Tough year ahead for construction firms despite railway bidding

Tough year ahead for construction firms despite railway bidding
04 January 2007

This year will be a tough one for construction firms, despite the government’s announcement that it will soon open bidding for contracts to build three railway lines totalling 118km  and valued at Bt165 billion.  
The president of Siam Cement Group’s cement operations, Pramote Techasupatkul, said this year’s demand for cement will be close to that of last year because new construction projects have not yet started.  
The government’s bidding process will open before the end of March and contracts will be awarded three to four months later. That means the construction process will not start until about the fourth quarter of the year - too late to drive the annual income of construction firms, he said.  
Pramote said demand for construction materials such as cement and steel will not have strong growth until 2009, in line with progress in new construction projects.  
Last year’s value of construction projects in Thailand is expected to reach Bt693 billion, an increase of only 0.7 per cent over 2005’s total of Bt657.48 billion. 
However, construction of condominiums by private developers will see strong growth this year following a changed preference among homebuyers for condominium units or townhouses rather than detached houses.  
Ch Karnchang’s chief executive Plew Trivisvavet said the construction industry will have to focus on private sector business or compete for jobs in neighbouring or overseas countries this year to replace work from government projects. 
However, despite the drop in government projects there will be no immediate negative impact on the construction industry because projects that began last year will continue to generate income. Italian-Thai Development president and chief executive Premchai Karnasuta said a number of projects that went through the bidding process last year will be started this year for delivery to customers up until 2009.  
As a result, next year’s financial performance of construction firms will not register a negative impact from this year’s delays in the government’s mega-projects. 
"The delay of the government’s mega projects will not affect construction firms this year. If the delays continue until 2009, then it will raise a negative impact on construction firms because they don’t have [big enough work] backlogs to generate income until 2009 and 2010," Premchai said.  
Meanwhile, demands for private construction projects, especially condominiums, will continue to grow, he said.  
Published under Cement News