Cement market gets ‘Lucky’!

The Sri Lanka Standards Institution (SLSI) yesterday lifted the ban on the import of Lucky brand of cement following the Pakistan-based manufacturer’s factory getting a certification on quality from a London laboratory.

The decision to lift the suspension imposed in June, was made at a meeting of the SLSI Council which includes representatives from the Treasury, Ministry of Commerce, Public Administration, Federation of Chambers of Commerce and Industry and former Government Analyst among others.

Sources said that Lucky cement had furnished the quality certificate obtained from Curtin Labs in UK, a SLSI accredited lab. Following the approval, SLSI will randomly inspect every shipment made by Lucky Cement over the next six months. The Ordinary Portland Cement (OPC) the popular variety requires a standard compressive strength of 42.5% and above. Lucky cement stirred a controversy recently when SLSI refused to approve the release of a consignment of 14,000 bags imported by the Co-operative as the brand was suspended for failing in quality standards. The consignment had reached the Colombo port after the suspension.                         

The withholding of the consignment midst a severe shortage in cement market saw a fiery Cooperative and Internal Trade Minister Johnston Fernando castigating SLSI in public for alleged discrimination. The Minister’s contention was that SLSI had allowed import of the cement from the same Pakistani manufacturer by private sector previously. SLSI had remained firm saying when it came to cement quality standards cannot be compromised.

The current shipment lying in the Colombo port is likely to be released if laboratory tests on samples are confirmed as of specified quality. Results are expected in the first week of September. Minister Fernando on his own had also dispatched samples of other brands of cement in the market to Singapore for testing.

Ceylon Institute of Builders (CIOB) President Dr. Rohan Karunaratne recently revealed that around one million 50-kilo bags of cement are need to be imported urgently to offset the current shortage whilst industry experts warned scarcity and increase in price would hit Sri Lanka’s Rs.250 billion construction sector hard.

Local producers Tokyo Cement and Holcim Lanka account for 50 to 60% of the supply whilst the rest is sourced via imports. Midst shortage the cement industry wants the Government to restore the former maximum retail price of Rs. 785 on account of rising raw material cost and shortfall in global supplies. The maximum price was reduced to Rs. 750 per 50 kilo bag early this year.

Demand for cement has grown sharply in tandem with a pickup in construction.

In the first quarter the construction sector’s GDP had grown by 14.3% in comparison to 8.5% in the corresponding period of last year. The Census and Statistics Department also said the total cement production increased from 903,711 Mt. to 1,070,945 Mt. indicating 18.5% increase year on year. The imported building materials quantity index increased from 178.6 Q1 2010 to 191.6 Q1 2011 indicating a 7.3% increase.

As per Central Bank data, local cement production in the first five months had increased by 17% to 803,000 tonnes. Imports had increased by 18.3% to 897,000 tonnes. The combined effect is that total cement market had increased by 17.6% to 1.7 million tonnes.

These high numbers are on the back of a rebound in 2010 in the construction industry and cement sub sectors.  In 2010 the construction sector expanded significantly by 9.3% in value added terms in 2010 compared to a lower growth of 5.6% in 2009. Cement availability grew by 18% in 2010 compared to a contraction of 11% in the previous year.