Building material prices surge in Saudi Arabia

Building material prices surge in Saudi Arabia
The increase in prices for materials comes as construction activity increased in Q1, according to a new report by real estate consultancy firm JLL. (Supplied)
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Updated 14 May 2021

Building material prices surge in Saudi Arabia

Building material prices surge in Saudi Arabia
  • While steel made the biggest surge, the growth slowed as the year progressed, going from 40% to 28% in March

RIYADH: The price of building materials, especially steel, rose in the first quarter (Q1) of this year, as construction activity began to recover from the slowdown caused by the coronavirus disease pandemic last year.

The price of steel surged to SR3,514.73 ($937.26) per ton in Q1 of 2021, a 33 percent increase year-on-year and the highest price since 2008, according to the latest data from the General Authority for Statistics (GASTAT).

The cost of ready-mix concrete rose 14 percent year-on-year to SR203.9 per cubic meter during the same timeframe, while cables rose 21 percent year-on-year to SR38.33 per meter.

In addition, wood prices rose 15 percent year-on-year to SR3,067.49 and cement was up 5 percent to SR14.03 per 50kg bag in Q1.

While steel made the biggest surge, the growth slowed as the year progressed, going from 40 percent growth in January to 28 percent growth in March.

The increase in prices for materials comes as construction activity increased in Q1, according to a new report by real estate consultancy firm JLL.

“From a supply perspective, the first quarter recorded an increase in construction activity,” the JLL report said. According to its figures, in the residential sector in Riyadh 7,700 units were handed over in Q1, bringing the total to 1.3 million units in the capital. In Jeddah, around 2,000 units were added, bringing the total to 838,000 units.

The report estimated that 36,000 units in Riyadh and 12,000 units in Jeddah are due to be delivered this year.

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The report estimated that 36,000 units in Riyadh and 12,000 units in Jeddah are due to be delivered this year.

In addition to the increased activity in the residential sector, Riyadh is also set to see an additional 386,000 square meters of office space, 240 square meters of retail space and 2,800 new hotels rooms built this year.

In Jeddah, the city is forecast to gain an additional 43,000 square meters of office space, 200,000 square meters of retail space and 2,700 new hotel rooms.

However, JLL said that while it remained “cautious about the timely delivery of future projects” it believed that going forward “the government initiatives that are pushing Riyadh to be the business hub of the region are expected to spur local and international demand.”

Announced in January this year by Crown Prince Mohammed bin Salman, the ambitious Riyadh Strategy 2030 aims to create 35,000 new jobs for Saudi nationals, pump up to SR70 billion into the national economy and double the size of the capital city’s population to as many as 20 million by 2030.

The increased development in the first quarter is a welcome change from 2020, when construction activity declined in the wake of restrictions due to the pandemic.

According to the Contract Awards Index produced by the US-Saudi Business Council (USSBC), the total value of construction contracts awarded in Saudi Arabia during the third quarter of 2020 declined by 84 percent year-on-year.

However, Albara’a Alwazir, an economist at the USSBC, told Arab News that he was confident the sector would rebound, just as it had done after the downturn between 2016 and 2018. “While numerous projects have been delayed because of the pandemic, the government has stated that there will be a continued focus on megaprojects especially those that relate to Vision 2030,” he added.

This was already evident in the USSBC’s Q4 report, which found that the total value of contracts rose 115 percent quarter-on-quarter in the last three months of 2020.


Shipping industry faces ESG heat from lenders

Shipping industry faces ESG heat from lenders
Updated 10 sec ago

Shipping industry faces ESG heat from lenders

Shipping industry faces ESG heat from lenders

LONDON: Banks are demanding much stricter environmental criteria when financing shipping companies as investor pressure grows on the sector to accelerate going greener, according to Boston Consulting Group (BCG).

Shipping, which transports about 90 percent of world trade, accounts for nearly 3 percent of the world’s CO2 emissions and BCG forecast the industry will need $2.4 trillion to achieve net-zero emissions by 2050.

“ESG-driven requests are already prompting more action from banks. Shipping is already feeling it and they (shipping companies) are under pressure now,” said Peter Jameson, partner with BCG, which are consultants for the COP26 UN climate summit that starts on Oct. 31.

Standard Chartered has already provided loans linked to sustainability targets for drilling group Odfjell and the shipping division of Oman’s Asyad Group, the bank has said.

“When looking at lending on new assets, banks are going to create a bigger conduit for CO2 reductions through their policies,” Jameson told Reuters.

“The banks are also seeing insurance companies feeling shareholder pressure and this is also causing big pension funds to reassess.”

ESG-related assets under management are estimated to represent up to 80 percent of total lending to shipping by 2030, BCG said.

UN shipping agency the International Maritime Organization has said it aims to reduce overall greenhouse gas (GHG) emissions from ships by 50 percent from 2008 levels by 2050, but industry groups are calling for more progress from governments.


Global FDI flows rise by over 70% despite a divergence in inflows for different countries: Economic wrap

Global FDI flows rise by over 70% despite a divergence in inflows for different countries: Economic wrap
Updated 6 min 11 sec ago

Global FDI flows rise by over 70% despite a divergence in inflows for different countries: Economic wrap

Global FDI flows rise by over 70% despite a divergence in inflows for different countries: Economic wrap

According to UN data, global foreign direct investment flows were valued at $852 billion in the first half of 2021. This reflected a partial-year growth of 78 percent when compared to 2020.

In the US, inflows were up by 90 percent, driven by a surge in cross-border mergers and acquisitions.

However, James Zhan, the United Nations Conference on Trade and Development’s director of investment and enterprise, said that this “mask(s) the growing divergence in FDI flows between developed and developing economies.”

While FDI inflows to high-income countries leapt by a massive partial-year rate of 117 percent, low-income countries faced a 9 percent decline in inflows.

Eurozone’s construction

The euro area’s construction output fell by 1.6 percent year-on-year in August, data released by Eurostat revealed. This was driven by a 2.9 percent annual decline in civil engineering production and a 1.3 percent fall in building construction.

Construction fell the most in Spain and Romania as they saw their annual construction output slip by 13.9 percent and 7 percent respectively. 

On the other hand, Hungary experienced the highest jump in yearly construction production, growing by 10.2 percent. Poland was the second highest with a 7.9 percent year-on-year rise.

On a monthly basis, the zone’s construction also declined by 1.3 percent in August when compared to July.

European trade balances

Switzerland’s trade surplus decreased to CHF4.4 billion in September down from the all-time high of CHF4.6 billion recorded in the previous month, official data showed. 

Exports declined by a monthly rate of 0.2 percent in September. This was driven by a fall in exports to a number of countries. Most notably, exports to the US and Japan slumped by 22.2 percent and 9.6 percent respectively. 

On the other hand, imports rose by 0.9 percent to reach its highest level in 20 months. Imports of pharmaceutical products experienced the highest increase as it grew by 5.2 percent.

Meanwhile, Spain's trade deficit steeply expanded to €3.87 billion in August from a deficit of €1.73 billion in the same month last year, according to official data. 

This was the largest monthly trade deficit since September 2019 as imports leaped by 33.9 percent year-on-year to €26 billion. This was fuelled by an 11.4 percent rise in energy purchases and a 7.9 percent jump in imports of chemical products. Meanwhile, exports rose at a slower 25.1 percent growth rate to reach €22 billion.

During the first eight months of the year, Spain's trade deficit rose to €10.87 billion, from €9.6 billion in the same period a year earlier.

Indonesia’s interest rate on hold

Indonesia's central bank kept interest rates steady at its record low level of 3.5 percent on Monday. Rates remain low to boost economic activity, the bank said.

Bank Indonesia expects the economy to grow by 3.5-4.3 percent in 2021.


UK sets out net zero strategy as it gears up to host COP26

UK sets out net zero strategy as it gears up to host COP26
Updated 20 min 24 sec ago

UK sets out net zero strategy as it gears up to host COP26

UK sets out net zero strategy as it gears up to host COP26

LONDON: British Prime Minister Boris Johnson on Tuesday set out his ambition for a green revolution that he hopes will force Western economies to kick their addiction to fossil fuels.

Britain at the end of the month hosts the COP26 UN climate talks in Glasgow, Scotland, which aim to strengthen global action on global warming.

“With the major climate summit COP26 just around the corner, our strategy sets the example for other countries to build back greener too as we lead the charge towards global net zero,” Johnson said.

Johnson, who once expressed skepticism about climate change, presented his 368-page net zero strategy as a document that would put the UK at the vanguard of green economies.

“The UK leads the world in the race to net zero,” he said in the foreword to the “Net Zero Strategy: Build Back Greener.”

“The likes of China and Russia are following our lead with their own net zero targets, as prices tumble and green tech becomes the global norm,” he said.

The net-zero strategy is essentially a series of long-term promises, some with caveats, to shift the world's fifth largest economy towards green technologies — from moving to clean electricity “subject to security and supply” to “setting a path” to low-carbon heating in British homes.

It aims to secure 440,000 jobs and unlock £90 billion ($124 billion) of private investment by 2030.

It also aims to help Britain gain a competitive edge in low-carbon technologies such as heat pumps, electric vehicles, carbon capture and storage and hydrogen.

The government aims to be powered entirely by clean electricity, subject to security of supply, by 2035. It aims to have 40 GW of offshore wind power by 2030, as well as 1 GW of floating offshore wind.

Britain will also deliver 5 GW of hydrogen production capacity by 2030 while cutting its emissions from oil and gas by half.

The government aims to deploy at least 5 million tons of CO2 a year of engineered greenhouse gas removals by 2030.

Earlier on Tuesday, Johnson announced nearly £10 billion of private investment in green projects at an investment summit in London.


Indonesia plans to ‘hit the brakes’ on raw commodity exports

Indonesia plans to ‘hit the brakes’ on raw commodity exports
Updated 33 min 5 sec ago

Indonesia plans to ‘hit the brakes’ on raw commodity exports

Indonesia plans to ‘hit the brakes’ on raw commodity exports

BEBATU: Indonesia is planning to “hit the brakes” on the export of all raw commodities in an effort to attract investment in onshore resource processing and create jobs, President Joko Widodo said on Tuesday.

Indonesia has banned a number of unprocessed ore exports including nickel, tin and copper in a bid to encourage downstream industries, including producing batteries for electric vehicles and aluminum industry, among others.

The government is currently conducting a study for the downstreaming of other commodities with a long-term goal of no longer selling just raw materials, the president, who is popularly known as Jokowi, said in an interview in the village of Bebatu on Borneo island.

A new policy would hopefully emerge next year, he said.

“Don’t be surprised. We had nickel (export ban) before. Next year, we may stop bauxite, the next year we may stop something else,” Jokowi said.

Under current regulations, Indonesia will ban bauxite shipments in 2023.

Stopping exports of unprocessed palm oil was being considered, he said, although he declined to provide an estimate of when such policy could be issued.


Chipmaker GlobalFoundries targets valuation of about $25bn in US IPO

Chipmaker GlobalFoundries targets valuation of about $25bn in US IPO
Updated 38 min 22 sec ago

Chipmaker GlobalFoundries targets valuation of about $25bn in US IPO

Chipmaker GlobalFoundries targets valuation of about $25bn in US IPO

BENGALURU: Chipmaker GlobalFoundries, owned by Abu Dhabi’s sovereign wealth fund Mubadala Investment Co., is aiming for a valuation of about $25 billion in its initial public offering in the US.

The IPO, one of the most hotly anticipated listings, is expected to cap a record year for flotations, after several big names such as Robinhood Markets Inc., Coinbase Global Inc. and Roblox Corp. capitalized on the stock markets boom earlier in 2021.

Alongside electric-vehicle maker Rivian’s stock market debut, GlobalFoundries is expected to headline an unusually crowded year-end IPO schedule.

IPOs in the US have already touched an all-time record of over $250 billion this year, according to data from Dealogic.

In a filing to stock exchanges on Tuesday, GlobalFoundries set a price range between $42 and $47 a share for its stock market flotation. At the upper end of the range, the company is expected to raise about $2.6 billion.

Including the “greenshoe option,” which allows companies to sell additional shares during an IPO, GlobalFoundries could be valued at about $26 billion.

Mubadala, which is selling 22 million shares in the IPO, will hold an 89.4 percent stake in GlobalFoundries and control 89.4 percent of the voting power, following the listing and the private placement, according to the latest filing.