Building materials prices expected to rise by 5% in the third quarter of 2008

The company further revealed that record oil prices, rising freight overheads and the strong demand witnessed in the GCC are the major causes of the steep increase in prices.

The price increase follows a rise in prices earlier this year triggered by higher freight charges due to local fuel hike, restrictions on log cutting by countries like Malaysia, Indonesia and Burma, appreciation in the Euro and increased local demand.

Danube predicts prices to continue rising until a drop in oil prices or the increased availability of freight shipments.

One of the construction products with the highest price increase was steel, which has doubled since January when it was at $700 per ton, reaching $1,500 per ton in July.

Costs of wood products such as timber and film-faced plywood have also gone up by at least 25% during the past three months, with the latter now costing around Dhs130 per piece from Dhs105 a few months ago.

Danube also revealed that whitewood prices have jumped by 20% to reach Dhs1,100 per cubic meter; aluminum prices have increased by almost 23% in the first quarter of 2008 compared to the average price in 2007; and red meranti has risen from $700 per ton to $900 per ton.

"The inflation follows the increase experienced earlier this year when prices rose between 10 to 15%. Continuous growth in the prices of core building materials will have huge financial implications on the local construction industry. We anticipate that the real estate and construction industry will feel a significant impact of the rocketing oil prices and the rising freight costs in the coming months, considering the massive projects that are being launched,"

said Rizwan Sajan, Chairman, Danube.

The steep increase in the price of steel is a source of major concern for Danube, with the company having announced its foray into steel production with an investment of Dhs200m.

In addition, plans to invest Dhs50m into the manufacturing of aluminum and glass products is also in place, which is expected to curb the rising costs of these materials in the region.

With aims to address the booming demand for high quality construction materials while buffering customers from rising costs due to various economic factors, Danube has further strengthened its presence in UAE by investing Dhs80m into new facilities in Ras Al Khaimah and Ajman.

"Amidst the widespread need for high quality core building materials, our focus is to invest in multiplying our resources and enhancing our production outputs, with an ultimate goal to placate the rising prices of these valuable supplies. By establishing new facilities across the UAE, we are expecting to pass on the savings from the cutbacks in transportation expenses to our local and regional customers. With our multimillion dollar investments in expanding our operations and product offerings, we are hoping to do our part in pushing the growth of both the construction and real estate sectors," concluded Sajan.

Danube is one of the largest building suppliers in the UAE and the region with an extensive portfolio of 10,000 selections ranging from MDF, plywood, timber, laminates, veneers to sanitary fittings, hardware, ironmongery, aluminium and glass among others.

In 2004, the company began its operations in Jebel Ali with a 19,000-square metre warehouse cum office, which serves as its regional hub and caters to booming markets in UAE, Oman, Bahrain and India.