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News Top Stories Ayala Land to completeprojects despite inflation
News Top Stories Ayala Land to completeprojects despite inflation
| Ayala Land to completeprojects despite inflation |
| Monday, 07 July 2008 12:16 | |||
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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. 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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