Malaysian ready-mix producers, caught off-guard by the 50 per cent jump in cement prices to RM180 per tonne since July 1 2005, say the higher price will aggravate the slowdown in the construction and property sectors. Prior to the increase on June 30, the cement price was RM117 per tonne.
The National Ready-Mixed Concrete Association of Malaysia (NRMCAM) said its members were caught by surprise. "One of our members received a phone call from one of the cement makers informing him of the price at 9.30 am last Friday," the association said. Cement makes up 55 per cent of the cost of producing ready-mixed concrete, followed by sand (20 per cent), aggregates (15 per cent) and water (10 per cent). Ang said that cement price fluctuation is common but this is the first time there is an overnight price jump by 50 per cent.
"There is not enough time allowed to pass the cost on to buyers. The cement makers should have given us an advance notice of the price jump, or at least raise the price gradually. This month, our members have no choice but to absorb the cost," NRMCAM president Ang Cheng Ho told Business Times. Meanwhile, in an e-mail response to Business Times, Malaysia’s largest cement maker Lafarge Malayan Cement Bhd confirmed the increase in cement prices.
"The price of cement has returned to a more normal level and we hope it can be stabilised at this level within the government-controlled ceiling price of RM198 per tonne," group president and chief executive officer Alain Crouy said. "In the first half of 2005, cement prices have been low and unsustainable. Many industry players incurred losses at those price levels. "The cost of raw materials to make cement have been going up gradually and cement export prices in the international market have risen since 2003," Crouy added.
Ang said the 50 per cent jump in cement price will see the price of concrete going up by about 18 per cent, or RM20, per cu metre. "Typically, a basic small low-cost flat uses about 60 cu metres of concrete. The overnight jump in cement price will push the cost of concrete of a low-cost flat by RM1200," he said.
Asked whether his earlier forecast of RM1.42 billion in concrete sales for 2005 will still hold, Ang said that the association would have to revise the figure further downwards. "With high cement prices we have no choice but to price our concrete accordingly. This would see property developers to delay or scale down their projects, especially in this kind of house buyers’ market. "With the further slowing down of private-funded construction and property developments, we are uncertain of a regular flow of income," Ang said.
The escalating price of diesel is also pushing up the price of ready-mixed and concrete producers’ operating costs. "Two years ago, industrial diesel price was 65 sen per litre. Now, it is more than 2 1/2 times at RM1.75. If our members can break even this month we will be happy. For the rest of the year, we’re praying hard for more local construction activities to keep us going," he added.