Saudi Basic Industries Corp (Sabic) said soaring construction costs and labour shortages in the Middle East will probably force some companies to cancel chemical projects and encourage acquisitions.

Costs have surged as much as 70 per cent in the last five years and 30 per cent in the last three, said Mohamed Al-Mady, chief executive officer of the world’s largest chemical company by market value. “The situation is really crazy,” Al-Mady said at a chemicals conference in Dubai recently.
“It makes it difficult to achieve acceptable financial targets when capital costs have risen so much ... this will lead to some project delays and probably some cancellations,” he said.
Building costs are climbing across the oil-exporting Gulf Arab, driven by a rise in global prices for materials such as steel, and competition among regional contractors working on projects worth $2.4 trillion. That is pushing up wages.
Sabic, which employs more than 30,000 people, cancelled an upgrading project at its unit Arabian Petrochemical Co because of higher costs, Al-Mady said.
State-owned Saudi Arabia Mining Co said in September a phosphate venture it is developing with Sabic would cost $5.6 billion, 62 per cent more than initially estimated. Norway’s Norsk Hydro said in October the price tag on an aluminium smelter it is building with state-owned Qatar Petroleum had risen to $5.6 billion, 86 per cent more than first estimated.
Costs are becoming so prohibitive that “people may have to go out and acquire a company” as a more competitive way of expanding, said Al-Mady.