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By Katrina Mennen A. Valdez, Reporter
THE Philippines’ biggest real-estate developer
is still bullish about completing its ongoing projects this year,
amid the soaring prices of construction materials.
Jaime Ayala, president of Ayala Land Inc., told
reporters that the price of the company’s condominium units have
surged by 20 percent as a result of costlier materials.
He said the company, however, remains upbeat
about finishing its roughly 100 projects for this year even though
the price of cement has gone up by 25 percent, and that of steel has
doubled.
“[We] do not see any project delays to take
place this year, despite the fact that the prices of basic
construction materials have gone up significantly,” Ayala said.
Last month, the price of steel went up by an
average of 50 percent following the surge in the world price of iron
ore and strong demand from China and India.
“So far, [we] do not have a problem on cement
since [we] have a locked-in contract with [our] suppliers. On the
other hand, it is difficult for us to win a locked-in contract with
steel makers,” Ayala said.
“Though [we] expect another increase [in
condominium prices] within this year, increasing [our] price would
be the last option,“ he said.
The executive said that steel accounts for 10
percent of construction costs, while cement, plumbing, glass and
electrical materials take up the remaining cost.
“[We] also observed that high-end buyers have
downgraded a bit, that is why our mid-class projects such as Avida
Land is taking up very well,” Ayala said.
The executive said that the global recession is
seen to hit the real property industry, adding, “but companies
with strong brands like us could survive.”
Last month, the surging price of steel products
was caused mainly by the increase in the cost of iron ore, which is
the basic raw material in steelmaking. In April this year, one of
the world’s biggest mining companies, Brazil’s Cia Vale Rio Doce
gained a 71-percent price increase for its annual iron ore contracts
with China.
This was followed by similar increases by other
major mining companies such as Rio Tinto and BHP Billiton of
Australia. The steel mills claim that higher prices are inadequate
to cover gains in raw materials costs. Industry experts believe
global steel prices will continue to soar as the cost of
steelmaking—including iron ore, coking coal and scrap—have
skyrocketed.
Consequently, the prices of steel materials like
slabs, billets, hot rolled coils (HRC), and cold rolled coils (CRC)
have doubled compared with last December prices.
Slabs and billets are priced from $950 to $980
per metric ton while HRC and CRC cost above $1,000 per metric ton
and over $1,300 per metric ton, respectively.
Moreover, supply from major steel-producing
countries such as Japan, Korea, Australia, Taiwan, India and even
China has been very tight because of their growing domestic demand.
As a result of these price movements in steel, local prices for
construction materials such as reinforcing bars, galvanized iron
sheets and other types of steel-based materials have increased
likewise by as much as 50 percent.
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