Today's Pick (02/08/12/139/832) All cement producers, except CMS, have raised prices

All cement producers, except CMS, have raised prices

PETALING JAYA: Local cement manufacturers have decided to raise their prices of the building material, mirroring an earlier move by the country's largest producer, Lafarge Malayan Cement Bhd, according to Master Builders Association Malaysia (MBAM) president Matthew Tee.
He told StarBiz via text message that “all cement producers have increased prices”, an outcome widely expected by industry players after a 6% hike by Lafarge effective yesterday.
This excludes Sarawak-based CMS Cement Sdn Bhd, which says it will maintain prices at the current level.
MBAM secretary-general Chuan Yeong Ming also said over the phone that the quantum of increase varied with companies, while in terms of timeline, some had imposed it yesterday while the others would soon follow.
“We have gotten complaints from our members that this is happening,” he said.
Another industry source pointed out that while there has yet to be black and white to substantiate the new rates, ready-mix concrete firms had already jacked up prices in anticipation of more expensive cement.
Meanwhile, the Malaysian Competition Commission (MyCC) said it had put the cement industry under its watchlist.
A spokesperson told StarBiz this was not tantamount to a probe or official investigation, but the commission would be keeping a close eye on any developments that might be in breach of the Competition Act 2010.
She said that so far, no party had stepped forward to lodge an official complaint with MyCC, thus it was not able to take any investigative action or presume that anti-competitive behaviour had taken place.
MBAM, after receiving a tip-off from its members last week, had warned of a plan by a “major” local manufacturer to raise the list price of cement in the Klang Valley by RM1 per 50kg bag and RM20 per tonne for bulk cement from RM16.75 and RM320 currently.
The last time prices were higher was in March 2011 when it also increased by 6%.
MBAM, which represents the local construction industry, stressed that price increases would be passed on to end-users and home buyers, adding that it saw no reason for higher prices as production costs had fallen during the year.
It also urged MyCC and the Government to investigate whether there had been an abuse of dominant position by the cement maker in question.
According to reports, the Real Estate and Housing Developers Association had said the construction cost of a terrace house would climb by RM1,000-RM2,000 following the price hike, hurting affordability in a market already reeling from spiralling property prices.
In addition, the cement makers were accused of colluding with each other to create an artificial shortfall in supply.
There are only six cement producers in Malaysia, namely YTL Cement Bhd, Tasek Corp Bhd, Cement Industries of Malaysia Bhd, Lafarge, CMS Cement and Holcim (M) Sdn Bhd.
Lafarge, which has a 40% share of the market, confirmed on Tuesday it was raising prices.
Its executive director Chen Theng Aik, however, denied the collusion claims, saying its decision was prompted by higher costs and a shutdown of its plants that resulted in lower production.
On the back of this news, the company has been upgraded by at least two research houses.
In upgrading the stock to “outperform” from “market perform”, RHB Research Institute said it saw the price hike as a “reflection of an improving demand picture in the local cement industry backed by key public infrastructure projects”, including KLIA2, the Light Rail Transit line extension, Tanjung Bin power plant extension, Manjung power plant extension, and My Rapid Transit.
“This allows cement producers to flex their pricing muscle,” it said in a client note.
The brokerage remarked that cement producers were not under any significant cost pressure in recent months as the price of coal, which makes up between 30% and 40% of production costs, was about 17% lower than last year.
Notably, CIMB Research highlighted in a report the possibility of Lafarge reversing the price hike given public pressure from MBAM as well as political factors, what with the
looming national polls.
Source : The Star
Date : 2 August 2012

Today's Pick (02/08/12/139/832)