1/3 Construction Industry Challenges by PCA: Rising Cost of Materials

The world came to a standstill as the COVID-19 Pandemic struck. 

In a previous interview with Pinoy Builders, Philippine Constructors Association (PCA) President Engr. Wilfredo Decena stated that now is the moment to act as one and build as one, that we need a coordinated effort from both the public and commercial sectors to win the war against COVID-19 and rebuild our country.

The rising cost of construction materials was one challenge PCA brought to light.

Why is there a rising cost of materials?

As the PCA points out, the cost of steel and other construction materials is at an all-time high, and we need to address this issue. Project viability is being impacted by the rising cost of steel.

Even if you don’t work in the metals industry or have recently been given a quote for a metal part, you know that steel prices in 2021 are going up. What you may not know, though, is that this isn’t just a small rise.

Domestic steel factories were forced to shut down. When COVID-19 took hold in the United States in the spring of 2020, several domestic steel factories that create flat-rolled goods were forced to shut down. Conversely, shutdowns and other safety-related steps reduced demand for steel and metal goods by reducing supply. The demand for metals remained constant from March to August 2020.

The need for metal has risen again as construction has just picked up and various economies have opened up around the country. This is great news for contractors and manufacturers that rely on customers to purchase their products.

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Not enough steel to meet the current demand. Steel mills are suffering because of the increased demand. Many mills cannot generate enough steel to meet current demand since they have been idle for some time.

Modern mills emerged. There are also several new and renovated steel mills on the way. These modern mills are more efficient than many older domestic mills that have been around for a long time. Because it costs a lot more to make money in these older mills, there’s been a shift toward opening new mills domestically rather than burning up the older mills.

In short, it means there isn’t much steel around.

Besides the rising cost of steel, a long-term solution is also required for the tough issue of quarry materials.

PCA Proposal

For economic recovery, PCA also suggested earlier this year that the following should be done because of the global focus on the infrastructure and construction industry:

• Public spending to be accelerated for private construction investments to follow.

• With uncertainty in projects and the extraordinary costs-related to coronavirus being absorbed by contractors, liquidity and prompt payments will send a positive message to all stakeholders.

• The government should also consider extending financial assistance and other incentives to licensed Filipino contractors and their workforce.

Recently, the Department of Public Works and Highways (DPWH) launched their Assistance to Youth and Unemployed for Development and Advancement (AYUDA) Program, which aims to provide local employment opportunities, especially to the displaced workers because of the pandemic.

Their goal is to at least hire one (1) member per household to guarantee food on the table of Filipino households that are struggling to make ends meet. They will be part of the DPWH maintenance crew, which is to keep the roads clean and free of obstructions by sweeping streets, cleaning street signs, hauling waste, and painting concrete barriers.

• While other countries have taken steps to protect their local industry, some sectors are pushing for the further opening of our industry—now is not a good time to further liberalize the market.

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While the good news is that an end is in sight, experts are divided on when that time will arrive. While many industry analysts believe prices will cool by the end of the year, some believe it would take up to two years. Until that moment comes, you may expect longer lead times and steel prices that are expected to grow by around 10% per month. Because of this, unless you can afford to put off your metal fabrication orders until things calm down, place your orders now.

Photos are from Freepik

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CITATIONS:

• Calapa, J. (2021, March 23). Steel Prices Update 2021: Steel Supply & Market News in Metal Roofing. Sheffield Metals. Retrieved December 7, 2021, from https://sheffieldmetals.com/learning-center/steel-price-update-2021/

• Johnson, G. (2021, July 13). An Update on Steel Prices in 2021: Why Are Metal Costs Still Rising? Lake Air Metals. Retrieved December 7, 2021, from https://www.lakeairmetals.com/an-update-on-steel-prices-in-2021-why-are-metal-costs-still-rising/