Gadang beefs up ops

Gadang's managing director and chief executive officer says the company is bidding for contracts worth about RM1.5 billion.

Kuala Lumpur: Gadang Holdings Bhd is beefing up its construction activities and eyeing several contracts under the Economic Transformation Programme (ETP) including hospital projects to improve earnings.

Managing director and chief executive officer Tan Sri Kok Onn said the company is bidding for contracts worth about RM1.5 billion.

"We are interested in working on hospital projects. We want to build on our expertise and hopefully, do similar projects overseas," he told Business Times in an interview recently.

In 2008, Gadang's unit, Gadang Engineering (M) Sdn Bhd (GESB), won a RM341.9 million turnkey contract for the Rehabilitation Hospital (formerly, Lady Templer) in Cheras, Kuala Lumpur.

Just this week, GESB won a RM411 million contract from the Public Works Department to complete the abandoned 300-bed Shah Alam Hospital.

The Shah Alam hospital project was mooted some 12 years ago at a cost of RM300 million to ease overcrowding in the nearest government hospital for Shah Alam residents, the Tengku Ampuan Rahimah Hospital in Klang.

The project was sub-contracted to GM Healthcare Sdn Bhd by its then main contractor, Sunshine Fleet Sdn Bhd in 2007, when its first sub-contractor, Isyoda Corp Bhd, withdrew from the project.

Sunshine Fleet is owned by Selangor princess Tengku Putri Arafiah Sultan Abd Aziz Shah and it won the contract via direct negotiations in 2007 for RM482 million.

The project, expected to be completed in 2009, was stalled after GM Healthcare filed a lawsuit against Sunshine Fleet for failing to pay the company.

The works ministry revoked Sunshine Fleet's contract and called for a new tender exercise in July last year to identify a "white knight" for the job.

Six companies were shortlisted, including Gadang, IJM Corp Bhd, Fajar Baru Capital Bhd, Limbungan Setia, Ahmad Zaki Resources Bhd and Gamuda Bhd.

Meanwhile, among the contracts Gadang is bidding for is the Sungai Buloh-Kajang line of the Mass Rapid Transit project.

Kok Onn said GESB had been pre-qualified in all of the three open categories for the MRT.

He said Gadang will tender for several works, including elevated civil works and elevated stations with five packages each, and construction of a depot.

For the year ended May 31 2011, Gadang posted revenues of RM348 million and a net loss of RM4.2 million. The loss was mainly due to non-recurring write-off of bad debt, amounting to RM9.45 million in the engineering division.

Gadang's profitability was also stifled by costlier building materials.

By Business Times

Major projects under Budget 2011 will drive demand for building materials

The slew of construction projects listed in Budget 2011 will drive up demand for buildings materials. —AP

PETALING JAYA: The construction sector emerged as the clear winner from Budget 2011 but a rally in the past months means stocks valuation are no longer cheap and the risk is higher.

The smart money call is on the building material suppliers, from steel makers to cement producers, analysts said.

“We expect more positive news flow in the coming months for the construction sector,” MIDF Research said in a note yesterday, predicting a slew of project roll-outs and tender awards in the coming months.

While the question of who will bag what remained unanswered, analysts said the sheer number of upcoming construction jobs out there would drive up demand for building materials.

Malaysia Iron and Steel Indsutry Federation (MISIF) president Chow Chong Long said there was enough capacity in the country to meet the anticipated increase in demand for construction steel bars and other products.

“We don’t foresee steel shortages if the construction projects listed in Budget 2011 are implemented next year,” he said in a SMS reply to a StarBiz query.

He noted that steel factories in the country were currently running at about half their installed capacity.

“MISIF does not expect steel demand to increase until the middle of next year as it usually takes up to six months for projects to take off from the date they are awarded,” Chow said.

On Friday, Prime Minister Najib Tun Razak announced that a number of multi-billion ringgit projects would start construction next year.

This includes the RM40bil mass rapid transit system in Kuala Lumpur, six highways, the RM26bil KL International Financial District and a plan for an iconic 100-storey tower by Permodalan Nasional Bhd, on top of smaller builds such as rural roads, schools and hospitals.

Most of the big projects were already made known prior to last Friday because they were part of the 10th Malaysia Plan, or the Economic Transformation Programme.

Hence, it was not really a big surprise for the market when the projects were announced in the budget.

“These construction and infrastructure projects would require a lot of steel bars and cement,” BIMB Securities head of research Rosnani Rasul said yesterday.

“We are comfortable to retain our forecast 7% growth in cement demand in 2011,” she added. Among potential beneficiaries are Lafarge Malayan Cement Bhd and YTL Cement Bhd.

Shares in bigger construction groups Gamuda Bhd, IJM Corp Bhd, MMC Corp Bhd and WCT Bhd declined yesterday, largely in sympathy with the FTSE Bursa Malaysia KL Composite Index’s (FBM KLCI) 9.16 points drop yesterday to 1,480.70 points.

The few big gainers yesterday included Ann Joo Resources Bhd, a steel maker rated as a “buy” by AmResearch and BIMB Securities.

“We expect significant gains for the steel sector, which is a cheaper entry for leverage to the Malaysian infrastructure theme,” AmResearch analyst Mak Hoy Ken wrote yesterday.

Mak’s top pick for the steel sector is Ann Joo. The stock yesterday climbed 14 sen, or 4.7%. to RM3.12 – its highest level since January.

Specialisation may help smaller firms stand out from the pack and MIDF Research sees pre-cast concrete manufacturer MTD ACPI Engineering Bhd as a potential beneficiary.

In the budget, the Government forecast its development expenditure would drop 9% to RM49.2bil in 2011, and the slack in spending to be taken up by the private sector.

One of the key aspects of infrastructure development hinges on the success of the implementation of public-private partnership (PPP) projects.

But given the lack of clear details, “much (uncertainty) still lingers on issues like execution of these projects,’’ Inter-Pacific Research head Anthony Dass noted in his report yesterday.

By The Star

Malaysia builders, steel firms lower

STEEL makers and select property stocks suffering further selling pressure after the government slashed development spending goal for 2010.

AMONG builders, Gamuda was down 0.3 per cent, WCT dipped 0.37 per cent and IJM, the country’s largest construction group by assets, fell 0.62 per cent.

Steel maker Ann Joo slid 2.65 per cent and Perwaja, the country’s largest steel firm by output, was unchanged after a weak opening.

Prime Minister Datuk Seri Najib Razak last week said development spending will be cut by 4.5 per cent next year as the government moves to contain ballooning budget deficit following this year’s big stimulus plans.

By Reuters

Higher demand for bricks in Johor

DEMAND for bricks – one of the main components in the construction of any building – was quite badly hit by the economic slowdown, but signs of improvement are showing, especially in Johor in recent months.

Major brick manufacturers in the state are now starting to receive orders from contractors and buyers, not only in Johor but also from Singapore.

Demand is also likely to get better in the second half of the year after a sluggish second half last year.

The price for common clay bricks is now 25 sen to 27 sen each and it is largely determined by the location of the brick plants and the distance between them and the projects.

It was priced at 35 sen when crude oil price was at US$110 per barrel in mid-2008 and also when demand for bricks started to decline.

Batu Pahat-based Kia Lim Bhd executive chairman Datuk Ng Eng Sos told StarBiz the Federal Government had played a crucial role in helping those affected by the current global economic downturn.

“The RM67bil economic stimulus package is helping to cushion off the effects faced by businesses and companies,’’ he said.

He said new public projects such as schools, hospitals, government staff quarters and police stations would help construction-related companies sustain their operations.

The private sector had already cut their spending in the second half of 2008 following the credit crunch in the United States and the financial crisis in Europe. The trend was likely to remain until year-end, he said.

Construction-related companies were pinning their hopes on public projects due to the softening of private and commercial projects, he added.

“What’s important now is the swift implementation of the projects by the relevant government agencies.’’

He said the company was also banking on the construction activities by both public and private sectors in Iskandar Malaysia to boost demand for its products.

Ng noted that several projects were already off the ground or would be implemented soon in the country’s first economic growth corridor despite the slowdown.

He said the assurance given by Prime Minister Datuk Seri Najib Razak that the Federal Government was committed to develop the area bode well for the construction sector in Johor.

Ng said demand for bricks from Singapore was also positive in recent months as there were several ongoing major public and private projects in the republic. “Traditionally, buyers from Singapore will choose brick manufacturers from Johor due to the long business relationship between the two areas and their close proximity,’’ he said.

Kia Lim is one of the few major producers of facing, common and paver bricks in Johor and currently has a 30% market share in Johor and Malacca. The company markets 80% of its products locally and exports the rest to Singapore.

For the financial year ended Dec 31 (FY08), it registered net profit of RM3.65mil on revenue of RM59.6mil compared with a net loss of RM1.32mil on revenue of RM49.34mil in FY07.

Another company, Claybricks & Tiles Sdn Bhd, sees equal demand for its bricks from the public and private sectors in Johor for this and next year.

Managing director Dr Tang Hai Chiang said the supply of bricks was mostly localised as the product was sourced by buyers from the same states.

“It has to do with the logistic and transportation issues as these two factors could determine the price of bricks in the market,’’ he said.

Claybricks & Tiles is the largest maker of fine quality clay products in Malaysia, producing 10 million bricks monthly at its plant in Kota Tinggi.

It produces facing bricks (60%) and common and paver bricks, and about 90% of its products are exported to Japan, Taiwan, Hong Kong, Singapore and the Middle East.

“Common bricks are essential items in the construction industry and I personally don’t see any substitute,’’ said Tang.

Like Ng, Tang said that demand for common bricks in Johor had improved much in the first half of 2008 and likely to get better in the second half.

Many did not know that the prices of bricks in the market were actually determined and controlled by building dealers and not the manufacturers, he said, adding: “The prices can fluctuate five to six times a year and they also depend on demand and supply.’’

However, Tang said the prices in Malaysia were still low and the export business was good because of the abundance of raw materials and low labour costs.

Tang said in the last 10 years there were about 400 common brick manufacturers in the country but 50% of them had since closed down due to stiff competition. In Johor there are only 10 left now.

By The Star (by Zazali Musa) (Posted on 22 June 2009)

Construction sector shows positive signs

The construction sector in Johor has been showing positive signs in the last three months after experiencing a slowdown in the second half of 2008.

Sin Sin Construction Sdn Bhd managing director Tan Wee Hiong said this was due to the implementation of new public projects in the state.

“The government-led projects are bringing relief to the construction industry during the current slowdown as the private sector had cut its spending,’’ he told StarBiz.

Tan hoped the relevant government agencies would be more efficient and swift in implementing the projects under the second stimulus package as they would benefit the construction industry.

He also hoped that the private sector would not further cut their spending as both the public and the private sectors played an important role even during a recession.

Banks in Malaysia had also played a major role by continuing to assist businesses and companies financially, Tan said, adding that low interest rates for housing loans offered by banks and special packages by housing developers also helped developers to launch new properties.

“It is okay if the number of units launched is smaller unlike during good times. Its better to have something rather than not having anything at all.’’

Tan said the slowdown in the second half of 2008 had stabilised prices of building materials, including common bricks.

He said Singapore also played an important role in Johor’s economic performance as both countries were closely linked economically.

Despite the recession, there were several ongoing major public and private projects in Singapore and demand for building materials from Johor for Singapore customers was still “healthy”, he said.

“When Singapore fully recovers, Johor will be the first to benefit as the city state needs more workers and Johor is traditionally the main supplier of labour there,’’ Tan added.

By The Star (by Zazali Musa) (Posted on 22 June 2009)

Maybank recommends Kinsteel, Lafarge

Investors should buy Malaysian steelmakers such as Kinsteel Bhd and cement producers including Lafarge Malayan Cement Bhd before construction projects accelerate next year, Maybank Investment Bank Bhd said.

The companies will be “prime beneficiaries of government infrastructure spending; the foundations are set for a recovery,” Maybank Investment said in a report today. “Projects are expected to gain momentum in 2010 after a year of awards in 2009.”

The government has unveiled two stimulus plans totaling RM67 billion (US$19 billion) to help revive growth as the nation nears its first recession in a decade. The economy may shrink as much as 5 per cent this year, the government said May 28, slashing its forecast in March for a contraction of 1 per cent at worst.

The central bank kept its key interest rate unchanged at 2 per cent last month, saying previous cuts and stimulus measures will contribute to a recovery later this year.
The cement industry should recover faster than steel as smaller-sized infrastructure and building projects “spark cement demand,” Maybank said.

By Bloomberg

Domestic steel demand to dip this year, pickup next year

KUALA LUMPUR: Domestic steel demand is projected to contract a further 25% this year, after falling 10.7% to 7.8 million tonnes in 2008, according to the Malaysian Iron & Steel Industry Federation (MISIF).

Chow Chong Long ... We expect demand to stabilise in the second half of the year as domestic construction activities go into full swing

Its president, Chow Chong Long, said consumption was expected to post a “recovery” in 2010 but “it would probably take a few years” for demand to be able to re-test its peak volume of 8.7 million tonnes achieved in 2007.

“We are probably at the bottom, or at least near the bottom, in terms of demand and prices,” he told a press conference after the opening ceremony of South East Asia Iron and Steel Institute’s conference and exhibition 2009.

Steel bar price in the domestic market had plunged from a high of RM3,800 per tonne in July 2008 to around RM2,000 per tonne in recent weeks. Chow said prices might creep up higher in the coming months, as new orders from the construction sector gained traction.

“We expect demand to stabilise in the second half of the year, as domestic construction activities go into full swing, boosted by the implementation of projects under the two economic stimulus packages,” Chow said.

Reflecting the trend in the global market, local steel consumption plunged more than 50% in the last quarter of 2008 and continued to be depressed during the first three months of this year.

Chow said while domestic demand was showing early signs of a rebound, the sharp drop in the early part of the year would weigh down on the country’s full-year consumption forecast.

The huge decline in domestic steel consumption projected by MISIF this year is also much lower than the 14.9% drop prediction in global consumption forecast by the World Steel Association.

The sharp contraction may have forced local steel millers, including Ann Joo Bhd and Perwaja Holdings Bhd, to delay their production capacity expansion and factory upgrade plans this year.

Currently, local steel millers are mainly skewed towards producing construction steel. While Malaysia’s production capacity in terms of tonnage “exceeds” total usage, the country still imports the bulk of its steel requirement.

Government figures showed total iron and steel products exports amounted to RM10.5bil in 2008, while imports stood at RM28.7bil.

By The Star (by IZWAN IDRIS)

Gloomy outlook for timber product sector

Projected pick-up in plywood demand from Japan the only bright spot going forward

The price outlook for Malaysian timber products remains flattish or negative, with an expected pick-up in plywood demand from Japan the only bright spot going forward, according to industry players.

Housing demand in Japan is expected to recover in September as a stimulus package for house buyers there starts to kick in, says Datuk Wong Kuo Hea, managing director of timber and plantation group Ta Ann Holdings Bhd.

Recently, plywood makers from three countries – Indonesia, Malaysia and Japan – had a meeting and agreed to try to sustain their prices.

“So plywood price has reached a bottom, (but) unfortunately consumption is going down for the next six months. Therefore, the price should be flat,” Wong says.

However, the demand for logs is still strong, particularly from India, but not from China where it is flat, he adds.

The International Timber Trade Organisation (ITTO), in its latest market report, says prices of Malaysian timber products “are not expected to hold,” due to the weakening domestic residential and commercial property industry.

The trade organisation notes that foreclosures of both private and commercial properties are on the rise in the wake of massive layoffs by major multinational companies and a slump in domestic demand.

“At the forefront of the layoffs were suppliers of major building and construction materials and household accessories.

“Prices of residential properties, often propped up by foreign investors and speculators, may actually decline for the first time,” it says.

However, ITTO sees a bottoming out of prices this month in Japan, a key importing market for Malaysian timber products. Prices of timber products in Japan are expected to bottom out after the Japanese Golden Week holidays in early May, it says.

On the global front, data show weakening timber-related exports.

Ghana reported dips in all timber product exports, except plywood, in 2008 while Brazil’s furniture exports to Argentina dropped 51% in the first two months of 2009.

Peru’s wood product exports also fell nearly 50% in the first two months of this year compared with the same period in 2008.

European imports last year showed a marked decline for tropical hardwood products, while China was the only country posting mixed results. China’s export value of wood and non-wood furniture grew 21.5% in 2008 but wood flooring sales declined in the fourth quarter of the same year.

By The Star (by Loong Tse Min)

Cement makers pin hope on stimulus package

Listed cement companies appear to be doing well based on their latest quarterly results but analysts and industry association agree that it could be quite a different scenario this year.

Cement producers, like its construction peers, are counting on the Government stimulus packages to provide growth.

There is also the issue of rising costs for the industry.


The demand for cement is expected to drop this year as the construction sector slows down.

While there is hope that quick project implementation could help boost the industry in the second-half year, analysts and the industry association, however, expect demand to likely rise only in early 2010.

Cement and Concrete Association of Malaysia executive director Grace Okuda says the 5% electricity tariff reduction effective March 1 will not be enough to reduce the cost of production for the industry.

Cement producers are still absorbing the 26% electricity tariff hike announced in August last year, Okuda says.

“The industry was hard hit by the hike as it is a major user of energy and a 5% reduction is not much compared with the previous hike,” she says.

Agreeing with similar sentiments by stock analysts, Okuda says: “We expect cement demand to drop in 2009.”

However, if the implementations of the Government’s stimulus packages are quick, it could help boost cement demand for the year, she says.

Okuda also confirms that construction activity has slowed down.



An analyst with a bank-backed brokerage says her firm has a “trading buy” on the construction and related sectors, in the hope of a higher amount from the mini-budget stimulus package to be announced on March 10.

Cement makers such as LaFarge Malayan Cement Bhd are waiting for the Government package despite the fact that it exports 30% of production.

“But the RM7bil stimulus package announced earlier is not enough to help the construction sector and thus, the cement manufacturers,” she says.

The next package will have to be bigger to boost demand for cement, the analyst adds.

AmResearch analyst Mak Hoy Ken says even with the fiscal pump-priming, there will be an “implementation lag”. “A boost in demand will be seen by the first month of next year,” he says.

Mak points out that unlike steel, cement prices has only recently (in the past six months) shot up, which further put a dampener on demand.

Following the liberalisation of the sector on June 5 last year, there have been two rounds of price hikes for cement by 15% to 20% in June and about 8% in August the same year due to an unprecedented 63% hike in diesel price and 26% rise in electricity tariffs respectively.

Cement price currently stands at about RM275 per tonne from RM220 in early 2007.

However, rebates are often given to customers for the sale of cement, so the real price is hard to determine, Mak adds.

The country’s largest cement manufacturer, LaFarge Malayan Cement, reported a 79.5% jump in pre-tax profit to RM129.4mil for its fourth quarter ended Dec 31 compared with the previous corresponding period.

The company, in its Feb 18 announcement, said the huge gain was mainly attributable to higher revenue, lower maintenance costs due to the timing of scheduled plant shutdown as well as the non-recurring gain on the sale of certified emission reductions of RM29.6mil.

Smaller but also main board-listed Tasek Corp Bhd did not report year-on-year quarterly performance due to a change in financial year-end but posted a pre-tax profit of RM28.3mil for the fourth quarter ended Dec 31 on a revenue of RM143.2mil.

Tasek recorded a slight rise of 0.2% in revenue to RM143.25mil in the fourth quarter compared with RM142.96mil in the preceeding quarter.

However, pre-tax profit fell to RM28.3mil against RM34.1mil in the third quarter, “affected by lower demand for local cement and higher operating costs,” the company said in its Feb 23 announcement.

YTL Cement Bhd, a major local cement producer which analysts estimated as being larger than Tasek but smaller than LaFarge, posted 11.3% growth in pre-tax profit to RM69.9mil and 55.9% jump in revenue to RM492mil for its second quarter ended Dec 31 compared with a year ago.

“The increase in revenue and pre-tax profit were substantially attributed to overseas operations and better selling prices,” it said.

By The Star (by Loong Tse Min)

Building materials prices to remain stable

PETALING JAYA: Prices of most construction building materials are likely to remain stable this year amid slowing demand and lower production costs on falling commodity prices.

Master Builders Association Malaysia (MBAM) president Ng Kee Leen predicted prices of all construction materials would eventually drop closer to the levels before the fuel hike in June last year. He said the current prices should stay stable unless the Government made drastic changes to the base materials prices.


Ng Kee Leen

“Government policies have to be consistent and predictable, as investors dislike uncertainty,” he told StarBiz yesterday.

Ng also said MBAM’s ongoing discussion with cement manufacturers on price reduction was encouraging and the association was confident of a positive outcome.



Meanwhile, National Ready-Mixed Concrete Association of Malaysia on Sunday announced a 5% price reduction for ready-mixed concrete effective Feb 1. It said the new recommended selling prices would be applicable in Kuala Lumpur and Selangor.

Transportation charges and steel bar prices have been revised several times since last year.

Ng said prices of domestic steel bars had declined to about RM1,900 per tonne, which was about RM200 per tonne above the imported steel price. He estimated domestic steel demand at about 2 million tonnes in 2009.

However, since the conditional steel import liberalisation on May 12, the import of other steel products, for both the construction and non-construction industries, had faced new setbacks such as higher import fees, more frequent product testing and longer importation procedures, he said.

“It (import of steel products other than steel bars) has become less efficient and unproductive,” he said.

On the RM7bil stimulus package and the second scheme, Ng hoped the Government would implement them quickly.

“New contracts must start entering the market as many ongoing jobs were awarded in 2007 and will be completed soon.

If not, the construction industry will be affected in 2010,” he said.

He said the impact of the stimulus package would be felt only in the second half of 2009.

An analyst with Maybank Investment Bank Bhd who has an “underweight” on the construction industry this year projected that construction materials, whose prices had fallen since the fourth quarter of 2008, would not revert to an uptrend anytime soon.

She forecast the domestic construction industry would remain quiet this year, while local construction companies with overseas projects such as in the Middle East could risk jobs cancellation and potential delayed payments.

She added that construction material costs in India had not come off as quickly as in Malaysia. She also predicted international steel prices to average US$600 per tonne in 2009 from around US$400 per tonne currently.

By The Star (by K.C.Law)

Timber prices fall on global housing slump

PETALING JAYA: Timber prices in the United States had fallen to their lowest levels since early 1990s, as the worldwide housing slump dries up wood demand for use in construction.

The drop in timber prices was less severe for tropical hardwoods, local players said, but prices were expected to head lower as key markets the US, Europe and Japan fell into recesssion.

“We are still getting good volume from Japanese buyers, but prices had gone down quite substantially compared with a year ago,’’ a company official at Sarawak-based Ta Ann Holdings Bhd said.

Ta Ann exports timber logs mostly to India, while Japan is its biggest market for plywood products.



The official said bad weather in Sarawak in the past few weeks had somewhat limited logging activities in the country’s biggest timber-producing state and this might help keep prices in check in the coming months.

Lumber prices, however, are worst hit in the US. On the Chicago Mercantile Exchange, lumber contract for March delivery fell US$3.40 on Tuesday to close at US$172.30 per 1,000 board feet.



The contract had dropped 32% over the past six months and is now down to its worst level since 1991.

Home prices in 20 major cities in the US declined at their sharpest rate on record in October, depressed by rising foreclosures and weak sales. Bloomberg, quoting a Morgan Stanley report, on Monday said house prices in the US were likely to drop until mid-2010 because of growing unemployment, an excess of unsold homes and low levels of lending.

The US is Malaysia’s top timber export market, behind Japan and Europe.

Dwindling demand from traditional export destinations was compounded by the loss in new export markets. Eksons Corp Bhd said exports of plywood to the Middle East had almost dried up, as the construction boom in the oil-rich region came to a sudden halt as crude oil price tumbled.

Analysts said local plywood prices were likely to head lower this year from mid-November levels after an uninterupted gain in the past nine consecutive months.

The downturn had already prompted some timber firms, especially the smaller ones, to curb logging activities - at least in their own timber concession areas.

Recent filings on Bursa Malaysia showed that Perak-based Leweko Resources Bhd’s log production in November was zero. This was due to the company’s shift in strategy to log in forest areas belonging to third parties to supply its sawmills.

“We will start logging in our own area when prices recover,’’ a company official said.

By The Star (by Izwan Idris)

Malaysia cement demand may grow 3pc

The Malaysian cement industry is forecasting growth in cement demand of about three per cent to 16.33 million tonnes this year compared with 15.46 million tonnes in 2007, says the Cement And Concrete Association of Malaysia.

"While there are signs of an economic slowdown and a corresponding slowdown in construction activities, we are quite optimistic that the government would be launching initiatives that would bring impetus for greater economic growth," said chairman Tan Sri Abdul Razak Ramli at the Cement and Concrete Association's Appreciation Dinner in Kuala Lumpur last night.

By Bernama

Slight rise in demand for cement this year

The Cement & Concrete Association of Malaysia (C&CA) expects domestic cement demand to grow marginally by 3% to 5% to about 16.33 million tonnes this year versus 15.86 million tonnes in 2007 due to a lacklustre construction industry.

Chairman Tan Sri A. Razak Ramli said cement demand had remained stagnant at 15 to 16 million tonnes a year since 2003.


Tan Sri A. Razak Ramli

“Despite an encouraging growth in the first half of the year, we will only see a relatively small growth in demand this year due to the slowdown in the construction industry. We hope things will be better next year. If the economy picks up next year then construction should also,” he told StarBiz.

In addition to a lack of demand, the local cement industry has been a much misunderstood industry.

Various accusations have been hurled at industry players including increasing cement prices after liberalisation and creating artificial shortages through orchestrated plant shutdowns.

There have also been calls by various parties for the Government to remove all import duties for cement, impose an export or windfall tax and/or impose an export ban on clinker and cement to ensure sufficient domestic supply.

To Razak the allegations are baseless.



“There can never be a shortage of cement in Malaysia as the cement installed capacity is very high at 28.3 million tonnes,” he said.

In 2007, cement production inclusive of export was only 19.48 million tonnes of which 15.86 million tonnes were consumed locally. Razak said the forecast production this year would be slightly higher at 19.62 million tonnes as domestic consumption was expected to increase to 16.33 million tonnes. Cement export is expected to increase to 14.7% of production this year, up from 14% last year.

“The Government should also not impose an export ban on cement because manufacturers can easily meet domestic demand and export the excess,” Razak said.

Moreover, the Government is in full control of clinker and cement exportas every tonne can only be exported with an export license from the International Trade and Industry Ministry supported by a letter of no objection from the association.

Razak said cement manufacturers were also not intentionally creating shortages by simultaneously shutting down plants for maintenance.

“No manufacturer would shutdown their plants unnecessarily thus incurring production losses and additional costs including high fixed costs. Kilns require a minimum of three days to heat up to the desired temperature of 1,500 ºC.

“All cement companies notify the Domestic Trade and Consumer Affairs Ministry on their scheduled plant maintenance shutdowns. The plants would also have stocked up to ensure sufficient supply,” he said, adding that unscheduled plant breakdowns, however, were beyond the manufacturers’ control.

He said complaints of tight cement supply, especially in Peninsula Malaysia, was actually due to the fact that “bagged cement was not moving fast enough.”

“With the increase in fuel price, many transporters are reluctant to carry bagged cement as cargo as they are low value, bulky items. Otherwise they will try to overload the lorries. There is also a lack of lorries, drivers and licences,” he added.

Road Transport Department operations on overloaded tankers and lorries carrying cement and its related raw materials also added to the industry’s transport woes.

Razak pointed out that although the Works Ministry had gazetted an additional 20% loading from the present permissible weight for lorries/tankers on all federal roads in Peninsula Malaysia, federal roads in east Malaysia and state roads nationwide were not covered.

To help ease supply issues, the C&CA is in the midst of setting up a public hotline centre to assist those in Peninsula Malaysia who have trouble with cement supply.

“Through the centre, Class F contractors will have a direct avenue to obtain cement. We will also be able to capture and build a database on public complaints on cement supply,” Razak said.



On cement price increases, Razak said the industry did not raise prices indiscriminately and exorbitantly despite having absorbed cost increases of more than 60% from 1995 to 2007.

There were only two price increases between 1995 and 2006 when cement prices were under the Price Control Act - 10% in August 1995 and an average of 9% in December 2006.

Following cement price liberalisation on June 5, prices were only increased twice - 15% to 20% country-wide in the same month as well as an average 8% in Peninsula Malaysia in August due to an unprecedented 63% diesel price hike and a 26% rise in electricity tariff. This price will hold until December.

Despite the price liberalisation, the return on investment (ROI) for the cement industry has only increased to 6% to 10% from the previous 3%.

“This is still insufficient to encourage reinvestment by industry players,” Razak said, adding that the cost of a 1.2 million tonne integrated plant was about RM1bil currently.

“This is why there has been no expansion programme or new plants coming on-line since 1997 although manufacturing licenses for the production of more than 14 million tonnes of cement have been issued by the Government.

“There has been some re-investments and upgrades but returns and demand are too low to encourage new expansion.”

By The Star (by Elaine Ang)

Maleki builds a future with 'green' materials

MALEKI GmbH, a Germany-based building materials manufacturer, aims to generate revenue of euro100 million (RM508 million) in five years, as demand for environmentally-friendly building materials grows.

"Our company is a start-up company. We have been around for more than a year and so far have sold little as our focus has been on product development.

"But we are confident of generating a revenue of more than euro100 million within five years, based on our innovative technology," Maleki strategic director Matthias Gelber told Business Times in an interview.


ENVIRONMENTALLY FRIENDLY: Gelber demonstrating the use of Maleki's green'cement

The company designs formulas for "green" cement, renders, protective coatings and self-levelling flooring compounds.

"You can call our technology disruptive technology as I am convinced it will replace currently dominant technologies, such as epoxy floors for high performance industrial flooring. That's because our material is as good as epoxy, but better in terms of environment, health, safety and far cheaper to manufacture," he said.

The company is in talks with local and foreign companies, mainly cement producers, on possible strategic tie-ups.

These may involve the local partner mass producing the green building materials using Maleki's formula via a licensing agreement. This means the more Maleki building materials are produced, the more revenue it makes.

"We are currently in talks with several major companies that want to license our technology. Talks are still in early stages. We hope something will materialise sometime next year," said Gelber, who declined to reveal the name of the companies.

Interest in Maleki's products has grown over the last few months as more countries and companies are placing more emphasis on environmentally-friendly initiatives.

"We are more environmentally friendly, have lower manufacturing cost and better product performance than currently dominating technologies in the market," Gelber added.

By New Straits Times (by Goh Thean Eu)