Construction costs burdened with cement price rise
The price of each 50-kilogramme bag of cement has increased by around 12 per cent, or Tk 50, to Tk 450 to Tk 460 -- a development that will push up construction costs, be it the government's development projects or privately-owned buildings.
The price increased in mid-March as a knock-on effect from a rise in prices of clinker, the main raw material, in the international market alongside that of shipping costs.
Basically, it was a form of commercial adjustment.
Just one month ago the prices were in the range of Tk 390 to Tk 420 depending on the brand.
Acknowledging this, Mohammed Amirul Haque, managing director of Premier Cement, said clinker prices increased by $6 per tonne while shipping costs almost 2.5 times compared to the pre-pandemic period.
He said such commercial adjustments were normal in this business.
"If the price of raw materials come down, that of finished products will also go down," he assured.
He said the prices of raw materials increased in December last year and that impact came about in March.
"We are hoping for the sector to achieve 20 per cent growth this year as the construction and infrastructure sector may consume huge quantities of cement," he noted.
Shahriar Jahan Rahat, deputy managing director of Kabir Steel Re-rolling Mills, whose sister concern is Royal Cement, said the rise was at least Tk 40 to Tk 60 per bag.
Basically, the production cost increased due to an increase in transportation costs, he said adding, "If production cost increases, its impact will automatically fall in retail market."
He hopes for the price to come down within the next two to three months when shipping costs would come down.
Meanwhile, Bangladesh Cement Manufacturers Association (BCMA) has expressed concern over a continuous rise in the price of raw materials in the international market.
Clinker is one of the main raw materials for making cement in Bangladesh. Importing one tonne used to cost $42 whereas it now costs $46 to $48, meaning an increase of $4 to $6.
According to cement manufacturers, clinker now costs more to produce due to the increase in the price of fuel coal used in its manufacture in the international market.
All the basic raw materials of Bangladesh's cement industry needs to be imported, said Md Alamgir Kabir, president of the BCMA and vice-chairman of Crown Cement.
For this the possibility remains for price changes in the domestic market keeping with the international market, he said.
It is not possible to sell this product at a reasonable price due to intense competition in the cement sector in the domestic market.
He also said there was 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, he said.
"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.
Asadul Haque Sufiyan, chief operating officer of Bengal Cement, does not see any chance of a decrease in price before October as there was no possibility of a reduction in the price of raw materials in the international market.
Even, there is no chance for a reduction in freight cost within the next six months, he said.
Mir Nasir Hossain, a former president of the Federation of Bangladesh Chambers of Commerce and Industry, said the construction sector was facing a great threat due to the price rise of construction materials including cement, rod and other components.
"The implementation of the Annual Development Programme will be affected significantly. We have no scope to stop the ongoing projects as there is no provision to adjust prices," he said.
"We, the local construction companies, fell in trouble as procurement entities do not adjust prices for the projects with tenures less than 18 months," he said.
However, he said there was a provision to adjust the prices for foreign companies.
"Our construction cost increased almost 15 to 18 per cent due to the recent price rise of raw materials," he observed.
Like Hossain, SM Khorshed Alam, president of the Bangladesh Association of Construction Industry, was in doubt over how they would keep business afloat as the price of raw materials has suddenly increased.
He said the construction and infrastructure costs increased significantly, which was a big burden for the construction industry.
He said some mid-level companies would inevitably stop their works to increase the budget next year and it would delay implementation of development projects.
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