Janet Silvera, Freelance Writer WESTERN BUREAU:
A STEEP escalation in world steel prices has caused the island's building contractors to discontinue the practice of giving quotes on projects and forced developers into increasing the price on houses by as much as 25 per cent.
In the last six weeks major steel importers Tank-Weld Metals has pushed up the price of steel by approximately 46 per cent and on Friday morning Rebar and Merchant bars went up by $4,000 per tonne, with indications that further increases are likely.
The collapse of the United States dollar against the other major currencies, the expansion of the world economy and the high demand for the material are being blamed for the volatility in the market.
"Commodity prices are all quoted in US dollars and with the dollar down 30 per cent against the euro, it takes more dollars to purchase these commodities," Tank-Weld's Philip Junor explained.
He said steel mills are producing at 95-100 per cent of capacity, causing demand to outstrip supply for finished and semi finished material. "This has affected inputs such as scrap, iron ore and coke.
The high demand has caused a shortage of ships worldwide, which in turn has given international freight operators the latitude to increase between 150 to 200 per cent.
"We at Tank-Weld are faced with additional surcharges and even cancellations of confirmed orders as the mills look to protect themselves," Mr. Junor said.
Since the uncertainty in the market, companies such as Montego Bay's largest hardware merchant, Discount Lumber and Hardware, have put their public relations strategy in overdrive. "We have to be constantly explaining to our customers that it's the world market that is affecting the goods," said Managing Director, Basil Johnson.
Meanwhile quotes on building a home or even a room are a thing of the past and building contractors shy away from giving estimates. However, if they do quote, they ensure the escalation clause dating from the date of the estimate is included.
"The escalation clause starts immediately, I now advise my clients to have 20 per cent more in their budget for unforeseen circumstances, said Norman Tulloch of Tulloch's Construction and Property Management.
And at least one major Montego Bay housing development is feeling the ripples. The Bogue Village which started out in November 2002, by selling their 730 square foot, two bedroom units for $2.5 million had to move its price to $3.15 million in less than a year.
Homeowners occupying houses in Phase one and two did not experience the crunch, but Phase four residents will pay the escalation cost.
"The price of steel is a big portion of the increase, but other factors such as lumber and the devaluation of the dollar are the immediate effect," said Gore Developments Limited Project Manager, Ilan Peleg.
He said about 30 per cent of the cost for building the 1,625 homes in the complex is affected by the increase in steel and lumber, but they have worked hard in keeping the price down.
