Wednesday August 11, 2010
Pick-up in Cement Demand Seen in H2
PETALING JAYA: Lafarge Malayan Cement Bhd is optimistic that local cement demand will grow slightly in the second half of the year on expectations of more robust implementation of ongoing and new infrastructure projects, said president and chief executive officer Bi Yong Chungunco.
Some of the upcoming projects include the Second Penang Bridge, the double track railway project and the low cost carrier terminal at the KL International Airport.
“As such, we hope to see single digit growth in cement demand in the second half of the year.
Bi Yong Chungunco “If the growth is still not strong in the second half due to project delays, then I think the spillover should boost cement demand in 2011,” she told StarBiz.
For the first half of the year, local demand for cement was relatively flat at close to seven million tonnes.
“We have earlier hoped for a small growth in anticipation of higher construction activities coming from news of better sales from property launches and infrastructure projects but this could be due to a delay in the implementation of some of the new infrastructure projects,” Chungunco said.
Domestic cement demand in Peninsular Malaysia suffered a contraction of 6.7% in 2009 year-on-year, reversing the 7% growth in 2008. Demand was flat in 2006 and 2007.
Chungunco said the low domestic cement demand growth in the past decade has been a concern for the industry.
However, she remains hopeful of stronger cement demand going forward as the Government looks at ways to attract more foreign and domestic investments under the New Economic Model and Tenth Malaysia Plan and with the much stronger interest to invest in public transport infrastructure.
According to Chungunco, the industry currently has a capacity utilisation rate of about 85%.
In addition to the lacklustre demand for cement, Chungunco said rising production costs as a result of the increase in fuel costs such as coal, petcoke, fuel oil and a potential a rise in electricity tariff was a concern for the industry.
To offset the increase in production costs, cement makers raised the gross average selling price by about 9% to RM300 per tonne on May 1.
Chungunco said the price increase was necessary due to the higher cement production input costs which continued to rise, especially coal.
She added that the Newcastle coal index, the barometer of coal prices, had increased by at least 35% compared with 2009 levels.
Nevertheless, Chungunco does not expect further increases in cement price this year.
“We do not foresee a significant change in production costs for the rest of the year and unless there is a significant change in energy cost, we believe the current list price should remain for the rest of the year,” she said.
Chungunco still sees a promising outlook for the cement industry in the country.
“Overall, Malaysia presents significant potential for cement companies due to its young and growing population as well as scope for growth in gross domestic product per capita which will spur the need for infrastructure,” she said.