NEWSBREAK Local cement companies mulling price hike: Sources

PETALING JAYA (June 14): The cost of constructing homes might increase in the future as cement companies mull the increase their product cement price in the near future, said industry sources.

Several industry players, including project contractors, cement product manufacturers and building material distributors who preferred to stay anonymous, told EdgeProp.my that they have received a price increase circular from one of the local cement companies.

“I have received the circular from one of the big players in end-May, which stated that the price of cement and ready-mixed concrete will increase in mid-June.

“However, the price is still the same until now, but it’s hard for us [contractors] to predict how big the impact will be as we expect there will be rebates from the cement companies,” said one of the owners of the construction company when contacted by EdgeProp.my.

According to him, the list price of the concrete will increase by RM80 per tonne and price for ready-mixed concrete will go up by RM40 per cubic metre.

He added that there are only a few players in the market, and if one of cement company increases the price, the others will follow suit.

According to Construction Industry Development Board (CIDB), the list price for cement is around RM385 per tonne (calculation based on a 50kg bag cement price of RM19.25) and list price for ready-mixed concrete price is around RM270 per cubic metre.

Cement was once a controlled item with a fixed price, but since cement trading was liberalised 10 years ago, the list price only serves as a reference of the ceiling price for the industry players, as cement companies will be giving rebates to their customers based on the demand and supply condition.

According to the source, building material such as cement, concrete and steel bars could take up to 30% of the construction cost of a housing project and the cost of cement could be around 10% to 12% of the total costs of building materials.

One of the cement product manufacturers/distributors said the rebate could be up to 70% when demand is low, thus, the real cost of this raw material fluctuates from time to time.

“But recently, some of the customers have felt the pinch as the rebates given by the cement companies have shrunk, for instance, during good times, the customers could get a RM180 rebate per tonne in certain times; now the rebate has narrowed to RM100, or less,” he explained.

Building Materials Distributors Association of Malaysia (BMDAM) President Bill Lee observed that the pullback of the rebates has caused some contractors and manufacturers’ profit margin to be squeezed as they could not increase the price of their existing orders.

“This will be a short-term impact to the main and sub-contractors who are working on their existing projects, but for future projects, the contractors will adjust the tender cost based on market price of the raw material to secure their margin,” he noted.

This also means there might be a possibility of future property price increase as cement and ready-mixed concrete are important building materials in property development, says Lee.

EdgeProp.my has contacted local cement companies – YTL Cement Bhd, Cement Industries of Malaysia Bhd and Hume Industries Bhd for comments, but they have not responded as at press time.