Butra Heidelberg Cement (BHC) Sdn Bhd, the sole producer of cement in the country, defended the impending price hike of cement which was the first in eight years.
Mr Ardi Wijaya, General Manager of BHC Sdn Bhd, said the price increase was to absorb the rising costs of freight and raw materials in the global market and it would not translate to profit margin.
Mr Ardi Wijaya added that the company could no longer absorb the rising costs and this prompted them to apply to the government for an increase in cement price for the first time in eight years.
The evolution of landed cost of Clinker (their main raw material), which is 70 per cent of the production cost, has increased 1.15 times in 2002, 1.25 times in 2003 and 1.5 times in 2004. This year, it has increased to 2.2 times since 2001.
The increase in price of raw material is due to an unprecedented surge in freight costs worldwide where a vessel, which used to be available for around US$7,000 per day, now costs more than US$35,000 per day. Reasons for this are the `China effect’, shortage of vessels, bunker price and other causes.
It is also due to a recovery in most of the domestic markets’ economy, which resulted in an increased demand and price for cement and clinker and reduced capacity for export as well as a drastic increase in export prices.
From as early as 2002, in view of the increase in the raw material and freight cost, BHC has held discussions with the government for approval to increase cement price, which was essential to cover BHC cash costs and to continue its operation.
Meanwhile, prices of cement are expected to fall by some 10 to 15 per cent following the Brunei government’s decision to re-allow the importation of cement into the country.