"It hasn't been long since paint prices went up, and last month it was flooring, this time it's vinyl sheets. They won't supply anything, saying production has halted because of the Middle East war. Then they raise prices by 10%–15%, and I have no idea how to set construction unit costs going forward."An official at an interior retail company in Nowon District
Interior construction costs are rising in the wake of the Middle East war, increasing the burden on consumers and small contractors. As petrochemical raw material prices climb, prices of key building materials such as vinyl sheets, wallpaper, adhesives and paint are being raised one after another. Some materials are not being supplied smoothly, leading to delays in construction.
According to the building materials industry on the 29th, since the United States and Israel bombed Iran at the end of Feb., prices of petrochemical-related raw materials have jumped, quickly pushing up interior material prices. The price of naphtha, a basic feedstock for petrochemical products, rose from about $500 per ton in Jan., before the war, to $815 last month. As naphtha prices rose, production costs for synthetic resin products that use it as a raw material also increased.
Silicone and specialty adhesives widely used in interior work are based on synthetic resins extracted from naphtha. Polyvinyl chloride (PVC), the main raw material for apartment windows and piping, wallpaper and vinyl sheets, is also a representative petrochemical product. PVC is made by mixing ethylene and chlorine, and the key raw material for ethylene is naphtha. According to market research firm Trading Economics, the global PVC price was 4,870 yuan per ton as of the 27th, up about 4.0% from a year earlier.
Building material companies are raising product prices one after another, citing cost pressures. Prices of adhesives used across interior work such as woodworking and flooring have risen about 30%–50%, and interior film prices are up about 30% as well. Wallpapering materials and tile materials have also reportedly risen about 10%–20%.
An official at an interior company said, "Prices are not rising all at once by material but sequentially, which makes it harder to prepare estimates," adding, "If material prices go up after a contract, we often end up absorbing the loss."
The paint industry underwent an investigation by the Korea Fair Trade Commission (FTC) during the price hike process. The Korea Fair Trade Commission (FTC) was said to have examined whether there was collusion as major paint manufacturers such as KCC, Noroo Paint, Samhwa Paint, Kangnam Jevisco, and Chokwang Paint raised supply prices around the same time. The paint industry explained it as an unavoidable step due to rising raw material costs, but some companies later withdrew their price hike decisions or adjusted the increase range.
The problem is that the burden of price increases is being passed intact to distribution and construction sites. Some wholesalers are not releasing inventory in anticipation of further price rises, and there are also cases where manufacturers are delaying supply. When material procurement becomes unstable, small contractors must buy materials at higher prices than before, and consumers are saddled with construction delays or additional expenses.
Interior work is generally carried out based on the estimate at the time of contract. However, if material prices rise after the contract, it is not easy to pass that on to consumers right away. Conflicts can arise during renegotiation of construction costs, or contractors may proceed with the work while taking a loss. Conversely, if materials cannot be procured in time and construction is delayed, consumers may see their moving schedules and additional housing expenses affected.
A person in her 30s surnamed Lee, an office worker preparing a remodel ahead of moving into a mid-20-pyeong older apartment, said, "The total repair expense was said to be about 70 million won, so we decided to do only the minimum, like wallpapering and vinyl sheets," adding, "But because we couldn't get vinyl sheet materials, only the wallpapering was done first and the rest of the work has been postponed indefinitely." Lee said, "The moving date is not far off, and I don't know if we can finish the work before then."