Business

Cement shortage to prevail till end of the year

 

  • Forex liquidity issue main cause
  • Industry says banks have limited LCs
  • Ready-mix concrete industry to collapse if Govt. does not intervene 

 

BY Shenal Fernando 

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.

Speaking to The Morning Business, 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.”

According to him, the current cement shortage is expected to continue for at least another two months until sufficient stocks are imported. However, in the interim, if measures are not taken to rectify the current shortage of cement in the local market, the ready-mix concrete industry will inevitably collapse in short order.

He further pointed out that this situation has been exacerbated by the recent price hike of cement, which has imposed further burdens on the ready-mix concrete industry.

Speaking to The Morning Business, LCRA Secretary Tissa Mallawarachchi reiterated that there is a shortage of bulk cement in the local market and that it is expected to continue for at least another two months, and that the primary cause for the shortage is the lack of dollars.

According to him, another reason for the scarcity present in the market is due to the low quality of raw materials produced in the countries from which Sri Lanka used to import earlier. For example, if the quality standard doesn’t meet the requirement of the Sri Lanka Standards Institute (SLS), then importers are not permitted to import cement.

This shortage of cement in Sri Lanka has been a persistent problem for several months owing to raw material prices increasing by over 30% together with high shipping costs. Moreover, since cement was subjected to a maximum retail price (MRP) in Sri Lanka, cement companies were unable to increase the price when the costs of the raw materials increased drastically.

However, last week, the Government removed its price controls on several goods, including cement, after which the price of a 50 kg cement bag was increased by Rs. 93. However, it appears that despite this price hike, owing to the local forex liquidity issues, the shortage in cement will likely prevail until the end of the year. 

Cement shortage to prevail till end of the year