Builders cry foul over backdated cement price hike

Builders cry foul over backdated cement price hike
Published: 05 January 2007

Builders and property developers’ are bracing themselves for losses after the Malaysian Government’s decision to backdate price hikes in cement, instead of giving them some lead time. 
 
From December 1 2006, the Government lifted ceiling prices for cement by between 3 per cent and 10 per cent. 
 
The cement price in Pahang, Selangor, Malacca, Negri Sembilan, Kuala Lumpur and Putrajaya increased from RM198 a tonne to RM219. In Perlis, Kedah, Penang and Perak, the new price is RM217 a tonne, while in the eastern region of Terengganu and Kelantan the price is now RM233. In Johor, the price had been revised to RM224 a tonne. 
 
"Contractors are shocked by this sudden and backdated cement price increase which was announced near Christmas and Hari Raya Qurban," Master Builders Association of Malaysia (MBAM) president Patrick Wong said in a statement. 
 
The association, representing about 600 contractors nationwide, said many of its members are losing money because there was not enough time for contractors to factor in higher cement costs into the job value when tendering. 
 
"We need a lead time ofat least six months to factor such price increase in building materials when tendering for jobs," Wong said in the joint statement with Real Estate and Housing Developers’ Association (Rehda) yesterday. 
 
MBAM cautioned that the cement price increase would eventually be passed on to the Government and property buyers. This is especially true of infrastructure projects such as dams, bridges and highways where concrete and cement usage is high. Rehda president Ng Seing Leong said the cement price increase is an added burden to the property sector at a time when the industry is starting to rebuild its foundation for growth. "Our members and market players were not informed in advance. The move will cause properties to be more expensive amid rising costs and thus, will not be beneficial to property buyers," Ng added. 
 
MBAM and Rehda said they fear that more infrastructure and housing projects will be abandoned after the price hike, as contractors cannot absorb the financial burden after signing fixed price contracts without any fluctuation clause for building materials and labour price increase. "The cement price increase will affect the Government’s effort to provide affordable housing to the masses. 
 
"Eventually, it will result in higher construction costs to low- and medium-cost housing," Ng said. 
 
Prices of other building materials which are not controlled by the Government, such as concrete, bricks, timber, galvanised iron sheet, diesel and bitumen are also rising, the statement said.