Malaysia to hike prices from 1 March

Malaysia to hike prices from 1 March
Published: 28 February 2011

Cement prices will be raised by approximately six per cent to RM325/t (US$106) from a current RM307 (US$100), effective March 1.

In its research report, RHB Research Institute Sdn Bhd (RHB Research) said this was in view of the high thermal coal prices in the global market.

Although thermal coal prices had eased from the peak of US$138 per tonne in January during the flood in Queensland, Australia, the current price of about US$120 to US$125 per tonne was nevertheless still 21 per cent to 26 per cent higher than the average price of US$99 per tonne in 2010.

In addition to the stronger ringgit against the US dollar, the research house estimated that the six per cent hike in cement prices would be sufficient to offset the higher thermal coal costs in 2011, which accounted for 30 per cent of cement producers’ cost of production.

The research firm also stated that there had been irrational discounting activities in the domestic cement market during the earlier part of this year.

Rebates given by the cement producers were as much as RM50 to RM60 per tonne from the usual RM20 to RM30 a tonne level during the seasonally weak demand period.

Nonetheless, those high rebates had since trended down and RHB Research expected cement producers to perform better from the second quarter of this year onwards, underpinned by the hike in cement prices as well as the pick-up in domestic construction activities.

The research firm was raising its financial year 2011 (FY11) to FY12 net profit forecasts for both Lafarge Malayan Cement Bhd (Lafarge) and YTL Cement Bhd (YTL Cement) by six to 10 per cent and four to 12 per cent respectively.

Some of the risks in the cement sub-sector included the delays in the roll-out of projects, steep rise in energy prices and a potential price war in the industry when new capacity came onstream near the end of 2012.