Saudi Construction Costs Rise as Hormuz Disruption Affects Supply Chains
Saudi Arabia: Construction costs in Saudi Arabia are increasing as disruption around the Strait of Hormuz has shifted the movement of materials from sea to road transport, according to industry experts cited by AGBI. Materials that were previously shipped through ports such as Dammam are now being routed through Jeddah or Yanbu before being transported by road to project sites. Saudi Contractors Authority data showed that cement prices changed little, while electrical wire and cable prices increased by as much as 22% and 26% year on year, respectively.
Saudi Arabia awarded SAR 111 billion (USD 29.6 billion) in construction contracts between January and July, an increase of almost 60% year on year, despite the disruption affecting regional supply chains. Seymour said project timelines had been managed through changes in planning and sequencing, although these measures had not removed the additional costs. He said: “The delay has happened, the planning has had to happen, and that pre-planning has stretched right out,” Seymour said. “But that does not take the cost away. This is going to cost more.” Some additional costs have remained with parties carrying the risk under fixed-price contracts, while some clients have accepted locally available substitutes to avoid delays. Seymour said projects linked to Expo 2030 and the 2034 World Cup have sufficient time to absorb the disruption without affecting delivery dates. The supply-chain pressures come alongside changes to Saudi Arabia’s Public Investment Fund strategy, which has placed greater emphasis on private-sector participation and removed references to Neom’s the Line and Trojena from its new five-year strategy.
Source: AGBI
