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UNIVERSITI TUNKU ABDUL RAHMAN

FACULTY OF ENGINEERING AND SCIENCE


MAY 2015 TRIMESTER
UEBE 2513 ECONOMICS OF THE CONSTRUCTION INDUSTRY

PROPOSAL
TOPIC: Demand and Supply of Cement in Construction Industry

Lecturer: Puan. Zuriati Binti Ashaari

Name

Students ID

Course

Year and Trimester

1. ARYN YEAN HOOI KHEI

1300556

QS

Y2S2

2. CHAN SZE KEI

1203881

QS

Y2S3

3. LAU CHIN VOON

1202804

QS

Y2S2

4. LIM SHU JUN

1202880

QS

Y2S2

5. TAN SHI HUI

1203048

QS

Y2S3

Date of submission: 26.06.2015

Member Tasks

Name

Students ID

Responsibilities

ARYN YEAN HOOI KHEI

1300556

Introduction

CHAN SZE KEI

1203881

Data Collection and Analysis

LAU CHIN VOON

1202804

Literature Survey

LIM SHU JUN

1202880

Result and Discussion

TAN SHI HUI

1203048

Conclusion and Recommendation

All Members

Presentation

Contents
1.0

Motivation................................................................................................. 1

2.0

Nature and Import of The Topic....................................................................2

3.0

Questions to be addressed.............................................................................4

4.0

Data Sources.............................................................................................. 4

5.0

Literature Review....................................................................................... 5

6.0

Bibliography.............................................................................................. 8

1.0
2.0 Motivation

1 | Page

Cement is known as the glue that holds the concrete together, therefore it is critical for
meeting societys needs of housing and basic infrastructure. Concrete is the second most
used material after water in construction industry, with nearly 3 tonnes used annually for
each person on the planet. As one of the basic elements for setting up strong and healthy
infrastructure, cements play a crucial role in economic development of any country.
Recently, the government finally unveiled the 11th Malaysian Plan, the last 5 years
for the country to achieve High Income Nation status by 2020. Many mega projects were
announced such as MRT2, LRT3, KL-Singapore HSR and Pan Borneo Highway. The
government has allocated RM260 billion for the entire plan which is believed that a huge
portion will be allocated for infrastructure spending. Thus, this leads us to choose the
topic Demand and Supply of Cement in Construction Industry for our assignment.
Demand is an economic principle that describes a consumers desire and willingness to
pay a price for a specific good or service, whereas supply is the amount available at a
specific price or the amount available across a range of prices if displayed on a graph.
Due to the fact that the government is investing a lot of money into construction,
the demand for cement will increase as cement is one of the base raw materials in
construction. And as we all know, as demand increases, there will be a shortage of supply
of cement and soon the equilibrium price will increase in order to meet the demand.
Therefore, in order to understand further the impact of increased construction project on
the demand and supply of cement, our group decided to choose this topic for our
assignment. We would also like to understand how the changes in price, population,
income and availability of credit will affect the demand and supply of cement.

1 | Page

3.0 Nature and Import of The Topic

Demand and supply of cement in construction industry has been chosen as our topic for
our assignment purpose. Basically, demand and supply is an economic model of price
determination in a market in microeconomics. It will show a competitive market, unit
price for a particular good, quantity to demand and supply and etc.
There are four basic natures of demand and supply:
1. Demand increases and supply remains unchanged, quantity of product for demand
increases, a shortage will occurs and it will lead to a higher equilibrium price and
quantity.
2. Demand decreases and supply remains unchanged, quantity of product for
demand decreases, a surplus will occurs and it will lead to a lower equilibrium
price and quantity.
3. If supply increases while demand remains unchanged, quantity of supply will
increases, a surplus will occurs and it will lead to a lower equilibrium price and
quantity.
4. If supply decreases while demand remains unchanged, quantity of supply will
decreases, a shortage will occurs and it will lead to a higher equilibrium price and
quantity.

2 | Page

Nowadays, cement is an essential component of infrastructure development and


also the most important input of construction industry. Therefore, the demand and supply
of cement in construction industry have concerned by people involved in construction
industry.
Based on the nature of demand and supply, we know that, if the demand for
cement has increased while the supply remains the same due to some factors such as the
budget of clients have increased, the more and big size of projects are coming into the
industry and so on, the quantity of demanded cement will be increased, a shortage will
occurs, new price will be priced because of the original equilibrium price and quantity
have been effected and vice versa.
Whereas for the supply graph, when the supply for cement increased but the
demand of it remains unchanged, quantity of supply will increases, a surplus will occurs
and it will lead to a lower equilibrium price and quantity. This may be caused by a
decrease in resource prices.

3 | Page

All these information are the highlight of the construction industry news. We can
easily get this information through the World Wide Web, daily newspaper, magazines,
online articles etc. Through these resources, we are able to obtain the latest news
regarding the current construction issue. By doing so, we are able to further understand
the current condition of the construction industry.

4.0 Questions to be addressed

There are three main questions to be addressed in our topic:


1
2
3

Is there high demand of cement in Malaysia construction industry?


Is there sufficient supply of cement in Malaysia construction industry?
What is the factors affecting the price of cement in Malaysia?

5.0 Data Sources

There are four types of data source used in this assignment. The four types of data
sources are internet, newspaper, books and portable document format file.
Internet is the main data sources of this assignment. From internet, a lot of
relevant information about demand and supply of cement in construction industry will be
found.

The

websites

uses

in

this

assignment

are

researchandmarkets.com,

buildingshows.com and others rather than Wikipedia to make this assignment more
reliable.
The newspaper articles provide current market information about cement helps in
increase the understanding about cement. The newspaper will be referencing include New
4 | Page

Straits Times, The Star, The Sun Daily and more. One of five article include in this
proposal is taken from The Star online newspapers.
Some books will be used to provide relevant economy knowledge. The books will
be use include The Economics Of The Modern Construction Firm, The Construction
Industry, Political Economy of Development in Malaysia and others. These books
enhance the understanding about some related supply and demand theory that applies in
construction industry.
Furthermore, some portable document format file (pdf file) secondary resources
will be used as reference in this assignment. The pdf files which provide author, publisher
and year of publish increase the reliability of the information provided. The pdf file is the
research result of others, by referencing those files more details information about
demand and supply of cement in construction industry will be found. Two of five article
include in this proposal is taken from pdf file.

6.0 Literature Review

According to the Malaysia Report, the Malaysian economy increase in the third
quarter of year 2014 by 5.6% which is lower than the previous quarter. This is because
the demand of Malaysian exports and domestic demand become lower and lesser. In year
2013, the economy of construction industry increased by 10.9%. However, the
construction industry grew 14.3% in the first half of year 2014 which is higher than year
2013. (Malaysia Report, 2014)

5 | Page

Besides that, the economy of Malaysia construction sector is expected to increase


due to the influence of the private sector in the implementation of many new construction
projects. When the number of construction project increases, thats means there is a
higher demand on construction labors, materials, machinery and equipment. (Meeting
Construction Industry Resources Requirements THE MALAYSIA WAY, 2014)
The demand for cement will increase if the construction project increased.
Therefore, the production or supply of cement must be higher to fulfill the demand. In
addition, the requirement for more cement has a directly proportional relationship to the
development of building activity throughout the country. (buildingshows.com, 2015)
In Malaysia, the cement industry showed a growth in demand from year 2011 to
year 2013. This phenomenon is causing many cement firms attempt to expand their size
and market. According to the Malaysia Cement Industry Report 2014, its stated that the
demand of cement will increase by government-led investments and main infrastructure
projects. However, the price of cement is expected to increase due to the fuel and
transportation costs increased. (reseachandmarkets.com, 2014)
Furthermore, the construction sector is important in producing downstream
demand through backward linkages and upstream demand through forward linkages. All
investment which made by other sectors will produce demand for construction works as
construction is a demand driven sector. (Meeting Construction Industry Resources
Requirements THE MALAYSIA WAY, 2014) The main factors that are affecting the
demand and supply of cement are sand mining, shut-down of brick kilns and shortage of
wagons which are slowed down the overall construction activities. Besides that, the

6 | Page

growing of Gross Domestic Product (GDP), investments in infrastructure and high energy
prices are also affecting the demand of cement in Malaysia.
The Eleventh Malaysia Plan (11MP) with the titled Closing the Gap
Expectations and Reality in the Malaysia Business Community will be introduced in
June 2015 to realize Vision 2020. One of the issues is focused on manufacturing sector
and selected services subsectors. (ELEVENTH MALAYSIA PLAN, 2015) Its included
main mega projects like the MRT Line 2, LRT line 3, the Warisan Merdeka Tower project
and the Sungai Besi Ulu-Kelang Elevated Expressway. From these mega projects, there
have many business opportunities for cement companies to get benefits. (S.PUSPADEVI,
2015) In this plan, the construction sector is expected to increase by 10.3% per annum
throughout the Plan period which is from year 2016 to year 2020. (ELEVENTH
MALAYSIA PLAN, 2015)

7 | Page

7.0 Bibliography

Abhik Tushar D., 21 November 2011, Cement-An Industry Analysis, retrieved 24 Jun
2015, http://www.slideshare.net/abhiktushardas/cement-industry-analysis
Eleventh Malaysia Plan 2016-2020 21 May 2015, [Online], retrieved 24 Jun 2015,
http://www.micci.com/downloads/11MP.pdf
Joseph Chin, 21 May 2015, 11th Malaysia Plan Economic highlights retrieved 24 Jun
2015, http://www.thestar.com.my/Business/Business-News/2015/05/21/11thMalaysia-Plan-Economic-highlights/?style=biz
Malaysia Cement Industry Report-2014 August 2014, Research And Markets, retrieved
24 Jun 2015, http://www.researchandmarkets.com/reports/2898596/malaysiacement-industry-report-2014
Malaysian cement production increases 8 May 2015, ITE Build&Interiors, retrieved 24
Jun 2015, http://www.buildingshows.com/market-insights/malaysia/malaysiancement-production-increases/801786688
Malaysia Report-Construction Market Update December 2014, Rider Levett Bucknall,
retrieved 24 Jun 2015, <http://rlb.com/wp-content/uploads/2015/01/malaysiareport- december-14.pdf>
Sariah Abd., Noridah S., Che Saliza & Nur Ima, August 2014, Meeting Construction
Industry Resources Requirements-The Malaysia Way retrieved 24 Jun 2015,
http://www.bre.polyu.edu.hk/20th_asia_construct/Theme%20Papers/Malaysia.pdf
S. Puspadevi, 11 April 2015, Uncertain outlook for cement industry, The Star Online,
retrieved 24 Jun 2015, <http://www.thestar.com.my/Business/BusinessNews/2015/04/11/Uncertain-outlook-for-cement-industry/?style=biz>