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05.04.2004 Business & Finance

Freight charges responsible for high cost of cement

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Accra, April 5, GNA - Ghana Cement (GHACEM) Limited on Monday attributed the recent increase in the price of cement to high freight charges especially of clinker, limestone and gypsum.

Speaking in an interview with the Ghana News Agency Business Desk in Accra, Mr E. Schmidt, Managing Director of GHACEM said clinker, which formed about 90 per cent of cement was shipped into Ghana from different international suppliers.

Mr Schmidt was making follow up comments on the recent increase in the price of cement on the local market especially in the light of complaints that other brands were selling far below GHACEM's price.

He noted that recent developments in freight charges for Handymax Bulk Ships made it necessary for GHACEM to adjust its prices accordingly. He said freight charges in dollars have increased by more than 300 per cent in the last 12 months, "and this puts us in a difficult situation if we have to keep to previous prices."

The Handymax Time Chart round trip in the Atlantic costs almost 37,500 dollars and in the Pacific about 28,500 dollars.

Mr Schmidt explained that, "in the last couple of years, the world economy has been through a recession and only a limited number of ships were commissioned.

"The number of Handymax Bulk Ships were particularly low," adding that the situation changed last year where the world economy recovered with sea-borne trade increasing by 137 million tons of which 72 per cent was related to the boom in China."

Consequently, he said, the demand for shipping capacity superseded the availability and the market had to adjust prices accordingly.

He said that even though Ghana enjoyed one of the lowest cement prices in the West Africa Sub-Region, clinker cost formed 69 per cent of the new price while devaluation of the cedi against the dollar formed 28 per cent. Mr Schmidt said GHACEM would continue to adjust cement prices in accordance with the development of the raw material cost and other main cost parameters.

He said while it was true that currently all these products were imported and were in no way available locally; "it is GHACEMS's strategy to use local raw materials in the manufacture of cement where necessary, even though this might not change the price in anyway".

"This will reduce consumption and dependence on imported raw materials and freight rates as well as reduce production costs ..."

GHACEM is currently in the process of applying for a mining lease for the Yongwa limestone deposits in the Yilo Krobo District of the Eastern Region while developing the Klo-begro limestone mine for the same purpose. The concession covers 81 hectares and the limestone reserves are approximately three million tons.

The deposit is located 100 kilometres from the Tema Plant and 350 kilometres from the Takoradi Plant.

The intention the GNA found is to use the limestone as filler at both plants, but the distance to Takoradi could be a disincentive.