Malaysia to remove cement price ceiling

Malaysia to remove cement price ceiling
Published: 03 June 2008

Malaysia will remove the ceiling price of cement from Thursday to boost the country’s building industry, the prime minister said on Monday, in a move that could stoke inflation.

In a separate measure to help liberalise the industry, cement importers would also only need to pay 10 per cent import duty, Abdullah Ahmad Badawi said.

Previously, ordinary Portland cement had import duty of 50 per cent while hydraulic cement was at 25 per cent.

The move to scrap the price cap was expected to boost the shares of cement makers such as Cement Industries of Malaysia (CIMA) but also to stoke inflation, which stood at a 15-month high of three per cent in April, when costs are eventually passed on to home buyers.

The cement measures come after Domestic Trade Minister Shahrir Samad said on Monday that pump prices for petrol and diesel would rise in August although subsidies would be in place for the poor.

Abdullah said the measures were taken because the maximum selling price, or ceiling price, of cement in Malaysia had not kept up with international levels, which were "much higher".

Artificially low prices had discouraged producers from supplying more of the material and hampered the development of national projects.

"The government has received many complaints pertaining to the supply disruptions of price-controlled cement due to rising demand," Abdullah said in a statement.

 "These efforts to liberalise the cement industry are in line with the government’s wish to ensure that the development of the country proceeds smoothly, and that the cement market becomes more transparent and efficient."

A trade ministry source said the supply of cement had been affected as cement makers and transporters, facing higher costs to produce and move the building material, were reluctant to supply to outlying regions.

He said industry estimates pointed to a 40-50 percent rise in the cost of making cement since 1995, but the industry had only enjoyed a 10 per cent hike in ceiling price in December 2005.