Rise in housing prices not due to cost of cement, says association

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KUALA LUMPUR (June 20): The Cement and Concrete Association of Malaysia (C&CA) said the price of cement is not driving house prices up, pointing to the Malaysian House Price Index (MHPI) which shows that the price of property had climbed between 2016 and 2018 despite a declining trend in the price of the raw material during that period.

The association issued a statement today to address concerns raised on the potential impact of the announced net cement price adjustment on the construction industry and house prices, if implemented.

“According to the MHPI, published by the Ministry of Finance;s National Property Information Centre (NAPIC), house prices in Malaysia have increased by 13% between 1Q2016 and 4Q 2018 against declining cement prices as shown in the charts below.

“Many cement-related building materials have not shown much decline in their prices despite cement prices deteriorating significantly. This means the fluctuation of cement prices does not correlate with many of such building material prices,” it said.

C&CA further said that the net cement price adjustment by companies is merely to restore prices to levels that allow the companies to survive.

While there are no restrictions on cement imports, the association said it does not see any influx of cement importation into the country, given that the local prices in Malaysia are among the lowest in the region.

It pointed out that Ministry of Domestic Trade and Consumer Affairs (MDTCA) officers have visited all cement plants and issued notices to collect information relating to reasons for the announcements of net cement price adjustments.

“The eventual findings will show that net cement prices have been on a decline and reaching levels that are lower than total operating costs and depreciation,” it said.

The association said the combination of lower cement prices and higher operating costs have resulted in its member companies suffering significant losses, highlighting the quarterly weak results registered by Lafarge Malaysia Bhd, HUME Industries Bhd and Tasek Corp Bhd since 1Q2017.

“Collectively, the above companies have incurred losses close to RM1 billion over nine quarters. As a result, cement companies were forced to take the necessary actions to lower their operating costs by mothballing kiln lines, cutting staff benefits and significant retrenchments.

“If this situation persists, we fear that there will be an adverse impact on the country’s GDP and thousands of jobs, direct and indirect, will be at risk,” said C&CA.

Meanwhile, the association said it has always been supportive of the Government’s affordable housing efforts, adding that it is always willing to assist the Government in achieving its vision of affordable housing with a special pricing scheme on cement.

It highlighted that this was previously done in the 1980s to assist in the construction of concrete roads, which made up 30% of the North-South Expressway.

“As the cement industry has an important role to play in the continued development of the nation, we have and will continue to support and assist the Government and the rakyat in our country’s future success,” it said.