KUALA LUMPUR: Borneo Oil Bhd (BornOil) predicts the demand for cement in Sabah and Sarawak to sustain in 2023 as both states steadily return to normality.
Currently, Sabah's cement demand is between 1.1 million to 1.4 million tonne annually while Sarawak has about two to 2.5 million tonne.
Executive director and largest shareholder Datuk Joseph Ambrose Lee said the sustained demand will be driven by ongoing infrastructures projects, Pan-Borneo Highway, new projects coming from the Brunei Darussalam–Indonesia–Malaysia–Philippines East ASEAN Growth Area (BIMP-EAGA) and several other stalled building projects.
"In Sarawak, we will see a rise due to the more efficient implementation of the Pan-Borneo Highway, hydro dams and government infrastructural developments.
For Sabah, Ambrose said cement demand in the state is still the lowest consumption rate per capita in Malaysia, due to the
the fact that Sabah is vastly underdeveloped in terms of infrastructure.
"In comparison to Sarawak, in land size and population, Sarawak has a demand of around 1.1 million to 1.8 million tonne of cement.
"This is due to the rapid infrastructure projects such as numerous dams and other ongoing infrastructure projects like Pan Borneo Highway etc," he told the New Straits Times.
Touching on cement prices, Ambrose said prices in Sarawak rose 49 per cent from RM198 per mt during pre-Covid to RM295.50 per tonne and are expected to rise to RM370 per tonne based on rising fuel and labour prices.
Similarly, in Sabah, Ambrose said the prices have also risen sharply from RM297.20 in 2020 to RM342.20 per tonne in Kota Kinabalu in November 2021.
"The sharp increase in fuel coupled with shipping issues this year caused further increase up to RM460 per tonne on the East Coast with some towns experiencing prices as high as RM480 per tonne due to transport costs.
"In comparison, the current price in West Malaysia as of November 2022 is RM340 per tonne bulk and RM17 per 50kg bag," he said.
Late last month, BornOil embarked on a private placement exercise to raise RM53.57 million to acquire a 30.73 per cent stake in Makin Teguh Sdn Bhd (MTSB).
BornOil stated in a Bursa Malaysia filing that the exercise involved the issuance of up to 2.8 billion new shares or about 30 per cent of the total number of issued shares to be placed to third-party investors which will be identified at a later stage.
If the deal goes through, BornOil's stake in MTSB will increase to 60 per cent.
Bornoil also intended to diversify its existing principal activities to include the manufacturing and trading of clinker, cement and related products.
At present, Bornoil Group is principally involved in the food and franchise operations, property investment and the provision of resources and sustainable energy.
Elaborating further, Ambrose pointed out that Cement Industries (Sabah) Sdn Bhd and Cahya Mata Sarawak Bhd are exclusive players in cement sales in Sabah and Sarawak.
"This results in cement in Sabah being heavily exposed to currency risk, high logistics costs, particularly to Sabah, and risk of shipping interruptions.
"This is the reason why cement prices in Sabah are the highest in Malaysia, with prices reaching RM460 per mt on the East Coast of Sabah (RM23 per 50kg bag). Furthermore, it is widely reported news that this situation often causes the shortage of cement in Sabah," said Ambrose.
Executive director Georgia Suzanne Lingam @ Georgianne said any future revision and analysis on MTSB's cement prices must be done in the context of the unique circumstances affecting East Malaysia.
MTSB, situated in Lahad Datu, currently produces 230,000 tonne of cement per year.
Georgianne said MTSB is close to the BIMP-EAGA region with a population of approximately 23 million.
"There is big room for growth. Currently, the internal demand in Sabah is the primary target market as there is an urgent demand.
"Places like southern Philipines are very close to Lahad Datu and cement is sold there for almost RM700-RM800 per tonne," she said.
Georgianne also said that the East Coast of Sabah also is very close in proximity to Tarakan and Nunukan which are entry points into the Kalimantan region.
"The impending move of the Indonesian capital to Kalimantan will open up a new market which can only be served by those who are competitive in logistics by virtue of proximity.
"These areas will serve as the secondary target market for the MTSB plant.
"MTSB plant will be aimed to serve this markets. The first phase of expansion will increase production to 1.5 million tonne per year to fulfil the urgent demand in Sabah and serve the nearby areas.
"This is targeted to commence in 2024," Georgianne said.