Indonesian checks on barges disrupt granite supply to Singapore

The Straits Times, March 3, 2007


THE construction industry, still grappling with Indonesia's recent ban on sand exports, has a new problem: a disruption in the supply of granite aggregate as a result of Indonesia's efforts to thwart sand smuggling.

The Indonesian authorities have stepped up checks on barges carrying granite, reportedly detaining 13 barges earlier this week for allegedly trying to smuggle sand into Singapore.

This shortfall in supply has contributed to a second wave of price hikes, in which granite aggregate has shot up from $25 to $70 per tonne. This has seriously affected the industry, said the Singapore Contractors Association (Scal).

Granite aggregate is used primarily to make concrete.

In a joint statement released yesterday, the Ministry of National Development (MND) and the Building & Construction Authority (BCA) said the Government is releasing some granite aggregate to the industry from its stockpile to make up for any immediate shortfall.

It is also procuring granite from alternative sources and urges the private sector to do the same.

But if the disruptions continue, the Government said it expects granite aggregate prices to rise further due to higher transport costs.

As it did with sand, the Government said it will work out cost-sharing arrangements with contractors and suppliers of existing public sector projects.

'The current situation is still not stable,' said Scal executive director Simon Lee. 'If prolonged, the industry will be badly shaken by this volatility, and this will hurt its recovery.'

Since March 1, the price of sand from the BCA stockpile has also increased, from $25 to $60 per tonne. This is in line with prevailing market prices, which have risen due to higher transport costs.

Contractors told The Straits Times that concrete prices, previously around $70 per cubic metre, have now shot up to about $200.

Scal president Desmond Hill said the BCA stockpile should 'provide some comfort' to the industry, since projects will not come to a standstill. But he added that many contractors, especially the smaller players, are worried that they cannot cope with the price hikes.

Other contractors like Straits Construction have 'bitten the bullet and given in to the high prices', said general manager Kenneth Loo.

'Our projects are going as normal now, as we've paid the price for our concrete,' he said.

But even companies prepared to pay higher prices may not be able to find enough supply, said Mr Chua Eng Him, honorary treasurer of the Ready-Mixed Concrete Association of Singapore.

'The production of concrete has gone down even further. We were not prepared for a situation like that, and now there is talk of finding other sources,' he said.

One granite importer, who declined to be named, told The Straits Times his business has been affected due to tightened security in Indonesian waters. He would not comment on whether any of his barges have been detained.

Singapore imports most of its granite aggregate - about 10 million tonnes a year - from Indonesia. It also imported eight million tonnes of sand from there before the ban.

Only a small amount of granite aggregate comes from Malaysia, due to logistics and traffic at the Causeway, said Mr Chua.

Reiterating their call for the industry to move towards alternative, greener methods such as steel construction to reduce its reliance on concrete, the BCA and MND said they will continue to work with the industry to diversify supply sources for construction materials.