Concrete prices fall in wake of cheaper cement

Concrete prices fall in wake of cheaper cement
Published: 07 April 2005

The Cement & Concrete Association Malaysia (CCAM) confirmed that a price war is under way in the industry, but said cement prices have dropped only in certain areas.   Association president Othman Abdul Rani told Business Times that the CCAM has no say over its members’ pricing policy. "Some of our members in Peninsular Malaysia have their strategy in capturing market share and this is not openly discussed when we meet up as an association," the chairman said in a telephone interview from Sarawak.  Othman said the association’s primary role is to ensure none of its members charges more than the ceiling price of RM198 per tonne set by the Ministry of Domestic Trade and Consumer Affairs.  

National Ready-Mixed Concrete Association of Malaysia (NRMCAM) members who buy cement from CCAM members confirmed the fall in cement prices within Peninsular Malaysia.  "We are lowering our ready-mixed concrete prices in tandem with the current drop in cement prices," NRMCAM president Ang Cheng Ho told Business Times.  "The cement price decline started a month ago and now it has plunged to RM128 per tonne - about 10 per cent lower than that just after the 1997-98 regional financial crisis.  

"However, sand prices in Selangor have been going up since 2000, the highest in the last 10 years. From January-April 2005 sand was sold at an average of RM25 per tonne," Ang said.  The main cost components of ready-mixed concrete are cement 55 per cent, sand 20 per cent and aggregate (small stones) 15 per cent. Quick lime and water make up the remaining 10 per cent.  

NRMCAM’s data show that as of December 2004, the top three producers of readymixed concrete were YTL Cement Bhd’s unit Buildcon Concrete Sdn Bhd, LaFarge Malayan Cement Bhd’s subsidiary Supermix Concrete (Malaysia) Sdn Bhd and Hanson Quarry Products Sdn Bhd.  

Ang said sporadic price wars among cement producers are common whenever local demand slows. "Although sand prices are going up, we are quoting lower prices to our customers," he said.  Ang expects the price decline to be temporary. "Our members are aware of the cement price fluctuation. So, the ready-mixed concrete prices we quote to our customers are for the short term," he said.  

Ang predicts that this year’s sales of ready-mixed concrete will most likely drop by 5 per cent to RM1.42 billion from 2004’s RM1.49 billion, which in turn declined 5 per cent from 2003’s RM1.56 billion. He attributed the annualised 5 per cent decline to the slowdown in the local construction scene.   "The ready-mixed concrete industry is basically a very localised trade, so we can’t really export. Right now, there’s more supply than demand in the market, we have no choice but to lower the prices," Ang said.