UAE developers and contractors shift to ‘buy local’ as imported materials and shipping costs soar
Dubai: Developers and construction companies in the UAE are working on a fundamental principle these days: buy local if possible. Because if they have to rely on anything that needs to be shipped, then be prepared to pay a lot more. Additionally, there are the inevitable delays in the arrival of goods at the ports here due to the scarcity of containers.
“Anything shipped from overseas is likely to have gone up in price,” said Tizian Raab, spokesman for Azizi Developments, which is busy with multi-billion dirham residential projects in Dubai. “This is only due to the higher logistics costs. A notable example of this would be steel rebar from Saudi Arabia, the cost of which has increased by around 18-20% during the pandemic.
“Timber prices have affected carpentry companies, with prices going up to 35% in some cases. Locally made materials such as concrete and aluminum remained the same or even fell in price during this period.
So, whether it’s UAE-based steel or cement manufacturers or suppliers such as RAK Ceramics, they find that being closest to their consumer here is quite the winning strategy.
Construction materials such as concrete and steel are generally sourced from the GCC – from the United Arab Emirates, Saudi Arabia and Oman – while products used for finishing – those that customers see and touch – are still mainly purchased from well-known overseas manufacturers, especially those in Europe
– Tizian Raab of Azizi Developments
Steel is in a price grip
Bharat Bhatia, whose Conares owns three steel mills in Dubai, knows that feeling. It depends on iron ore to power mills and produce products that are sold locally as well as exported. Bhatia says UAE steel producers are feeling the brunt of iron ore prices hitting new highs along with the cost of shipping them. Prices for iron ore, which is the essential raw material for steel, have increased by almost 20% since the last months of 2021.
“It’s not just one thing that’s causing the spike in iron ore prices – it’s the tight restrictions due to Omicron which are hurting shipments from major commodity supply markets like Australia. “Bhatia said. “The global mining industry remains under pressure as some key mines remain closed, which is also reflected in iron prices.
“Until we find a balance between the opening of relevant source markets after the winter and some easing on the shipping side, iron ore and steel prices will remain on the upside.”
Steel prices alone are up 30-35% since the start of 2020 when COVID-19 began to wreak havoc on global supply chains.
It’s not just commodity iron ore prices that are on the rise – there’s the higher added premium and shipping costs that are a burden. Shipping costs do not drop.
– Bharat Bhatia from Conares
No cost pass-through – so far
Several developers in the United Arab Emirates said they have so far not passed on any of the higher building material costs over the past 24 months to their buyers. How long can they keep doing this? Off-plan launches are back in favor with buyers, and developers won’t be in the mood to delay new offerings just because their cost to build goes through the proverbial roof.
This is where it gets tricky – if they increase the value of their property off-plan, demand could feel the pressure, especially for mid-market homes. All the more reason for developers to consider buying local – or regional – to control building material costs.
source from within
“Global transportation issues are causing major inconsistencies in pricing and availability,” Raab said. “For example, a product made locally, like in Ras Al Khaimah, now has the same or even lower price and will come with better payment plans, while a product ordered from Italy will lead to customer headaches. shipping which will also increase costs.
“It is difficult to say when the logistics sector will adapt. Arguably, shipping lines and other logistics players are seeing higher pandemic-induced demand overwhelm them and lead to inflated prices. Obviously, transport companies will eventually adjust and expand their operations to cover the growing demand with an expanded logistics offer. But for us, it is not known how long this correction could take. »
The same goes for other developers – and they too will switch to buy local wherever they can.