Higher fuel, material costs squeeze developers, but Sarawak supply chains hold firm

File photo for illustration purposes only.

By DayakDaily Team

KUCHING, June 19: Construction costs in Kuching and across Sarawak are facing upward pressure amid geopolitical tensions in the Gulf region and concerns over disruptions to global energy and shipping routes, but local supply chains remain stable with no widespread shortages of key construction materials reported.

While the conflict has contributed to higher logistics, fuel and material costs, Sarawak Housing and Real Estate Developers’ Association (Sheda) advisor Dato Sim Kiang Chiok however said there is currently no indication of a severe shortage of construction materials in Sarawak, allowing most projects to continue according to schedule.

He noted that Works Minister Dato Sri Alexander Nanta Linggi had recently stated that although the conflict has increased logistics, fuel and material costs, the overall impact remains manageable.

The minister had indicated that contractors are still able to absorb the price increases and that ongoing infrastructure projects would not be delayed or deferred.

He added that the Ministry of Works, together with the Construction Industry Development Board (CIDB) and the Public Works Department (JKR), had already prepared short-, medium- and long-term mitigation measures to address any further escalation in construction costs.

For Sarawak’s private development sector, Sim said market activity remains healthy despite higher construction expenses.

Industry feedback, he said, suggests developers are experiencing increases in diesel, transportation, steel, cement and imported building material costs.

“Nevertheless, local supply chains remain largely intact, and no widespread shortages of cement, steel bars, aggregates or ready-mix concrete have been reported in Sarawak. The more immediate concern is the gradual increase in input costs rather than the availability of materials,” he said in a statement today.

Sim pointed out that private developers in Kuching could see profit margins come under pressure if material prices continue to rise.
However, he stressed that the current situation bears little resemblance to the severe supply disruptions experienced during the Covid-19 pandemic.

“Unless the Gulf conflict significantly affects global fuel supplies for a prolonged period, Sarawak’s construction sector is expected to remain resilient, with moderate cost escalation rather than a full-blown supply crisis,” he said.

Looking ahead, Sim expressed cautious optimism following the recent Memorandum of Understanding (MoU) signed between the United States and Iran, which has helped ease concerns over global energy supply disruptions.

He said the agreement has paved the way for the reopening of the Strait of Hormuz, a critical shipping route that handles about one-fifth of the world’s oil and liquefied natural gas trade.

Following the announcement, global oil prices retreated significantly, with both Brent crude and West Texas Intermediate (WTI) crude falling to their lowest levels in several months as markets anticipated improved supply conditions.

Sim said lower oil and fuel prices could eventually benefit Sarawak’s construction and property development sector by reducing transportation, logistics and manufacturing costs associated with cement, steel, aggregates and other building materials.

“While the benefits may take several months to filter through the supply chain, developers and contractors are hopeful that the recent price pressures experienced during the Gulf conflict will ease in the second half of 2026,” he said.

Nevertheless, he cautioned that industry players remain vigilant as the peace agreement is still at an interim stage and any renewed disruption to global energy markets could once again drive up construction costs.

“While there are encouraging signs, the industry will continue to monitor developments closely to ensure projects remain viable and construction activity continues uninterrupted,” he added. — DayakDaily