Business

Friday August 3, 2012

Probe warranted if cement makers have pact to raise prices

By JOHN LOH
johnloh@thestar.com.my


PETALING JAYA: The slew of price hikes by cement manufacturers do not at this juncture warrant a formal investigation by the Malaysian Competition Commission (MyCC), unlike the situation with the Cameron Highlands Floriculturist Association (CHFA), said MyCC chief executive officer Shila Dorai Raj.

“Price increases are by themselves not anti-competitive in nature. However, if there is evidence of collusion among the competitors to increase prices, this would be of concern to MyCC and may merit an investigation.

“In the case of CHFA, it had publicly declared its intention to raise prices by 10% in a news article in March whereas for the cement industry the announcement that came from the manufacturer was made unilaterally but seemed to be followed suit by other manufacturers,” she told StarBiz.

The commission has yet to receive any formal complaint on the higher prices charged by cement producers.

However, it has put the cement industry on its watchlist.

While not tantamount to a probe or official investigation, MyCC will keep a close eye on any developments that might be in breach of the Competition Act 2010.

StarBiz reported yesterday that all cement manufacturers had decided to raise prices of the building material following an earlier move by the country's largest producer, Lafarge Malayan Cement Bhd.

This was widely expected by industry players after Lafarge hiked up its prices by 6% on Wednesday.

There are six cement producers in Malaysia, namely YTL Cement Bhd, Tasek Corp Bhd, Cement Industries of Malaysia Bhd, Lafarge, CMS Cement Sdn Bhd, and Holcim (M) Sdn Bhd. Only Sarawak-based CMS Cement has confirmed it would keep prices at the current level.

When contacted, MBAM secretary-general Chuan Yeong Ming said if the industry body received any evidence of collusion among cement makers, it would be brought to the attention of the MyCC.

The Cement and Concrete Association of Malaysia, which represents the interests of the cement industry, said on Wednesday it was not in any way involved in the setting of prices by its members as that would count as an infringement of competition laws.

It was earlier reported that MyCC had made a “proposed decision” on CHFA, which was a notice to the affected party listing out the facts and penalties that could be imposed.

A proposed decision is final unless refuted by the affected party.

Under the Act, it is a violation when enterprises in the same level of production or supply chain agree to fix the price of their goods or services.

Tasek shares finished three sen, or 0.3%, higher to RM9.87, gaining 30.5% for the year.

Lafarge, meanwhile, was up 33 sen, or 4%, to RM8.50 yesterday and 21.8% year-to-date on the back of upgrades from three research firms this week.

Hwang DBS Vickers Research yesterday upgraded the stock to “hold” from “fully valued”, saying cement players were poised to ride on Malaysia's infrastructure boom and the existing oligopoly market structure.

It added Lafarge has a controlling 40% market share and the largest spare capacity among its peers, with 30% of production for export.

“The cement price hike is a positive note for Lafarge as the previous hike in May 2011 did not fully compensate for the increase in energy and fuel costs, due to Tenaga Nasional Bhd's 7% average electricity tariff hike and removal of diesel fuel subsidies which increased diesel prices by 22% or 32 sen per litre,” the brokerage said.

Lafarge on Wednesday raised prices by RM1 per 50kg bag and RM20 per tonne for bulk cement from RM16.75 and RM320 currently. The last time prices were higher was in March 2011, also by 6%.

Cement makers were accused of colluding with each other after MBAM received a tip-off from its members last week that a “major” manufacturer planned to raise the list price of cement in the Klang Valley.

It then urged MyCC to investigate whether there had been an abuse of dominant position by the cement firm.

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