Wednesday, June 19, 2024
BusinessContractors in hot water as price of construction materials doubles

Contractors in hot water as price of construction materials doubles

The price corrugated iron almost doubled in two weeks

Contractors are in trouble with the doubling of construction materials that has triggered delays of projects across the country.  

Price of construction materials doubled in Addis Ababa, with significant upsurge seen in the costs of roofing sheets and nails, according to The Reporter’s assessment across wholesalers in the capital.

It is a situation that has already led to a surge in cost of construction, affecting contracts and hurting contractors that have been working on public project without price escalation adjustment.

The price of corrugated iron increased by 150 birr in two weeks, surging from 250 birr to 400 birr per piece. Price of nails also surged from 400 birr to 600 birr per package, in two weeks. Price of galvanized roofing sheets also doubled from 500 to 1,000 birr. Construction products such as tubular and rebar have also shown significant price hikes.

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“The prices are sharply increasing daily. But there is no rise in demand, neither supply shortage,” said Mohammed Ibrahim, a wholesaler who usually trades local construction materials.

Owner of Tesfatsion Metals, Samuel Tezare, said the demand for construction materials has even decreased due to the slowdown in the construction sector over the past two years.

“But the price has risen sharply over the past three months. There is no concrete reason for the price surge. As far as my knowledge on the matter goes, there is no problem on the supply side,” said Samuel.

Cement prices, which has been in short supply for years, is also on the rise. A cement trader, who spoke on conditions of anonymity, told The Reporter that a quintal of cement reached 720 birr, showing an increase of more than 40 percent within a month.

While local industries are facing chronic shortages of raw material supply, importing finished construction materials have also become difficult, after the central bank re-prioritized the forex allocation directive last month.

Experts say wholesalers of construction materials and other imported items, are inflating prices because supply of these materials is forecasted to decline in the months ahead.

Despite repeated attempts to obtain more information from the Ministry of Mines concerning the increase in the cost of construction materials and production practices, it did not bear fruit.

There are more than 500 large and medium-sized steel industries in Ethiopia, with an annual production capacity of 11.3 million tons. However, due to shortage of inputs caused by a lack of forex, they are utilizing less than 20 percent of their capacities.

Cement factories have an annual production capacity of 13 million tons, but only managed to produce eight million tons.

According to the latest report of Ethiopian Statistics Service (ESS), the price of construction materials inflated by 23 percent in January 2022 compare to the same period last year.

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