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SINGAPORE: Construction companies, already short of workers, have to deal with more expensive construction materials as both freight and demand for raw materials have skyrocketed, creating a shortage in the supply chain.
For consumers, this has led to more expensive renovation projects, as contractors and material suppliers struggling to stay afloat spend the highest prices in the chain.
The cost of building materials, such as rebar and bricks, has increased between 20% and 40%, said Eddy Lau, CEO of the Specialists Trade Alliance of Singapore, which represents some 1,300 member companies, most of them they are specialized contractors and material suppliers.
For example, bricks that used to cost S $ 0.25 each are currently priced at S $ 0.35, he said.
Since construction materials typically account for 30 to 50 percent of a project’s total outlay, many contractors have had to invest in their reserves just to keep the business going, he said.
“Most of them are just trying to stay afloat,” Lau said.
“They have been pressured in all sectors – workers, then after the price of materials went up (still) the prices of the contracts (were) already fixed but (the prices of materials) also went up,” he said.
Some contractors have had to turn down projects because they are unsure how long the shortage of materials and labor will continue, he said.
For those bidding for new projects, they are concerned about passing on costs as they could lose out to competitors, but they are also concerned that absorbing costs would mean lower profit margins, he added.
IN FRONT OF A BRICK WALL
The industry is already plagued with companies pricing their offerings extremely low prices, causing profit margins to drop from 10 to 15 percent about three to five years ago, to zero to 3 percent today, Winston said. Ang, the honorary secretary. from the Singapore Micro Builders Association.
Ang, who is also a director of construction company Unicon Group, said his construction costs rose 25 percent during this period, leaving him unsure of how to bid on six tenders he’s targeting.
He suggested that authorities establish a minimum bid amount for all construction projects so that no one unfairly undermines their competitors.
Nelson Tee, the owner of CHH Construction, said he is careful when choosing new projects at this time. Existing projects are already suffering losses because contracts were signed before the “circuit breaker,” when raw material and labor costs were lower.
Like many others, CHH Construction did not stock up on inventory because it did not know how long the circuit breaker would last and did not want to risk accumulating storage and depreciation costs.
It also has to cope with the current labor shortage. Unlike normal times, you can no longer rely on hiring subcontractors to do some of the construction, as they all have few workers.
Productivity has also dropped due to movement restrictions at workplaces, he said.
“Can our workers do it? Do we have the internal capabilities? If we don’t, we can’t bid on the project, ”said Tee, whose company specializes in the construction of bungalows, commercial premises and security systems.
On Tuesday (December 15), the Ministry of Manpower announced that it had eased restrictions on new applications for work permits and S Pass to address the current labor shortage.
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SQUEEZE SHIPPING
Added to the industry’s problems is a double whammy of raw material shortages and low shipping capacity.
Strong demand for containerized cargo has been driven by limited air cargo capacity, industries restocking their inventories after initial closures around the world, increased demand for household goods and medical supplies, Hua Joo said. Tan, Container Shipping Market Analyst at Liner. Investigation services.
This has led to a shortage of containers and congestion at ports, leading to higher freight costs.
The price to ship a 20-foot container from Shanghai to Singapore jumped from around $ 170 in October to $ 798 as of December 11, about 370 percent, based on container shipping rates from the Shanghai Shipping Exchange.
So estimated that the situation could last until the Chinese New Year period.
Prices of raw materials like steel and plywood have also risen amid a supply shortage as builders around the world gradually return to work. At the same time, safe clearance requirements in factories to avoid COVID-19 are in limited production, local suppliers of building materials said.
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REJECTION OF CONTRACTORS ‘ORDERS
Plywood distributor Kiera Sim, which imports from China, Indonesia and Vietnam, said rising raw material and transportation costs have forced it to raise its prices by 10 to 15 percent. The lack of wood panels on the market has made it difficult for it to sell at the usual volume and price, the Vita Group chief executive said.
Vivien Ngo, a marketing manager for Foresight Metal Engineering, a company that sells cable support systems to contractors, said its supplier in Malaysia has raised prices by 7 to 20 percent. They told him the steel supply from steel mills has been cut and social distancing protocols have cut the mills’ workforce in half.
Ms. Ngo said she fears that higher material prices, coupled with high labor costs, could cause some cash-strapped contractors to walk away, so she plans to impose stricter payment terms, such as reject new orders if contractors have delayed their payment in previous ones.
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RIPPLE EFFECT ON THE OWNERS
The problems in the construction sector have already affected consumers. Home renovation bills have risen 10 to 25 percent, according to interior designers, as costs come down.
Interior design firm Key Concept co-founder Kenneth Chang has increased his service fees for new contracts by 10 percent, he said.
Icon Interior Design co-founder Max Lee said he will raise his rates by 8 to 12 percent if tension in construction doesn’t ease after the Chinese New Year. Both said they will honor existing agreements, rather than change the price.
Previously, renovations for a four-bedroom apartment would cost about S $ 30,000, said Michael Ong, deputy general secretary of the 115-member Singapore Association of Renovation Contractors and Materials Suppliers. This has risen to around S $ 40,000 today.
With a lack of workers and building materials, homeowners must also be prepared for longer renovation periods, the interior designers said.
Four-bedroom apartment renovations that typically take eight to 10 weeks to complete are expected to take 14 to 16 weeks, Lee said.
“(Customers) might be surprised to say ‘my friend could do it in two months. Why do I (need) three months? ‘They (need) to realize that it is still the COVID period,’ said Mr. Ong, who is also the director of TBG Interior Design.
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