Turning Global Supply Challenges into Opportunities That Strengthen Local Content
Dr. Saddam Bin Keda, director of Al-Masar Factory, emphasized that the industrial sector does not view the rise in production costs for construction materials at this stage merely as a crisis, but rather as an opportunity to boost local content, increase efficiency, and build a more stable and sustainable market in the long term.
Bin Keda explained that the market is also affected by the ease or difficulty of accessing raw materials, logistics risks, and the regularity of global supplies. This is what is causing caution among both manufacturers and developers.
The real estate newspaper «Amlak» conducted an in-depth interview with Dr. Saddam Bin Keda regarding fluctuations in prices of construction materials and raw materials. Here is the text of the interview:
Which raw materials have experienced the highest levels of price volatility?
The highest volatility is often seen in metals and energy-related materials and global supply chains, such as copper, aluminum, and iron, in addition to petrochemicals used in a wide range of building materials, paints, and adhesives. Domestically, cement prices are typically less volatile than those of materials directly linked to global imports, while lumber remains one of the materials most sensitive to transportation and shipping costs.
How are local manufacturers coping with market stability in light of price fluctuations of imported raw materials?
Local factories have become more reliant on three key strategies:
First: Diversifying procurement sources and avoiding reliance on a single supplier.
Second: Building a secure working inventory of sensitive materials.
Third: Entering into medium- and long-term contracts to lock in a portion of costs.
There is also a growing trend toward improving operational efficiency and reducing waste so that not every increase is passed directly on to the customer.
Does the local market have the capacity to fill global supply gaps? And what are its main challenges?
Yes, the Saudi market has a high capacity to compensate for global supply shortages thanks to government support and the localization of industries under "Vision 2030." At «Al-Masar Factory,» we have relied on local raw materials, which has strengthened our stability and enabled us to lower prices despite global crises.
The challenges lie in developing supply chains, securing certain specialized materials, competition, and training personnel, but we are optimistic that we will overcome them. With continued support, the local industrial sector has promising potential that extends beyond self-sufficiency to strong regional and global competitiveness.
How has the rise in the cost of raw materials affected real estate developers and residential projects?
It has clearly impacted construction costs, especially in projects with long timelines or contracts that were not based on flexible assumptions. At this stage, developers are facing cost increases not just for a single material, but for a comprehensive package that includes materials, transportation, and certain site-related services. As a result, cost control has become more complex, and the margin for error in initial pricing is much smaller than before. Consequently, many developers have begun recalculating actual costs, though to varying degrees.
Which materials place a direct financial burden on real estate developers?
The materials with the greatest financial impact are typically those that account for a large portion of the total cost or are subject to rapid global price fluctuations, such as iron, copper, aluminum, and certain chemical and petrochemical products used in insulation, paints, and adhesives.
How do long-term contracts between manufacturers and developers mitigate price volatility?
Long-term contracts are the most important tools for stability at this stage; while they do not completely prevent volatility, but they do reduce their occurrence and provide both parties with greater clarity in planning—whether in production, execution, or cash flow. They protect the manufacturer from sharp losses and shield the developer from sudden price spikes.
What tools can the relevant authorities use to regulate market prices?
The most important tools are increasing transparency in the publication of prices, indices, and data, intensifying oversight of distribution chains, monitoring monopolies or unjustified hoarding, encouraging fair competition, and facilitating the entry of reliable local alternatives.
Are there local technologies and alternatives that can reduce dependence on imported materials?
Yes, there has been notable progress in expanding local alternatives, with the adoption of innovative technical solutions to improve production quality, increase efficiency, and utilize modern construction techniques that significantly reduce waste and time.
How can a balance be achieved between factory profitability and the sustainability of fair prices for real estate developers and end consumers?
True balance begins with efficiency, not just raising prices. When a manufacturer boosts productivity, improves procurement management, reduces waste, and controls costs, it can maintain a reasonable profit margin without passing the entire burden onto the developer or the consumer. Conversely, the market needs a more mature partnership between manufacturers and developers, built on long-term planning and transparency, rather than on knee-jerk reactions.
If the wave of rising costs continues, can we expect a noticeable change in the selling prices of real estate units for the end consumer?
The increases will gradually be reflected in final selling prices, as developers attempt to absorb the impact by squeezing margins and improving design efficiency; the effect may be amplified in projects that rely more heavily on volatile materials.
What message do you have for real estate developers and buyers regarding the current phase of price volatility?
My message to developers: This is a phase that calls for deeper partnerships with domestic manufacturers, early procurement planning, and more flexible and transparent contracts.
My message to buyers: The market is undergoing a rebalancing phase, but the presence of a strong local industry greatly mitigates the impact of global shocks.
