The quarterly index measures changes in contractor input costs such as labour, materials and plant items. Over the 12 months up to December 2011 the price of nearly all commodities decreased, with the exception of crude oil, cement, reinforced bars and steel beams. Rubber, tin and nickel showed the most movement during the year, decreasing in price by 32%, 26% and 25% respectively.
Nick Smith, head of cost and commercial for EC Harris in the Middle East said that commodity prices have shown huge volatility over the past year, reflecting an uncertain recovery in world markets. “I don’t think we will see an improvement this year, but tender prices should pick up over the next couple of years as a number of large projects across the Gulf region are given the go ahead and put out to tender,” he said.
EC Harris predicts that consumer price inflation, material prices and construction labour rates will all be flat in 2012, before an expected rise in 2013. With new projects unlikely to be put out to tender until 2013 at the earliest, EC Harris is warning contractors in the UAE that they face a tough 12 months and will have to absorb any increases in labour, plant or materials which will impact margins.
Looking to 2013, EC Harris forecasts that tender prices are likely to rise by up to 4% during the year, followed by a steady growth of around 5% in 2014 and 2015 as confidence returns to the global economy and finance becomes more readily available.
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