During 1Q 2023, construction materials have seen moderate to high increases compared to historical and seasonal trends. Several materials have recorded exceptional price increases in response to the elevated rates of inflation the country is experiencing, such as reinforcement steel bars, electric cables and items with high foreign exchange components.

However, we expect most construction materials will not witness further significant price hikes, provided foreign exchange rates remain stable. Instead, we anticipate only traditional price inflation trends for the remainder of the year.

This report focuses on imported materials and equipment, which, through past experiences have accounted for most budget over runs and procurement delays. The current price rises for these items comprise the largest increase in construction materials costs during both 4Q 2022 and 1Q 2023. Whilst instability in exchange rates and the shortage of foreign currency persists, we expect this to continue.

Overall, the construction market shows signs of recovery, but the storm is ongoing. Key construction sectors — and the economy as a whole — are showing positive indicators of improvement.

Following the removal of the Letters of Credit (LC) requirement by the Central Bank of Egypt (CBE), the construction market is beginning to overcome the supply chain shortages that took place in 2022. Many construction materials and items price increases compensated for the additional demurrage and storage fees in ports that suppliers incurred while waiting for the resolution of the LC issuance situation.

Although foreign currency shortages have reflected onto project revenues, this has not resulted in a market halt — showing the remarkable strength of Egyptian construction in the face of this storm.