Firms with no cost escalation clauses in their tender contracts are hurting, according to the Master Builders Association Malaysia, which represents more than 1,000 members.

It is now seeking help from the government to shield them from the risk of surging prices.

“Contractors who previously locked in the building material prices would feel the impact of the price increase now,” Sufri Mohd Zin, president of the association, said in an email to Bloomberg.

“The rise in materials costs is not good for the industry, be it manufacturers, suppliers, contractors, developers and the people.”

Cost pressures from a year-long rally in commodities are being felt across the building and property industries in Malaysia, adding to hurdles faced by the government as it struggles to revive an economy pummelled by the worsening spread of Covid-19.

The rising costs also come as the government is looking to revive mega infrastructure projects and has set aside a record RM69 billion for development expenditure in its 2021 budget.

The government said on Saturday it will shorten business working hours from today and cut public transport capacity to reduce movement, while high-risk places will also be shut immediately. New cases in Malaysia hit a record of almost 7,000 on Sunday.

A gauge of Malaysian builders have tumbled almost 9% this month, with Gamuda Bhd, the largest by market value, slumping 12%. IJM Corp Bhd has fallen 11% and Kerjaya Prospek Group Bhd is down 8.2%.

Builders have proposed to the government that a variation of price clause be included in projects to shield them from price surges in building materials, said Sufri. The Construction Industry Development Board is also recommending a similar clause for government projects, he said. CIDB declined to comment when contacted.

Prices of 10mm steel T-bars in Malaysia, one of the key materials used in the building industry, have jumped as much as 30% from September to more than RM3,000 in March, according to data on the Master Builders Association’s website.

Some builders do not think the surge in steel prices will continue for long. Also, China’s bid to rein in surging prices has spurred declines across its markets, with aluminum, steel and iron ore tumbling.

The price surge in steel is expected to last until year-end but it will balance out eventually, Kerjaya Prospek’s executive chairman, Tee Eng Ho, said. “I don’t think this price will be sustained.”

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