. The next major checkpoint will be the review of the National Housing Accord targets as the federal government assesses the feasibility of the 2024-2029 build schedule.
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