Cement makers unlikely to invest more if no price revision, Malaysia

Cement makers unlikely to invest more if no price revision, Malaysia
Published: 18 August 2006

Cement manufacturers are unlikely to pour in more investment to expand capacity unless there is a revision in the ceiling price of the building material, an industry player said.  
 
Lafarge Malayan Cement Bhd president and chief executive officer Alain Crouÿ said the company and other industry players had been in talks with the government since May last year to push for a price revision.  
 
“At current prices, there is no justification for additional investment as our production costs have increased substantially. The price revision issue is one that has been long overdue.  
 
“Operation and production costs have accelerated in the past few years, and the last price revision was in 1995,” he said. The government-controlled ordinary Portland cement (OPC) is priced at RM198. 
 
Lafarge is the biggest manufacturer in Malaysia with a 44% market share and invests about RM60m to RM70m annually in research and development, and more in equipment to maintain production levels, said Crouÿ.  
 
Speaking to reporters in Kuala Lumpur on Aug 17 after launching the Avancrete premium cement range, he said the company expects the industry to pick up pace next year as the construction sector is likely to be robust with the Ninth Malaysia Plan (9MP) projects coming on stream. 
 
“Domestic cement consumption this year had improved as at end-July compared to 2005, and the industry as a whole would experience positive growth in tandem with the construction sector next year, depending on how fast the 9MP projects are launched,” he said. 
 
On its Avancrete premium cement, Crouÿ said the Lafarge Malaysian team developed it with the support of Lafarge’s Asia Technical Centre in Petaling Jaya on a one-year intensive programme.  
 
He said the premium cement has been proven to improve productivity, is easier to mix and faster to set with better workability, which translates to less manpower and shorter working time for users.  
 
“For 2006, Avancrete is expected to replace more than 10% of Lafarge’s bag volume. Since we introduced it through a series of industrial workshops last August, we have sold over five million bags” he said.  
 
Crouÿ said Avancrete is priced at RM237 per tonne, compared with the RM198 government-controlled price of ordinary Portland cement (OPC). He said the company expects to sell about 2.3Mt of cement this year.  
 
“The launch is not a strategic move to increase our market share as Avancrete is a niche product and is not expected to replace OPC, although it will contribute to a slight increase in revenue.  
 
“What we are doing is differentiating ourselves from our competitors and providing better value to customers. A 40kg Avancrete bag performance is equal to a 50kg OPC bag,” he said.