All hot over costlier cement
Consumers
up in arms as other products will also be affected
THE usually staid cement industry got a
bit hot under the collar recently when rumours surfaced of a hike in prices
that will, in fact, take effect today.
The Master Builders Association Malaysia
(MBAM) kicked up a fuss last week after it was notified by one its members,
which happens to be a large listed developer, that one of the “major” local
cement manufacturers had all but decided to raise the list price of cement in
the Klang Valley.
A few days earlier, the Building
Materials Distributors Association of Malaysia came out to say that the price
for a 50kg bag of cement was set to climb RM1 and the price per tonne RM20,
according to market talk.
This means a 6% increase from the current
prices of RM16.75 per 50kg and RM320 per tonne. The last time prices were
higher was in March 2011, also by 6%.
Naturally, those who would be affected
were up in arms, alleging that collusion and even an artificial shortage had
taken place among the six producers, namely YTL Cement Bhd, Tasek Corp Bhd,
Cement Industries of Malaysia Bhd, Lafarge Malayan Cement Bhd, CMS Cement Sdn Bhd
and Holcim (M) Sdn Bhd.
Then yesterday, Lafarge let the cat out
of the bag when the country's largest cement producer by capacity confirmed it
was raising prices.
“The decision was made unilaterally and
taking into consideration our increasing costs associated with manufacture and
delivery of cement, which we have endeavoured to absorb over the years,” its
executive director, Chen Theng Aik, was quoted as saying by a local daily.
He also refuted claims of collusion,
insisting that a shutdown of its facilities for maintenance earlier this year
had led to lower production.
When contacted, MBAM president Matthew Tee said the organisation, which represents the local
construction industry, had made its stand and was sticking to it.
In a statement last week, MBAM appealed
to the Domestic Trade Ministry to look into the matter, saying the increase in
price would “definitely” result in a spike in the price of all concrete and
cement-based products, and inevitably the cost of construction.
“Contractors will be impacted as they
have signed fixed-price contracts with project developers. Ultimately, the
price increase will be passed on to end-purchasers and house buyers.
“We see no reason for the said increase
as production costs have not gone up but in fact fuel and energy costs have
come down this year.
“We would like to draw the attention of
the Malaysia Competition Commission to investigate whether the major cement
manufacturer is making use of its dominant position to lead in the said price
increase and thus control the market price,” it said.
Tee also told StarBiz by phone that the
association did not oppose a price rise per se, but rather the lack of “due and
proper notice”.
“As long as there is proper notice, and
based on fair market conditions, we are OK with higher prices,” he said, noting
that the two sides had in the past engaged each other on this very issue.
He also questioned the view that
Lafarge's decision was motivated by supply and demand, stressing that price
hikes should not be done erratically. “What if it goes up again in September,
or later?”
Another industry player pointed out
that once Lafarge began charging higher rates, the rest were sure to follow
suit, if past experience was anything to go by.
So far, only Sarawak-based CMS Cement
has said publicly it will keep prices as they are. The other firms did not
immediately respond to queries from StarBiz.
Meanwhile, the Cement and Concrete
Association of Malaysia (CNAC) has steered clear of the debacle, saying it has
no role whatsoever in the setting of prices by its members.
“I have made it quite clear. Pricing is
not a matter for CNAC to collate as that would be against competition laws.
Each company has the right to raise prices on its own volition,” executive director Grace Okuda explained.
On the repercussions of this for property
developers, Real Estate and Housing Developers Association president Datuk Seri Michael Yam said any increase in building material costs would, due to the
compounding effect, lead to more expensive homes and offices.
“We are concerned because there is only
so much the customer can bear,” he said, but added he was cognisant cement
companies were entitled to a return on their business.
Be that as it may, analysts are of the
opinion that the price rise was driven by market forces as massive
infrastructure projects, including the Klang Valley My Rapid Transit and
extension of the Light Rail Transit, get under way, giving a fillip to demand.
One industry watcher rubbished claims
that more costly cement would cause a plunge in consumption or some such
adverse reaction.
“The market will adjust itself. Supply
and demand will take precedence at the end of the day,” he said.
Source : The Star
Date : 1 August 2012
afternoon highlight
(01/08/12/136/610)
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