After MCO, prices of materials have gone sky-high, complain builders

 

Builders are complaining that steel prices have shot up 40% in six weeks and suspect this is the work of a cartel among suppliers.

PETALING JAYA: Construction groups say the government needs to intervene to stop unethical suppliers from price gouging to prevent projects from being abandoned.

In the case of residential properties, a developer says these increased prices would ultimately be passed on to the public through higher property prices.

Md Nasir Ibrahim, chairman of the Guild of Bumiputra Contractors Bhd, said that steel in particular had increased in price by nearly 40% in the last six weeks up to nearly RM3,000 a tonne.

He said the cost of materials like sand, cement and bitumen had also been on the rise.

“My conclusion is that it’s a result of a cartel among suppliers, who are able to control the prices in order to cut losses from the lack of demand during the pandemic,” he told FMT.

He said that with many contractors still feeling the effects of revenue losses caused by the various lockdowns, the price hikes have added additional pressure.

He urged the government to “intervene” by controlling the prices of these products and penalising suppliers who take part in unethical price manipulation.

This was echoed by the Master Builders Association of Malaysia, who said price increases are particularly damaging to smaller stakeholders, who may not have predicted the cost of adhering to Covid-19 standard operating procedures, like testing workers and operating with a limited workforce.

“The government should implement strict control over prices of construction materials to prevent cartels and monopolies taking advantage of these,” it said.

It further suggested that it be made mandatory for a price variation clause to be included in all contracts to account for fluctuations in material costs.

Tan Hun Beng, chairman of the Penang branch of the Real Estate and Housing Developers’ Association Malaysia, said if prices continue to increase for contractors, they will not be the only ones who will feel the pinch.

He said that in many cases, contractors will factor in the risk of cost increases into their tenders.

He said some developers were willing to negotiate if prices rise beyond a certain reasonable threshold, with the additional burden passed on to future buyers.

“A developer cannot adjust the price a property has been bought at after it has been sold.

“So if the contractor is affected by high cement and steel prices, and if they renegotiate their agreement with us, our margin on the sold units shrinks.

“Since they can’t change the selling price, they have to make up for the difference by pushing up the price of unsold units.”

Nasir hoped the government would have the will to intervene, but was worried that internal power struggles within political parties may supersede the needs of builders.

“The government has the power to take control but, at the moment, they are focused on politics, so maybe this seems like a small thing to them.

“But this is our bread and butter, it’s not small to us.”

He said the government has a stake in ensuring prices are kept reasonable too, because if contractors are unable to afford to continue construction, or stay afloat, projects will stall or will be abandoned.

“The contractors lose, the government loses, and the people will suffer too,” he said. - FMT