THE spike in building material prices has delayed projects, said construction players.

Prices of materials rose as a result of the Covid-19 pandemic, putting contractors in a tough spot as they struggled with tight cash flow, forcing some of them to delay the completion of projects.

Industry players are urging the government to intervene to stabilise prices.

Pembinaan Mitrajaya Sdn Bhd director Foo Chek Lee said items such as steel bars, PVC pipes and metals such as aluminium and copper wires have seen an increase in price.

“For steel bars the price has now increased to about RM3,000 to RM3,200 per tonne depending on the size, from RM2,100 per tonne earlier. As usual the price will hold only for a week or two. For PVC pipes there is an increase of 30% from earlier this year,” he said.

“Contractors who had tendered and awarded jobs are now suffering. Some contractors, especially the smaller ones, cannot absorb the cost and they have no choice but to either slow down or abandon the project due to cash-flow problems.”

He said for future tenders, contractors are bound to mark up the costs to cover the uncertainty in the price of building materials.

“So the project cost will increase as no one wants to lose money,” Foo said.

He said it was important for prices to stabilise as that will enable construction players to provide a fair quotation when submitting the tender.

Foo said the government has to relook the provision for price variation of materials in both public and private projects.

This can be done by setting a fixed base price for important materials, and the contractor should be compensated if the price increases by more than 5%.

“Likewise if the price drops by more than 5%, the cost should be deducted from the contractor.”

He added that the government should also relook the decision to liberalise the market.

Building Materials Distributors Association of Malaysia president Bill Lee said distributors have no control over prices.

He said the spike could be due to freight costs and global raw materials prices like commodities.

“As distributors, we are trading intermediaries or traders – if you like – in building and construction. As such, we are an inherent part of the supply chain but essentially have no control over the prices of building material supplies,” Lee said.

“We are channels of distribution solely involved in breaking bulk, ensuring efficient redistribution, and providing credit to the trade. As we buy and sell, the price difference represents our gross profit.

“We work on margins, and in some cases absolute margins – for instance steel bars and cement. Hence, any subsequent price increase can only result in margin compression as the absolute gross profit remains,” he added.

Lee said price increase will only lead to margin compression and higher risk of exposure.

“Our members prefer market price stability or an orderly priced market. As experienced in the past, sudden price surges and demand speculation can be detrimental to the business environment as we will see short-term shocks in the market.

“Hopefully, we will see these unfavourable issues subside soon. Otherwise, there will be consequential inflationary pressures if housing prices head north and affordable housing becomes a further illusion,” he said.

Meanwhile, Mah Sing chief executive officer Ho Hon Sang said the company has been awarding its projects to contractors at a fixed contract price.

“So, we will not be affected by material price movements as contracts awarded out on a lump-sum basis allow for no fluctuation in price,” Ho said.

“We had a number of launches last year, MArisa, MAdora, MLuna, MAruna (Carya), and Meridin East (Acacia 2).

“The launches did well and had healthy take-up. So we are not delaying launches as we are confident our affordable properties at sought-after locations can do well,” he added.

According to the Construction Industry Development Board, the shortage in global supply of iron ore is one of the reasons for the spike in steel bar prices.

The price of steel bars hit RM2,890 per metric tonne in January.

Comparatively the price of the item was at RM2,435/MT between January and April 2020, before falling by 6.4% to RM2,278/MT in May and remaining so until July 2020. – April 24, 2021.