Due to a sharp rise in steel prices amidst a shortage of supply, over half of the constructions jobs currently being tendered out to some 117 members of Penang Master Builders and Building Materials Dealers Association (PMBBDMA) are expected to be held up.
According to its President Datuk Lim Kai Seng, not a single member wants to take on new projects in the state, including infrastructure and low-cost housing, as steel bars now cost about RM2,800 per tonne inclusive of the goods & services tax (GST).
This is the second highest since June 2008 when steel prices reached RM3,200 per tonne, and also surpasses the price of RM1,950 per tonne seen three weeks ago.
More importantly, this has an adverse impact on the real estate industry, as the hike in steel prices, in turn, lead to a 10 percent rise in construction costs.
Consequently, the companies that were awarded jobs in Penang last January would face significant losses as the cost of steel bars surged by more than 50 percent since that month.
In addition, developers will need to pay a fine if their affordable housing projects are delayed, shared the Penang Branch of the Real Estate and Housing Developers’ Association (REHDA).
“To avoid that, they will have to renegotiate with the contractors or compensate them for the hike in steel price,” said its Chairman Datuk Jerry Chan.
“Should the situation persist, the scheduled implementation of major infrastructure plans such as the Penang Master Transport Plan (PTMP) and key affordable housing projects would also be delayed,” added Lim.
Given the high cost of this important construction material, he shared that some PMBBMDA members are mulling whether to import steel bars from other countries.
“But the move is a bit complicated, as you would need to import a minimum volume and require also a letter of credit, which means that only the big players are eligible to buy overseas.”
Similarly, the 6,000 members of Malaysia’s Master Builders Association are also shunning government tenders in light of the shortage and expensive price of steel, according to its President Matthew Tee.
“This would definitely delay the implementation of infrastructure and housing projects” across the country, he added.
Image: Sourced from The Star
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
