Sunday, September 24, 2023

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Construction industry raises concerns on cement shortage urging CB support

Despite the recent price hike of cement, the cement shortage in the local market is expected to continue for at least another two months, according to industry sources.

 Lanka Ready-mix Concrete Association (LCRA) Chairman Anura Vithanage claimed that there are about 300 ready-mix concrete companies in Sri Lanka who are all facing dire circumstances due to the shortage of cement in the local markets.

Withanage further stated: “Prior to the current shortage, my monthly requirement was about 1,000 tonnes. However, I can barely get 500 tonnes now. It doesn’t matter if you have money, there is no cement in the market.”

Explaining further, he claimed: “According to cement suppliers, when they open LCs (letters of credit) for cement imports, they are granted approval only for a limited amount. 

Where once a ship would bring about 4,000-5,000 tonnes of cement, now when a LC is opened, approval will be granted for only about 2,000 tonnes. From these limited stocks of cement, the cement suppliers will give priority to their continuous cement buyers. Consequently, there is no cement available for the normal consumer.”

The Ceylon Institute of Builders (CIB) raised concerns over the worsening cement shortage and urged for swift solutions from the Central Bank.

CIB said the construction industry, being one of the largest GDP contributors and employment generators, is paralysed due to the massive shortage of cement in the country.

“We require local production of approximately 8.8 million tons, and presently, we can’t release this because LCs cannot be opened to import raw materials. 

Further, there is no stable selling price for cement. Although a fixed rate has been indicated in the range of 1,300, this is not our reality,” CIB Chairman Dr. Rohan Karunaratne said.

He said cement prices are dangerously volatile and the issue of such abnormal prices is overshadowed by the larger issue that cement (at any price) is markedly unavailable.

“Therefore, the Central Bank should offer an appropriate solution for banks to open up LCs for raw material importers of cement,” Dr. Karunaratne added.

According to CIB over the last two years, the cement market has struggled. First, there was a 11% year-on-year drop in total local production and imports, to 7.2 million tons in 2020 from 8.1 million tons in 2019. 

Then, imports fell by 18% year-on-year to 1.83 million tons from January to August 2021 from 2.24 million tons.

“Local production has stepped up to mitigate this, producing a final growth in total local production in 2021, and continuing this effort in 2022. But they cannot retain this untiring support to Sri Lankan building without their raw materials,” CIB Chief said.

“The cement industry is a good example of how dangerous exchange rate effects are, once again, making the survival of thousands of Sri Lankan workers and many of our copious businesses, an almost impossible job,” he added.

It was pointed out that the largest supplier Tokyo Cement (accounting for approximately 38% of production), INSEE (35%), Ultratech (13.6%), Singha etc., when questioned about the cement shortage, have warned the industry that no relief should be expected anytime soon and that this may continue, unless they are given the ability to open up LCs. 

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