Cement Price has increased again by 7%, how do you explain this trend?
Cement is a mixture of Clinker, Gypsum and Filler (Limestone). Clinker constitutes 80% of the cement whereas Gypsum 5% and Limestone (or other constituents) 15%. Clinker and Gypsum are imported from the international market. (Illustration 1)
The raise of raw material prices during the last 12 months has been a big challenge for the cement industry. Indeed, clinker price (Clinker + Freight) increased by 55% during the first half of 2021 and will even reach 98% soon. (Illustration 2)
Consequently, despite the efforts to contain this raw materials crisis, the cement price has increased during the first half of 2021 by almost 20-25% and recently by another 5-10%. (Illustration 3)
It is important to mention that this is even not considering the forecast of raw materials prices which could reach the 100% of increase. That will continue to affect the cement price unfortunately.
What is this issue of demurrage or penalties paid by the cement manufacturers?
Any importer has contractual terms to respect otherwise he will pay penalties. For cement manufacturers, each day the vessel is delaying at the anchorage or at the port generates a penalty of 35-45’000US$ (15,000USD$/day before 2020), this is called demurrage.
Today, the vessels are waiting 10 days in average to offload the clinker against 1 or 2 days in the previous years, that is huge! Adding the fact that, this penalty must be paid in foreign currency to the foreign ship owners.
This situation worsened in April 2021 due to the congestion of the bulk terminals/berths and the exclusion by GPHA of the cement manufacturers to use the berths 1 and 2. Many petitions and discussions have been initiated by the chamber of cement manufacturers but still under study by GPHA. (Illustration 4)
With the Ministries of Trade & Industry and the Ministry of Transport, the Chamber of Cement Manufacturers (COCMAG) has tried to find solutions to contain these impacts, very productive meetings have been held and many ideas proposed. We sincerely thank the ministries for their time and effort. However, many challenges are facing the executives to translate the proposals to effective actions. In this regard, the chamber is still pleading for an urgent action from GPHA to avoid additional increase in cement prices.
Will this trend continue?
This media release is an initiative by the cement manufacturers Chamber to make the consumer aware about the current situation. Never the objective of the price increment was to increase the profit, and as presented the current price increments are even not compensating the raw materials price impact. The COCMAG will also continue to work hand in hand with Government bodies to find solutions to minimize this impact on the consumer.
The Specialists have forecasted a return to the normal situation by June 2021, but the situation is even worse now! We think that if the COVID 19 pandemic is continuing, we could not predict the market.
Now, there are some rumors that we could see an improvement before the end of the current year but what is sure, is that the cement Manufacturers assured the Chamber that as soon as the raw material prices show an improvement, the cement price will undoubtedly decrease since it is not of the interest of any party to keep this situation as such.