Builders Concerned Over Automatic Pricing Mechanism for Cement


21 June 2007


KUALA LUMPUR (Bernama) -- The Master Builders Association Malaysia (MBAM) has raised concern over the implementation of the Automatic Pricing Mechanism (APM) for determining cement prices from Jan 1, 2008.


"We need to look at this very objectively with the interest of the construction industry in the long run," MBAM president Patrick Wong said in a statement Thursday. He said many of the association members were still adjusting to the previous price increase of cement effective Dec 1, 2006.


Implementation of the APM was announced by Deputy Prime Minister Datuk Seri Najib Tun Razak Wednesday. According to MBAM, some discussions and dialogues should be carried out to protect the interest of contactors and builders before the APM implementation.


"Not only must views from the industry be consulted to ensure that the supply of cement will be constant once the APM is effected but the public should also be kept informed on how the APM for cement really works and what is the total impact to contractors, clients and the man in the street," Wong said.


He noted that the tenure of a contract is generally between two to three years and if the recommendation for a price review is carried out every four months, then the pricing will be adjusted about three to nine times depending on the duration of the contract.


"MBAM feels that the frequent price adjustments would be unfair to contractors and builders," he said. The association felt that the current supply and demand model could still be used as the benchmark for determining the price of cement, Wong said.


He said MBAM objected to a cost plus APM that ensures profit guarantee for cement manufacturers while end users like contractors have to absorb all costs and risks. The association also expressed concern that there will be difficulty in monitoring the APM to prevent it from being abused like the current ceiling price for cement.


Wong said MBAM was in favour of allowing free market forces to determine the price of cement. "By opening up the market, market forces will find its own equilibrium and this would cause the prices to be more stable," he said.
"It is also important that price fluctuations clauses must be incorporated in all forms of contract to ensure that contractors can adjust to these price fluctuations accordingly," he added.