Cement in crisis!

By Uditha Jayasinghe

Construction has ground to a halt with the Rs. 250 billion industry facing a severe cement shortage, say industry experts, calling on the Government and private sector to work together to provide a short-term solution. Ceylon Institute of Builders (CIOB) President Dr. Rohan Karunaratne told the Daily FT that they had received calls from builders stating that there was such a severe shortage of cement in the country that during the past few days, construction had ground to a virtual halt.

The complaint comes despite the cement market experiencing a volume increase of 17.6% to 1.7 million tonnes in the first five months of this year.

According to Dr. Karunaratne, the reason behind this is the fact that the two largest suppliers of cement to Sri Lanka are selling large amounts of their products to the UK.

“India and Pakistan are our biggest suppliers of cement, but in the recent months they have been selling most of their stock to the UK. Britain is buying massive stocks of cement, perhaps to fund its construction for the Olympics. This is resulting in not only a cement shortage but an increase in prices,” he explained.

At present a bag of cement is sold for around Rs. 680 to Rs. 690, but the CIOB President acknowledges that if the amount were to meet international prices, then it would have to increase by at least Rs. 50. This would be a huge blow to the industry since it would discourage more building. Even though several private sector companies import cement, the prices are controlled by the Government.

Currently cement imported by the Lanka Cement Corporation and Kankasanthurai (KKS) Cement only provides 20% of the market requirement.

“It is necessary for the amounts to increase. Lanka Cement receives a shipment every other day, but it is bought up completely within a few hours. What we need is for the Construction Ministry to intervene.”

Dr. Karunaratne admitted that finding a solution for the shortage was difficult, but insisted that Government authorities should engage with the private sector companies to find a halfway point so that imports could increase without a corresponding rise in prices.

“It is difficult, but something needs to be done soon. At present we have a Rs. 250 billion construction industry so even a Rs. 10 increase will mean a lot of money.”

In the long-term getting the KKS factory up and running will be crucial to unhindered local cement supply.

Construction industry 1Q

In real terms, the construction sub sector indicated a 14.3% growth for Q1 2011 compared with the growth of 8.5% in the same quarter of last year. This growth was mainly driven by the large-scale development projects in the country and rehabilitation, and resettlement programmes especially in the Northern and Eastern Provinces.

The total cement production increased from 903,711 MT.to 1,070,945 MT, indicating an 18.5% increase in the first quarter. The disbursement of loans for the constructions, such as houses, business premises, other buildings and property development, rose by 40.5% at the end of Q1 2011.

Imported building materials quantity index increased from 178.6 Q1 2010 to 191.6 Q1 2011 indicating a 7.3% increase.

(Source: Census and Statistics Department, Ministry of Finance)