Diesel and Asphalt Price Surges Squeeze Contractor Profit Margins, Industry Bodies Warn

Key figures

• ●Industrial diesel rose 44% from RM2.95 per litre (Feb 2026) to RM4.26 per litre (Jul 2026)
• ●Asphalt rose 42% from RM2,125 to RM3,025 per tonne between February and July 2026
• ●Grade 30 ready-mix concrete rose 15% from RM350 to RM402 per cubic metre
• ●Logistics and transport costs rose 15% to 40% after stricter load-limit enforcement from October 2025
• ●Minimum wage raised to RM1,700, with new EPF requirements for non-Malaysian employees also adding to contractor costs

News summary

The president of the Master Builders Association Malaysia and the chairman of the Malaysian Bumiputera contractors association issued a joint statement warning that construction costs are rising much faster than contract prices, according to a Nanyang Property report. They said many projects were priced before the latest round of cost increases, so contract prices cannot be adjusted even as the cost of diesel, asphalt, concrete, cement, transport and manpower continues to climb.

The statement cited sharp price movements for key materials: industrial diesel rose 44% from RM2.95 per litre in February 2026 to RM4.26 in July 2026, while asphalt rose 42% from RM2,125 to RM3,025 per tonne over the same period. Grade 30 ready-mix concrete increased 15% from RM350 to RM402 per cubic metre, and ordinary cement rose 6.7% from RM22.50 per 50kg in June 2025 to RM24 in July 2026.

Logistics and transport costs were also reported to have risen by 15% to 40% since stricter enforcement of vehicle load limits began in October 2025. The two bodies added that the increase in the minimum wage to RM1,700, changes to the Employees Provident Fund structure for non-Malaysian employees, and copper prices at record highs have added to contractors' manpower and operating expenses.

The associations said that when fixed-price contracts have already been locked in, contractors cannot pass on the higher costs, and the simultaneous rise in material, transport and labour costs directly erodes project profits. They noted that small and medium-sized contractors are bearing the brunt of the impact.

The two bodies cautioned that if costs continue to accumulate, contractors' ability to complete projects on schedule while maintaining commercially sustainable profit margins could come under greater pressure. They also said they had noted the Works Minister's recent remarks on the overall impact of costs on the construction industry, but argued that national average figures may mask the actual cost changes experienced at individual project sites.

Despite the cost challenges, the associations said they will continue to cooperate with the government in developing national infrastructure, including major national projects and development programmes under the 13th Malaysia Plan.