ASX construction shares like Brickworks (ASX:BKW) are falling today

Why are construction shares like Brickworks falling today?

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a man peers through a broken brick wall to see grey clouds gathering beyond it

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The S&P/ASX 200 Index (ASX: XJO) is not having a great trading day so far. At the time of writing, the ASX 200 is down 0.56% to 7,266 points.

One sector joining the malaise is ASX construction and building materials shares. They’re down across the board.

Take Brickworks Ltd (ASX: BKW). This company has retreated from its all-time high of $24.99 a share that we saw yesterday and is down 0.24% today to $24.70 a share.

It’s not alone either. CSR Limited (ASX: CSR) is down a hefty 2.2% today. James Hardie Industries plc (ASX: JHX) has lost 1.4% to $45.16 a share. And Boral Limited (ASX: BLD) is down 0.2% to $7.32 a share.

So what’s going on here? Well, an article in The Australian points to a possible catalyst. According to the report, the Australian building industry is in the midst of a “severe shortage of timber”. A fall in domestic timber production thanks to the Black Summer bushfires, coupled with a global supply squeeze, is to blame.

Reportedly, timber prices have risen “three to fourfold” in the US. This is resulting in the US market “sucking timber from around the world”.

Got wood? That’s what ASX construction shares are wondering

A report from the ABC corroborates this story. According to the national broadcaster, the South Australian construction industry is feeling a particularly acute shortfall in timber supplies, leading to calls for more supply to be unlocked.

The report tells us Masters Builders South Australia has called for both immediate and long-term solutions. Here’s some of what association chief executive Will Frogley told the ABC:

We’ve got a situation here where we’ve got record [timber] demand, record high building approvals because of the massive popularity of the federal government’s HomeBuilder Grant… The price of timber has gone up 400 per cent in the last year in America … and that’s really hurting supply.

If timber prices remain so elevated, it could obviously have the potential to damage the construction industry. As such, it could be a reason why ASX construction shares have come off the boil today.

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Motley Fool contributor Sebastian Bowen has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Brickworks. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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