THE price of cement is set to rise by eight per cent on January 17.

Caribbean Cement Company Limited (CCC) made the announcement in a release to members of a professional association, noting the main reasons for the increase stemmed from double-digit increases in materials and services cost along with immense rises in the cost of electricity. The release stated that cement purchased prior to January 17 and picked up by January 21 will not be affected by the price increases.

The increase in Jamaica follows a 15 per cent hike for cement in Trinidad and Tobago by Trinidad Cemnt Limited (TCL), which shares a parent company with Jamaica-based Caribbean Cement.

This price increase would be the second round of price increases in Jamaica as noted in Cemex S.A.B. de C.V.’s second-quarter presentation in 2021. Cemex is the ultimate parent company of CCC. Chief executive officer of Cemex, Fernando Gonzalez noted in an October 2021 conference call that price increases have been one way the company has moved to combat inflation and the rising costs of imports, alongside other variable costs.

“In the case of the United States and Europe, this was the first time in almost 15 years that we have introduced a second round of national cement price increases in the same year. While pricing was sufficient to cover the increase in variable cost and freight, largely energy related, it was not enough to compensate for the rising cost of imports. Imports, primarily in the US, were responsible for [a] 1.8 percentage points headwind in margin. While we do believe some of these cost headwinds, such as shipping and fuel shortages, are transitory in nature, we are moving quickly to adjust pricing. With tight supply/demand dynamics in most markets, we expect such actions to be successful. In our bagged cement market you should expect continued rapid adjustment to recover input cost inflation,” Gonzalez said in his opening remarks to analysts.

“We have seen increased oil prices, increased interest rates, and depreciation of the dollar. We’re not surprised at the level of increase by Carib Cement; we would have experienced similar increases in our cost profile,” stated managing director of Arc Manufacturing Limited Deanall Barnes. Arc manufactures various building materials and distributes cement across the country.

In addition, Deanall continued, “We haven’t seen any correspondence to have a clear understanding of what led to their [CCC] increases but, based on the fact that we’re in the trade, transportation expenses have gone up over the last year, oil prices have increased, and all sectors have to consume oil indirectly or indirectly – which would increase costs.”

West Texas Intermediate (WTI) crude prices have gone up by 11 per cent over the last month and 54 per cent in the last year to US$77.01. The exchange rate to the United States dollar has depreciated by 5 per cent over the last three months and by 9 per cent over the last year to $155.64. The Bank of Jamaica has increased its policy rate from 0.50 per cent to 2.50 per cent, with their next decision set for February 18.

CCC’s fuel and electricity costs have gone up by 7 per cent to $2.91 billion over their first nine months to September 2021. A company like CCC would be charged under rates 40 and 50 by the Jamaica Public Service (JPS),which makes up 55 per cent of kilowatt hour consumption. CCC currently uses end-of-life tyres as another source of fuel, in an arrangement with the Government of Jamaica.

Though inflation was flat for November there was a 0.6 per cent increase in transport due to higher petrol prices, and a 2.8 per cent increase in the index for housing, water, electricity, gas and other fuels division (HEGO) due to increases in the respective rates. Point-to-point inflation was 7.8 per cent, with HEGO up by 8.3 per cent. JPS has provided correspondence to the Office of Utilities Regulation regarding the steep increases in fuel and other related charges which are expected to further impact customer bills in he coming months.

In Trinidad, TCL has come under fire from that country’s Ministry of Trade and Industry for raising prices when 90 per cent of inputs in the manufacturing of cement is local. Cement prices in T&T effectively tripled from TT$50 ($1,138) to TT$150 ($3,414) before the latest round of increases.

In a proactive move related to the potential increase, the cabinet of Trinidad and Tobago on November 18 revised the quota for the import licensing regime for cement in 2022. The maximum quota ceiling has been doubled to 150,000 tonnes, with each registered importer receiving a 50 per cent increase in their quota allocation for 2022. There has also been a revision on the rate of duty on other hydraulic cements to 20 per cent, with the common external tariff suspended until the end of 2022.

Cemex, S.A.B. de C.V. will be disposing of its El Salvador and Costa Rica operations for US$335 million ($51.95 billion) to Cementos Progreso Holdings, S.L. later this year. Both subsidiaries are held under Cemex Latam Holdings S.A. Cemex sold assets in Spain and France last year for US$199 million while issuing US$1 billion in its 5.125 per cent subordinated notes in June. Cemex also implemented master service and intellectual property agreements across its various subsidiaries, including its publicly listed subsidiaries TCL and CCC which came into effect on January 1. Cemex will earn up to 4 per cent annually from each subsidiary through these arrangements.

Even with all that’s happening, Barnes remains confident of activity in the sector going forward. Construction recorded a 4.4 per cent improvement in the third quarter and has seen continued improvements since the pandemic started.

“I still believe that there would be reasonable activity in the trade. We’re cautiously optimistic that the trend will continue, albeit at a decreased rate when you compare the last two years to what we expect over the next two years.”