Construction costs fall on building slump

Construction costs fall on building slump

081119_p3.jpg
081119_p3.jpg

But cash-strapped developers hit by the global financial crisis are unable to take advantage of plummeting prices

Photo by: HENG CHIVOAN

Workers load sacks of cement onto a truck in Phnom Penh in this file photo.

Supplier
US$ 50kg sack
US$ tonne
US$ tonne, delivery included
K-Cement
$ 5
$ 95
$ 97
Elephant Cement
$5
$ 98
$ 100
Diamond Cement
$ 4.80
$ 95.50
$ 95
Camel Cement
$ 5
$ 94
$ 96
Crocodile Cement
$ 5
$ 98
$ 98

Falling demand for construction materials amid a general building slump has forced Cambodia's suppliers to drop their prices by between 30 and 40 percent from peak prices in June, building companies say.

The managing director of construction material supplier Lay Muy Leng Construction Co said she was now selling steel for between US$650 and $780 per tonne, down from between $1,130 and $1,150 per tonne in June.

Lay Muy Leng said prices started dropping in September and October and were still falling.

The company imports steel for resale from Vietnam. While prices had also dropped there, from around $1,000 per tonne in June to around $755 per tonne now, Lay Muy Leng said she was still shifting stockpiles bought at higher prices so was unable to take advantage.

"My business was running well in 2006 and 2007, but now business is so quiet," Lay Muy Leng said. "All construction material suppliers are losing money on material in their stockpiles."

Soum Sambath, an executive director at Cam Paint Manufacturing Co Ltd, said prices for construction materials began falling in the buildup to the national election in June, but that the onset of the global financial crisis had deepened the slump.

"There are no new projects and there is no action on existing projects, so prices for construction materials have fallen," he said. 

Paint prices have dropped from between 10 percent and 20 percent since June, Soum Sambath said.

Cement prices have remained relatively stable at around $95 per tonne after soaring from $75 per tonne in early 2007. Figures from the Ministry of Economy and Finance show prices are up 22.19 percent this year to almost $5 for a 50 kilogram sack from about $4 on January 1 this year.

Cement prices tend to track the price of fuel, which is the primary input cost, meaning prices are unlikely to drop until existing stockpiles are exhausted. Soum Sambath said a lack of new construction activity meant that could take some time.

There are no new projects

and there is no action on

existing projects, so prices for

construction materials have fallen.

Leav Vanny, project manager of construction at Kaing Meng City, said lower prices were good for developers, but many were not in a cash position to take advantage as people had stopped buying apartments.
"We cannot buy construction materials to build because our project has not sold any houses," he said. "I'm happy that construction materials are cheaper, but how can I buy materials if I can't sell houses?"

Construction activity at the Kaing Meng City site slowed by 50 percent before the national election and has not recovered, he said.

Sok Sina, an independent economist, said that the cost of construction was significantly higher in Cambodia than in neighbouring countries, as most materials needed to be imported. "To reduce the high cost of construction materials in our country, we must start producing them here," he said.

According to a source within the government, imports of construction materials increased 46 percent year-on-year during the second quarter of 2008, at the height of the boom. However, imports during the quarter were down 1.6 percent from the first quarter of the year, showing the tide was turning.

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