‘Unjustified’ construction price spikes

Ahmed Abdel-Hafez, Tuesday 28 Nov 2023

Ahmed Abdel-Hafez talks to experts about recent hikes in the price of construction materials



A sudden surge in the prices of building materials occurred at the onset of the fourth quarter this year, with this being deemed “unjustified” by traders.

Cement and steel prices soared by 46 per cent and 104 per cent, respectively, year-on-year, reported the cabinet’s Information and Decision Support Centre (IDSC), citing its Construction Materials Price Tracker.

According to the IDSC Tracker, on 21 November the average price of grey cement stood at LE2,400 per ton and of steel at an average of LE38,500 per ton.

Mohamed Lokma, a member of the Board of the General Union of Construction and Building Contractors, expressed concern over suspected monopolistic practices among merchants and distributors of building materials in the local market.

He said that these practices have led to an “unjustified rise” in cement prices for consumers, reaching LE3,000 per ton and up from the factory price of LE2,000. Similar disparities had been noted in steel prices, he said, sold by factories to distributors at LE34,000 and then to consumers at LE42,000.

“Official data do not record these disparities since the Central Agency for Public Mobilisation and Statistics [CAPMAS] Periodic Bulletin is based on factory prices rather than retail prices to consumers,” Lokma explained.

He called for state intervention, urging “government agencies to tighten up controls over the market to ensure fair pricing.”

Ahmed Al-Zeini, a member of the Board of the Building Materials Chamber at the General Federation of Chambers of Commerce, said that cement prices have surged to LE4,000 per ton in two governorates in Lower Egypt due to a sudden increase in demand driven by haphazard construction activities on agricultural land in recent weeks.

He added that the surge had occurred on the assumption that the state was preoccupied with foreign-policy matters, creating what seemed like an opportune moment for encroaching on agricultural land for construction purposes.

The government, in collaboration with the relevant agencies, has initiated a campaign to halt these encroachments on agricultural land. This intervention had led to an immediate drop in cement prices from LE4,000 to LE3,000 per ton, Al-Zeini explained.

He noted that construction activities in the two governorates escalated rapidly, prompting contractors to exhaust all the cement quotas allocated to neighbouring governorates. Since the available quantities of cement in the market were predetermined and factories could not increase their production without approval from market-control agencies, an imbalance had occurred, and the prices of cement had skyrocketed.

A source at an Upper Egyptian cement factory, who preferred to withhold his name, said that his factory sells a ton of cement to traders for LE1,900. However, in Greater Cairo and the Delta, the same kind of cement is sold for LE3,000 per ton, even though transportation from Upper Egypt to Cairo costs only LE150.

This information was discovered by the factory’s marketing and sales department after monitoring production and tracking final sales prices to consumers, the source noted, suggesting that the current price increases are bring orchestrated by certain merchants and distributors rather than by the producers themselves.

Moetaz Mahmoud, head of the Industry Committee in the House of Representatives, the lower house of Egypt’s parliament, warned that such crises could recur as long as a black market for the dollar exists, leading to dual currency prices.

Some traders and distributors are exploiting this situation to manipulate the market, ostensibly to hedge against the dollar’s instability and exaggerate its price and ultimately seeking short-term gains at the expense of market stability.

* A version of this article appears in print in the 30 November, 2023 edition of Al-Ahram Weekly

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