Price of construction material could witness significant hike next fiscal

The price of construction material could increase by up to 40 per cent after the ban on construction is revoked

Sujata Awale

Kathmandu

The cost of construction material is likely to increase in coming fiscal year 2015-16. The business of construction material such as bricks, sand, aggregates, cement and iron rods is facing tough time due to the government’s ban on construction till mid-July. However, it is anticipated that the price of construction material will swell up to 40 per cent after revoking the ban owing to high demand. Even the scarcity of materials is likely to hit the market.

As per the Federation of Construction Materials Business Association of Nepal (FCMBAN), consumer will face 10 to 15 per cent price hike on cement, 10 per cent on iron rods, 40 per cent growth on sand and aggregates and the price of bricks will increase arbitrarily along with 25 per cent price hike on wages of workers while conducting construction the next fiscal. If it is something to go with the announcement of the government to provide home loans to earthquake victims, the industry will face massive growth in demand by mid-July to mid-September.

While the construction industry is in stagnant state with the imposed ban, the effect is seen to the construction material business. As much as 70 per cent sales have dipped after earthquake on April 25, according to the FCMBAN. “The demand of bricks industry came to nil while the demand for other construction material such as cement, sand, aggregates and rods have confined to 30 per cent as compared to the same time last fiscal year,” said Yubak Rajbhandari, President of FCMBAN. However, he said that the market is witnessing gradual momentum in sales a week ago. According to him, earlier April to June used to be peak season for the sales of construction material.

Providing example of recent price hike on sand and aggregates, Rajbhandari said, “The price of sand per tipper was Rs 8,000 just a month ago. But with the gradual demand seen in market, the price has jumped to Rs 9,500 per tipper.” According to him, the government should plan ahead about probable demand and control mechanism on pricing for construction material. “We have sufficient capacity to fulfil demands on cement industry. However, we will face crisis on iron rods and brick industry,” he asserted, adding that there will be the chance of artificial scarcity and stipulation in price for bricks, sand and aggregates.

Brick industry faces nil in demand after the earthquake. Earlier in mid-February, due to heavy rainfall green clay worth Rs one billion were destroyed and the earthquake further dipped the production of bricks this year. As districts like Sindhuli, Ramechap, Dhading, Sindhupalchowk, Kavre and the valley are the most affected by the earthquake, the stock of bricks is confined to merely 100 million units.

“Viewing with the current trend, we feel that the stock will be more than enough for the reconstruction,” said Mahendra Bahadur Chitrakar, President of Federation of Nepal Brick Industries (FNBI). He also stated that as the government will pose revised National Building Code and By-laws, the demand for bricks will not increase by December. Assuring that there will not be scarcity of bricks in the market, he said, “If there is a high demand, we will fulfil the products by bringing in from districts like Nawalparasi, Parsa and Janakpur.” According to him, the Federation has appealed all entrepreneurs to trade in same price set prior to the quake. Earlier the price of bricks set for Rs 14,000 to Rs 15,000 per thousand units. There are altogether 800 brick kilns across the country.

As the restriction on construction industry has multiple chain effect, entrepreneurs appeal to the government to revoke the ban at the earliest. With the ban in construction, the cement industry faces 85 per cent dip in demand. “The government should work efficiently and considering the emergency should introduce new Building Code and revoke the ban. If not it will create negative impact on whole economy,” said Dhurba Raj Thapa, President of Cement Manufacturers Association of Nepal (CMAN).

Citing that the cement industry can fulfil extra 50 per cent demand, Thapa said, “We are operating only 50 per cent of installed capacity. If also the demand soars another 50 per cent, domestic production can meet the demand.”According to the CMAN, the annual consumption of cement totals 4.5 million tonnes and there are 45 cement factories operating across the country. 

Published on The Himalayan Times June 20, 2015 at THT Property Plus

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