Rony
Moderator
Construction, an industry that relies on careful management of everything from labour to land, lumber, cement and other materials to ride out market peaks and valleys, has reached new heights of complexity.
The Covid-19 pandemic shutdowns impacted supply networks, delaying completion of projects and leading to escalating costs of construction.
Due to the government's execution of the Movement Control Order in June 2021 and the four phases of the National Recovery Plan, construction materials in Malaysia became more expensive once construction activities began on Oct 22, 2021.
It has hampered building plans as material costs grow, and the issue isn't only lumber, cement, and steel, but also labour costs. The pandemic is delaying planning, and in certain circumstances, organizations may end up spending more than twice what was initially budgeted.
Below are the factors that contribute to rising construction costs.
Oil plays a critical part in the success of construction projects, from cement manufacturers to transportation and job site equipment operation. Crude oil prices may continue to climb when the Malaysian economy reopens and pre-pandemic behaviour such as travel resumes.
Of course, steelmakers are striving to remedy this issue, but as with other things, it will take time.
The metal is found in a variety of construction materials, including electrical cables and water pipes. With the worldwide drive toward green energy and electric mobility technologies, copper will be even more in demand in the coming years.
The price increase occurs in the context of reduced supply-side investment in the mining sector since the boom years of 2003-2013 and the subsequent absence of new expansion plans for existing operations.
The predicted rise in demand will almost probably have an influence on copper prices in the coming years.
This is due to increased residential construction and renovation during the pandemic, decreased mill output, and the pandemic forcing many people to adjust to a stay-at-home lifestyle.
Talented applicants are in high demand, and they are aware of it. This complicates the recruiting process since numerous businesses may have to compete for the attention of experienced or skilled workers.
Contractors are paying a premium for available skilled labour since it is difficult to find. Profit margins are diminished as a result of the hefty payments.
As a result, businesses will have to raise their prices, and the industry would suffer as a result.
Tariffs and trade concerns, as well as environmental legislation and shifting demand, all drive higher costs.
The Covid-19 pandemic shutdowns impacted supply networks, delaying completion of projects and leading to escalating costs of construction.
Due to the government's execution of the Movement Control Order in June 2021 and the four phases of the National Recovery Plan, construction materials in Malaysia became more expensive once construction activities began on Oct 22, 2021.
It has hampered building plans as material costs grow, and the issue isn't only lumber, cement, and steel, but also labour costs. The pandemic is delaying planning, and in certain circumstances, organizations may end up spending more than twice what was initially budgeted.
Below are the factors that contribute to rising construction costs.
1. Oil
Crude oil prices have risen by more than 60% owing to supply restrictions and increasing demand during the economic recovery, which is significant because oil is essential to the construction industry.Oil plays a critical part in the success of construction projects, from cement manufacturers to transportation and job site equipment operation. Crude oil prices may continue to climb when the Malaysian economy reopens and pre-pandemic behaviour such as travel resumes.
2. Steel
Steel prices are at an all-time high across the world, including in Malaysia. Prices in China and Europe have risen by more than 80% from the pandemic's lows. Limited international supply and logistic constraints keep U.S. imports at a low level, which has a direct influence on steel prices.Of course, steelmakers are striving to remedy this issue, but as with other things, it will take time.
3. Copper
Copper prices have climbed by more than a quarter since the beginning of the year, as the world economy recovers from the Covid-19 pandemic.The metal is found in a variety of construction materials, including electrical cables and water pipes. With the worldwide drive toward green energy and electric mobility technologies, copper will be even more in demand in the coming years.
The price increase occurs in the context of reduced supply-side investment in the mining sector since the boom years of 2003-2013 and the subsequent absence of new expansion plans for existing operations.
The predicted rise in demand will almost probably have an influence on copper prices in the coming years.
4. Lumber
The cost of timber, which is used in the majority of Malaysian home-building and commercial construction projects, has reached an all-time high. It is more than twice as expensive in 2021 as it was in 2020.This is due to increased residential construction and renovation during the pandemic, decreased mill output, and the pandemic forcing many people to adjust to a stay-at-home lifestyle.
5. Labour
The whole construction industry is experiencing a major challenge: there are numerous unfilled positions and not enough skilled workers to fill them.Talented applicants are in high demand, and they are aware of it. This complicates the recruiting process since numerous businesses may have to compete for the attention of experienced or skilled workers.
Contractors are paying a premium for available skilled labour since it is difficult to find. Profit margins are diminished as a result of the hefty payments.
As a result, businesses will have to raise their prices, and the industry would suffer as a result.
In a Nutshell
As you are now aware, these are the factors contributing to the escalating cost of construction. The two significant factors responsible for this are the high cost of construction materials and the shortage of skilled labour.Tariffs and trade concerns, as well as environmental legislation and shifting demand, all drive higher costs.
