Construction costs burdened with cement price rise
The cost 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 purchase price increased in mid-March as a knock-on effect from a rise in prices of clinker, the primary raw material, in the international market alongside that of shipping costs.
Basically, it had been a sort of commercial adjustment.
Just one single month ago the prices were in the number of Tk 390 to Tk 420 according to 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 when compared to pre-pandemic period.
He said such commercial adjustments were normal in this business.
"If the price of raw materials drop, that of finished products may also go down," he assured.
He said the prices of raw materials increased in December last year and that impact came into being in March.
"We are hoping for the sector to accomplish 20 per cent growth this year as the construction and infrastructure sector may consume huge levels 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 because of a rise in transportation costs, he said adding, "If production cost increases, its impact will automatically fall in retail market."
He hopes for the purchase price to come down next 2-3 months when shipping costs would come down.
Meanwhile, Bangladesh Cement Manufacturers Association (BCMA) has expressed concern over a continuous rise in the cost of recycleables in the international market.
Clinker is among the main recycleables to make cement in Bangladesh. Importing one tonne used to cost $42 whereas it now costs $46 to $48, meaning a rise of $4 to $6.
According to cement manufacturers, clinker now costs more to create due to the increase in the cost of fuel coal found in its manufacture in the international market.
All the basic raw materials of Bangladesh's cement industry has to be imported, said Md Alamgir Kabir, president of the BCMA and vice-chairman of Crown Cement.
For this the probability remains for price changes in the domestic market maintaining the international market, he said.
It isn't possible to sell the product at an acceptable price due to powerful competition in the cement sector in the domestic market.
He also said there was no potential for monopoly. Only once there is an upsurge in price in the international market, there may very well be an impact on the country, he said.
"We'd request that in the interest of the development of the country, especially in the interest of middle-income buyers, adjustments be produced in additional tax imposed by the National Board of Revenue, which continues to be tolerable, to really increase sales," Kabir said.
For example, there may be adjustments to the double tax and decrease in the import duty from Tk 500 to Tk 250.
He thinks that if it had been possible to keep the price within the reach of general buyers and within their purchasing power, then income generation would can also increase due to the increase in sales of goods.
Asadul Haque Sufiyan, chief operating officer of Bengal Cement, will not see any potential for a decrease in price before October as there is no possibility of a decrease in the price of raw materials in the international market.
Even, there is absolutely no chance for a decrease in freight cost next half a year, he said.
Mir Nasir Hossain, a former president of the Federation of Bangladesh Chambers of Commerce and Industry, said the construction sector was facing an excellent threat as a result of price rise of construction materials including cement, rod and other components.
"The implementation of the Annual Development Programme will be influenced significantly. We've no scope to avoid the ongoing projects as there is absolutely no provision to modify prices," he said.
"We, the neighborhood construction companies, fell in trouble as procurement entities do not adjust charges for the projects with tenures significantly less than 1 . 5 years," he said.
However, he said there is a provision to adapt the costs for foreign companies.
"Our construction cost increased almost 15 to 18 % as a result of recent price rise of recycleables," 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 cost of raw materials has suddenly increased.
He said the construction and infrastructure costs increased significantly, which was a large burden for the construction industry.
He said some mid-level companies would inevitably stop their works to boost the budget next year and it could delay implementation of development projects.
