Presentation On

Building Materials
Price Hike
∑ Group members:
+ Imaad Ali Khan
+ Hiten Umrania
+ Brinda Patel
+ Seow Yee, Ang (Sharon)
The aim of our presentation is
to link theory with practice.
We have used an article from a
business magazine referring to
Danube Building Materials FZCO
to demonstrate some of the
various economic concepts
found in the real business
scenario.
Danube is one of the largest building materials
suppliers in the UAE and the region with the
extensive portfolio of 10,000 selections ranging
from MDF, plywood, timber, laminates, veneers,
aluminium and glass among others.
In 2004, the company began operations in Jebel Ali
with a 19,000 square metre warehouse-cum-office,
which serves as its regional hub and caters to
booming markets in UAE, Oman, Bahrain and
India.
 Topics are covered very superficially
and are as follows:

 Demand And Its Causes

 Supply And Its Factors
 Price Determination
 Elasticity Of Demand
 Scarcity
 Solution To The Problems In The Above
Concepts
 Production Possibility Frontier (PPF)
Due to high rate of inflation in the market, demand for
building material have increased.

How inflation affects price?


In inflation situation,

Lending capacity of banks increases.

Due to this, there is more money flowing in the market.

When there is more money, people tend to buy more.

This increases demand for the product

So when demand increases, the price of the product is
increased by the suppliers.
The other main factors which lead to increase
in price of building materials are:

 Scarcity* of raw materials

 Restrictions of log cutting in supplier countries like
Malaysia, Indonesia and Burma.
 Local demand in the supplier countries for the above
materials has increased so there is a scarcity of raw
materials in these countries

*(scarcity of resources means limited availability of resources in relation to demand)

Increase in cost of production


Price of oil has increased

Due to the fuel hike there has been a tremendous

increase in freight charges also increasing the local
transportation cost
Materials Prices Before (AED) Prices After (AED)

Steel 2520 / ton 6120 / ton

Wood 105 / pc 130 / pc

White Wood 880 / m3 1100 / m3

Red Meranti 2570 / ton 3300 / ton

Aluminium 1800 / ton 1900 / ton

Even though prices are rocketing, demand is at
its peak.
Therefore, the demand for building raw
materials is inelastic (graph shown)
This market condition dispays inelasticity of
demand.
Reasons for inelasticity of demand is because
GCC is the region with the highest level of
ongoing construction projects.
Danube has decided that new facilities like
warehouses will be established across the
U.A.E.
Danube has invested AED 80 million into new
facilities in Ras Al Khaimah and Ajman.
It helps to cut down on transportation costs
across the region.
Frequency in freight expenses decreases.
When supply is more, more demand is met.