Jan 2013 Financial News

Pres-T-Con CEO on cement, aggregate hike: Heat is on until 2015 general election

Jan 17, 2013

The heat in the construction sector is on and will be that way until the 2015 general election. That’s how an official at the Arima-based Pres-T-Con Ltd described two price increases that took effect between December 10, 2012, and January 9, 2013.

Those increases were an estimated 13 per cent hike for the cost of aggregate supplied by state-owned National Quarries Company Ltd (NQ) and a 9.5 per cent hike on the ex-factory price for a bag of cement by Trinidad Cement Ltd (TCL).

And if the price increase for NQ aggregate is not bad enough, some companies cannot even get materials as much of it is being used on the Pt Fortin highway project. The official said Pres-T-Con, which manufactures pre-cast and pre-stressed concrete structures, now has to pay 29 per cent more for washed sharp sand from companies like Coosal’s.

“The heat is on again. It’s a case of supply and demand,” the official said.

“It’s hard to get aggregate because of the highway. It’s up to the small guys to fill in the demand.”

He said given the present scenario, Pres-T-Con will likely have to import aggregate by year’s end.

The increases for aggregate and cement will lead to a “nominal increase” of between five and eight per cent for pre-mix concrete. Pres-T-Con, a subsidiary of the Neal and Massy Group, supplies pre-mix concrete and concrete piles and slabs for bridges, structures and energy plants.

One such project the company supplied concrete products to was the interchange project at the intersection of the Churchill Roosevelt and Uriah Butler Highways.

The official said six months ago, the concrete in a house cost roughly $925 per cubic metre, which has since risen to $1,100: a 19 per cent increase.

“The concrete of a structure could be between 20 per cent and 50 per cent, depending on the structure,” the official said.

Jan Landreth-Smith, chief executive officer at Pres-T-Con, said when materials go up, a contractor can request a variation of contract prices when increases have been beyond their control, depending on the type of contract drawn.

Landreth-Smith said the ability of a contractor to recover a material cost increase depends on whether the client is “willing to entertain or accept” the cost increases.

“Indirectly, we are sub-contractors to contractors that have government contractors. As a sub-contractor, unless the main contractor is compensated, it’s very challenging to get it (compensation).”

He said many contracts contain a clause that if prices vary, plus or minus ten per cent, a contractor can request a price adjustment.

“Request does not mean approval,” Landreth-Smith said, in a telephone interview last week. “It depends on the case put forward and how strong that case has been put forward.”

Commenting on the TCL cement price increase, he said it wasn’t announced, but implemented.

Jokingly, he said of work done on the interchange, given higher prices: “We’re glad we’re finished.”

Using a pre-stressed 400 millimetre square concrete piles as an example, Landreth-Smith said prior to the TCL/NQ increases, one such pile cost $328 per linear metre. That product is now $348 per linear metre.

“That is a total increase of almost six per cent,” Landreth-Smith said.

Daran Bahadoorsingh, a director and administrative officer at Caribbean Housing Ltd, the developer behind the proposed upscale Brentwood Palms project at Chaguanas, said last Friday that an inhouse analysis of the cement increase has indicated that it will have no more than a one per cent effect on construction costs in general.

“It depends on how concrete intenstive a project is. If it’s steel beams or prefabricated walls, the impact would be less. If it’s concrete plaster and heavy use of concrete, then that would have a stronger bearing,” Bahadoorsingh said.

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While the information below is not an exhaustive recount of previous TCL increases, online research indicates the Claxton Bay cement maker has applied at least four increases since January 2007:
• four per cent in January 2007
• TCL Group chief executive officer Dr Rollin Bertrand announced a single-digit increase that took effect in February 2008
• an increase of 6.5 per cent in August 2008
• seven per cent in December 2011

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Mikey Joseph, former president of the T&T Contractors Association:

Responding to TCL agreeing to the TTCA’s request of TCL to grant a 90-day moratorium to the association, Joseph said, “We have a policy that whenever we are seeking a benefit for members, it would only apply to financial members. We have about 96 financial members, and about 20 per cent of them may have fixed price contracts.” Had TCL not granted a stay on its increase, Joseph said, it means that those TTCA members with fixed price contracts that disallow increases of 15 per cent and under would have had to absorb such increases.

Fédération Internationale Des Ingénieurs-Conseils (FIDIC) contracts kick in for increases of 15 per cent and more.
On the issue of house construction, Joseph said building blocks will also be affected by the TCL increase.
He said the cost of concrete in building a house will go up by between three and five per cent.

Joseph said an average three-bedroom house would require roughly 34 cubic metres of cement, which works out to 250 bags at an ex-factory price of $55, which works out to $13,750. That does not include block work, concrete blocks, yard paving or anything of the sort.


Source:
Sandra Chouthi
Trinidad Guardian
Thursday January 17, 2013

​http://guardian.co.tt/business-guardian/2013-01-17/pres-t-con-ceo-on%E2%80%88cement-aggregate-hike-heat-until-2015-general