reporter2
06-09-21, 11:28
Construction raw material prices to stay high amid supply chain, shipping disruptions
Sep 06, 2021
https://www.businesstimes.com.sg/companies-markets/construction-raw-material-prices-to-stay-high-amid-supply-chain-shipping
CONSTRUCTION raw material prices look set to remain elevated as countries around the world struggle to contain the Delta coronavirus variant.
In particular, companies have been grappling with lockdown-induced supply chain and shipping disruptions since the start of this year. And as demand rose on the back of global economic recovery, supply has struggled to keep pace.
A Singapore Contractors Association (SCAL) spokesperson said steel rebar prices have risen 54 per cent, aluminium prices 59 per cent, copper prices 81 per cent and concrete prices more than 20 per cent.
"While Singapore has a regionally diversified source of material supply, sporadic lockdowns as well as border restrictions imposed by countries greatly disrupted the continuity of supply. Therefore, the delivery of required materials has seen significant delays for most projects," the spokesperson said.
SCAL said the sporadic lockdowns also resulted in production shutdowns, rendering factories and plants unable to operate at optimal capacity.
Soaring shipping costs have also been a cause of concern for companies importing construction materials from overseas. The Freightos Baltic Index, a global benchmark for major shipping routes, has risen from S$1,946 a year ago to S$10,323 for the week of Aug 27.
"The implementation of Covid-19 safety measures has resulted in port congestion and shipping port inefficiencies," said Compact Metal Industries general manager Charles Lee.
He does not expect shipping rates to ease in the next two to three years either, as demand for shipping continues to increase.
China shut operations at two ports this year after the emergence of Covid-19 cases there. The Meishan terminal at Ningbo port, the world's third-busiest container port, was closed for two weeks in August. Yantian port was closed for a month in late May.
There have also been bottlenecks unique to specific construction materials. For instance, steel prices have been heavily impacted by demand and supply imbalances in China.
Seah Kiin Peng, chief executive of steel reinforcement solutions provider BRC Asia, said China has managed to control its Covid-19 pandemic more effectively and its construction industry has therefore recovered strongly.
This increased Chinese demand for raw materials could not be met by the country's domestic supply. China, the world's largest producer of steel, recently became a net importer of steel, he said.
Since May 1, the Chinese government has removed export tax rebates for certain steel products such as hot-rolled coils and plates. From Aug 1, it removed rebates on items such as cold-rolled coils and hot-dipped galvanised coils as well.
Furthermore, Mr Seah said, the Chinese government's push to limit greenhouse gas emissions has capped the country's crude steel output at 2020 levels.
"A lot of steel mills have been producing as much as they can because prices are going up. For the first half of 2021, they have already surpassed the amount that they made in the first half of last year so they will have even less (output) in the second half," he said.
Mr Lee of Compact Metal Industries also noted the Chinese government's shutting of smaller steel mills that failed to adhere to environmental standards. This has impacted supply.
Lockdown-related disruptions have also caused the price of cement to increase by up to 40 per cent, said Pan-United Cement CEO May Ng.
She said production facilities have been adversely affected at different times due to the pandemic, with the most recent disruption being the lockdown imposed in Malaysia. This caused the cost of cement and aggregates to rise.
Ms Ng said it is difficult to predict when prices would be expected to ease as uncertainties remain and Singapore remains dependent on imports.
"The costs of such raw materials and the disruptions to the supply chains depend on when the source country significantly normalises its economic activities," she said.
For tile specialist Soon Bee Huat, its costs are up about 5 to 7 per cent compared to pre-pandemic prices due to a rise in gas prices for tile-firing in kilns.
Because of the many factors causing prices to rise, it may be difficult to predict when prices will normalise or even fall.
Shahzad Nasim, executive chairman at planning, engineering and project management company Meinhardt Group, said: "Businesses have suffered huge losses during this period and the suppliers and manufacturers must be factoring in these in their calculations and concerns about the continuity of supply chains."
Similarly, SCAL said it does not foresee prices falling to pre-pandemic levels in the near term as countries such as India, China and the United States have been stimulating their domestic economies with infrastructure projects.
"With the US$1 trillion infrastructure package being rolled out at the same period by the US government, global demand for raw materials, especially for metal commodities, may surge, and this will push the prices higher. Construction costs will therefore be on the rise."
Sep 06, 2021
https://www.businesstimes.com.sg/companies-markets/construction-raw-material-prices-to-stay-high-amid-supply-chain-shipping
CONSTRUCTION raw material prices look set to remain elevated as countries around the world struggle to contain the Delta coronavirus variant.
In particular, companies have been grappling with lockdown-induced supply chain and shipping disruptions since the start of this year. And as demand rose on the back of global economic recovery, supply has struggled to keep pace.
A Singapore Contractors Association (SCAL) spokesperson said steel rebar prices have risen 54 per cent, aluminium prices 59 per cent, copper prices 81 per cent and concrete prices more than 20 per cent.
"While Singapore has a regionally diversified source of material supply, sporadic lockdowns as well as border restrictions imposed by countries greatly disrupted the continuity of supply. Therefore, the delivery of required materials has seen significant delays for most projects," the spokesperson said.
SCAL said the sporadic lockdowns also resulted in production shutdowns, rendering factories and plants unable to operate at optimal capacity.
Soaring shipping costs have also been a cause of concern for companies importing construction materials from overseas. The Freightos Baltic Index, a global benchmark for major shipping routes, has risen from S$1,946 a year ago to S$10,323 for the week of Aug 27.
"The implementation of Covid-19 safety measures has resulted in port congestion and shipping port inefficiencies," said Compact Metal Industries general manager Charles Lee.
He does not expect shipping rates to ease in the next two to three years either, as demand for shipping continues to increase.
China shut operations at two ports this year after the emergence of Covid-19 cases there. The Meishan terminal at Ningbo port, the world's third-busiest container port, was closed for two weeks in August. Yantian port was closed for a month in late May.
There have also been bottlenecks unique to specific construction materials. For instance, steel prices have been heavily impacted by demand and supply imbalances in China.
Seah Kiin Peng, chief executive of steel reinforcement solutions provider BRC Asia, said China has managed to control its Covid-19 pandemic more effectively and its construction industry has therefore recovered strongly.
This increased Chinese demand for raw materials could not be met by the country's domestic supply. China, the world's largest producer of steel, recently became a net importer of steel, he said.
Since May 1, the Chinese government has removed export tax rebates for certain steel products such as hot-rolled coils and plates. From Aug 1, it removed rebates on items such as cold-rolled coils and hot-dipped galvanised coils as well.
Furthermore, Mr Seah said, the Chinese government's push to limit greenhouse gas emissions has capped the country's crude steel output at 2020 levels.
"A lot of steel mills have been producing as much as they can because prices are going up. For the first half of 2021, they have already surpassed the amount that they made in the first half of last year so they will have even less (output) in the second half," he said.
Mr Lee of Compact Metal Industries also noted the Chinese government's shutting of smaller steel mills that failed to adhere to environmental standards. This has impacted supply.
Lockdown-related disruptions have also caused the price of cement to increase by up to 40 per cent, said Pan-United Cement CEO May Ng.
She said production facilities have been adversely affected at different times due to the pandemic, with the most recent disruption being the lockdown imposed in Malaysia. This caused the cost of cement and aggregates to rise.
Ms Ng said it is difficult to predict when prices would be expected to ease as uncertainties remain and Singapore remains dependent on imports.
"The costs of such raw materials and the disruptions to the supply chains depend on when the source country significantly normalises its economic activities," she said.
For tile specialist Soon Bee Huat, its costs are up about 5 to 7 per cent compared to pre-pandemic prices due to a rise in gas prices for tile-firing in kilns.
Because of the many factors causing prices to rise, it may be difficult to predict when prices will normalise or even fall.
Shahzad Nasim, executive chairman at planning, engineering and project management company Meinhardt Group, said: "Businesses have suffered huge losses during this period and the suppliers and manufacturers must be factoring in these in their calculations and concerns about the continuity of supply chains."
Similarly, SCAL said it does not foresee prices falling to pre-pandemic levels in the near term as countries such as India, China and the United States have been stimulating their domestic economies with infrastructure projects.
"With the US$1 trillion infrastructure package being rolled out at the same period by the US government, global demand for raw materials, especially for metal commodities, may surge, and this will push the prices higher. Construction costs will therefore be on the rise."