Jan 2008 Financial News

Cement concrete …set to increase

Jan 03, 2008

The price of cement and concrete will increase in 2008.

“From Trinidad Cement Ltd’s (TCL) perspective, the price of cement and concrete will go up,” said TCL Group chief executive officer said on Monday in a brief telephone interview.

As to the extent of the increase, Rollin Bertrand said cautiously, “It will be a single digit increase. We would expect the increase to be around February.”

Ordinary portland cement increased twice in 2007, each time by eight per cent.

TCL’s premium cement increased by four per cent in January 2007. Consumers will be paying more for premium cement this year.

What is the main factor driving this impending price increase? Essar Steel Caribbean.

The $12 billion company, to be built in Claxton Bay, is expected to be this year’s most significant user of concrete.

Bertrand described the Essar project as the largest project in T&T in recent times, second only to Atlantic LNG.

“That steel plant is very, very large,” Bertrand said in an earlier interview.

He explained that in the last five years, cement price increases have not kept pace with inflation.

TCL’s cement price increases have been applied to cover its own increases in costs.

“We’re in a peculiar position. Most of our plant is purchased in euros. We face the double whammy of local inflation and currency issues.”

TCL’s numbers three and four lines were European designed

Spare parts have to be purchased in Europe

Paid for in euros

Essar to impact on supply

“Once the Essar plant starts being built in 2008, everything will be tight.”

By his estimation, construction of the Essar plant will use 140,000 metric tonnes of concrete.

TCL, having expanded and upgraded its plant, can produce 1.1 million metric tonnes of cement annually.

“We have new capacity coming on stream in Jamaica next year. Between Jamaica, the expansion and facilities we have in Barbados and Trinidad and our alliances with various suppliers in the region, we feel comfortable we can supply everybody’s needs.”

Demand for aggregate to increase

With the local quarrying sector struggling to meet the market’s demand for aggregate in 2007, don’t expect 2008 to be any better.

Bertrand said 20 per cent of the TCL Group’s consumption of aggregate is imported.

Booming industry

“The cost of importation is twice the cost of locally-produced aggregate, so obviously, that will have a significant impact on concrete companies.”

There are piles of aggregate on Tracmac Engineering’s compound along the Uriah Butler Highway, Chaguanas, and opposite TTPost’s head offices at Piarco roundabout.

Dave Aqui, general manager of Jusamco, predicted, too, that the company will this year continue to import aggregate to satisfy its construction needs.

“I could see if the articulations of the government and, in particular of the Ministry of Works, to ease the traffic situation runs true to form, I can see us having a fair amount of road works—road construction, road surfacing; both major and secondary roads.”

Jusamco imported roughly 200,000 metric tonnes of aggregate from the Dominican Republic, the Bahamas and Canada at an average cost of US$30 a tonne.

Aqui expects Jusamco to import a similar amount this year.

To treat with increasing cost of materials that have to be sourced abroad, Aqui said Jusamco has been trying to “promote” that contracts it signs that run between 18 months and two years include escalation clauses for items that are outside its control.

“If they move beyond a certain percentage, we expect of owners of the contract to make provisions for those things in tendering.

“The Ministry of Works has been receptive to those things in the past.”

Demand for homes grows

…but few affordable for the middle-income

Don’t expect any significant downward change in the real estate market this year, said Richard Saunders, president of the Association of Real Estate Agents (Area).

Demand for homes is still high. And rising.

Saunders said there isn’t sufficient product other than The Government’s mass housing programme, which he said is targeted for a particular segment of the market.

“There’s no comparable production. Home Construction Ltd has some production. One Woodbrook is a large installation,” Saunders said.

“When you look at supply, there is no significant increase in production.”

Complementing demand is an increase in people’s salaries and access to higher loans, he said.

“Prices will continue to climb. If somebody has a product to sell, they are going to say they want to sell at a price so in a year’s time, they won’t regret they made a bad decision,” Saunders said.

Commercial real estate

Like housing, there’s not much new commercial real estate coming on the market to match government’s thrust in office space. “There’s not a parallel increase in the private sector,” Saunders said.

With the economy doing well, more companies are looking to add more staff to treat with a higher volume of work coming their way.

“People want to add more staff. Their volume of work has increased. As a consequence, you will have rising prices. That has been reflected in increases in the cost of rental,” Saunders said. “Some people are forced to pay higher rents.”

With demand for commercial office space outstripping supply, Saunders said that’s one of the reasons many Woodbrook properties are being converted for business use.

“Some people are saying it is a good strategy to have commercial condos,” he said.

High-priced properties

There seems to be too many high-priced properties being built, but not enough affordable housing for middle-income earners, said Mary Jardine, who manages the office for the Association of Real Estate Agents (Area).

“That has always been the challenge,” Jardine said last week.

Most of Jardine’s work is in rental and property management. She figures that the 2008 real estate market will remain much the same as it was last year.

“As long as we have the energy sector doing well, real estate is going to continue has it has for the last year. I don’t think we are going to see any major changes,” Jardine said.


Source:
Sandra Chouthi
The Trinidad Guardian
Thursday 3rd January, 2008

http://www.guardian.co.tt/bussguardian5.html