Facing up to increasing costs

This week’s front page story confirms what most of you already know: material prices continued to rocket upwards in 2006. The price of copper went up 66% in the first nine months of the year, with cement rising 10% and aluminium by 9%.

  • E-Mail
By  David Ingham Published  December 30, 2006

|~||~||~|This week’s front page story confirms what most of you already know: material prices continued to rocket upwards in 2006. The price of copper went up 66% in the first nine months of the year, with cement rising 10% and aluminium by 9%. At the same time, new developments continue to spring out of the woodwork in Dubai and across the UAE; according to this week’s report on page 18, Abu Dhabi has around US $100 billion worth of projects in the pipeline. The upshot is that the pressure on the materials and labour supply chain is increasing. Saudi Arabia is beginning to invest its oil windfall in massive infrastructure projects, China’s economic boom continues and India’s construction sector is retaining a traditionally strong source of labour supply for the Gulf. The local industry is facing a situation where it could become the victim of its own success. In the future, the most profitable companies will be those that use innovative methods to find the most competitive prices and reduce the cost of doing business. The best contractors will start investing more money than ever before in IT systems that can help them predict long-term materials requirements, negotiate better prices and plan their cash flow. Late payers will be chased through the courts and increasingly find themselves labelled as companies that are not good to do business with. There is also the danger, of course, that some contractors will use untoward means to save money. Faced with rising materials costs, many will try to source sub-standard or counterfeit products that may contravene health and safety rules. Others will try to pile further pressure on employees that are already overworked. This will mean that local authority inspection teams will have to be increased in size and given more power to prosecute. With so many new projects in the pipeline, 2007 will undoubtedly be a year of massive opportunity for construction companies. Those that innovate, rather than those that cut corners, will hopefully be the winners.||**||

Add a Comment

Your display name This field is mandatory

Your e-mail address This field is mandatory (Your e-mail address won't be published)

Security code