Lafarge Malaysia expects subdued demand, higher prices

Lafarge Malaysia expects subdued domestic cement demand to continue in 2019 but prices are anticipated to increase due to higher production costs.

A report in the Edge Financial Daily states that the recovery in the property market will take longer as the oversupply overhang and affordability issue continues to plague the industry. The potential revival of the East Coast Rail Link (ECRL) project is positive for the group as it had secured a cement supply contract previously, the report added.

However, analysts at Affin Hwang Capital believe it is not sufficient to bump up the group’s domestic sales as it adds only 0.3-0.4Mta of cement sales over a three-year period. The cement export average selling price (ASP) has improved by about 20 per cent in 2018 and is expected to be flat in 2019. The research house expects export volumes to improve in 2019, driven by clinker demand from Bangladesh and Sri Lanka. 

The current situation continues to put downward pressure on domestic cement prices. The domestic cement ASP was at its lowest in the fourth quarter of 2018, and Lafarge expects prices to pick up in 2019 as the current domestic cement price is not sustainable, given that most of the cement companies are making losses. The higher cost of production, partly due to higher energy costs, is likely to put pressure on domestic players to raise cement prices.