Lebanon producers threaten to abandon postwar price ceiling

Lebanon producers threaten to abandon postwar price ceiling
Published: 13 November 2006

Lebanon’s three cement producers have threatened to abandon a price ceiling on building materials that they adopted in August if cement smuggling into Syria continues to revert to pre-war levels. The general manager of Sibline said the price cut in Lebanon has boosted demand for imported cement in Syria, where the price per ton is nearly twice as high, leading to a steep rise in illegal trade over the past two weeks.

"If the smuggling is to be beyond reason, then our position will be reviewed," Nicholas Nahhas told The Daily Star.

At the request of the government, the producers agreed to cut the cost of cement from $75 per ton to $65 per ton for one year, in order to facilitate Lebanon’s postwar reconstruction needs. Cement costs about $130 per ton in Syria.

Smuggling was down after the war, as the government made an effort to combat the illicit trade, said Jamil Bou Haroun, business development manager at Holcim. Though reliable figures on cement smuggling between Lebanon and Syria do not exist, the General Manager of Cimenterie Nationale, Pierre Doumit, acknowledged that though it "is picking up," trade is probably still shy of pre-war levels.

Lebanon’s cement companies collectively produce about 5 million tons of cement annually; smuggling estimates vary, but Doumet said that about 300,000 tons were smuggled into Syria each year.

Taking into account Syria’s $30-per-ton import duty on cement, such a level of smuggling would represent an annual loss of $7.5 million for Lebanon’s three producers.

The $10-per-ton price cut represents a potential windfall of $3 million for smugglers, if Doumet’s estimate is accurate.

Postwar reconstruction will not significantly affect the producers’ bottom line, the managers said.