Building material price slide

Developers with cash are saying now is a great time to build due to the cheap price of building materials. How true is this? Benjamin Millington talks to a range of industry experts and gets the low-down on past, present and predicted prices for some of the main building materials.

A year ago everyone was happy. Everyone was making money. There was no shortage of construction projects and cetainly no shortage in demand for building materials.

But times change. As the financial crisis grips property markets around the world many construction projects that once seemed feasible are being stalled, cancelled or put on hold.

In turn, the demand for building materials has taken a severe blow and suppliers now face fierce competition for the few projects that are proceeding.

Story continues below

Advertisement

FEATURED COMMENT not in satisfactory level   1 Comments Read more comments »

In these tough times most experts are saying it is unlikely that there will be any material price booms in the foreseeable future.

Steel
The steel industry had a rollercoaster ride in 2008 with immense profits in the first half of the year and a crippling price crash in the second half.

John Short runs UAE-based consultancy Steel Derivatives. He says the price of rebar peaked at around US $1600 (AED6000) per tonne in the middle of the year before plunging to a around $540.

The cause of the price rise and fall is rather complicated but can be attributed to a reduction in exports from big steel producers such as China and Ukraine and a huge domestic demand in the GCC.

This demand led the price to rapidly rise and short term traders and contractors began to get in on the action, purchasing bulk steel with the intention of off-loading it at a higher price or protecting themselves from further price hikes.

When imports from China were once again freely available, supply was no longer a problem, everyone tried to off-load their steel stockpiles and the price inevitably plummeted – schoolboy economics says Short.

Since then steel prices have been on a relatively flat but slightly downward trajectory for about the last two months, he says. The new bookings for imports is now between $400 and $425 a tonne, the wholesale price is around $490 and the retail price is between $517 and $530.

Short says this is around about fair value for steel and he expects it to stay within an import price range between $375 and $500 for the rest of the year.