After steel, cement prices set to increase

After steel, prices of cement are also set to increase  by this week, which industry insiders say will raise the cost of public construction projects  and building homes.

This is the impact of price hike of clinker, the main  raw material of cement, in the international market and freight on board  (FOB).

The price of cement is going to increase by around 5 per cent as a form of commercial adjustment.

In other words, cement manufacturers will raise the price by Tk 20 each for 50-kilogramme (kg) bags of cement, according to industry insiders.

Now the 50-kg bags are being sold at Tk 390 to Tk 420 depending on the brand, meaning the price will reach Tk 410 to Tk 440.

In December, the price of steel, another major raw material of the construction sector, increased by 17 per cent.

The retail price of 60-grade mild-steel (MS) rod rose to Tk 64,000 per tonne, up from Tk 54,000 in November and to Tk 61,500 in the corresponding period last year, data from the state-run Trading Corporation of Bangladesh showed. The price has remained unchanged.

Mohammed Amirul Haque, managing director of Premier Cement, said the manufacturers were compelled to make commercial adjustments as the price of clinker increased by $6 per tonne in international markets while the shipping cost increased by almost 2.5 times compared to last year.

However, he said the commercial adjustment would lead to a very nominal increase.

He fears that the price may increase in the coming days as the price of clinker in the international market was undergoing a rising trend since mid-January.

According to him, the cement sector gained 21 per cent growth in January this year compared to the same month in 2020.

"We are hoping that the sector may achieve 20 per cent growth this year as the construction and infrastructure sector may consume huge quantities of cement this year," he noted.

Mir Nasir Hossain, a former president of the Federation of Bangladesh Chambers of Commerce and Industry, said the hike in the price of cement would usher in a threat for the infrastructure and construction sectors as cement is a key component.

"The implementation of the annual development programme will be affected significantly. Local construction companies will fall in trouble as procurement entities do not adjust prices for the projects with tenures less than 18 months," he said.

Similarly, procurement entities do not keep the provision of revising the budget of projects whose implementation tenure is more than 18 months, although the latest public procurement rules support it.

The condition of price adjustment is, however, kept in case of the involvement of foreign companies, the entrepreneur said.

He said around 20 per cent cement was required in construction sector and so, its cost would have a huge impact.

Meanwhile, the Bangladesh Cement Manufacturers Association (BCMA) has expressed concern over the continued rise in price of cement's raw materials in the international market.

Clinker is one of the main raw materials for making cement in Bangladesh. It used to cost $42 to import each tonne of clinker, now it costs $46. In other words, the cost of importing per tonne of clinker has increased by $4. This trend of price rise is still continuing.

Of the cost, there has been a $2 increase for freight on board (FOB) of clinker due to hike of production costs. Besides, rest $2 increased for cost and freight or CFR (shipping).

According to the cement manufacturers, the production cost of clinker has increased due to the increase in the price of fuel coal used in the manufacture of clinker in the international market.

Due to these reasons, the price of clinker, one of the main raw materials of cement, continues to rise in the international market, which may affect the domestic cement sector.

Md Alamgir Kabir, president of the BCMA and vice-chairman of Crown Cement, said there has been a resurgence of development work in many countries in recent times.

"So the demand for construction materials worldwide has increased tremendously in the last few months," he added.

Kabir also said all the basic raw materials of the cement industry in Bangladesh need to be imported. In such a case, there is a possibility of price changes in the domestic market in keeping with the international market.

It is not possible to sell this product at a reasonable price due to intense competition in the cement sector in the domestic market.

There is no chance of monopoly. Only when there is an increase in price in the international market, there is likely to be an impact on the country.

"We would request that in the interest of the development of this country, especially in the interest of middle-income buyers, adjustments be made in additional tax imposed by the National Board of Revenue, which continues to be tolerable, to actually increase sales," Kabir said.

For example, there could be adjustments to the double tax and reduction in the import duty from Tk 500 to Tk 250.

He thinks that if it was possible to keep the price within the reach of general buyers and within their purchasing power, then revenue generation would also increase due to the increase in sales of goods.

Kamal Mahmud, vice-president of the Real Estate and Housing Association of Bangladesh and managing director of Skiros Builders, said the new cement price would increase the cost of projects by 15 per cent.

"This will affect the construction industry. The increase of cement price will affect not only the infrastructure and construction sectors, but also the development work in the country."

He alleged that steel and cement makers hike the price during the peak season for construction every year.