VIETNAM: Cement, steel price increases

Although the market is the construction season, the level of competition force enterprises (companies) must be carefully calculated decision to raise prices, the "whirlwind" building material prices have now property, not a business that could bystander.

From April 2.2011, Vietnam Cement Industries Company In field (VICEM) are allowed to adjust the price of cement increased by 60,000 VND per ton. But Vietnam Steel Association (VSA), also candidly stated: Increase the price of steel is that companies compete by doing, just look different, but can not increase as world prices rise beyond the tolerance of DN in water.

60.000dong/tan cement increased. Photo: VNA

Input price increase

Many companies have adjusted the price of cement increased with increasing input signal. The selling price of cement at the plant is at 960.000d - 1.4 million per ton depending on type and depending on the region. Representing Vietnam Cement Association confirmed that this price adjustment equivalent to about

5-6% is acceptable and will not greatly affect the market. Representatives of several businesses, said before the Lunar New Year, the price of coal sold to cement producers rose more than 2 times the previous price of electricity, gasoline and some types of supplies for production fluctuations team was made up of cement prices. Calculation, the raw material for production has increased about 1.5 times, while prices of cement to the quarter from first quarter 2008 increased approximately 15% new IV/2010. By the cement market has to balance supply - excess demand in the country and, should the company want to increase the price, is not.

An official Department of Building Materials (Ministry of Construction) admit, this year's supply of cement is capable of up to 55 million tons, up about 4 million tons from last year, but prices are very competitive, because the DN do not want market share fell to rival. This can only benefit consumers. Last year, as prices have not increased this year, but the stock market was 2.2 million tons of cement and clinker.The important thing is out of this, VICEM own stock to 1.6 million tons. Therefore, prices move up 60.000d/tan can say is that degree of caution, taking into account the tolerance of the market and partly offset the losses due to input price increases.

Similarly, the "fever" of steel companies is explained by world price spike. According to the Vietnam Steel Association Chairman Pham Chi Cuong 'import price of steel reached 685-690USD/tan world. Even the iron and steel scrap, raw materials imported for domestic production of embryos also increased 560USD/tan; therefore, calculate the price of imported steel scrap plus a shipping fee was around 15 million tonne. Since then, the price a ton of finished steel products produced in the country had reached 16 to 16.5 million tons (sold at the factory). This was not the difference in dollar exchange rates when companies have to purchase at market price up to 21.500d/USD freedom to contract payments for imported raw materials. "  

Pinned difficult to price?

Surveys in some building materials stores in Hanoi on 10.2, construction steel prices are now in season should start moving up significantly. According to shop owners on the road De La Thanh, Lang and some steel sole agent of Thai Nguyen Iron and Steel Company, the Company Vietnam - Italy Steel ..., prices of construction steel are common at around 17 million per ton. Meanwhile, the U.S. Steel Company In field site (VNSteel), steel prices of Southern Steel Company has been listed at 14.95 million tonne steel coils with non-6, 8 and non-shaped steel bar. However, the purchasing power of the market did not decrease. Information from VNSteel (headquarters south) also said that this unit has increased steel prices to adjust more 400.000d/tan for both steel and rolled steel. Accordingly, the price of steel products for delivery at the factory of VNSteel at 16.467 million tonne steel plant 16.797 million per ton. This shows that steel prices will set a new price even in February, while the purchasing power did not decrease.  

Mr Cuong said, because demand for steel in the world through bleak period is up, it forecast in early March next, the steel market will be hard to reduce the heat. Increase sharply, about 300,000 - 500.000d/tan depending entirely on raw material prices as well as the consumer. With cement products, business forecasts, the market will continue to "hot", but the growth rate will be contained.

INDIA: Operating profit stay flat, net down 38%

India Cements, the southern cement major has registered 38% fall in net profit (to Rs.21.47 crore) for the quarter on a sale of Rs. 783.50 crore, a fall of 11%. Though the de-growth in bottom-line was steeper than expected the company has moved back to black after a disastrous second quarter ended Sep 2010, where it has recorded a net loss of Rs.33.63 crore on a sales of Rs. 842.84 crore (down 15%yoy).

• Sales for the third quarter was lower by 11% to Rs. 783.50 crore for the quarter impacted by 23% yoy lower despatches for the quarter to 20.4 lakh tones. Higher realization on year on year basis seems to have moderated the impact of strong slide in despatches to some extent. Third quarter of an April-March fiscal year is an empirically a weak quarter due to active monsoon season in south east peninsular India, where it has strong presence.
• On the back of slack demand, the production of clinker for the quarter stood lower by 22.1% to 16.88 lakh tones and cement grinding was lower by 21.4% to 20.96 lakh tones.
• The company which operated its plant at lower capacity in the wake of slack demand has managed to reduce the variable cost (as % to sales net of stocks) even though the fixed cost has been higher/flat as proportion to sales, net of stocks. While the material cost, transportation charges are lower by 130 bps each to 13.1% and 18.7% respectively, the power & fuel cost was nearly flat at 28.6% with rising coal prices negating the lower fuel consumption in volume in line with lower production. However the fixed cost i.e. staff cost was higher by 100 bps to 7.7% and that of other expenses was up by 40 bps to 16.1%. This has resulted in overall 170 bps expansion in operating margin, which inturn resulted in flat operating profit negating the impact of lower sales.
• Other income was higher at Rs. 3.83 crore compared to nil in the corresponding previous period. Spurred thus the PBIDT was up by 3% to Rs. 132.61 crore. However impacted by higher interest cost (up 36% to Rs. 40.65 crore) and higher depreciation (up 8% to Rs. 61.69 crore) the PBT before forex gain was lower by 26% to Rs. 30.27 crore.
• With forex income stand at Rs. 1.80 crore down by 85% the PBT before EO was lower by 39% to Rs. 32.07 crore. EO for the quarter as well as corresponding previous period was nil. Taxation was lower by 41% to Rs. 10.60 crore in absolute terms and the tax rate was lower at 33.1% compared to 34.1% in corresponding previous period. Thus the net profit was lower by 38% to Rs. 21.47 crore.

Nine month performance

The clinker production for the 9 months ended Dec 2010 was at 58.57 lakh tonnes (64.50 lakh tonnes) while cement grinding was marginally lower at 75.08 lakh tonnes (76.08 lakh tonnes). The sale of cement was at 74 lakh tonnes as compared to 75.50 lakh tonnes in April-December 2009. Clinker sale was at 0.15 lakh tonnes only as compared to 4.62 lakh tonnes in the same period of the previous year.

Sales for the period was lower by 11% to Rs. 2509.13 crore and the operating profit was lower by 64% to Rs. 261.25 crore as OPM crash to 10.4% compared to 25.6% in the corresponding previous period. The net profit was down by 96% to Rs. 12.82 crore as degrowth was escalated by higher interest cost and depreciation.

Upgradation / Expansion plans

The capacity upgrade at Chilamakur has started yielding results after initial teething troubles while the cement plant in Banswara, Rajasthan put up by the subsidiary Indo Zinc Ltd has started commercial production from January 2011. Work is in the advanced stage of completion at the power plant in Tamil Nadu and preliminary work for an identical plant in Andhra Pradesh has also started. The mining operations in the coal mining rights acquired in Indonesia are also being actively pursued to ensure uninterrupted supply of coal for the company's requirements.

Outlook

The experts have assessed and also predicted a growth of 8 to 9% in the GDP during the current year. Since cement consumption is one of the primary drivers of the economy and which is also linked to growth of the same, it can be reasonably expected that growth in cement consumption is likely to be higher in the future. Given the capacity overhang that exists it can only expect gradual improvement in capacity utilization over the next year. While the current prices are stable, the continuity of this depends on the demand growth and the utilization levels of the industry.

The stock was hovering around Rs. 89.75.

India Cements: Standalone Result

	1012 (3)	0912 (3)	Var.(%)	1012 (9)	0912 (9)	Var.(%)	1003 (12)	0903 (12)	Var. (%)
Sales	783.50	875.97	-11	2509.13	2831.14	-11	3805.45	3471.93	10
OPM (%)	16.4	14.7		10.4	25.6		22.6	30.0
OP	128.78	128.37	0	261.25	724.68	-64	860.70	1040.23	-17
Other income	3.83	0.00		30.83	0.00		2.81	2.97	-5
PBIDT	132.61	128.37	3	292.08	724.68	-60	863.51	1043.20	-17
Interest	40.65	29.89	36	98.36	105.77	-7	142.64	112.15	27
PBDT	91.96	98.48	-7	193.72	618.91	-69	720.87	931.05	-23
Dep.	61.69	57.30	8	182.50	171.55	6	233.12	203.32	15
PBT before forex G/L & EO	30.27	41.18	-26	11.22	447.36	-97	487.75	727.73	-33
Forex Loss	-1.80	-11.65	-85	-1.50	-31.38	-95	-43.57	79.43	LP
PBT before EO	32.07	52.83	-39	12.72	478.74	-97	531.32	648.30	-18
Tax provisions	10.60	18.03	-41	-0.10	162.72	-100	176.98	216.12	-18
PAT	21.47	34.80	-38	12.82	316.02	-96	354.34	432.18	-18
EPS (Rs)*	#	#		#	#		10.6	15.8
* Annualised on current equity of Rs. 307.17 crore; Face Value of Rs. 10 # EPS can not be annualised due to seasonality of business LP: Loss to profit; PL: Profit to loss EO: Extraordinary item Figures in Rs. crore Source: Capitaline Corporate Database

PHILIPPINES: Blended cement next generation building material, says CEMAP

Local cement producers are promoting the use of blended cement as an attractive option for basic construction material to strengthen or enhance most major infrastructure projects in the country.

The move is also seen as an answer to the strong consumption of cement in the past two years especially last year, 2010 which posted the highest annual cement consumption for the country. This is the first time that the previous highest annual demand recorded in 1997 has been exceeded.

Ernesto M. Ordoñez, president of the Cement Manufacturers Association of the Philippines (CEMAP), said that blended cement is appropriate for many applications in the country’s burgeoning construction industry.

Noel de la Cruz, a recognized authority on cement testing and the Cement Testing Center’s Executive Director, strongly recommends blended cement for many of the Philippines’ various construction activities. While Portland cement is used due to its high early strength and is appropriate for other applications, blended cement is utilized because of its durability, performance in severe ambiance, sustainable construction (CO2 emissions) and economics.

Noel de la Cruz said blended cement is a mixture of Portland cement clinker, gypsum and pozzolan while Portland cement is made up of clinker and gypsum only. With less clinker (less limestone or CACO3) used in the production of blended cement, there is less CO2 emissions, reducing negative impact to the environment. The exigence of more eco-friendly approach by the manufacturing sector in its operations is a pressing reality. The cement industry responds to this exigency through the production of blended cement.

Blended cement, therefore increases the available capacity of producing more cement of cement firms because it uses less clinker. Blended cement is usually more efficient economically because it permits the industry to maximize other available cementitious materials different than clinker. The capability of the cement industry is better enhanced to better serve the infrastructure and housing program of the government.

Contrary to the belief of many, cement with less clinker is not inferior. The standards set by government for blended cement in combination with the rigorous testing methods observed by the CeMAP members ensures that the quality of blended cement will be more than sufficient for its many applications.

De la Cruz said blended cement has better workability and it increases the ultimate strength of concrete. He pointed out that finely ground pozzolan in blended cement contains silica that reacts with the lime in cement forming cementitious materials that fill in the air voids in the concrete making the concrete denser and more durable.

“Blended cement can prevent the penetration of chemicals that may weaken concrete, cause the corrosion of steel as well as other structures,” de la Cruz pointed out.

PARAGUAY: INC recibió materia prima y hay esperanza de mayor producción

La Industria Nacional del Cemento (INC) abrió la esperanza de entregar más bolsas de cemento, en virtud de que recibió una pequeña cantidad de clinker que le permitirá incrementar la producción, a partir de la próxima semana.

En el mejor de los casos, según confirmaron ayer, se despacharán 55.000 bolsas diarias, pero esa cantidad se destinará a entregar productos ya comercializados, pero hasta hoy no entregados.

Se estima que la cementera estatal tiene 150.000 bolsas pendientes de despacho. Es decir, equivalentes a 5.000 millones de guaraníes de facturación. Es decir, cobra a los distribuidores y no les entrega a tiempo.

A mediados de esta semana los distribuidores llegaron a recibir apenas 15.000 bolsas por día, lo que significa que el déficit fue de 70.000 bolsas, atendiendo que esa es la necesidad básica del país, a más de los productos importados que ingresan al país.

El gerente industrial de la INC, Claudio Montiel, afirmó que la próxima semana las entregas se irán normalizando y esperan que por todo un mes la cementera produzca a su máxima capacidad para cumplir con sus clientes.

Si bien la INC tiene reserva de clinker para 1.000 años, la empresa paraguaya importa el producto de Europa, por el que paga 122 dólares la tonelada, cuando que el clinker nacional apenas llega a 105 dólares la tonelada.

La administración de Optaciano Gómez, que ya lleva más de dos años al frente de la INC, ha incurrido en total imprevisión, por lo que se ve obligado a traer clinker de España cuando que en su momento no hizo stock para afrontar la bajante del río Paraguay.

La Federación de Distribuidores de Materiales de Construcción del país protestó nuevamente ayer por la ineficiencia de la INC, lo cual está perjudicando al sector de la construcción y, por ende, a una cadena de servicios afines.

MEXICO: Cemex Fined $1.4 Million for Polluting

Cemex, one of the nation's largest cement makers, will pay $1.4 million for exposing people to sulfur dioxide and nitrogen oxide emissions. Cemex also must install pollution controls at its Ohio cement plant as part of the settlement in Cincinnati Federal Court.

The state and federal governments sued Cemex under the Clean Air Act for modifying its cement plant without proper permits. The plant's pollution contributes to smog, acid rain, heart disease and asthma, particularly in children.

Cemex must install emission controls to reduce annual emissions of nitrous oxide by 2,300 tons and sulfur dioxide by 288 tons.

Of the $1.4 million, $932,400 will go to the United States, $233,800 to Ohio and another $233,800 to Ohio's Regional Air Pollution Control Agency; $46,760 of the state's money will go into its Clean Diesel School Bus Program Fund.

AFRICA: Mozambique to Impose Price Controls on Cement, AIM Reports

Mozambique’s government plans to impose price controls on cement produced by Cimentos de Mocambique, the largest cement factory in the country and a unit of Cimpor Cimentos de Portugal SGPS SA, state run Agencia de Informacao de Mocambique said.

The company sells a 50-kilogram (110-pound) bag of cement for $8, while resellers almost double the price on the local market, the Maputo-based news agency said, citing Steffen Kasa, chairman of the company’s executive committee.

Cimentos de Mocambique’s three cement plants produced 960,000 tons of cement in 2010, short of the country’s consumption if 1.1 million tons, AIM said.

INDIA: Rain Commodities acquires Birla Cement from Yash Birla Group

Rain Commodities Ltd has informed BSE that the Company has acquired Birla Cement and Industries Ltd. from Yash Birla Group. Birla Cement and Industries Ltd. holds certain Limestone Mining Leases in the State of Andhra Pradesh.

Consequent to the said acquisition, Birla Cement and Industries Ltd. has become a Wholly owned subsidiary of the Company.

AFRICA: KenGen to set up coal plant near Mombasa cement factory

Business Daily Africa reported that the 300 MW coal power plant that KenGen plans to build at the North Coast will be moved to a new site because the initial location, Dongo Kundu in Mombasa, is on a flight path.

Mr Eddie Njoroge MD of KenGen said that the KES 104 billion plant will now be built near the Mombasa Cement factory. He added that "The Directorate of Civil Aviation said the initial site at Dongo Kundu was on the flight path. The chimney of the power station was too high and was on the funnel of the runway."

The coal fired plant which will be constructed on JV basis and which is expected to be running in 3 to 4 years may be extended to 600 MW.

The tender requires the formation of a JV company, with the winning bidder holding a 60% stake and KenGen the rest. KenGen could then raise its stake up to 49%.

To transmit the power from the source, the Kenya Electricity Transmission Company has contracted Indian firm Kalpataru to construct a KES 7.4 billion 400 kV line to be used to transfer electricity from thermal power stations in the coastal area to Nairobi.

The targeted plants include the 90 MW Rabai Diesel plant that is already operational, the 120 MW diesel facility being put up by KenGen and the proposed 300 MW coal power plants. In 2010, the Energy ministry announced it was concessioning coal blocks within Mui Basin, Kitui for exploration, exploitation and development.

To accelerate that, exploration, exploitation and development of the coal, the government has created 4 coal blocks for lease to prospective investors for possible exploration, exploitation and development. A feasibility study to prove commerciality of the coal deposits has been done in some of the blocks where most of the appraisal wells have been drilled.

Coal prospecting has remained a key project in the Ministry of Energy since 2000. Initial surface exploratory activities were concentrated in Mui Basin of Kitui and Mwingi Districts, but in 2002 work moved to Taru Formations in Kwale and Kilifi Districts in Coast Province.

INDIA: Orient Paper to set up a cement plant in Karnataka

The board of Orient Paper & Industries cleared the company's proposal to set up INR 1,473 crore three million tonne per annum Greenfield cement manufacturing facility at Gulburga, Karnataka. The board also approved plans to set up a 50 MW power plant entailing an additional investment of INR 247 crore.

Information trickling in suggests OPIL has already obtained the Karnataka government’s approval for the proposed project as well as its go ahead to buy some 1500 acres plus for the same. Sources close to the group indicated that the location of the proposed power plant and its use couldn't be ascertained. The greenfield Karnataka unit will, in all likelihood , be part financed by a mix of internal accruals, debt and equity.

The move to add 3 million tonne per annum cement capacity is in sync with OPIL's aim to become a 12-15 million tonne cement manufacturing firm by 2015-16 .

OPIL board also approved the issue of convertible warrants aggregating INR 1.20 crore to two promoter group companies namely Central India Industries and Shekhavati Investments and Traders at INR 57.25 a piece to raise some INR 70 crore long term capital for the venture. An extraordinary general meeting has been convened on March 7 to seek shareholders' approval for the preferential issue.

The company has been looking to build up its cement capacities for sometime now. It has recently expanded the capacity of its Andhra Pradesh and Maharashtra units, boosting its overall capacity from 3.4 million tonne per annum to 5 million tonne per annum. A 50 mw captive power plant has also been installed at Devapur (Andhra Pradesh) plant.

VIETNAM: Cement producers face market glut

HCM CITY — The competition in the cement market will become stronger this year as output outpaces demand, experts have said.

Figures from the Ministry of Industry and Trade show that the country produced 50.85 million tonnes of cement last year, equalling 101 per cent of the year's target. However, domestic demand last year was about 48.5 million tonnes, resulting in an excess of about 2 million tonnes.

As at least seven more cement plants will be put into operation this year, the cement surplus is expected to be higher this year, between 5 to 10 million tonnes.

An oversupply of cement had made cement producers hesitant to raise cement prices despite increased input costs, including electricity and coal, which had strongly risen in the past three years, said Le Van Toi, head of the Construction Material Department under the Ministry of Construction.

Cement prices had only increased by between 13-15 per cent since 2008, while coal prices had doubled, he added.

To avoid overproduction, the Ministry of Construction has promoted cement use domestically such as for rural transport construction projects, and reviewing import and export of ashlar paving stones and encouraging the use of non-fired materials.

To ease competitive pressure, many domestic cement producers, including Cam Pha Cement, Viet Nam Cement Industry Corporation, Vinakansai Cement and Thang Long Cement, have sought to increase cement exports to foreign markets such as Cambodia, Laos, Singapore and Bangladesh.

However, the volume of exports to these countries is still modest.

Last year Vinakansai Cement Joint Stock Company, exported nearly 100,000 tonnes of clinker to Singapore and 70,000 tonnes of clinker to India and signed a contract to ship 100,000 tonnes of clinker per month to Bangladesh.

Thang Long Cement Joint Stock Company last month shipped 25,000 tonnes of cement to Africa.

Le Do, general director of Thang Long Cement Joint Stock Company, said his company was eying more exports to Africa, a market with strong potential and high demand.

The country plans to export 1.5 million tonnes of cement this year, an increase of 500,000 tonnes over last year, according to Viet Nam Cement Association.

However, experts warned that cement exports may not bring attractive returns because of high transportation costs.

There are currently 90 firms nationwide producing or trading cement. Of these, 33 are subsidiaries of the State-owned Viet Nam Cement Industry Corporation, five are foreign-invested joint ventures and 50 are smaller producers. — VNS

QATAR: Qatar National Cement gross rises 25% on cost cuts

Gross profit at Qatar National Cement Company rose by nearly a quarter last year against 2009 as a steep fall in sales cost compensated for a 28% fall in revenue.

The country’s biggest manufacturer of the building product saw pre-tax gains leap from QR421.6million to QR509.5million between the two years, according to its latest financial statement.

The cost of sales fell by almost half from QR1.09billion to QR580.5million to make up for the slide in revenue from QR1.5billion to QR1.09billion. A fall in finance charges and a smaller loss from available-for-sale assets saw net profits rise almost 12% from QR417million in 2009 to QR466.9million.

Despite a decline in the value of its non-current assets – which includes its property, plant and equipment and investment in property and securities – the company’s level of inventories rose 48% against the previous year, from QR296.8million to QR439.5million.

AFRICA: Ohorongo to boost manufacturin

THE construction industry is expected to gain momentum in the near future following the commissioning of the multi-billion dollar Ohorongo cement plant in Otavi by President Hifikepunye Pohamba last week. The plant will finally break the long reliance of importing cement from South Africa.

Inaugurating the plant, President Hifikepunye applauded the Schwenk Group of companies for delivering on their promise to supply cement in both Namibia and Angola adding that it would go a long way in stabilising the prices in the country. 

“This is a fulfilment of the dream that was set here two years ago and we will now build our country from cement manufactured from Namibia,” said Pohamba.

Prior to the conceptualisation of the idea of giving Namibia one of the most technologically advanced cement plant with a potential to produce 750,000 tones annually on full capacity the country was reliant on imports.

The plant, built within two years,was finished a few months ahead of its set completion date of June this year following a hefty loan injection from European Investment,the project’s major funders.

Although the project is expected to sustain the domestic market, Ohorongo Managing Director Hans-Willem Schuette said they are also keeping a close eye on both Angolan and Sadc in the future when production increases.

“We have an advantage of our central location and the availability of transport network to Namibia. This would make it easy for us to access the market,”Schuette said.

Schuette also said Ohorongo cement products would be accessible to the rest of the country within the next few months at affordable prices.

Some of the share holders in the multi-billion dollar project include the Schwenk Group that has branches in Europe, Development Bank of Namibia and the Southern African Development Bank.

Ohorongo cement plant has a staff complement of 200 and potential to create about 3,000 jobs.

IRAN: Invest $500mln for Building Cement Plant in Tajikistan

TEHRAN (FNA)- Iranian Ambassador to Dushanbe Ali Asqar She'rdoust announced that the country plans to invest $500mln in implementing a project to build a cement factory in Tajikistan's Khatlon province.

The plant with an annual production capacity of more than one million ton will be constructed in Nosir Khusrav district in Tajikistan's Khatlon province, the Iranian envoy told reporters. 

She'rdoust also pointed out that the Iranian Lian Kavan Kaniha Company will develop the plant during one and a half years period. 

"The agreement on building this plant was signed in late January 2011" after two years of negotiations, he further explained. 

A seven-member Iranian delegation, comprising legal experts, investors and experts from the Lian Kavan Kaniha Company visited Tajikistan in early 

Iran and Tajikistan have recently accelerated expansion of their ties and cooperation and observers believe that the good achievements gained in area of their mutual cooperation should be deemed as a result of the efforts made by the two countries' officials. 

Tajik President Emomali Rahmon in a meeting with his Iranian counterpart Mahmoud Ahmadinejad on the sidelines of the 11th summit of the Economic Cooperation Organization (ECO) in Istanbul in late December underlined his country's willingness to boost all-out ties with Iran. 

"Developing cooperation among the Persian speaking nations is beneficial to these states and also the entire region," the Tajik president said. 

In the same meeting, Iran's President Ahmadinejad described the two countries' ties as "fruitful and constructive", and underlined that there exits no hindrance to the bolstering of cooperation between Tehran and Dushanbe.

EGYPT: Cemex en Egipto; Torre, a Competitividad

La subsidiaria de Cementos Mexicanos en Egipto, Assiut Cement Company o Cemex Egipto, a diferencia de algunas plantas de la competencia, no ha cerrado sus instalaciones a pesar de la crítica situación política que se vive en aquella nación. Las instrucciones de Lorenzo Zambrano, su presidente, son muy claras: que los trabajadores y funcionarios tomen las precauciones debidas y que se busquen rutas nuevas para la entrega de productos sin afectar las manifestaciones.

La planta egipcia de Cemex de 5.4 toneladas de capacidad instalada está a 350 kilómetros de El Cairo, en la población de Assiut, y no se ha visto en la necesidad de cerrar instalaciones y frenar producción hasta que la situación se estabilice. Las principales competidoras que tiene en ese mercado son Egyptian Cement, Italcementi, Arabian Cement, Titan, Ameriyah, National, Sinai, Misr Beni Suef y Misr Quena Cement Companies.

La afectación principal de Cemex Egipto se da en la distribución y comercialización, en los tiempos de entrega de mercancía y en la paralización de algunas obras públicas y privadas en El Cairo y otras ciudades. Sin embargo no se tiene una estimación de los efectos ni pronósticos sobre esta situación; hay que destacar las facilidades otorgadas a los trabajadores por las difíciles circunstancias, pero es claro que el ausentismo laboral es mínimo.

Por otra parte, le puedo comentar que todo parece indicar que José Antonio Torre será el nuevo subsecretario de Competitividad y Normatividad en la Secretaría de Economía, puesto que dejó Felipe Duarte para irse a la Secretaría de Comunicaciones y Transportes. En las organizaciones cúpula del sector privado lo conocen bien por su disposición al diálogo y porque ha actuado anteriormente a favor de las empresas mexicanas.

Torre se desempeña aún como coordinador de asesores del titular de la dependencia, Bruno Ferrari, quien tiene plena confianza en el funcionario con quien ha trabajado desde ProMéxico. Se espera que ponga en orden el entuerto causado por su antecesor en materia de baja en la competitividad internacional y la controversia constitucional que analiza la Suprema Corte de Justicia de la Nación porque el gobierno federal abrió unilateralmente la equivalencia de normas con Estados Unidos y Canadá.

VENEZUELA: Se incendia planta de Cemex

Explosión en Cemex deja a

cuatro trabajadores lesionados

■ La información fue suministrada por Julio Millán, miembro de la Junta Transitoria de Cemex, quien indicó que los heridos presentan quemaduras de 1er y 2do grado.

■ Luis Barrios, Jesús Beltrán, Ismael Alcalá y Félix García están siendo atendidos en la clínica Meditotal en Puerto La Cruz.

■ El hecho se produjo a la 1:47 de la tarde, cuando se efectuaba el mantenimiento en la planta uno.

Puerto La Cruz.- Un conato de incendio en la planta principal de cemento Cemex de Puerto La Cruz, Anzoátegui, dejó como saldo cuatro trabajadores heridos, que presentaron quemaduras de segundo grado.

El hecho se produjo a la 1:47 de la tarde, cuando se efectuaba el mantenimiento en la planta uno. Presumen que hubo una chispa al momento de hacer una soldadura en una de las piezas, lo que produjo el incendio.

Los heridos son Félix García, Ismael Alcalá, Jesús Beltrán y Luis Barrios, quienes se encuentran recluidos en un centro clínico en la ciudad porteña y su condición es estable.

Se desconoce si el hecho afecta la producción de cemento.

AFRICA: SOUTH AFRICA: Crunch coming in cement

Low demand, rising capacity threaten decades of prosperity for PPC.

JOHANNESBURG - For a century PPC (JSE:PPC) has been one of SA’s best performing companies but dark clouds have gathered over the Prolific Profit Company since its bleak trading update last week.

Therein it warned that cement demand in the first quarter fell 5% - after a 22% fall since the heady days of 2007.

Concurrently Murray & Roberts (M&R) (JSE:MUR) and WG Wearne (JSE:WEA) announced impending losses, underlining  serious distress in PPC’s feeder, the building and construction industries.

After supposed dissolution of the cement cartel between PPC, Lafarge and AfriSam, the industry is also under a competition cumulo-nimbus.  To minimise potential fines, PPC is co-operating with the commission.  With most companies that has turned out to be an admission of guilt.

In its annual report PPC was proud to report that it has given shareholders an annual average compounded return of 13.3% for 100 years. Had you invested R100 when the company listed in1910 and reinvested dividends, you would now have R26m. (What was my grandfather thinking?)

SA has sunk many mines, built millions of houses, factories, shops, bridges and roads in the past century. PPC has led the sector since the beginning. The track record from the 1970s to the early 2000s was particularly impressive. Such was the benefit of a cartel! Cartel-like behaviour dies hard, hence the current investigations into construction and cement by the Competition Commission.

Until recently, cement prices have risen once or twice a year largely in spite of stagnant demand. PPC raised prices 5.5% last year and is about to publish another increase. Rising energy and railage costs pretty well oblige price increases.

PPC has stagnated for the past three years with operating profit, cash generated and dividends paid stuck in a band (see table). Now we have the prospect of a sharp reverse.

PPC the vital numbers:

	2010	2009	2008
Revenue (Rm)	6807	6783	6248
Op profit  (Rm)	2115	2418	2323
Cash generated (Rm)	2442	2602	2546
Dividends paid	1062	1195	1401

The spectre of tougher competition in the near future is something for investors to ponder.

The graph from PPC’s last results presentation shows that the industry’s capacity already far exceeds demand. Capacity rose from 7mt to 13mt between 1970-1986. After that there was a slow rise to 14mt by 2007. PPC reckons capacity now is 17mtpa while demand is around 12mt. The new players will push capacity to 20mtpa, which implies huge over capacity soon.

I asked Pieter Fourie, who heads Sephaku Cement, why he believes profits are to be made with a new 2.2mt facility costing R3bn.

“We disagree with current capacity figures. The industry’s biggest problem is that plants are antiquated. The average age is 38 years and some are more than 50 years old. The average power consumption of existing plants in SA is 145 kwh per ton. Our new plant will use only 95kwh/t.”

Fourie says the new plant will be more efficient because it will comprise two sites – one in Lichtenburg and the other in Delmas. Trains will take coal to Lichtenburg and return with clinker. Fly ash from the Kendall power station will be added at Delmas and the mixture ground to the finished product. This could give Sephaku a 30% cost advantage.

Fourie says Sephaku Cement will be funded as to 60% debt, 40% equity. The equity is already in the bank and negotiations are going on with the banks for the rest of the funding. Loans will be guaranteed by Dangote Industries of Nigeria, Africa’s biggest cement producer.

Sephaku is busy converting into a pure cement play, selling or unbundling other assets. It received R80m for gold assets and wants R20m for its nickel assets. Its own financials make for daunting reading but now Dangote has a 56% stake perhaps it can set its sights long term on the sort of rating enjoyed by PPC. The share hit a high of 384c in August 2010 but has subsequently come back to 335c.

According to Fourie, AfriSam, formerly named Holcim and before that Anglo-Alpha, is in an awkward situation. He says the deal by which the PIC and BEE interests acquired the company from Holcim of Switzerland was not exactly favourable.

“They paid R16bn for 4mt of old capacity. We are paying R3bn for 2.2mt of new capacity. Those numbers speak for themselves. The PIC picked up R10bn of debt so they are not in a strong position to engage in a price war if one does break out.”

Not that Fourie believes there will be such a war because cement demand is price inelastic. But he adds: “It would be naïve to assume that prices will be unaffected in a more competitive environment.”

AfriSam’s Victor Bouguenon says at the time of the deal with the Swiss, cement was booming. He also points out that a going concern with long-held customers is more valuable than a start-up. He says the competitive dynamics are complex but he does concede that the shareholders’ debt can affect the trading company which effectively has to service that debt.

Jannie Stockenström, who is running the Wiphold-Conticem-Jidong project at Brits, says all is well. Initially the new plant will have capacity of only 700 000tpa at a capital cost of R1.65bn. He says capacity can quite easily be trebled but this consortium is proceeding cautiously.

Kevin Odendaal of PPC concedes that a number of existing plants are antiquated. The least efficient are in mothballs and were last used during the boom of 2008, yet are still in their capacity figures. PPC is upgrading certain plants, most notably those in the Western Cape. He agrees that new plants are more efficient. PPC’s Dwaalboom, for instance is 30% more energy efficient.

Odendaal points out that electricity is only 7% of PPC’s cost. Coal is 12%. Coal emissions are an industry worry but he says most emissions in cement making come from burning limestone.

If PPC’s capacity is so antiquated, the question arises, why did it pay dividends of R2.6bn and buy back shares worth R740m in the past three years? Dividend cover has fallen to 1.25.

Should PPC not rather have built new more efficient capacity? The big dividends and share buybacks have reduced shareholders equity to the point that PPC earned 125% on equity last year – up from 77.9% the previous year.

Until now, like any industry with capital intensive plants working at high capacity, PPC has been a cash cow. The question in the new environment: is this level of payout sustainable?

While the share price of M&R has fallen by two thirds since the boom years, that of PPC has been pretty resilient. At just over R30, it is down only 14% from the one-year high of R35.

Gloom in the industry is far from complete. The new capacity will come on stream only in 2013. The great hope is that government’s promised R850bn infrastructure programme will be rolling more convincingly by then – and who knows, perhaps confidence will revive so that people build houses, flats, shops, offices and factories again?