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Construction commodity volatility in Singapore shows signs of easing in 2H2022: Linesight

/ EdgeProp Singapore |

August 4, 2022 5:56 PM SGT

We anticipate that a levelling of supply costs, combined with increased interest in alternative construction methodologies is likely to contribute to a very active construction industry for the second half of 2022 and into 2023, says Michael Murphy, director of Linesight Singapore. (Picture: Samuel Isaac Chua/The Edge Singapore)

SINGAPORE (EDGEPROP) - According to a commodities report by global construction consultancy Linesight, construction commodity prices in Singapore are starting to show some signs of easing for the rest of this year.

Although material prices in the local construction industry are expected to be affected by geopolitical instability, any price increases that will come later this year are likely to be “modest”, the consultancy forecasts.

The local construction industry could see a 5.7% growth in real terms for the whole of 2022. Construction contracts awarded this year will be the main driver of this forecasted growth in the coming years, underpinned by investments in transport, residential, renewables, and manufacturing projects, says Michael Murphy, director of Linesight Singapore.

“The geopolitical climate globally will impact (the market for construction commodities), which is driving continued material price volatility, high energy costs and supply chain constraints, posing downside risks,” says Murphy.

Table: Linesight

For example, Linesight expects steel prices to climb on the back of supply disruption, higher input costs, and improving demand from steel-consuming industries. Global supplies of steel have come under pressure due to the Russia-Ukraine conflict, with both countries being key suppliers of steel and iron. The prices for steel rebar and flat steel are projected to increase by 1.5% this quarter.

While Covid-lockdowns in China have alleviated some demand for copper, prices of the commodity are expected to remain volatile due to a general fall in global economic growth expectations. “In view of the uncertain economic outlook, prices are expected to continue to fluctuate in the coming quarters,” says Linesight.

The firm expects copper prices to fall about 13% this quarter, although it says that investments in the electric vehicle and renewable energy sectors will strengthen underlying demand in the long term.

Meanwhile, lumber prices are likely to remain relatively high for the rest of the year, buoyed by improved residential construction and global supply pressures.

“Looking ahead, we are anticipating that a levelling of supply costs, combined with increased interest in alternative construction methodologies such as modular construction, is likely to contribute to a very active construction industry for the second half of 2022 and into 2023,” says Murphy.

Linesight is advising its clients to adopt a more strategic approach towards procurement in the coming months, in order to mitigate risks associated with supply chain challenges, inflated commodity prices, and logistics difficulties.

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