Cement prices to rise with surging coal cost

By Ayen Infante

07/24/2008

The already high cement prices may further increase if the cost of coal in the world market hits $140 per ton from the current $120, Holcim Philippines Inc. senior vice president for sales and marketing Eduardo Sagagun said.

Coal, which is crucial to cement production, tracks the cost of fuel in the world market which, if the cost of crude oil continues its uptrend, may push coal prices to $140 per ton before the end of the year, Sahagun explained.

If this happens, the local industry may be forced to effect a P4 hike in every bag of 40-kilos of cement since Sahagun said “for every $10 increase in coal, this translates to a P2 adjustment in the price of a bag of cement.”

Coal is fed to kiln as the baking part in producing cement product. Electricity accounts for 40 percent of cement production.

The price of coal in the global market went up two-fold to $120 per ton in May from $60 around March and April this year.

Toward June this year, cement prices rose by at least P8 per bag following the increase in the prices of coal in major sources such as Indonesia, Vietnam and Australia. In 2007, Holcim was only buying coal at $38 per ton.

Coal prices dramatically went up mainly due to the increased in demand for the product in other countries, particularly China, which would always bid high to get coal supply coming from Indonesia.

To maintain its leadership in the market, Holcim said it has launched a new product, the Holcim WallRight that would be offered 30 percent cheaper as compared to general application cement types. The product is basically for walling and flooring application.

Initially, it will be sold at P176 per bag or lower by P4 as against its portland which is priced at P180 per bag. The company hopes to sell one million bags of WallRight a month.

Sahagun expressed optimism that their new product will not directly compete with their existing product but instead eat up the market of its closest competitor the Palitada King by Cemex.

Holcim now sells eight to nine million bags of Portland a month including the 10 to 11 percent being exported to other countries including India, Middle East, Africa and South Pacific.

He explained, however, that exports are the excess capacity in its plant in Mindanao (Davao and Iligan City) and not those produced in its facilities in nearby Metro Manila. It has production plant in Bulacan and La Union.

Back to top

For comments about this website:Webmaster@tribune.net.ph
The Daily Tribune © 2006