Causes complex for cement price rise
-Global demand, logistics, strikes...
By Patrick Denny
Business September 10, 2004
Stabroek News
September 10, 2004
Uncertainty about the monthly demand for cement, insufficient information about special projects and vessel availability, weather conditions and unplanned plant stoppages are some of the problems which have caused a shortfall of cement from Trinidad Cement Limited in recent months.
Government officials have laid the blame for the shortage squarely at the door of Caribbean cement conglomerate, Trinidad Cement Limited, a subsidiary of Cemex, one of the largest cement producers in South America, with plants in Colombia, Venezuela and Costa Rica, from which cement could be sourced as a result of the government waiving the Common External Tariff (CET) on cement obtained from outside the Caricom region.
TCL has plants in Jamaica, Trinidad and Barbados. The shortage has seen a rise in cement prices but the Trade Ministry acknowledges that the increase is in part due to the rise of cement prices worldwide driven by demand from China. With the government's removal of the Common External Tariff (CET) on extra-regional imports of cement, importers have sourced the product from higher-priced suppliers to fill the gap.
The CET, which had bad been waived for the past five months, is being further extended to September 30, 2005, to allow importers, according to Trade Minister Manzoor Nadir, better access to extra-regional sources by being able to enter into long term contracts.
Nadir says that with additional supplies being sourced from outside the region he expects prices to settle at around US5/G$1000 a bag. Stabroek News understands that prices at the TCL distributors are presently US$5.20 /G$1040 and at other retailers the price ranges from US$5.75/G$1150 - US$6.75/G$1350.
Permanent Secretary in the Ministry of Trade, Joseph Singh told Stabroek Business that the demand for cement is 12,000 tonnes monthly but that TCL has not been supplying that quantity and would need to supply 17,000 tonnes a month for the rest of the year to satisfy built up needs.
He explained that the cement shortage, which is affecting the construction industry, hurts thousands of families where the wage earner is a carpenter or mason or just involved in the construction business.
TCL's General Manager, International Business and Marketing, Marketing Manager, Kelvin Mohabir does not deny that there has been difficulty in meeting the Guyana demand. He told Stabroek Business these difficulties arose from vessel availability, weather conditions and unplanned plant stoppages.
He explained too that due to the regional shortages it is very difficult to find additional product to meet any logistical interruptions in TCL's delivery programme. He stressed that the "TCL Group is committed to ensuring that the Guyanese market is fully supplied and consequently has not been supplying many potential customers who cannot now get suppliers out of their regular sources due to tight world supply conditions."
The trade publication GCL: N&S American Cement in its June-July 2004 issue reported that "the cement shortages in the US are biting more deeply with the result that more and more customers are being put on allocation: prices are now increasing steadily as the summer construction season kicks in. The price rises are being felt particularly keenly by construction companies."
The previous issue of the publication reported that "an acute cement shortage is threatening to raise prices and delay work at job sites in the south-eastern US." It said that suppliers blamed the shortage on the construction boom in China that "is tying up ships that normally import cement to the United States, which depends on imported cement to fill the gaps in times of high demand," and that "more than 20 per cent of the cement used in the country last year was imported."
Mohabir explained during the first quarter there was a fire in the Suriname grinding station which caused the closure of that plant. This resulted in halts to many construction projects and the TCL group came to the assistance of a Caricom neighbour.
"This created some bottlenecks at our ports in handling the extra cargo."
During the second quarter, Mohabir said there were two instances of vessels being delayed out of TCL's Barbados facilities due to bad weather. There was also an incident at the start of the third quarter with a minor mill stoppage in Barbados.
"In all instances where vessels were in position Guyana shipments have been given priority," Mohabir said and added that "shipments to Guyana have increased year over year."
He said on "Monday and Tuesday of last week (August 31 & September 1) there was a two-day industrial action by workers in Trinidad which will result in a three-day delay in shipments to all destinations."
Commenting on the amount of cement supplied this year, Mohabir said that between January and August TCL had shipped 2,006,195 bags of cement but concedes that "there have been some gaps in our supply this year which created some unpredictable demand patterns."
And he noted that to gauge the actual demand is difficult since TCL normally uses GDP growth and reports on special projects to do so. He said TCL has been made aware of the projects by the government but that the company is "awaiting the details of the volumes and draw-down schedules to further fine tune our planning".
Singh said the Ministry had provided TCL with figures which had projected the estimated demand for this year.
Mohabir pointed out too that until July this year its price for cement ex-factory was US$2.72/G$544 a bag. In July it went up to US$2.76/G$552. The price charged locally in Trinidad ex- factory is US$4.60/G$920 per bag, which means, he says, that the cement sold to Guyana is at a discount of 40%. "To date we have absorbed most the price increases of fuel, power, spares and other inflation-related items through our higher productivity and improved efficiencies. The next level requires a heavy technology and capital injection to contain costs."
To address the problems caused by the disruption to supplies to the Guyana market as a result of port congestion and weather conditions, TCL has commenced work on a US$5 million cement terminal that will increase storage capacity on the ground here to the equivalent of approximately 280,000 bags/c14000 tonnes.
Mohabir says that the necessary approvals have been obtained for the facility which meets all World Bank and local environmental standards. Mohabir says that the facility is part of the steps being taken to ensure that the regional supplies of cement are maintained. By March 2005 an additional 9,400,000 bags of cement per annum should be available as a result of expansions at TCL's plant in Trinidad. Longer term, the expansion of its Jamaican factory, scheduled to complete in 2007, would result in a similar increase in volumes of cement. The expansions will cost TCL close to US$180M.
Uncertainty about the monthly demand for cement, insufficient information about special projects and vessel availability, weather conditions and unplanned plant stoppages are some of the problems which have caused a shortfall of cement from Trinidad Cement Limited in recent months.
Government officials have laid the blame for the shortage squarely at the door of Caribbean cement conglomerate, Trinidad Cement Limited, a subsidiary of Cemex, one of the largest cement producers in South America, with plants in Colombia, Venezuela and Costa Rica, from which cement could be sourced as a result of the government waiving the Common External Tariff (CET) on cement obtained from outside the Caricom region.
TCL has plants in Jamaica, Trinidad and Barbados. The shortage has seen a rise in cement prices but the Trade Ministry acknowledges that the increase is in part due to the rise in cement prices worldwide driven by demand from China. With the government's removal of the Common External Tariff (CET) on extra-regional imports of cement, importers have sourced the product from higher-priced suppliers to fill the gap.
The CET, which had been waived for the past five months, is being further extended to September 30, 2005, to allow importers, according to Trade Minister Manzoor Nadir, better access to extra-regional sources by being able to enter into long -term contracts.
Nadir says that with additional supplies being sourced from outside the region he expects prices to settle at around US$5/G$1000 a bag. Stabroek Business understands that prices at the TCL distributors are presently US$5.20 /G$1040 and at other retailers the price ranges from US$5.75/G$1150 - US$6.75/G$1350.
Permanent Secretary in the Ministry of Trade, Joseph Singh told Stabroek Business that the demand for cement is 12,000 tonnes monthly but that TCL has not been supplying that quantity and would need to supply 17,000 tonnes a month for the rest of the year to satisfy built up needs.
He explained that the cement shortage, which is affecting the construction industry, hurts thousands of families where the wage earner is a carpenter or mason or just involved in the construction business.
TCL's General Manager, International Business and Marketing, Kelvin Mohabir does not deny that there has been difficulty in meeting the Guyana demand. He told Stabroek Business these difficulties arose from vessel availability, weather conditions and unplanned plant stoppages. He explained too that due to the regional shortages it is very difficult to find additional product to meet any logistical interruptions in TCL's delivery programme. He stressed that the "TCL Group is committed to ensuring that the Guyanese market is fully supplied."
The trade publication GCL: N&S American Cement in its June-July 2004 issue reported that "the cement shortages in the US are biting more deeply with the result that more and more customers are being put on allocation: prices are now increasing steadily as the summer construction season kicks in. The price rises are being felt particularly keenly by construction companies."
The previous issue of the publication reported that "an acute cement shortage is threatening to raise prices and delay work at job sites in the south-eastern US." It said that suppliers blamed the shortage on the construction boom in China that "is tying up ships that normally import cement to the United States, which depends on imported cement to fill the gaps in times of high demand," and that "more than 20 per cent of the cement used in the country last year was imported."
Mohabir explained during the first quarter there was a fire in the Suriname grinding station which caused the closure of that plant. This resulted in halts to many construction projects and the TCL group came to the assistance of a Caricom neighbour.
"This created some bottlenecks at our ports in handling the extra cargo."
During the second quarter, Mohabir said there were two instances of vessels being delayed out of TCL's Barbados facilities due to bad weather. There was also an incident at the start of the third quarter with a minor mill stoppage in Barbados.
"In all instances where vessels were in position Guyana shipments have been given priority," Mohabir said and added that "shipments to Guyana have increased year over year."
He said on "Monday and Tuesday of last week (August 31 & September 1) there was a two-day industrial action by workers in Trinidad which will result in a three-day delay in shipments to all destinations."
Commenting on the amount of cement supplied this year, Mohabir said that between January and August TCL had shipped 2,006,195 bags of cement but concedes that "there have been some gaps in our supply this year which created some unpredictable demand patterns."
And he noted that to gauge the actual demand is difficult since TCL normally uses GDP growth and reports on special projects to do so. He said TCL has been made aware of the projects by the government but that the company is "awaiting the details of the volumes and draw-down schedules to further fine tune our planning." Singh said the Ministry had provided TCL with figures which had projected the estimated demand for this year.
Mohabir pointed out too that until July this year its price for cement ex-factory was US$2.72/G$544 a bag. In July it went up to US$2.76/G$552. The price charged locally in Trinidad ex-factory is US$4.60/G$920 per bag, which means, he says, that the cement sold to Guyana is at a discount of 40%. "To date we have absorbed most the price increases of fuel, power, spares and other inflation-related items through our higher productivity and improved efficiencies.
The next level requires a heavy technology and capital injection to contain costs." To address the problems caused by the disruption to supplies to the Guyana market as a result of port congestion and weather conditions, TCL has commenced work on a US$5 million cement terminal that will increase storage capacity on the ground here to the equivalent of approximately 280,000 bags/c14000 tonnes.
Mohabir says that the necessary approvals have been obtained for the facility which meets all World Bank and local environmental standards. Mohabir says that building the facility is one of the steps being taken to ensure that the regional supplies of cement are maintained.
By March 2005 an additional 9,400,000 bags of cement per annum should be available as a result of expansions at TCL's plant in Trinidad. Longer term, the expansion of its Jamaican factory, scheduled to be completed in 2007, would result in a similar increase in volumes of cement. The expansions will cost TCL close to US$180M.