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Firms renegotiate prices of construction materials

Construction material suppliers are receiving cancellation requests on a daily basis. (CRAIG SCARR) 

By Joseph George

Companies are cancelling orders from building material suppliers in an attempt to renegotiate prices of construction materials.

Prices of most construction materials have dropped by around 15 to 30 per cent and according to building material suppliers, developers and contractors are unwilling to purchase materials at previously agreed prices.

Adnan George, Territory Manager at Janaco International, yesterday said he had received a request to delay the delivery of €10 million (Dh7.52m) worth of building material supplies.

"Today we received an order from a project in Palm Deira requesting us to delay the deliveries until December 2009 and another one until December 2010. According to them they have been instructed by engineers to slowdown the orders," said George.

One sub contractor, speaking on condition of anonymity during the Gulf Building Material and Technology Conference in Dubai, said Nakheel had cancelled orders worth several hundred million dirhams.

Several other suppliers told Emirates Business that they have been receiving cancellation requests on a daily basis.

Rakesh Mirani, Managing Director of Al Raha International, suppliers of cement, steel and plywood, said his company alone had received many cancellation requests during the last few weeks.

"The trend started ever since the steel prices started falling. More than the contractors, it is the developers who are more keen on canceling the contracts as they want to make the best use of the present situation," said Mirani.

Ahmed Shaikhani, Managing Director, Memon Investments, said construction cost in the UAE has dropped significantly and many developers are renegotiating contracts with construction firms.

"As for Memon Investments, we are definitely renegotiating our contracts with our construction partners and making necessary adjustments to realign with the current construction costs," said Shaikhani.

Developers and contractors are requesting a minimum timeframe of six to 12 months for materials to be delivered, said George. "Until last month they used to call me every five days asking for the status of freight and delivers. Things have suddenly changed and everyone now want to delay placing the orders," he added.

According to a spokesperson from Access Building Materials, many developers and contractors who are working on projects that are proceeding as scheduled are waiting for the prices to fall further.