The recent decision of Algeria’s state-owned GICA to raise cement prices by 20 per cent from ALD320 to ALD380 (US$4-4.70) has caused concern among business leaders. It is feared the rise will push up the cost of constructing houses and infrastructure.
The increase in cement prices is expected to further weaken construction companies operating in a highly-competitive market where operators often slash prices to get access to public procurement, because of stringent conditions imposed by the administration.
"The construction companies are now caught in a trap. To qualify, they must drop out of contracts and for the markets, they need to lower their prices and sometimes work at a loss. In a way, these companies obtain contracts by working at a loss. With the rising price of cement, they will still minimise their margins to stay alive, "says a senior official in the ministry.
The price rise could also cost the state as it wants to build 2m homes by the end of 2014. In addition, public investment projects relating to infrastructure such as dams, roads, highways and airports will become more expensive, particularly as GICA is the largest cement producer and supplier for the projects.
