CHINA: Conch Cement Plans Another Round Of Acquisitions

- Anhui Conch Cement is eager to begin another round of acquisitions of cement makers in Shaanxi province after it paid 448 million yuan to buy four cement factories belonging to Baoji Zhongxi, with total annual clinker capacity of 7.2 million tons and nine million tons of cement, on August 27, reports nbd.com, citing a source with knowledge of the matter. 

According to the source, Conch Cement is currently in talks with with local cement makers, including Shenwei Cement.

Industry experts regard the planned acquisitions as an attempt to buy cement assets at low prices due to the excess cement production capacity in Shaanxi province. 

Cement makers from Shaanxi province are the least profitable in China, and the price of 42.5 grade bulk cement fell from 380 yuan per ton in the same period last year, to 275 yuan per ton, down 27.63 percent.

The ex-factory price of 42.5 grade bulk cement had recently dropped to 210 yuan per ton in some parts of Shaanxi, resulting in 40 percent of cement makers in Shaanxi Province incurring losses.

Luo Wei, an analyst at CICC, said cement prices and the profitability of cement makers in Shaanxi province had reached a bottom, and a rebound is expected in the late 2012 due to the reduction of new capacity and increased industry concentration.

According to the report, Baoji Zhongxi was ranked fourth in the clinker market in Shaanxi province, while Shenwei Cement was ranked inside the top three.

Following the acquisition of Baoji Zhongxi, Conch Cement will have total annual production capacity of 15 million tons in 2012. 

Conch Cement aims to be able to produce 300 million tons of clinker over the next five years, becoming the world’s largest maker of clinker.

Shares of Conch Cement fell 1.31 percent to close at HK$21.90 today.

AFRICA: Kenya: Cement Factory Store Faces Closure Over Pollution Claim

Residents of Mikindani in Mombasa are up in arms after a cement factory set up a storage area for clinker in their neighbourhood. Mombasa Cement rented a transport company's yard and set up a facility to store their clinker.

Clinker is coral mixed with chemicals and burnt at high temperatures. It is the main material used to make cement. The residents claim the dust from the clinker has been affecting them for the two or three years the facility has been in their neighbourhood. They said their children fall sick frequently. "They said they would wet the clinker before loading or offloading to reduce the dust. But that has not been done. Now we take our children to hospital everyday with chest problems," said Kame Baungu, 61, the Kikaango village elder in Mikindani.

Mercy Ichuku, a nurse at a health facility in the area said cases of chest problems are common in the area. "Almost everyday there has to be a patient with chest problems, cough, or any other respiratory infection or complication. We have had to refer some cases to the Coast General Hospital," she said.

The Public Health ministry has threatened to shut down the facility claiming the company went against the recommendations of an Environmental Impact Assessment report. "It is true we have received several complaints from the area residents. I did some investigations and found that the Mombasa Cement company has not followed what was agreed on when they conducted the EIA together with Nema," said Changamwe district public health officer John Ndung'u.

Ndung'u said the company was supposed to install a cyclone vent in the facility to prevent the dust from escaping into the air, but has failed to do so. "In May, they requested three months to acquire some machines from India to arrest the dust. But nothing has been done so far. We are contemplating moving to court or shutting down the facility altogether," said Ndung'u.

Nema environmental officer Benson Wemali said the company is in breach of the occupational safety measures. "There are two companies in the yard, the transport company, Montrex, and the cement company. It might be that the dust is from the floor of the yard which has no carbral," said Wemali.

Wemali said the company has to wet the clinker before loading or offloading. He said he will visit the site today to ascertain exactly which company is at fault.

AFRICA: Nigeria: Two Months After, FG's Order on Cement Prices Crashes

Once again, prospective property developers in the country have been hit with yet another round of cement price hike. This is coming just two months after President Goodluck Jonathan directed manufacturers of the product to crash the price of the commodity, which they actually did briefly.

Just like a baton changing game, Kerosene scarcity/ price hike just gave way- though not totally - and now cement prices had picked from where kerosene stopped.

Different reasons have been given for the latest price hike but they are technically not quite different from the previous ones stakeholders in the industry tabled when they met President Jonathan.

The Cement Manufacturers Association of Nigeria has said the current high cost of cement was due to an increase in the cost of Low Pour Fuel Oil (LPFO).

Mr. James Salako, Secretary to the association, said the price of the oil has increased from N40 to N68 per litre. He said the distributors of cement took the decision increase the price, with the knowledge that manufacturers would not cope with the price differential for a long period.

Salako said one of the major manufacturers has stopped production to undertake a turn-around maintenance of its plant, adding that this reduced supply. "These are the reasons for the hike," he said According to him, distributors are now hoarding the product in anticipation of a formal increase in price by the manufacturers.

Some of reasons given by the manufacturers do not sound alarming though but the reality in the cement market and lack of access to the commodity is quiet alarming. For those who face the reality in the market place of purchase, no explanation has yet cushioned the effect of the price nor has changed the sad reality they are hard hit by.

Bitrus Toma, Managing Director of Gyel Block Industry in Masaka, in Karu local government area of Nasarawa State, said some weeks ago, he bought the commodity at 1,600 naira but it rose to 2,000 naira and even beyond in some places but now it is 1,800. He told Weekly Trust that it has, however, not yet affected block prices. "We have not yet increased our prices but if the status quo is maintained, we would have no option than to hike the price of building blocks by Monday."

He said all block producers had agreed to monitor the situation but if it does not improve, then price hike of blocks is imminent, latest by Monday.

Meanwhile, a land developer in Katsina State told Weekly Trust that he used to buy the commodity at 1,650 naira but has risen to 1,850 naira. According to him, cement sellers claimed that there was increase in the transportation fare and thus they have to also increase their price to be able to meet up.

Mr. Alamba Jidauna of Lamba Block Industry in Kubwa, FCT said he buys the commodity for 1,850 naira to 1,900. Unlike the other block producers, he has hiked his price a little bit. "I don't want to deceive my customers by reducing the quality of the product just to maintain the old price. I have told them that there would be a little price hike so as to maintain the quality pending when the situation changes. Six-inch block that was sold for N 120 is now N 140, while nine-inch block that was sold for N 140 is now N 155 here. But I assure my customers that the moment the situation changes for good, the price would surely crash too. They know the quality of my blocks, so I don't want to compromise that. Hence, I told them the truth.

While most people attributed the sudden price hike to lack of electricity to enable local manufacturers produce at a cheaper rate, others said the persistence price increase is caused by the market forces of demand and supply. This implies that demand is higher than supply of the product in the market, thereby forcing the price to go up.

According Uche Nweze who is trying to complete his two-bedroom apartment at Byazhi, outskirt of Kubwa, "government should think of the common man who is struggling to get shelter for his family. With that outrageous price of cement, how can a common man cope?"

For Eze Amara who sells cement at Jabi "I have added 300 naira to a bag of cement. It is now 1, 900 naira. I don't know if the manufacturers have increased their prices, mine was due to the transportation increment. Is only the main dealer who I collect goods from that would ascertain whether the manufacturers have increased. All I know is that the price has gone up a bit."

Speaking on the implication of the high cost of cement, Architect Mustapha Ado of Dream Land Consult said the concern of people in his profession is that the high cost of cement could force people who are in construction work to go for poor quality products to cut cost. Such situations had in the past given rise to cases of collapsed buildings in parts of the country.

Reeling his experience of the cement market, "in my own opinion, I think the government should also look at the supply side that has to do with importation. The high demand and low supply is also a factor that has to be looked into. If our local manufacturers do not have the capacity to meet the high demand, why not import since it is cheaper abroad. Common sense should make Nigeria to start importation since it is cheaper to do so. The truth is that even some of our so-called manufacturers import a huge quantity of cement and bag them here for sales. So allow more people to import."

Ado said there are rumors making the rounds that one of the factors is the expiration of the licenses issued to manufacturers to import cement to the country. "I also hear of the transportation burden and the cement factory oil. But these are all regular issues they take advantage of to hike prices and hoard commodities."

He suggested that there should be a price control agency that would monitor both the manufacturers, wholesalers; retailers and even local block sellers so that they don't take advantage of such situations.

"In the United States, 80 pounds bag of Portland Cement is $4 (six hundred naira) while in England, it is just a couple of pounds higher. Why does it cost three times as much in Nigeria?," he queried.

The Federal Government has given 2013 as the target for the achievement of the self-sufficiency in cement production. However, the current national demand for cement is estimated at about 13.5 million tonnes whereas the national production level is 11.5 tonnes since 2009.

It could be recalled that in 2008, the Nigerian cement industry had an estimated market size of N361 billion (US$2.4 billion), or in aggregate consumption terms, 13.4 million tonnes, of which 46 per cent (6.2 million tonnes) was produced in Nigeria. Driven by the acute infrastructure deficit and significant demand for housing, the domestic production volume of the product has grown at 25 per cent (CAGR) over the last four years but has still not been able to meet the increasing demand.

INDIA: Monsoon hits cement sales in August: IIFL

IIFL Institutional Equities, a part of the IIFL Group, one of the leading players in the Indian financial services space, in a recent report says that cement despatches for the month of August were moderate due to severe monsoon.

Based on initial cement despatch numbers, the brokerage estimates industry despatches to have increased 4-6% YoY for August 2011 (grew 10% in July and 2% in August YoY).

According to the report, August despatches of Ambuja Cements (ACL), ACC and Jaiprakash Associates increased 3%, 20% and 21% YoY, respectively. 

The moderate growth is attributable to flooding in different parts of the country (August rainfall was 10% higher than the long-period average) and a truckers strike for a week in the south. 

In the past one month, although cement prices declined in the northern and central regions they increased in the western and eastern regions. Prices were largely stable in the southern region. 

Dealers expect cement prices to increase post monsoon. 

“We expect demand growth to accelerate in the coming quarters with likely revival in demand in the rural and infrastructure segments,” IIFL says.

The report was published by IIFL’s Institutional Equities Research desk.

VIETNAM: Cement industry loses loan guarantees

The Government will stop guaranteeing overseas borrowings by cement enterprises following a report by the State Auditing Agency that four companies are likely to default on repayment and have sought support from the Ministry of Finance.

The Government had guaranteed foreign loans worth US$1.36 billion for 16 State-owned cement companies out of whom Dong Banh, Thai Nguyen, Tam Diep and Hoang Mai companies were facing financial problems and could not repay, said the Minister of Finance, Vuong Dinh Hue, during a press meeting in Ha Noi on Thursday.

Analysts warn many others could end up in the same boat.

The reasons are not hard to find: the mushrooming of cement plants in the country leading to a massive oversupply and the ineffective operation of plants due to the use of outdated technologies.

In 2004 the cement industry began to adopt the Chinese rotary kiln technology and imported machinery at low prices though they are much less efficient than technologies and equipment imported from Europe or Japan, according to Saigon Economic Times.

But what made things worse was that the number of cement plants licensed rose three-fold in the last seven years while demand just doubled.

Thus, while there are 110 factories with a designed capacity of 64 million tonnes annually and current production is around 57 million tonnes, demand is expected to be only 52.5 million tonnes this year due to a reduction in the number of building projects, according to the Viet Nam Cement Association.

The association added that in addition there were 4-5 million tonnes in stock.

Producers are looking to boost exports but international prices are low while transport costs are high.

Dao Ngoc Binh, director of the Hoang Thach Cement JSC, says if firms stop or reduce production, they would incur even higher losses due to high fixed costs.

In such a situation, many of the newcomers have to sell their products at "competitive" prices that may be lower than their production costs.

Saigon Economic Times said while the prices of feedstock and production costs had doubled or tripled since 2003-04, cement prices were lower than they had then.

Clearly, there has been a failure by the relevant authorities to monitor the import of equipment and technologies for cement manufacture, draft a master plan for the industry, and accurately forecast the growth of the market.

Vietnamese not welcome

The customer may be God, as a Japanese saying points out, but sometimes they turn out to be devils, some homeowners in the Cuu Long (Mekong) Delta say.

Sai Gon Tiep Thi (Sai Gon Marketing) magazine quotes tour guides in Tien Giang Province as saying that many old houses in Cai Be District welcome foreign guests but refuse to entertain Vietnamese tourists.

Phan Van Duc, owner of Ba Duc Ancient House in Dong Hoa Hiep Village, told a tour operator that he would take in local visitors only if they came in tour groups organised by well-known travel agencies.

Duc said both foreign and local guests used to be equally welcome at his house. But then he found that some locals badly damaged the house and his orchard while foreign guests always showed consideration and respect.

"They [local guests] picked even unripe fruits and badly littered the facility," he said.

Others had asked him to serve meat of rare animals like snakes and turtles and paid little heed to the environmental protection.

"During lunch, they always drink and become loud.

"I am afraid that foreign guests may leave my house if they see such behaviour."

Le Thi Chinh, manager of an old house named Ut Kiet, explained: "It is much more difficult for us to serve local guests who always demand specialties."

Director of the HCM City-based Lua Viet Travel Company, Nguyen Van My, says most Vietnamese tourists prefer drunken merrymaking and massage services to absorbing the cultural values of places they visit.

Huynh Thanh Huu, the head of the travel sector at the Tien Giang Department of Culture, Sports and Tourism, hopes the refusal by the old houses to allow local tourists would shock them into changing their behaviour.

Fish dealers can't deliver

Many foreign importers are offering attractive prices for tra catfish and want large quantities, but exporters have to reject their orders because of a shortage of the fish.

Duong Ngoc Minh, general director of the Hung Vuong Seafood Co said many European and US importers came last week looking for big volumes of tra filet.

Minh said that they wanted deliveries in the fourth quarter of this year and the first quarter of next year and offered average prices that were 20 per cent higher than in July.

Just a couple of weeks ago, analysts had predicted exporters would be in trouble in the last few months of the year due to the economic crises in Europe and the US which would force consumers to tighten their belts.

Farmers had immediately called for help as buyers, who supplied fish to seafood processing companies, refused to buy from fish farms, leading to a sharp decline in tra prices.

But tra remains on top of the import list in western countries because it is cheaper than most of other seafoods.

The rising demand for tra products in the European and US markets has caused stiff competition among seafood processors to scramble for the fish.

On August 30 first grade tra sold at VND24,500 per kilogramme on the domestic market, up VND1,500 from the previous fortnight. But even at the higher price, seafood processors find it difficult to source the fish.

The steep rise in fish costs and bank lending interest rates and the fall in tra prices caused losses to farmers and forced many of them to leave their fish ponds idle.

According to feed manufacturers, sales have dropped by 20 to 50 per cent in the past few months even as tra prices dropped from VND28,000-29,000 to VND20,000-21,000. The Viet Nam Association of Seafood Exporters and Producers (VASEP) sounded a warning about a serious shortage of tra from September onwards.

Viet Nam exported nearly 400,000 tonnes of tra in the first eight months for US$1.1 billion, a 4 per cent increase in volume and 25 per cent rise in value year-on-year.

VASEP said with the conditions becoming favourable, exports this year could top $1.5 billion.

INDIA: Cement sales slip in August as realty, infra sectors stumble

Cement sales remained lacklustre in August as hopes of revival in demand from the realty and infrastructure sectors with the monsoon entering its end stage were belied. Left with little scope to pass on the increase in raw material cost to end users, companies had to tighten their production to match the fall in demand.

“The recent hike in the lending rate by most banks had forced many realtors to postpone new projects. On the other hand, home buyers have also turned cautious as there is an uncertainty in the rate hike cycle with inflation well above the RBI's comfort level,” said an analyst.

The consistent fall in cement demand in the last six months was well reflected in the GDP numbers — in the first quarter of this fiscal, the construction sector grew just 1.2 per cent against 7.7 per cent in the same period last year. Cement demand is closely linked to GDP performance.

“Given the high interest rate regime and the slowdown in the global economy, the GDP growth rate might not pick up anytime soon. Corporate investments have also slowed while the fiscal deficit situation is not inspiring any confidence,” said Mr Amar Ambani, Head of Research, IIFL.

RURAL MARKETS

A bountiful monsoon has turned all attention to the rural market for cement companies. The agriculture sector, the mainstay of the rural economy, has been one of the star performers in the overall GDP growth in the first quarter.

Though the rising input costs and the supply glut are major concerns, much of the trouble can be sorted out if the rural demand picks up. But the slowdown in infrastructure spending by the Government remains a cause of concern, said a cement company official.

Cost of power and fuel, a major input for cement, is set to increase by about 18 per cent this fiscal, given the soaring coal prices, said a Crisil Research report. In addition, an increase in effective excise duty rates will lower cement manufacturers' net price realisations by 2-4 per cent.

The magnitude of the demand-supply imbalance and cost escalation will halve the cement industry profit margins to about 10 per cent by FY13 — the lowest level in the past 10 years, said Mr Prasad Koparkar, Head, Industry Research, Crisil Research.

AFRICA: NIGERIA: Dangote Cement’s Nigeria Ibese to Start This Month

Dangote Cement Plc, Africa’s biggest producer of the building material, will start production at its Ibese plant in southwestern Nigeria this month, Chief Executive Officer Devakumar Edwin said.

The company will add an additional production line at its Obajana plant in central Nigeria in the fourth quarter, Edwin said on a conference call from Lagos today.

“By the end of the first quarter of next year, both plants will be operating at 90 percent of capacity,” Edwin said. Obajana will have the capacity to produce an additional 5 million metric tons of cement, or twice its current capacity of 5 million tons, while Ibese has a capacity for 6 million tons, he said.

Dangote Cement is the biggest company by market value on the Nigerian Stock Exchange with a capitalization of 1.61 trillion naira ($10.4 billion). The company expects its total annual production capacity to rise to 50 million tons in the next five years, it said on April 13.

The stock was unchanged at 104 naira by the 2:30 p.m. close in Lagos.

INDIA: Binani Cement: Larger than life

Cement major Binani Cement is looking to expand its horizon, literally. The company has come out with a new television commercial (TVC) to highlight its grand plans and a larger than life image. Starting with the first cement plant in Sirohi, Rajasthan, in 1997, the company, under the Braj Binani Group, has expanded into foreign territories like China, Mauritius, Dubai, Sudan and Africa, and wants an image makeover to portray itself as a global brand. That is precisely what the new TVC tries to achieve.

Continuing with long-term brand ambassador Amitabh Bachchan, the ad emphasises the ‘expanding horizons’ part using mountain peaks, vast oceans and the city skyline as a backdrop. Bachchan’s poetic reflections and a ballad by Kailash Kher complete the ad. “The idea behind the TVC was to establish Binani Cement’s steadily expanding presence across the world without limiting the growth as related to any specific country. The topographies (snowy peaks, ocean and cityscape) have been used to create the feeling of expansion across geographies. The narrative and jingle has established how Binani Cement is bringing the world closer together and set for greater heights,” says Bina Verma, MD of Media Magix, the advertising agency.“Given the competitor landscape, when most cement brands are talking only about strength and other product attributes, Binani Cement chose to create a niche for itself by positioning itself as a brand with global ambitions,” adds Kalpana Binani, spokesperson, Braj Binani Group.

Bachchan has been associated with the brand since 2004. The earlier campaigns highlighted different aspects of the brand, from ‘good housing’ to ‘cultural bonding’. The tag-line “sadiyon ke liye” stands for the quality, durability, strength and resilience of the product.

The Rs 1,06,375 crore (FY 2011) cement market in India is dominated by players such as Ultra Tech, Ambuja Cement, ACC, Jai Prakash Associates, India Cements among a host of national and local brands. So product differentiation through branding is important even for a commodity like cement.

Directed by James Ashburn from Australia, the 45-second TVC does just that. The snow-capped mountains symbolise the brand’s mission to achieve new heights while the next frame highlights the brand’s aspiration to go across the oceans and encompass the globe. “Bachchan’s charismatic aura resembles the brand. It also reflects the quality and enduring spirit of the brand,” says Binani.

The year-long campaign will try to reach out the target audience of 25 plus through radio and TV ads as well as outdoor campaigns. “In the long run, we would like to be reckoned as a brand with true global qualities. On the domestic front, we would like to expand our presence across various markets. The new TVC is in line with our business aspirations,” signs off Binani.

SRI LANKA: Pakistani cement cleared without authorisation

COLOMBO: 

Sri Lanka’s Trade Minister Johnston Fernando has said that the cement stock imported from Pakistan that aroused controversy was released by the Sri Lanka Standards Institution (SLSI) without consulting the Consumer Affairs Authority, Customs Department and distributing agents.

Fernando criticised SLSI for not consulting the authorities concerned before approving the distribution of the cement stock, according to Colombo Page, an online newspaper of Sri Lanka.

He said that the imported cement stock was not released at the request of any party.

Fernando said that the matter had been raised with Science and Technology Minister Pavithra Wanniarachchi because SLSI came under her purview.

He said that local cement companies were creating cement shortages to create an artificial price hike.

CHINA: Cement Makers Lead Losers On Chinese Indices

The Shanghai Composite Index dropped 0.33 percent or 8.22 points to close at 2,470.52 points today on transaction value of 50.14 billion yuan.

The Shenzhen Component Index was down 1.61 percent or 176.47 points to close at 10,778.43 points today on transaction value of 45.63 billion yuan.

Both bourses opened lower as a result of the slump in European markets. The Shenzhen bourse hit a new one-year low, while the Shanghai index is approach the 2,437 points level it reached last month.

The average August CPI growth estimate of 22 chief economists from 22 foreign and domestic financial institutions was 6.1 percent.

CICC maintained its 2011 GDP estimate of 9.2 percent. It lowered its 2012 growth estimate by 0.3 percentage point to 8.4 percent.

Led by Chongqing Brewery (600132, 66.73, -5.508%), Jiugui Liquor (000799, 22.28, -4.827%) and Beijing Yanjing Brewery (000729, 15.67, -3.569%), brewers and spirits makers fell today. 

Cement makers, the biggest losers yesterday, continued their bearish performances. The top losers from this sector today were Anhui Conch Cement (600585, 18.69, -5.223%), Tangshan Jidong Cement (000401, 15.85, -4.518%) and Huaxin Cement (600801, 19.65, -4.146%).

Some of the automobile-related companies fell today. Jiangsu Pacific Precision Forging (300258, 31.44, -9.991%), Hubei Aviation Precision Machinery Technology (002013, 20.25, -6.811%) and Harbin Dongan Auto Engine (600178, 8.66, -5.767%) recorded losses.

Financials posted a mixed performance today as some borkerages posted gains, while others companies fell. Anxin Trust and Investment (600816, 21.19, +1.436%), Sinolink Securities (600109, 21.19, +1.436%) and Shaanxi International Trust (000563, 12.26, +0.905%) outperformed.

Industrial and Commercial Bank of China (601398, 4.07, -0.245%), Bank of China (601988, 2.92, -0.341%) and Bank of Communication (601328, 4.64, -0.429%) traded lower.

Gold companies posted gains. Shandong Gold Mining (600547, 47.89, +0.991%), Zhongjin Gold (600489, 27.53, +0.916%) and Zijin Mining Group (601899, 5.34, +2.692%) rose.

A brokerage estimates that 16.7 billion yuan worth of state-owned assets will be injected into listed companies, with the pace of restructuring to pick up in late 2011. This led to the outperformance of some Shanghai-based companies, such as Shanghai Cimic Tile (002162, 9.79, +10.00%), Shanghai Tianchen (600620, 4.96, +5.53%) and Shanghai Lansheng Corporation (600826, 12.3, +3.97%).