Sharp rise in raw materials hurts Dubai construction

A sharp 40 per cent increase in raw materials costs has impacted on Dubai's construction sector, company bosses have confirmed.

The surprise scale of the increase has resulted in net losses of as much as 20 per cent for some companies in the sector.

Speaking exclusively to Gulf News, K. Varkey Abraham, managing director of Abu Hail Contracting LLC, said: "The prices of raw materials are going up sharply, with an approximate 40 to 50 per cent increase during the last three months only.
"Steel is one of the main products to have seen a sharp increase, having doubled in price."

Factors, such as the monopoly in the steel market, have pushed up prices, he said. "There might be a shortage of steel, or a monopoly in the steel market. The traders have increased their prices due to the shortage and prices have gone up sharply with the boom in the construction sector," he said.

While they will, inevitably continue with themassive construction projects that plays such an important role in Dubai's economy, many of the companies are beginning to see significant losses. "We have had about a 20 per cent loss in the past four months due to the increase in the prices of raw materials, and this is not good for us," he said.

Abraham added that concrete is another important raw material to have seen a sharp price increase. "Every two months, the price of concrete goes up noticeably. We are suffering losses as raw material costs are going up."

Abid A. Junaid, general manager of Associated Construction and Investment Company, said there has been a 20 to 30 per cent increase in the prices of raw materials of late. "There are different reasons for the increase in prices and demand for steel.

"The main reason is the increasing value of the euro against the dollar. When the value of the euro goes up, imported products from Europe become more expensive, and this adds to the costs," he said.

According to him, they are suffering losses due to previous contract commitments. "We have already booked for projects, and today we have ended up paying more for all the committed projects."

He said they will be very careful with forthcoming tenders.