Manpower, material constraints behind cost spike for construction firms

There has been a shortage of workers over the past year due to tighter border rules and safe management measures.
There has been a shortage of workers over the past year due to tighter border rules and safe management measures.PHOTO: ST FILE

SINGAPORE - Manpower and building material costs in the construction sector have spiked since the Covid-19 pandemic began, delaying projects and hitting the cash flow for companies in the supply chain.

Here are the main costs companies are grappling with:

1. Salaries

Before the pandemic, a basic-skilled worker earned about $800 a month, The Straits Times understands. Higher-skilled workers earned $1,600.

But there has been a shortage of workers over the past year due to tighter border rules and safe management measures.

Companies with workers whose work permits have expired have also faced difficulties renewing them.

As a result, salaries have gone up by 10 per cent to 50 per cent as companies compete for a shrinking pool of manpower. Poaching workers with the promise of higher pay has become more common.

The Singapore Contractors Association (Scal) said that average wage costs have gone up 46 per cent for similar jobs compared with pre-pandemic times.

2. Foreign worker levies

Contractors are also feeling the pinch from foreign worker levies, which range from $300 to $950 a month, depending on a worker's skill level.

The levy rebate for eligible building workers rose from $90 a month before May to $250 for the period between May and the end of December.

Lian Beng executive chairman Ong Pang Aik said that while the rebates have helped, the Government should keep lowering the levy until the industry recovers, to offset the steep rise in salaries.

A worker's remuneration could be double his basic wage once costs like the levy, accommodation, food expenses, overtime pay as well as mandatory Covid-19 testing and other safe management measures are factored in, ST understands.

Workers coming into Singapore must also serve a stay-home notice at dedicated facilities that their company has to pay for.

3. Building materials

Prices for key building materials such as steel, copper and aluminium have shot up since March last year due to supply constraints.

Mr Darrell Lim, executive director of BRC Asia, said a drop in production in China as lockdowns hampered supply, together with rising global demand, has pushed prices to record highs.

Steel, for example, has surged by almost 40 per cent a tonne since early last year, noted the Building and Construction Authority.

As a result, material costs for steel rebar have shot up 54 per cent, aluminium by 59 per cent, copper by 81 per cent and concrete by more than 20 per cent, according to Scal.

Other materials such as cement, granite, sand and ready-made concrete have risen between 3 per cent and 10 per cent.

4. Shipping

Singapore imports most of its building materials. A backlog in global deliveries caused by the closure of several key Chinese port terminals has driven up freight rates, said Mr Mick Aw, senior adviser at consulting firm Moore Stephens.

These disruptions have resulted in a shortage of ships and containers, exacerbating cost pressures on construction companies here.

Freight rates from China to Europe have already doubled since the middle of last year, while rates between Asia and the United States are up by 400 per cent, Mr Aw said.