SUPPLY disruptions from the Russia-Ukraine war and ongoing supply chain issues will cause prices of core construction materials in Singapore, such as copper, steel, concrete, cement and bricks, to remain elevated in the next few quarters.

According to a report released on Thursday (Apr 28) by construction consultancy Linesight, real output of the construction industry in the city-state is not expected to exceed levels seen prior to the Covid-19 pandemic until 2026, even though it staged a recovery last year with the sector growing by 20.1 per cent.

The availability of labour and its associated costs, as well as the escalation in material cost, are expected to constrain growth, which is forecast to come in at 15.4 per cent in real terms this year, read the report.

STEEL AND COPPER

Both steel rebar and copper prices are expected to go up by 11.9 per cent in the third and fourth quarters of this year, compared to the same period a year ago.

The prices of these metals have soared sharply in 2021 and prices were initially expected to ease this year.

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However, with the Russia-Ukraine war shocking markets and disrupting the supply of raw materials and finished products, prices have gone up instead.

Russia and Ukraine are key suppliers of steel and iron ore to the European Union, and the regional disruptions to trade will mean European buyers seek alternative source markets, thereby tightening global supplies.

According to NatSteel, steep rebar prices in Singapore had already risen 15 per cent by mid-March since the start of the conflict, and imports from Turkey and the Middle East were limited because of higher energy and transportation costs, as well as preferences to target European buyers.

CEMENT

Cement is one of the most used commodities in construction projects in Singapore, and given the outlook for relatively high prices for raw materials and transportation costs, cement prices are projected to go up 19.9 per cent in the third and fourth quarters of 2022, compared to the same period a year ago.

Cement prices have already gone up by around 7 per cent in the first 2 months of the year and faced continued upward pressure in March.

"Demand will pick up in line with the recovery in the construction sector, but this demand is primarily met through domestic production," read the report.

BRICKS

The price of bricks is expected to go up 3.6 per cent year on year in the second half of 2022, as demand is expected to improve as construction output continued to recover.

Even though supplies will likely be sufficient to meet this rising demand, higher energy prices will push up production costs, causing brick prices to trend upwards in the coming quarters.

DIESEL

Diesel prices are estimated to go up by 20.1 per cent, over the same period.

Prices have already surged in March, as suppliers reacted to the sharp rise in global crude prices following the outbreak of the war in Ukraine.

"In view of the likely continuation of disruption in supplies from Russia, global prices will remain at high levels," read the report.

There are also emerging shortages of diesel, with Singapore's diesel fuel inventories in March 4 million barrels below the 5-year average, prior to the Covid-19 pandemic.