Construction Costs Soar on High Commodity Prices

Construction costs in Kenya are set to go up as manufacturers of building materials increase their prices to reflect the rising commodity prices in the international markets.

Manufacturers of paint, corrugated sheets, steel products, and cement have experienced a surge in production and operational costs, forcing them to issue warnings of price rises.

The rising costs have been associated with the high global oil and steel prices, which have been compounded by weaker shilling and inflation.

The World Trade Organization (WTO) has warned that the ongoing rise in commodity prices is expected to hold into 2011 on rising demand from Japan, India, and China. Japan is planning a massive reconstruction after the devastating earthquake and tsunami.

According to the London Metal Exchange, Copper prices have risen 14 per cent since December followed by Zinc at 30 per cent and aluminium at 10 per cent.

This has seen East African Cables increasing its prices by 8 per cent in a bid to re-energise its profits which have dropped for the past two years.

“Our prices went up eight per cent on the 1st of April due to high raw material costs. For instance, the 1.5mm squared roll is now going for Sh2095 up from Sh1927 in March,” said a staff member at East African Cables.

The biggest impact of the sky-high metal prices on construction costs in Kenya is likely to show in the price of corrugated sheets – the most popular roofing material among home builders –  whose prices have risen 12 per cent since January.

The price of the three metre sheet gauge 28 is now selling for Sh1, 200 up from Sh1, 000 in January, and players in the roofing sector are mulling increasing prices in the coming weeks.

Besides high metal prices, the skyrocketing oil prices have also pushed up the cost of construction materials, especially paints and cement.

Paint manufacturers have announced plans to increase paint prices by at least 10 per cent due to the rising cost of raw materials. The review comes barely three months after the paint makers hiked prices by 8 per cent in January.

Oil and Titanium –  which account for about 60 per cent of the paint manufacturers’ production costs – have risen by 31 and 10 per cent respectively.

“Under these adverse conditions we are left with no other option but to affect a further price increase of 10 per cent effective April 15,” said Mr Gaurav Bhalla, the head of sales and marketing at Crown Berger.

Cement prices are also set to go up as distributors move to increase their fees by 20 per cent to cushion themselves against the sky-high fuel prices. This will see the price of a 50-kg bag of cement increase by Sh25 and Sh40 depending on the location.

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