JAYA, Malaysia) -- Lafarge Malayan Cement Bhd, the country’s largest cement
producer, has increased the recommended retail prices for its bagged
cement products by RM1 per 50kg bag or RM20 per tonne effective Aug 1.
The price increase will apply until year-end. (see table)
latest move was seen by industry observers as setting the benchmark for
local cement players to increase their prices “anytime” soon.
President and chief executive officer Bi Yong Chungunco told StarBiz that the company had to adjust its cement selling prices to alleviate some of the major cost increases.
cement industry continues to face more increases in its cost of
production, particularly for coal and fuel since December 2006 to June
There has been no adjustment in local cement prices since
1995. In December 2006, the Government increased the cement price by 9%
but during the same period, the sector was facing cost increase of over
Following the liberalisation of the local sector last
month, cement prices had increased by an average 17% to “help defray
some of the cost increases that the industry has been absorbing since
1995,” Bi Yong said.
Despite the price hike in cement, diesel
price shot up even higher, by 63%, while electricity cost rose 26%
effective early July.
Bi Yong said: “The higher electricity
tariff has an immediate impact on Lafarge’s cost of producing cement
and the increase in diesel price directly impacted our inbound and
outbound transportation costs.
“This also indirectly affects our other costs including overheads, contract works and capital expenditure.”
on the latest cement price increase effective next month, Bi Yong said
cement price would have increased only three times in the past 13 years
which is a total of 34%.
“This is an average of about 2.6% per
annum which is much lower than the annual inflation rate while other
costs have risen much higher in recent years,” she added.
there was consensus that cement prices next year would depend on the
prices of vital raw materials that are expected to rise in tandem with
the commodity prices.
The current local cement prices range from RM250 to RM280 per tonne.
A spokesman of a major local cement group told StarBiz yesterday
that coal prices had increased three-fold to US$120 this year from
US$40 five years ago while cement prices increased merely 10% in the 10
years between 1995 and 2006.
“We will absorb additional costs
but there are limits to how much we can absorb. The rest we need to
pass on to consumers,” he said.
He said international cement prices were 5% higher than local prices, excluding logistic and storage costs.
recent hikes in fuel price and electricity tariff were also to be
blamed for squeezing manufacturers’ operating margins, he added.
Cement and Concrete Association of Malaysia executive director Grace
Okuda said the 10% import duty imposed on non-Asean countries was a
fair measure for all parties, including builders.
She also said Malaysian manufacturers had excess supply and there was no shortage of cement at this moment.
analyst with OSK Research has a negative outlook on the construction
industry for the second half of this year. He said construction
activities had slowed down partly due to economic uncertainties and
The price of cement, an important component of concrete, jumped 22% after the ceiling price was lifted on June 5.
Coal, fuel and electricity make up more than 50% of the total raw material costs for cement products.