WORRIED about the “seemingly endless” increase in the prices of fuel and other basic commodities, some stakeholders of the construction and building sectors are calling on other players in the industry to organize a summit where they can discuss such issues.
The event is still all talk, said 8990 Housing Development Corp. president JJ Atencio.
He proposed, though, that the government takes the initiative with the Hardwares Consolidated Inc. (HCI) as partner.
“We all need to sit down and come up with a proposition. (It will be a summit) to get all the stakeholders to have a dialogue on how we can put our best ideas together, (discuss) these high prices and (how) to ride out, for one, this phenomenon of inflation,” he said.
The National Statistics Office recently announced that the rate of inflation—increase in prices of goods and services—in May hit 9.6 percent, the highest since 1999, primarily due to surging prices of food, beverages and tobacco. This has prompted the Bangko Sentral ng Pilipinas to raise key interest rates to slow down inflation.
Cemex Philippines marketing manager Dindo Val Bautista noted that the Subdivision and Housing Developer Association Inc. (SHDA), of which Atencio was former national president, was upbeat about this year’s figures as house and lot sales were “really good” at the end of 2007.
“(But) it (good sales) was not sustained in the early part of 2008. SHDA continued to buy from us, though, for last year’s backlog. We, at Cemex, are also dependent on them,” he said in an interview with reporters at the 16th Construction Show-Cebu in SM City Cebu Trade Hall last Friday.
Lower sales
Atencio admitted that 8990 Corp.’s sales were lower in the first quarter of this year compared to the same period last year because of high production cost, caused by high prices of raw materials and electricity as well as wage hike.
He explained that a developer is caught in the middle between price increases of materials and labor and the unchanged affordability of the buyer. This could lead the developer to end up with “diminishing profits to the point that (housing construction and development) may no longer be a viable business to continue.”
“The phenomenal thing is that before, the price increases were minimal, manageable and steady,” he said. “Cement is actually the most stable construction material now. But the topic of the conversation is steel. In Cebu, the price of steel has risen by at least 60 percent from December last year. If you analyze the trend, we are looking at the possibility of more than double the price by the yearend. It could even triple. Prices of steel change every day. It’s very volatile.”
Joel Velasco, area manager for Vietnam-based Zamil Steel, said the prices of steel started to become “unstable” around February and rose to 30 percent, mainly due to growing demand from high-rise residential and industrial buildings in countries such as China, India and Indonesia rather than fuel price increases.
“Price increase of steel is happening worldwide. It’s more on the demand (from infrastructure development),” he said. “At Zamil Steel, we have a six-month inventory so we can deliver (at the price that) we have committed to our customers for a couple of months without having to increase prices (every day),” he said.
Velasco said the country has to import steel from other countries because of the absence of a steel mill.
“This could also be a factor in the increasing price of steel in the country,” he said. He added that in the present situation, buyers have to buy the steel immediately because the price may increase the following day.
“That is how unstable the prices of steel are,” he said.
The price of cement, on the other hand, is also affected by rising energy prices since 70 percent of the cost to produce the material comes from electricity.
“Electricity would mean petroleum and coal. Their prices haven’t gone down since the start of the year. Our cost of production also increases each time fuel increases. This affected our sales that went flat. But we are hoping for a rebound before the year ends,” said Bautista.
He said the spiraling prices of basic commodities challenged Cemex to market innovative products to help end-users save
money, such as Apo Premium that is meant for one to four-storey structures.
“With a product like this, people need no longer buy cement that is beyond specs (specifics) like Portland, whether Apo or any other brand. For a one- to four-story structure, Apo Premium would be enough and the price is lower compared to any Portland type in the market,” he said. (NRC)
