Construction Crisis: Industry Leaders Warn of Mass Project Abandonment as Costs Spiral
The Thai Contractors Association urges immediate state intervention as diesel and material costs skyrocket, warning that without aid, projects will be abandoned
- The Thai construction industry is warning of mass project abandonment due to spiraling costs for essential materials like diesel, steel, and concrete.
- Contractors are trapped by rigid fixed-price private contracts and an outdated public sector price adjustment formula ('K-Factor') that fails to cover the actual increase in expenses.
- To avert the crisis, the Thai Contractors Association is urging the government to intervene by declaring the situation a force majeure event, reforming the public contract formula, and providing liquidity support.
The Thai Contractors Association urges immediate state intervention as diesel and material costs skyrocket, warning that without aid, projects will be abandoned.
The Thai construction industry has issued an urgent distress call to the government, warning of a potential wave of abandoned projects and site closures as the cost of essential raw materials and fuel reaches "unsustainable" levels.
Liza Ngamtrakulpanit, president of the Thai Contractors Association (TCA), warned on Wednesday that the sector is facing a terminal crossroads. Operators are now being forced to choose between halting work entirely or continuing at a loss that threatens their solvency.
The Scale of the Surge
Data released by the TCA highlights a staggering rise in overheads. Since early March, diesel prices have climbed by 14.30 baht per litre, triggering a domino effect across the supply chain. Key materials have followed suit:
Steel Rebar: Prices have surged by at least 4.5 baht per kg, with suppliers reporting severe stock shortages.
Concrete: Ready-mix prices have risen by up to £10.15 (450 Baht) per cubic metre.
Logistics: Freight costs for heavy haulage have seen "unprecedented" spikes, with some Southern routes seeing surcharges of up to 78,000 baht per trip.
Systemic Failures in Private and Public Contracts
The TCA highlighted a "double bind" affecting contractors in both the private and public spheres.
In the private sector, many project owners have refused to acknowledge the inflationary pressure, holding contractors to original fixed-price agreements and threatening heavy fines for delays—even those caused by national lockdowns or global supply shocks.
"Many private owners are opportunistically ignoring the reality of the market," Liza stated. "Without a price escalation clause in these contracts, the contractor is expected to absorb 100% of the risk."
The public sector offers little more protection. While state contracts include a price adjustment formula—known as the 'K-Factor'—the TCA argues it is "dangerously outdated."
Created in 1989, the formula often tracks irrelevant metrics like the Consumer Price Index (CPI)—which monitors the price of eggs and sugar—rather than the actual market price of industrial fuel and steel.
A Call for Emergency Legislation
To prevent a total industry shutdown, the TCA is lobbying for a three-pronged emergency package:
Force Majeure Status: A decree declaring the current economic climate a force majeure event for all private contracts, allowing for legal pauses in work and the renegotiation of costs.
K-Factor Reform: An immediate overhaul of the public sector’s price adjustment formula to reflect "refinery-gate" fuel prices and the removal of the 4% "risk threshold" currently borne by contractors.
Liquidity Support: Direct subsidies for transport costs and the immediate release of delayed government payments to boost industry cash flow.
"I do not wish to encourage the abandonment of projects, as the social and economic fallout would be immense," Liza concluded. "However, if the state does not act, contractors will have no choice but to prioritise their own survival. At that point, project abandonment will become an unavoidable reality."
