The UAE's construction sector, currently enjoying a boom, is facing the pinch of the steep price rise in building materials, said industry officials.

Dubai's total imports of building materials are estimated at Dh15 billion ($4.1 billion), according to industry estimates. Over the years, local cement and ceramics manufacturers have managed to meet part of these needs, said a Gulf News report.

However, imports of building materials have increased due to the unprecedented boom witnessed in the UAE, especially Dubai.

Prices of certain building materials have skyrocketed while others witnessed a moderate jump due to a number of factors, including high freight charges and an increase in demand in the international market.

These include materials ranging from steel products to white wood.

Thus, many contractors are expected to make losses, while the small operators are likely to be the worst hit, say industry sources, according to the report.

'An increase in global demand as well as the hike in freight charges have mainly caused the surge in building materials prices,' said Ibrahim Yousuf Al Rahmani, president of the Dubai-based Building Materials Group and managing director of Al Rahmani General Trading Co.

'Freight charges increased between 25 and 50 per cent in some cases. Most of the white wood comes from places as far away as Chile, for which we have to pay a heavy freight charge, said the report.

'This has come at a time when the construction sector is enjoying a boom with so many construction projects being carried out. Most of the construction firms are feeling the pinch of this price hike and many are expected to incur losses if the prices are not reduced.'

Especially hard hit will be companies who had won bids while the building materials cost low. The hike at the time of project execution is to affect them, said the report.

In such a situation, there is no provision for compensation, forcing contractors to be cautious. 'While large operators can absorb this shock due to better inventory, manpower and risk management capabilities, smaller operators will come under pressures. 'There will be delay in payments, non-payments and an increase in dud cheque cases.

'I suspect a number of small contractors will run into debt owing to the current situation. As a building materials supplier, we are also sharing the pain in terms of having to extend credit facilities. The money remains stuck in the market, while we maintain the supply chain.'

Al Rahmani has over 11,000 types of items in store, supplying to over 3,000 customers on a daily basis. With 400 employees spread across five large distribution outlets, the company is expanding its bottomline with over Dh400 million in annual turnover. Meanwhile, according to MESteel, an industry portal, the Middle East's steel output increased by 7 per cent in February this year compared with February last year, added the report.