SOUTH KOREA: Bank run at Tongyang Securities cools since crisis

Fund withdrawals by Tongyang Securities Inc. customers have declined sharply since the immediate aftermath of its parent firm Tong Yang Group's default in September, amid a move underway to sell the brokerage arm, data showed Thursday.

The outstanding amount of deposits at Tongyang Securities stood at 2.3 trillion won (US$2.17 billion) at the end of November, equivalent to only 60 percent of the total it held in late September, according to the data by the Korea Investors Service Inc. (KIS).

Tongyang Securities is an affiliate of Tong Yang Group, South Korea's 38th-largest family-owned conglomerate currently undergoing debt restructuring after it failed to repay maturing debts.

The conglomerate, which originally started off as a cement manufacturer, filed for court receivership for five of its units in September, prompting a bank run by investors.

In October alone, Tongyang Securities customers pulled out a total of 1.46 trillion worth of funds, but the pace of withdrawals sharply slowed to 42.2 billion won in November, the data showed.

"The liquidity risk has certainly eased last month compared with September and October, but (the firm) is facing a massive amount of redemption payments in regards to the suits filed against it," said Ha Tae-kyung, a KIS researcher.

Tongyang Securities is estimated to have sold short-term debts tied to Tong Yang assets worth about 1.57 trillion won to individual investors, KIS data showed.

KIS projected the brokerage firm may need between 160 billion won and 630 billion won as redemption funds.

The Financial Supervisory Service (FSS), the financial watchdog investigating Tongyang Securities on suspected fraudulent sales of such debt instruments, said it has found evidence to prove the firm's negligence and intentional omissions in explaining potential risks to investors.

"We'll have the executives submit their explanations, but there were clearly cases of wrongful sales," Lee Dong-yeop, an FSS director in charge of the probe, told reporters at a briefing.

The FSS plans to finalize the investigation within the first half of next year, at which point the regulator will also have concluded the amount of compensation for the investors, he added.

Tongyang Securities, a mid-sized brokerage house with 15 trillion won in assets, has recently received court approval to find a buyer.

Among the possible bidders are KB Financial Group Inc., the second-largest banking firm in Korea, and Yuanta Securities Co. of Taiwan.

SOUTH KOREA: South Korean private equity fund Hahn & Co to pay $283M for Hanjin Shipping's bulk shipping unit

Hahn & Co will be paying $283 million or KRW 300 billion to acquire a stake in the bulk shipping company of Hanjin Shipping Co, Bloomberg reported. Hahn & Co is a private equity fund based in South Korea while Hanjin Shipping is the biggest sea cargo carrier in South Korea. The report said the stake sale is part of the carrier's plan to raise funds and reduce debt.

In an emailed statement to Bloomberg, Hanjin Shipping said the private equity firm will hold a 76% stake in the bulk carrier business while the rest of the stake will be owned by the Seoul-based cargo liner.

PAKISTAN: Cement sellers irked by ‘artificial’ supply shortage’

Cement retailers have complained that companies in Karachi are creating an artificial supply shortage that will result in a significant increase in prices in the coming weeks.

Contrary to these reports, cement companies deny any shortage in the country as there has been no significant change in supplies or sales, especially in Karachi.

However, a retailer said that the companies are restricting their sales for a week. “Cement companies, especially renowned brands, in Karachi are restricting their sales to retailers since last week,” a cement retailer told The Express Tribune, “This has led to shortages, which can increase the cement prices in the coming weeks.”

All Pakistan Cement Manufacturers Association (APCMA) Chairman Muhammad Ali Tabba, commenting on the reports, said there is no cement shortage anywhere in the country especially in Karachi where a large number of cement producers are functioning.

APCMA is a group of over one-and-a-half dozen cement producers that have often been accused of working as a cartel in the country.

Cement producers say that, an increase in cement prices is inevitable as they have to pass the burden of increased electricity rates onto their consumers. “Cement companies will have to pass on the price increase they have witnessed with the high rates of power and transportation,” added Tabba.

Company officials say cement prices will hover between Rs510-Rs520 per 50-kg bag depending on the cement brands.

When the government raised power rates for the industrial sectors in August, cement producers’ retaliated by stating they will gradually increase cement prices in coordination with high cement demand or sales.

Cement prices are on the rise but this time the trend of price increase is different. Average cement prices in the domestic market is surging constantly but, unlike preceding years, the magnitude of the price increase is not noticeably high.

For instance, cement prices on September 21, 2013 were Rs501 per 50-kg bag, Rs502 on October 24, Rs507 on November 7 and Rs512 on November 28, according to the data compiled by Pakistan Bureau of Statistics (PBS).

Summit Capital analyst Sarfraz Abbasi said, “Cement companies are increasing prices in the range of Rs2 to Rs5 per 50-kg bag a month unlike previous increases of Rs10-Rs15 at a given time.”

According to Abbasi, the average cement prices have been around Rs503 per bag in the first five months of the fiscal year 2014 against per bag price of Rs452 in the corresponding time period of the previous fiscal year showing an increase of 11% year on year.

“The unprecedented hike in the electricity tariff, rising fuel costs and freight rates have impacted the profitability of the cement companies and, thus cement prices will keep surging till the cement price per bag reaches to Rs520-Rs530 per bag,” said Abbasi.

PHILIPPINES: Lafarge acquires Harbour Centre lot

Following a meeting, Lafarge said its board of directors “authorized the purchase of land situated at the Manila Harbour Center as well as the cement silo, packhouse and other improvements situated on the land.”

“The purchase will give the company full control of the facility, which is currently using under lease agreement,” it added.

Lafarge also said the strategic location of the facility allows the company to easily dispatch its products, giving Metro Manila customers a more accessible pick-up point for cement purchases.

The cement maker is enjoying brisk demand on the back of private and government-led construction boom.

In January to September, Lafarge’s net income attributable to equity holders of the parent firm surged 53 percent to P3 billion from P1.95 billion. Its net sales jumped by a fifth to P17.85 billion from P14.64 billion a year ago due to higher volumes and improvement in the selling price.

Last May, the company’s board of directors approved an investment for a new mill at the Teresa plant that will produce 850,000 metric tons (MT) per year starting 2015.

For the first time, nationwide demand exceeded 16 million MT at 18.4 million MT last year, up 18 percent from 2011 due to a huge infrastructure backlog in the country.

The company has five cement plants, of which four are in Luzon, that produce a total of 7.7 million MT of cement per year.

Lafarge, formerly Republic Cement, was incorporated in 1955 to primarily engage in the manufacture, development and sale of cement, marble and all other kinds and classes of building materials.

MOROCCO: Cement sales up 29.7%

Cement sales in Morocco increased by 29.7 per cent in November 2013 compared to November 2012. However, on a year-to-date basis, sales continue to decline by 6.52 per cent. 

The fall in cement consumption has been attributed to several factors. The National Federation of Developers points out that the major factor impacting the sector is the lack of liquidity due to the banking crisis. The continued weakness in real estate demand and the slowdown in public works have affected the demand for cement in the country. Public works have been affected by a MAD15bn (US$1.8bn) cut in the government’s capital budget. 

In addition, following tight licensing in self-construction, there has been less building in this segment

Furthermore, since January 2013, taxes on sand and rebars as well as an increase in taxes on cement dating from the Finance Act 2012 have led to a slowdown in cement demand. As a result, the market is not expected to pick up in December 2013. 

When broken down by region Guelmim-Es-Smara recorded the largest decline in cement sales. During the Jan-Nov period, they fell 42.9 per cent from 250,343t to 143,021t YoY. Greater Casablanca, Morocco’s largest market saw a 9.8 per cent contraction to 1,987,000t over the period. At the other end of the spectrum, Doukkala-Abda noted a market expansion of 10.9 per cent to 981,133t.

INDONESIA: Bosowa Breaks Ground at New Project in Barru Amid Ongoing Expansion

Makassar-based conglomerate Bosowa Corporation on Thursday held a ground-breaking ceremony for a Rp 700-billion ($57.4-million) project to build a cement packing plant and some supporting facilities in Barru, South Sulawesi, the company said in a statement.

The ceremony was attended by Hatta Rajasa, coordinating minister for the economy, Bosowa founder Aksa Mahmud and chief executive Erwin Aksa.

Senior government officials for Barru and South Sulawesi were also present at the proceedings.

Erwin said the project would include a cement packing plant, a port and jetty as well as silos and warehouses.

“These facilities will serve as a hub to avoid queuing for ships that load or unload cement as well as producing clinker for exports. The clinker we produce will also distributed to milling plants in Bosowa and other islands in Indonesia,” said Erwin, Aksa’s eldest son.

The facilities in Barru — situated 107 kilometers from Makassar and 60 km from Maros, where Bosowa operates an integrated cement plant — there will be able to store up to 20,000 tons of cement and clinker, a raw material in cement making.

There will also be warehouses to store additives in for the cement making process such as gypsum and iron ore. The storage will also be able to accommodate coal.

Bosowa — whose businesses now cover 10 different sectors including automotive, cement, energy, property, logistics, infrastructure and finance — has aggressively boosted the scale of its cement business, its main revenue contributor.

On Saturday, it celebrated the commissioning of the second cement mill in Maros, which added 1.8 million tons per year to the group’s cement production capacity.

Bosowa owns Semen Bosowa Maros, which can now produce up to 4 million tons of cement from its two mills and an integrated cement facility, also in Maros.

Also on Saturday, Bosowa celebrated the commissioning of a plant to boost clinker production at its Maros facilities to 7,200 tons per day from 5,500.

The conglomerate spent Rp 1.1 trillion to boost cement and clinker production capacities in Maros.

Bosowa owns another cement-making unit, Semen Bosowa Indonesia, which operates a cement plant in Batam, Riau Islands Province.

Combined, Bosowa can now produce up to 5.3 million tons of cement per year.

Bosowa is currently building cement plants in other parts of Indonesia, including in Banyuwangi on the eastern tip of Java, and Cilegon in Banten.

BRASIL: CRECIMIENTO DE LAS VENTAS DE CEMENTO 2013

Las ventas de cemento en Brasil muestran crecimiento en lo que va del año, lo que es una señal de que la actividad de construcción puede estar repuntando en el país.

Las ventas en octubre alcanzaron las 6,5 millones de toneladas, lo que representa un 4,7% más que en el mismo mes del año 2012.

Las regiones Centro-oeste, Noreste y Sur fueron las que más compraron cemento, con alzas superiores a los 8% cada una en relación al octubre pasado.

El número acumulado del año muestra crecimiento en las ventas de un 2,4%, lo que significa ventas hasta el momento de 58,9 millones de toneladas.

KENYA: Kenyan cement firm takes on Nigerian giant

ARM Cement is set to build Kenya’s biggest plant in Kitui County, setting it up for a fight with Africa’s richest man Aliko Dangote who plans to open a $400 million plant in Kenya.

The Nairobi bourse-listed firm will raise up to $300 million to fund new plants including the planned unit in Kitui that will produce 8,000 tonnes of cement per day. This will make it the single largest cement factory in the country and places the unit ahead of the planned Dangote plant that will have a daily capacity of about 5,500 tonnes.

“We plan to start construction of the Kitui plant late next year. It is a major development for us,” Pradeep Paunrana, ARM’s chief executive told the Business Daily in an interview.

This will re-open the fight for Kitui mines, which three years ago locked Bamburi Cement and ARM in a court battle for control of a 180-square kilometre piece of land endowed with limestone.

The East Africa Portland Cement Company (EAPCC) has also directed its management to strike a deal with Kitui County to secure key raw materials to counter Dangote and local rivals.

“It was agreed that the board would take urgent steps to get in touch with the Kitui County officials and ensure that the raw materials reserves are secured and purchased by EAPCC,” said Portland’s board minutes seen by the Business Daily.

Kenya produced 4.7 million tonnes of cement last year, up from 2.8 tonnes in 2008, according to the Kenya National Bureau of Statistics.

Players expect double digit growth in coming years on the ongoing construction boom.

These are the numbers that have caught the eye of Dangote Cement and new entrants National Cement and Mombasa Cement as well as the established players who have announced expansion plans, deepening competition.

As a result, management of production costs is dominating the cement makers’ strategy sessions in an environment where prices have remained unchanged over the past two years. This is expected to turn Kitui into a battleground due to its huge limestone deposits and proximity to the Mui basin, which has large coal reserves.

The manufacture of cement involves mixing of clinker, a key raw material, and limestone or coral rock mainly from the Coast, with pozzolana, an ash-based product mainly found in the Rift Valley.

Most cement firms are also turning to coal to power their machines as opposed to expensive oil fuel, which is prone to price volatility. Kenya imports the bulk of its coal from South Africa.

Mr Paunrana say the firm will raise up to Ksh25.5 billion to fund the Kitui plant and other planned factories over the next five years.

The fund raising will be done through a mix of bank loans, corporate bonds and rights issues, said Mr Paunrana, adding that the cement maker’s board is yet to arrive at the share of debt and equity.

BENIN: Benin Nocibe mill produces first batch of cement

The Benin Nocibe works, a project led by Groupe Layousse of Ciments du Sahel and contracted to Sinoma International (Tianjin), has produced its first batch of qualified cement from mill No 1.

Installation of steel structure was started in April, followed by mechanical equipment in June and electrical equipment in August. The project was commissioned in October. In less than half a year, the project team overcame all difficulties and completed installation and commissioning works smoothly in preparation for the first batch of cement on 23 November 2013.

Following performance tests of cement mill No 1, the commissioning of mill No 2 will commence. On-site work will also focus on the installation of a clinker production line.

Benin president, Boni Yayi visited the plant in Onigbolo at the start of this month, stating that the Nocibe plant will play an active role in Benin's cement market and economic development.