Economy, Services, Commodities and Prices-The changing prices of cement |04 September 2009

Builders Construction Supplies was selling cement for R120, while established importer Lafarge, also known as Kot Silo, was asking for R126 a bag. A spokesman for Builders Construction Supplies said the consignment it imported did not last long as the demand for the cheaper cement was high. He said that in less than three weeks all the 50 slings of cement were sold; one sling contains 40 bags of cement.

A spokesman for the owners of bulk importer Lafarge Cement Company, Farouk Jean-Baptiste, said the price of R126 is for individual customers. Mr Jean-Baptiste said they imported their cement mainly from Malaysia and Indonesia. He also added that their cement is always fresh as it is stored inside silos at a certain temperature.

Moreover, there are no limits on the number of bags customers can buy. People who want to buy 1,000 bags will get 1,000 bags of cement.

With regard to Builders Construction Supplies, it can be argued that the 2,000 bags of cement the company imported were insufficient. The company should indeed import more, to keep the competition alive. The spokesman said the owner is away and may have gone overseas to negotiate the import of a bigger consignment of cement.

For students of economics, there is something interesting that surfaces when dissecting the price differences. It is about the economy of scale.

It is often said that importing in small quantities costs more per unit, but this is not always the case.

Builders Construction Supplies imported only 2,000 bags. Lafarge must have imported a lot more if it is also supplying contractors and able to satisfy demands for 1,000 bags, yet Builders Construction Supplies’ cement is R6 cheaper per bag. There are other factors that add up when producing the final price the customer will be charged.

In six months – from February to August this year – the price of cement fell from R203 to R120 a bag.

There was also cement for sale at R100 a bag, but it was not from established traders of the commodity.  
    
Apart from cement, Builders Construction Supplies is selling plywood at a very reasonable price. The 12mm is R300, a little cheaper than the price in 2007. This is the same price that the Providence OJ Supplies enterprise is asking. In our article on plywood dated July 3 this year, it was noted that OJ Supplies had taken the lead as the main competitor in setting the prices of plywood.

Animal feeds

The Seychelles Farmers’ Cooperative has announced a reduction in prices of the animal feeds it produces.

The products are chick starter, poultry grower, layer feed, layer mash, broiler starter, broiler finisher, pig creep, pig starter, pig grower, sow meal, dairy meal, calf grower, rabbit feed, horse feed, dog feed and lactating sow.

Prices for members of the cooperative are lower than for non-members. 
  
More growth for China’s factories

China’s manufacturing sector continued to recover in August, two separate monthly surveys have indicated.

The China Federation of Logistics and Purchasing’s index rose to a 16-month high of 54 points in August, up from 53.3 in July.

With any figure above 50 indicating growth, this was the sixth month of expansion. A separate manufacturing index compiled by HSBC also rose.

The government’s stimulus spending is continuing to lift factory output.
 
This policy was launched in November last year, and Beijing is aiming to spend $586bn between now and the end of 2010 on housing and infrastructure projects across the nation, and on post-earthquake reconstruction in the south-west of the country.

China’s factories are also continuing to benefit from an upturn in export orders as the global economy continues to recover.

HSBC’s index of manufacturing output rose to 55.1 in August from 52.8 in July, its fifth month of growth.

The latest signs that China’s vast manufacturing sector is continuing to recover come despite some sharp declines in Chinese shares in recent weeks, due to fears that stocks are overvalued.

“China’s equity market has taken a battering in the last few weeks, but the economic data suggest that the recovery remains on track,” said Brian Jackson, a strategist with the Royal Bank of Canada in Hong Kong.

The most recent official figures showed that the Chinese economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter, but less than the double-digit growth seen between 2003 and 2007.

Commodity briefs from around the world

• South Korea drives to up rice consumption amid glut

• Bangladesh allows private traders to ship aromatic rice

• Kenyan coffee prices climb as buyers fear drought

• India’s coffee exports down 19% in last eight months

• Brazil ports work at full stretch to keep pace with sugar exports

• Pakistan sugar tender attracts high price bids

• Indonesian sugar industry faces major shortage

• Germany’s official grain estimates lower than expected

• Expected rains may not salvage Australia’s wheat

• Indian spice exports rise in July but are still lower for season so far

Crude oil prices
As at 03/09/09

Nymex Crude Future                     68.77 dollars per barrel
Dated Brent Spot                            67.77 dollars per barrel