Frankly Speaking: Cement dilemma

This article first appeared in The Edge Malaysia Weekly, on June 24, 2019 - June 30, 2019.
-A +A

Last week, Minister of Domestic Trade and Consumer Affairs Datuk Seri Saifuddin Nasution Ismail, after a meeting with cement manufacturers, decided that there would not be an increase in cement prices.

This came about after construction players, property developers and consumer associations had complained that higher cement prices would cause house prices to rise and result in massive losses for contractors.

But what about the fate of cement manufacturers? According to the Cement and Concrete Association of Malaysia, lower prices and higher operating costs have resulted in its member companies suffering significant losses. Three listed manufacturers — Lafarge Malaysia Bhd, Hume Industries Bhd and Tasek Corp Bhd — collectively incurred losses of almost RM1 billion over the last nine quarters.

The price of ordinary Portland cement, which was close to RM400 per tonne five years ago, has halved to about RM200 per tonne. Meanwhile, electricity tariffs and packing materials and imported fuel have all risen.

Because of this, cement companies have no choice but to lower operating costs by cutting their workforce and staff benefits, among other things. Some players have exited while others are merging to become more efficient.

The low price environment is not unique to Malaysia due to the global oversupply and overcapacity situation.

Is cement-making a strategic industry?

Since there are reportedly no curbs on imports, will we be better off importing cement if it is possible to do so at a cheaper price? If it is strategic, should local producers be forced to sell at unsustainable prices? Clearly, this is not viable. That is why the government needs to step in and come up with a clear policy for the sector.

Save by subscribing to us for your print and/or digital copy.

P/S: The Edge is also available on Apple's AppStore and Androids' Google Play.