Cement prices rise 20pc on high clinker costs, freight charges

Cement prices have shot up by 20 percent in domestic market over the last three months as manufacturers feel the bite of high freight charges and clinker prices.

A 50-kg bag is now selling between Tk 265 and Tk 275, which was Tk 220-230 three months ago. Local cement producers, who fully depend on foreign sources for clinker, the main raw material, say high freight charges combined with rising prices of clinker have led to the situation.

The sudden heat in the cement market has ultimately affected general people as real estate companies have increased apartment prices by Tk 200 per square foot.

The costly clinker puts some small cement companies on the verge of production halt when local producers start exporting to overcome market saturation. Some local companies have started exporting cement to the eastern states of India.

The clinker prices went up to $45 a tonne from $30 a few months back, marking a 50 percent rise which cement companies attribute to the December 26 tsunamis that damaged clinker sites and port facilities in Indonesia and Thailand. Bangladesh needs 6 million tonnes of clinker a year.

"As tsunami-hit countries have started re-building their infrastructure, they reduce export of clinker, causing scarcity of the raw material," says a senior official of a local cement company.

Freight charges for carrying clinker have also shot up in a big way. Importers now have to pay $22,000 to $25,000 per day to hire a 25,000-tonne capacity vessel which was only $7,000 to $8,000 until September 2003, he said.

Apart from soaring oil prices, the abnormal freight charges are also blamed to non-availability of vessels. Usually old vessels, which are considered comparatively cheaper, are used to carry clinker to save marine insurance cost, he said.

But as demand for steel goes up significantly in China due to massive construction activities ahead of Olympic games, the owners of old vessels find it lucrative to scrap and sell the old vessels instead of engaging the vessels for clinker transportation, the official added. Ship scrap is the main raw material of steel.

Investment saturation puts Bangladesh on huge cement production base. At present, some 40 operational companies have a total production capacity of 1.5 crore tonne a year while the consumption is only 70 lakh tonnes.

Industry sources say when Lafarge Surma Cement goes into production in 2006 it may create a huge glut in cement market. The lone integrated dry process cement plant in Bangladesh will produce 1.2 million tonnes per year.