Supply disruptions from the Russian invasion of Ukraine and persistent supply chain issues will keep prices of core construction materials in Singapore—such as copper, steel, concrete, cement, and bricks—at elevated levels in the coming quarters.
According to a report released on Thursday (April 28) by construction consultancy Linesight, the actual output of the local construction sector is not expected to surpass pre-Covid-19 levels until 2026, despite the sector beginning to recover last year with 20.1 per cent growth.
The report stated that available manpower and its associated costs, as well as rising material costs, are expected to constrain growth, with a real growth rate of 15.4 per cent projected for this year.
Steel and Copper
The prices of steel rebar and copper are projected to increase by 11.9 per cent in the third and fourth quarters of this year, compared to the same period last year.
Prices for these metals surged significantly in 2021 and were initially expected to ease this year.
However, prices have risen instead, as the Russia-Ukraine war hit the market, disrupting the supply of raw materials and finished products.
Russia and Ukraine are major suppliers of steel and iron ore to the European Union, and disruptions in regional trade will mean European buyers will look to alternative markets, thereby tightening global supply.
According to NatSteel, the price of steel rebar in Singapore had already risen by 15 per cent as of mid-March, since the start of the conflict. Imports from Turkey and the Middle East are limited due to elevated energy and freight costs and a preference for European buyers.
Cement
Cement is one of the most commonly used materials in Singapore’s construction projects. Given the prospect of relatively high raw material and freight costs, cement prices are expected to rise by 19.9 per cent in the third and fourth quarters of 2022 compared to the same period last year.
Cement prices had already increased by about 7 per cent in the first two months of the year and faced continuous upward pressure in March.
The report stated: “Demand will pick up in line with the recovery of the construction sector, but this demand is largely met through domestic production.”
Bricks
The price of bricks is projected to rise by 3.6 per cent year-on-year in the second half of 2022, as demand is expected to improve with the continued recovery in construction output.
While supply is likely to be sufficient to meet this growing demand, elevated energy prices will drive up production costs, causing brick prices to continue rising in the coming quarters.
Diesel
Diesel prices are projected to increase by 20.1 per cent over the same period.
Prices had already surged in March as numerous suppliers reacted to the sharp increase in global crude oil prices following the outbreak of the war in Ukraine.
The report stated, “Given the potential for continued disruptions to Russian supply, global prices will remain at elevated levels.”
A shortage of diesel is also beginning to emerge, with Singapore’s diesel stocks in March being four million barrels below the five-year pre-Covid average.
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