April 14, 2007

Concrete woes may delay projects, say Japanese trade agencies

They urge action to tackle 'profiteering' in ready-mixed concrete; BCA to hold talks

By Tan Hui Yee, Housing Correspondent

TWO JAPANESE trade bodies here have appealed to the Singapore Government to compensate contractors quickly for losses suffered on public projects because of recent hikes in the price of concrete.

The Japanese External Trade Organisation (Jetro) and the Japanese Chamber of Commerce and Industry also want the Government to bring some stability to sand, granite and concrete prices, and combat what they allege is profiteering by suppliers of ready-mixed concrete.

In a letter to the Building and Construction Authority (BCA) last Tuesday, written on behalf of the 22 Japanese contractors in Singapore, they warned of possible delays in projects should the current situation continue.

According to a recent survey that the two trade bodies conducted, one Japanese contractor stood to lose as much as $30 million solely from the hike in concrete prices on its ongoing projects if it was not compensated.

The company was not identified, but major Japanese contractors here include Sato Kogyo, which is building the double-helix bridge across Marina Bay; Taisei Corporation, which is working on the Circle Line MRT project; and Kajima Overseas Asia, which is building St Regis hotel and residences off Tanglin Road with its local partner Tiong Seng Contractors.

Their main gripe: The price of concrete, which is made with sand, granite and cement, has more than doubled in recent months because of the hikes in prices of sand and granite.

This follows the Feb 5 Indonesian ban on the export of land sand and the subsequent detention of barges carrying granite to Singapore by the Indonesian navy.

But the increase in the price of concrete is larger than the combined increase in the prices of sand and granite, the director of Jetro's construction division, Mr Noriyuki Fukuoka, told The Straits Times.

Sand is being sold now for about $60 a tonne, up from about $20 before the ban. Granite, meanwhile, is going for $70 a tonne, up from $25 before.

The prices of ready-mixed concrete, however, range between $180 and $200 per cubic metre now, up from about $70 previously.

The Government has said that it will compensate contractors up to 75 per cent for the increase in the price of sand and granite for ongoing public sector projects.

But the two trade bodies argue that the compensation should be based on the increase in the price of concrete instead. The two agencies feel the rise in concrete prices has been disproportionately larger than the hike in sand and granite prices.

The president of the Ready-Mixed Concrete Association of Singapore, Dr Sujit Ghosh, denied that its nine member companies were profiteering.

He said that the association has turned over details of the material costs to the authorities and the Singapore Institute of Surveyors and Valuers.

'We have explained our selling prices, which are justifiable.'

The BCA, when contacted, said that it was monitoring the situation closely and will look into specific feedback on cases of any unjustifiable increase in prices.

The price of concrete, said the BCA, is 'determined by the market' and depends not just on sand and granite costs, but also the cost of cement and manpower, for example.

To allow for more competition, BCA has released sites for companies to set up new ready-mixed concrete plants and was prepared to release more if there was demand.

The authority also said that it has replied to the two Japanese agencies to explain the various measures taken to help the construction industry cope, including urging private developers to adopt cost-sharing arrangements with their contractors.

'We have also assured them that there is sufficient amount of sand and granite for the industry to continue construction work and shipments of sand and granite from various alternative sources in the region have begun to arrive,' it said.

The BCA will meet both agencies next week to discuss these issues further.

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$60 a tonne, up from about $20

$70 a tonne, up from $25

$180 to $200 per cubic metre, up from about $70