Traders have allayed public concern over the impact of rising cement prices on the construction sector.
Representatives of major dealers who spoke to the GDN reassured that the effect would be ‘negligible’ and existing and new projects would continue uninterrupted.
Falcon Cement Company general manager Adnan Bashir asserted that a rise in the prices of cement alone will not lead to a spike in construction costs. However, as steel, aluminium and all other raw materials are imported in Bahrain, a cumulative effect could be felt, he added.
“When you look at a construction project and add all of these together, it is bound to have an effect on the cost of construction,” he pointed out.
“But the eight to 10 per cent spike in cement prices alone will not have any significant impact, because the cost of cement in a project is a very small percentage.”
Mr Bashir said the industry had been “absorbing prices” to support the government during the pandemic.
However, with rising shipping and energy costs, clinker prices are set to surge by nearly 27 per cent.
“We may see price increases for customers in the coming months,” he said.
“The increase may not have an impact on existing projects because some companies have not passed on all costs to customers, but this may not be the case with concrete firms and their contractors.
“New projects could be valued differently and costs may rise.”
Mr Bashir’s views were echoed by United Cement Company chief executive Faisal Shehab, who said that production plants have witnessed a dramatic spike in costs as a result of the rise in energy prices, particularly coal.
“Coal prices have risen by more than 500pc in just over a year, from $50 per tonne in September 2020 to $270 per tonne in October 2021.
“The cost of bags to pack cement has also increased, with the prices of paper doubling – it used to be $140 to $150 for 1,000 bags a year ago, but it is now more than $300, with very limited availability.”
Prices quoted in the midst of the pandemic, unlike in the past, are for shorter periods, requiring quarterly review and on an order-by-order basis, which Mr Shehab described as the “way forward.”
“Cement cost in Bahrain ranges from BD1.35 per bag to BD1.600 per bag for traders, depending on strength class, mode of payment, and volume,” he said.
“Another 150 to 200 fils may be added for transportation and trader margin for the retail customer.
“For large volumes of 52 Newton (cement strength), it is BD1.600, while for 42N it ranges from BD1.35 to BD1.500.
“These prices are still significantly lower than the price cap imposed by the 2012 ministerial order - BD33 per tonne for bulk OPC cement (commonly used) and BD32 per tonne for OPC 50kg bags.”
Mr Shehab noted that construction activity in Bahrain has been steadily declining over the last five years, with annual cement consumption dropping from 2.1 million tonnes in 2017 to 1.2m tonnes last year.
Meanwhile, Bahrain Chamber board member Basim Al Saie said price increases have been putting “tremendous pressure on raw materials, leading to a snowball effect” for the past year.
“Shipping costs dramatically increased – the rush of booking for raw material after the initial Covid-19 phase and with the economy recovering – led to a run on every material, be it microchips or basic metal, causing price disruption, in general,” Mr Al Saie explained.
Mr Al Saie
“We see this in the construction industry on steel, aluminium, metal and cement, among other things.
“And the projects will be affected, as some have predicted – end users, companies, developers, or owners – this is a global phenomenon.
“Some blame the increase on greedy suppliers, but this is not correct. We must raise awareness on this issue.”
He called on businesses to plan ahead in anticipation of delays and setbacks during uncertain times.
The GDN reported yesterday that Industry, Commerce and Tourism Minister Zayed Alzayani met local traders in the field - representatives of United Cement Company, UltraTech Cement Bahrain Company, Falcon Cement Company, and the Kingdom Cement Company – to discuss the stability of cement prices and to meet the needs of the local market.
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