Building merchants marking up cement price – PPC

Building merchants marking up cement price  – PPC
Published: 08 June 2007

Some building merchants have been placing huge mark-ups on the price of bagged cement, with one merchant in the Free State marking up the product by 50.94 per cent, according to a survey by Pretoria Portland Cement (PPC).  
 
This was revealed this week by John Gomersall, PPC’s chief executive, when he confirmed that PPC had announced an increase of 3 percent across its range of cement products from July 1. PPC increased its cement prices by about 9.8 percent on January 1.  
 
Lafarge South Africa has increased the price of its bagged cement by almost 20 percent in the past five months.  
 
Lafarge SA chief executive Albert Corcos confirmed last month that excluding the cost of its pallets, it had increased the price of its bagged cement by 7.5 per cent in January and another 12 per cent from May 1. He said the hikes were justified by cost increases.  
 
Wandile Zote, a Holcim South Africa spokesperson, said it increased its price by an average of 9.9 per cent in January, with the increase varying from region to region, and was targeting eight per cent for its next price increase on July 8. 
 
Gomersall said PPC’s policy in the past two financial years was that it would not exploit the cement shortage by ramping up prices, but would pass on its cost increases, many of which would not be in line with producer price inflation.  
 
PPC and Lafarge claimed building merchants made little or no profit on the sale of cement several years ago, but were now aggressively marking up the price. 
 
Gomersall said PPC’s retail mark-up survey last month found that average margins were acceptable in Gauteng, the Cape Peninsula, Mpumalanga and the North West, but were a bit on the high side in Polokwane and the Free State.  
 
But at the high end, there were mark-ups of 20 percent in Gauteng, 16 percent in the Cape Peninsula, 20 percent in Mpumalanga, 26 percent in Polokwane, 29 percent in the North West and 50.94 percent in the Free State.  
 
Gomersall stressed that PPC had conducted the survey because of all the talk about the high cost of cement. “It’s not only cement producers that are putting the price up, but PPC cannot and does not get involved in retail price maintenance, as evidenced by the price being all over the place.”  
 
Everybody had a perception that building costs rose just because of cement, but there were many other products that influenced building cost inflation. “The bubble of infrastructure expenditure … is bound to create pressures,” Gomersall said.  
 
Absa said last month that the cost of building a new house rose 10.6 per cent year on year in the first quarter, compared with 11.1 per cent in the fourth quarter of last year.  
 
Rising building costs were driven by factors such as the strong demand for building materials and skilled labour caused by high levels of activity in the sector.