West Asia Conflict Sparks Price Hikes, Threatening Nepal's Construction Sector

Kathmandu. The ongoing conflict in West Asia has impacted Nepal's construction sector. Due to the sharp rise in petroleum prices stemming from the conflict between the US-Israel and Iran, the cost of essential construction materials like cement, rebar, and bitumen has increased across the board.

Currently, the price of crude oil in the international market has reached $113 per barrel, with potential for further increases if the conflict prolongs. Ravi Singh, President of the Nepal Contractors' Association, stated that construction works nationwide are being affected due to the unexpected and excessive price surge in all construction materials following the rise in petroleum prices. He noted that the construction sector is nearly at a standstill due to soaring material costs.

President Singh informed that producers have significantly increased the prices of essential materials such as cement, rebar, and bitumen. According to him, the recent price hikes include nearly NPR 50 per bag for cement, NPR 18 to 20 per kilogram for rebar, and up to NPR 45 per kilogram for bitumen.

The price of bitumen, which was NPR 85 before the petroleum price hike, has now reached NPR 130, while the price of rebar has increased from NPR 72 to NPR 85. OPC cement was previously available for NPR 680 per bag, and PPC cement for NPR 780. However, both types of cement have now increased by NPR 20 per bag, reaching NPR 700 and NPR 800, respectively.

Producer 'Cartelization' and Artificial Price Hikes

President Singh accused cement and rebar industrialists of increasing prices through 'cartelization'. He stated, 'Cement and rebar producers have cut production to create scarcity in the market and raise rates.' He argued that industrialists are raising prices now under the pretext that international crude oil prices have risen from $70 to over $110 per barrel.

He mentioned that prices were increased for goods already in stock, even though raw materials from abroad are expected to take another two to three months to arrive. Due to the unbearable inflation making it impossible to continue work, construction entrepreneurs have demanded that the government either adjust prices or declare a 'construction holiday' (suspension of construction work). However, he noted that the interim government has not responded.

'We have drawn the government's attention to our demands,' Singh said, 'Since the current government is preparing to leave, there has been no response. We will re-apply pressure on this issue once the new government takes charge.'

He stated that the construction sector is not only slowing down but is on the verge of a complete shutdown as it is becoming technically and financially impossible to proceed with work under the current circumstances. Construction entrepreneurs have alerted the state to the serious situation, noting that projects nationwide are beginning to halt due to the impact of inflation.

Construction Work May Halt If War Prolongs

Dr. Bijay Jaisi, Director General of the Department of Roads, stated that while construction work on the country's main road projects has not stopped yet, the work is being affected due to the increase in fuel prices. He clarified that work has not stopped because construction entrepreneurs have enough materials in stock for 15 days to one month. 'Work has not completely stopped, but there is a risk that fuel problems will gradually appear and costs will rise,' Dr. Jaisi said.

According to Director General Jaisi, major and important projects such as the Suryabinayak–Dhulikhel road section, the Nagdhunga Tunnel, and the Mugling–Pokhara Highway are proceeding regularly. Although entrepreneurs are managing with previously stocked materials, he indicated that the impact of the international conflict and the resulting price hikes will soon become apparent. Dr. Jaisi said, 'If the current problem continues for another one or two weeks and the supply of fuel and construction materials does not become smooth, construction work could face problems.'

Construction entrepreneurs have been drawing the government's attention to the increased transportation and production costs of construction materials due to the recent sharp rise in fuel prices. Nevertheless, Director General Jaisi informed that the department is coordinating to speed up work on national pride and strategic roads.