The cost of construction materials in Singapore is expected to remain resilient in the face of US President Donald Trump’s recent tariffs, according to Steve Raye, associate director at construction consultancy LineSight.
In the face of a growing global trade war, much of the world is scrambling to determine where prices will renormalise once the dust settles.
All in all, the tariffs set by Trump’s second administration currently affects more than US$1 trillion ($1.33 trillion) of US imports.
“Many of us here in Asia watch with anxiety at President Donald Trump’s tariffs on the US’ three largest trading partners, and his plans for more,” said Deputy Prime Minister Gan Kim Yong at CNBC’s Converge Live event in Singapore on March 12.
Rebalancing global supply and demand
“Singapore’s diverse supply chain, strong trade agreements and logistic networks makes it resilient to the direct impact of the tariffs,” says Raye. However, he believes that prices could rise from fluctuations in global supply and demand.
“By imposing these tariffs on external suppliers of construction materials, chances are that US companies will increasingly procure such materials locally where possible,” explains Raye. This would lead to a drop in demand for these materials at production lines outside the US.
“You might see production lines being closed temporarily to reflect the reduced demand. As a result of reduced production, there’s going to be potentially less supply available which will put upward pressure on prices,” he adds.
While the opposite scenario could also occur — where suppliers overestimate demand, leading to an oversupply of materials and thus driving prices down — suppliers are generally risk-averse, says Raye. Thus, they are incentivised to retool their production lines towards other industries in order to maintain their prices at the current rates.
Any increase in price would be on top of the baseline 4%–5% increase in construction materials LineSight projected for 2025.
(Source: LineSight Insight Report, 3Q2024)
A material heavily subjected to this price readjustment would be steel in the form of steel sheets, steel rebar and stainless steel. The US is one of the largest global importers of steel, bringing in 26.4 metric tonnes (Mt) in 2023, according to the World Steel Association. The same year, China was its largest supplier, producing 94.3Mt. With a 25% tariff on all imports from China to the US currently in effect, steel products could face the brunt of the price increase.
Conversely, local construction projects requiring complex components from the US could face price increases as they compete with US companies for a very limited supply. Such equipment includes transformers, chillers, cooling towers, generators and batteries required for data centres, biomedical/pharmaceutical labs and large-scale infrastructure projects such as airport and port facilities.
(Source: LineSight Insight Report, 3Q2024)
Emergence of a new regional supplier
As global supply lines struggle to readjust from Trump’s economic upheaval, Raye believes that Singapore could seize the opportunity to emerge as a regional supplier of semiconductor chips — an integral component for the operations of data centres.
According to data published by the Economic Development Board in August last year, Singapore accounts for 10% of all chips produced worldwide and about 20% of global semiconductor manufacturing equipment production.
STMicroelectronics, a European multinational semiconductor manufacturer, produces silicon carbide chips — otherwise known as third-generation semiconductors — in Singapore, which is required in data centres that support AI technology due to its lower power draw.
“With its free trade agreements (FTAs), Singapore is in a much better position than its neighbouring countries to benefit from the gap in semiconductor supply,” says Raye. “Singapore also has a diverse supply chain which may just prompt certain clients to look to it when exploring the market for other suppliers.”
Singapore maintains a network of 27 FTAs. It is also one of only four countries in the Asia Pacific region with a free trade agreement with the US. The others are Australia, Korea and Japan, whose agreement with the US focuses mainly on minerals.
Demand for high-spec construction projects in Apac
Singapore’s emergence as a supplier comes when the region is experiencing a construction boom. The Asia Pacific region is expected to be the fastest growing region globally in terms of construction output this year. According to the latest estimates by LineSight, India saw a 7% y-o-y increase in investment value towards construction projects in 2024, the highest in the region. The country was closely followed by Malaysia (4.4%) and Singapore (3.3%).
(Source: LineSight Insight Report, 3Q2024)
Much of the construction demand is supported by the region’s public infrastructure needs and the growing demand for data centres, says Raye.
“India has committed to spending US$1.5 trillion ($2 trillion) over the next five years on public infrastructure, building what they call the 11 corridors,” points out Raye.
The National Industrial Corridor Development Programme is India’s most ambitious public infrastructure programme aimed at developing and linking key manufacturing and R&D centres across the country as it transitions into industries higher up the value chain.
“From a data centre perspective, India is also seeing a huge amount of investment,” adds Raye. “Taking into account the tax benefits, availability of infrastructure, power and land, data centres will inevitably end up there as well.”
In Singapore and Malaysia, Raye has also seen a strong pipeline of major projects on the horizon. Johor is expected to satisfy most of the spillover demand for data centres that is constrained by Singapore’s limited supply of land and power.
Meanwhile, Singapore has its own pipeline of mega projects such as the upcoming Cross-Island MRT Line, the continued development of Tuas mega port and Changi Airport Terminal 5.
