SCCC first to raise local cement prices

PRACHUAP KHIRI KHAN : Siam City Cement (SCCC), the country’s second largest cement maker, today will become the first local producer to raise its prices, as domestic consumption has been better than expected, thanks to growth in infrastructure and property development.

Managing director Philippe Arto said the price increase by 200 baht per tonne mainly reflected more costly coal, for which 2011 prices are being quoted at 15% higher than this year’s level.

Before the increase, SCCC’s Insee cement products were priced from 1,900 to 2,020 baht per tonne.

Local cement prices have stayed relatively unchanged over the past 10 years even though prices of coal, electricity and wages, which together account for nearly 90% of production costs, have risen, he said.

Statistics show that cement prices in Thailand are among the lowest in 80 countries surveyed, given the excess capacity and severe competition. Cement producers including SCCC have to export some output at lower margins than on domestic sales.

But this year, cement demand in Thailand has exceeded projections, growing in a range of 7-8% from last year to return to the 2008 level of 26 million tonnes against the original forecast of a 3% rise over 2009, said Mr Arto.

Two major drivers of demand have been government spending on infrastructure projects under the Thai Khem Khaeng economic stimulus scheme and improving private investment in property projects, especially condominiums and houses, he added.

SCCC, which is one-third owned by Switzerland-based Holcim, has a 27-28% share of the cement market, behind Siam Cement Group (SCC).

“We want to maintain our market share so we have to grow in line with the overall market,” said Mr Arto.

The strong appreciation of the Thai baht, meanwhile, has had only a small negative impact on SCCC’s financial results as it benefits from a natural hedge against currency exposure.

The company imports coal in US dollars and quotes dollar prices for its exports of clinker, he explained.

Kim Eng Securities projects domestic cement demand will rise 10% to 26.5 million tonnes this year and another 10% to 29 million tonnes in 2011.

SCCC in the first half earned a net profit of 1.54 billion baht (6.73 baht a share), up marginally from 1.5 billion (6.52 baht a share) in the same period last year.

Shares of SCCC closed on Friday on the Stock Exchange of Thailand at 230 baht, up one baht, in trade worth 118.4 million baht.

Source: http://www.bangkokpost.com/business/economics/198334/sccc-first-to-raise-local-cement-prices