CHINA: Anhui Conch, Asia Cement link up as pressures rise

Anhui Conch Cement, Asia's largest cement producer, yesterday signed a strategic partnership agreement with Taiwan's Asia Cement to explore overseas markets and share expertise in eco-friendly technologies as the industry begins to feel the bite of Beijing's anti-pollution drive.

Cement prices on the mainland have been rising since September last year, when the central authorities stepped up efforts to close some of the most heavily polluting cement factories even as demand began to pick up with rapid investment in the infrastructure and property sectors.

The State Council said in October it planned to cut 100 million tonnes of outdated cement capacity by the end of next year, driving up the stocks of industry leaders such as Anhui Conch, as investors bet the move would strengthen the bigger players.

"If we find any target that suits our strategies, we will actively seek acquisition opportunities," said Guo Wensan, the chairman of Anhui Conch. "Globally, our priority [of investment] is Southeast Asia."

The firm, which has a domestic capacity of more than 200 million tonnes, is eyeing 10 million tonnes of combined capacity in Vietnam, Indonesia and Myanmar in the next three to five years.

"We don't have much global experience and will learn from Asia Cement," Guo said at a news briefing after the signing ceremony, referring to the latter's global sales networks in other Asian regions as well as America, Africa and the Middle East.

"It's very important to form strategic partnership as pressure from competition and cost rises," said Hsu Shu-tong, the chairman of Asia Cement, which is present in Hubei, Jiangxi and Sichuan provinces and is looking to expand further on the mainland.

The two companies are yet to divulge the details of their planned co-operation. It is understood they will explore opportunities in sharing green technologies, management expertise, market and product expansion and cost control.

They will also tap possibilities for Anhui Conch to enter the Taiwan market and jointly invest in property projects using Anhui Conch's land reserves in over 200 places on the mainland and leverage the department store business of Far Eastern Group, Asia Cement's parent company, said executives from the two companies.

The two firms expect the supply-demand balance in the mainland's cement market will improve this year, with prices and profits rising over last year.

The China Cement Association estimates profits in the industry might have exceeded 80 billion yuan (HK$102.4 billion) last year, while cement output rose 9 per cent to more than 2.4 billion tonnes.

SOUTH AFRICA: ARM cement awaiting directors’ approval for South African plant

ARM Cement Ltd., Kenya’s second-largest maker of the building material, has yet to receive its directors’ approval for a plan to construct a plant in South Africa, Managing Director Pradeep Paunrana said.

“We have not approved any budget or plans at our board yet,” Paunrana said. Mafikeng Cement, in which ARM has a 70 percent stake, plans to build a plant with daily capacity of 3,000 metric tons in the continent’s biggest economy, Nairobi-based Business Daily newspaper reported, citing Paunrana.

Sub-Saharan African nations from Kenya to Nigeria are investing in the construction of ports, railways and power-generation projects that will help accelerate economic growth. ARM is considering selling Eurobonds to help fund a planned $300 million expansion program that will double cement production within four years, Paurana said on Nov. 7. Kenya’s per-capita cement consumption has surged 60 percent to 85.7 kilograms (189 pounds) over the past five years, according to Kestrel Capital East Africa Ltd.

That compares with 300 kilograms in South Africa and 500 kilograms in Egypt, according to ARM. Bamburi Cement Ltd., the Kenyan unit of Lafarge SA, is the nation’s biggest producer of the material. Chairman of Nigerian based Dangote Cement; Aliko Dangote recently announced plans to invest $500 m in Kenya to build a cement plant.

ALGERIA: Chinese Firm To Construct 1.5m Tonne Cement Plant

China Triumph International Engineering Group Co (CTIEC) has secured a deal for the development of a 1.5m tonne annual capacity cement plant in Algeria.

The Chinese firm signed an engineering, procurement and construction (EPC) contract with Myanmar-based STG Engineering and Real Estate Development Company for a 4200 tonnes per day plant.

The plant, which will be situated in the city of Adrar in Algeria, will boost cement production in North Africa and develop a healthy business relationship between both companies, cement-focus review Cemnet revealed.

“In view of CTIEC’s wide business scope and superb business capacity, the two sides will widen and deepen cooperation in other building materials and the housing industry,” Bassa Bakhshi of STG said.

Along with the 1.5m annual capacity, the plant is capable of producing 200,000 tonnes of oil well cement yearly and will mark CTIEC’s debut of oil well cement technology in the North African country.

MAURICE: prix en hausse depuis le début de l'année

À peine la tête sortie de l’eau, le secteur de la construction doit faire face à un nouvel obstacle. Holcim a augmenté le prix de sa pochette de ciment Kolos de 50 kg depuis le 1er janvier. Celle-ci est passée de Rs 184 à Rs 198,72. Une augmentation qui fait suite à celle de Lafarge, l’année dernière.

Ceux qui ont de projets de construction devront mettre la main à la poche. Depuis le 1er janvier 2014, la compagnie Holcim a majoré le prix de la pochette de ciment Kolos, au grand dam de certains constructeurs. Celle de 50 kg est passée de Rs 184 à Rs 198,72.

La pochette Kolos de 25 kgs est passée, elle, de Rs 92 à Rs 99,36. Pour Ecocem, livré parHolcim, il va falloir débourser Rs 193,32 contre Rs 179 pour la pochette de 50 kg. Alors que celle de 25 kgs coûte Rs 93,96 contre Rs 87. 

Pour des opérateurs, cette nouvelle augmentation viendra alourdir les coûts des chantiers individuels. Et «l’augmentation du coût du ciment entraînera celle d’autres produits fabriqués à base de ciment, comme les blocs», prévient Gérard Uckoor, président de l’Association des petits entrepreneurs. Il estime que pour un projet de construction de Rs 3 millions, l’augmentation peut se situer dans les environs de Rs 9 000 sur une consommation de 600 pochettes.

Cette hausse intervient alors qu'en 2013, le prix du ciment avait déjà connu une augmentation. Holcim avait, en effet, revu ses prix à la hausse au début de cette année-là. Et la pochettePortland de 50 kg de Lafarge est livrée à Rs 182 au lieu de Rs 170 à la cimenterie de Fort George depuis février 2013. Depuis la libéralisation du marché local du ciment, le 1er juillet 2011, les Mauriciens sont habitués à des augmentations du prix de ce produit, lancées tour à tour par les deux seuls opérateurs de ce marché.

INDIA: Cement companies may remain on shaky ground in 2014

Analysts expect cement sales growth to improve only marginally to 6.5% next year compared to 4-5% in the current fiscal year

The outlook for cement firms, as with most other industries, hinges upon an economic recovery. Sales in 2014 are expected to remain under pressure on the back of slower government spending as fiscal deficit concerns mount, and a slow recovery in the capital expenditure cycle by private firms. At the same time, higher costs may continue to weigh on the profitability of cement makers in the coming year.

Analysts expect cement sales growth to improve only marginally to 6.5% next year compared to 4-5% in the current fiscal year. What is worrying is that cement demand may not pick up ahead of the general election due in May . Pre-election infrastructure spend may be constrained because the government is walking a tightrope, trying to curb the fiscal deficit to hold off threats of a rating downgrade even while growth is sluggish. Uncertainty about the new government is also making companies defer their investment plans.

Secondly, given the slow recovery and excess capacity in the industry, prices may remain soft in the first half of the next year, say analysts. Average capacity utilization levels are expected to drop from a decadal low of around 70% in FY13 to 68% in FY15 due to capacity additions. All India capacity is expected to rise marginally to around 375 million tonnes (mt) next fiscal year from 350 mt this year, according to Barclays Research. Prices will also remain under check because of new entrants such as ABG Cement, Lafarge Cement, Siddhi Vinayak Cement and Reliance Cement.

The all-India average cement price for FY14 is estimated to remain nearly flat year-on-year versus an estimated increase of 1.5% in the current year. The excess capacity situation is bad enough for brokerages to downgrade their price hike estimates for financial year 2015 to 5.5% compared to 8% earlier.

These factors will weigh on profit margins even as diesel and railway freight costs continue to escalate. Note that operating profit margins for the top ten cement players were the lowest in the last three years in the September quarter.

The shares of cement companies have underperformed the market year to date with stock prices of top ten players down 6-50%. The recent run-up in share prices has made valuations slightly expensive.

Unless demand improves and companies can exhibit pricing power, earnings downgrades will put pressure on stock prices next year.

EUROPE: European Commission rejects Germany’s request to review Holcim, Cemex deal

The European Commission (EC) has rejected a request from Germany to refer the planned acquisition of Cemex West by Holcim to the German competition authority for assessment under national competition law.

The EC concluded that the geographic scope of the affected cement markets is wider than national and that therefore the Commission cannot refer the assessment of the transaction to Germany. The commission has until 31 March 2014 to take a final decision.

In the proposed transaction Holcim intends to acquire part of Cemex’ activities in cement, ready-mix concrete, aggregates and cementitious materials in western Germany and a small number of plants and sites located in France and The Netherlands.

In September 2013, Germany submitted a referral request under Article 9(2)(a) of the EU Merger Regulation. Under the Regulation, the Commission has exclusive jurisdiction to assess mergers above certain turnover thresholds. It allows the Commission to refer all or part of the assessment of a case to a Member State provided that the competitive effects are restricted to purely national or smaller than national markets. 

The German competition authority submitted that the transaction threatened to affect significantly competition in the cement markets in Northern and Western Germany. It contended that those markets present all characteristics of distinct markets within Germany within the meaning of Article 9(2)(a) of the EU Merger Regulation. It therefore requested a full referral of the transaction so as to examine the transaction itself. 

Following an extensive investigation, the commission concluded that the relevant cement markets affected by the transaction are not national or narrower than national in geographic scope but include territories outside of Germany, such as parts of Belgium, The Netherlands and the Northeast of France. "This finding takes into account the existence of substantial cross-border trade of cement and the results of the commission's market investigation regarding the competitive dynamics of the cement sector. As one of the conditions for referral under Article 9 of the Merger Regulation is not met, the commission could not refer the assessment of the transaction to the German competition authority," it said in a statement.

The commission will therefore continue its in-depth investigation into the proposed transaction, opened in October 2013.

GHANA: GPHA awards $2.5bn expansion project

The Ghana Ports & Harbours Authority (GPHA) is expected to award contracts worth $2.5billion through 2018 to double capacity, handle larger ships and reduce waiting time for vessels.

Government has given 18 companies from around the world a deadline of January 27, 2014 to present technical and financial bids for five stages of expansion at Tema and Takoradi ports, Paul Asare Ansah, Head of Marketing and Public Relations at the GPHA noted in an interview on November 18. He declined to name the bidders.

Capacity for twenty-foot equivalent containers at Tema, which handles about 90 percent of the nation’s traffic, will double to 2 million (twenty-foot equivalent units) TEUs a year by 2018, he said. Tema is located 30 kilometers (19 miles) east of Accra, the capital.

Ghana has already awarded contracts valued at about $470 million for the first stage of expansion at Tema and Takoradi, 218 kilometers west of Accra.

About 197 million Euros ($265 million) in financing has come from KBC Groep NV and the agency will seek about $200 million from the $3 billion China Development Bank loan Ghana got in 2011, Ansah said. The agency will determine how it will raise the rest of the funding after it reviews proposals next year, he said.

The extra 745 million cedis ($329 million), which the government will raise from increasing the Value-Added Tax to 15 percent from 12.5 percent, will be used for an infrastructure fund, Finance Minister Seth Terkper said on November 19. Traffic at Tema rose five-fold to 822,131 TEUs last year from 2000, according to data on the agency’s website.

Allowing deeper vessels to enter the port will boost trade revenue by $490 million, according to an African Center for Economic Transformation report. Takoradi Port handles oil exports from the offshore Jubilee field operated by London-based Tullow Oil Plc.

(TLW) output will more than double to 250,000 barrels a day in 2021 from about 102,000 barrels this year, according to the Ghana National Petroleum Corporation (GNPC).

The projects include dredging of channels to allow deeper ships to enter, building a base for oil operations and for the bulk handling of bauxite, manganese and clinker or Portland Cement. Takoradi handled 60,746 TEUs last year, a 48 percent increase from 2003, according to the earliest available data on the authority’s website.

SAUDI ARABIA: Saudi cement sales slowdown set to harden

The negative impact of labor shortages on Saudi Arabia’s cement industry will remain in the short term, NCB Capital, the investment arm of the Kingdom’s biggest bank by assets, warned.

NCB Capital lowered its annual cement sales target for last year to 53 million tons from a previous estimate of 56 million tons.

“We believe this slowdown will continue for the next few months and gradually improve as more legal workers arrive to the Kingdom,” it said in a recent research report.

After a strong start to last year, cement producers struggled after the government in November intensified its expulsion of two million illegal expatriate laborers. With many of those workers forming the backbone of the building industry, the crackdown led to suspension of construction projects and delays in the transportation of cement.

Cement sales in November slipped 15 percent from their level a year earlier, the largest year-on-year decline on record. 

NCB said it expected demand to be kept in check for the next four to six months.

Zamil Al Mugren, chairman of the Saudi committee for national cement companies, said last week sales growth last year would slide to about 3 percent, down from 10 per cent the year before. Sales by the Kingdom’s 15 cement firms dipped by nearly 30 percent after the enforcement of the amnesty in May, Al Mugren was quoted as saying in an Arabic language daily.

The downturn is taking a toll on cement stocks. They were the worst performers on the Saudi Arabian bourse last month, with Yanbu Cement falling by 5.6 percent to SR66.75 and Saudi Cement also dropping by 5.6 percent to SR101.

Levels of inventory have accelerated, rising to a record high of 13 million tons in November. Despite the excess stock, officials have said some of the Kingdom’s 15 cement firms are planning to commission new plants.

But NCB said that longer term, the outlook remained positive. “Over the long-term, outlook remains strong, supported by the increase in construction contract awards,” the report said.

It pointed to a 52 percent year-on-year rise in contract awards for the first nine months of the year to $6.72 billion. Saudi Arabia is building a number of big projects, including a metro in Riyadh and the expansion of King Abdulaziz International Airport in Jeddah.

HONDURAS: Cemento se encarecerá un 3% por nuevo tributo

Dos trancazos en menos de 15 días recibirán los clientes vinculados con la industria de la construcción.

En las próximas horas entrará en vigencia un incremento adicional de 3% a la bolsa de cemento gris producido por la firma Argos (Incehsa), debido a la aplicación de un nuevo tributo aprobado de manera reciente por el Congreso Nacional.

Los consumidores fueron sorprendidos a finales de 2013 y principios de 2014 con la información de que la bolsa de cemento gris puesto en la planta de Comayagua se encareció en 10.51 lempiras. Aunque en una encuesta telefónica realizada por EL HERALDO se constató que en varias ferreterías el precio de venta final de este insumo se ha disparado en más de 11 lempiras.

El nuevo gravamen que está en espera se le denomina contribución especial de 3% sobre ventas netas de bienes y servicios realizadas por personas naturales y jurídicas en el mercado nacional. Esta normativa está incluida en la denominada Ley de Ordenamiento de las Finanzas Públicas, Control de las Exoneraciones y Medidas aprobada el 20 de diciembre de 2013 y que entrará en vigencia en las próximas horas.

En una proyección realizada con base al nuevo precio mínimo y máximo de la bolsa de cemento gris, el nuevo impacto oscilará entre 5.71 y 5.92 lempiras por el cargo de este nuevo tributo, que además se aplica a los demás bienes y servicios, según esta ley.

El alza

En algunas ferreterías aledañas a la capital, según factura, se cotizó el precio unitario de la bolsa de cemento gris a 176.13 lempiras más el 12% de Impuesto sobre Ventas (ISV), se obtuvo un precio final de 197.27 lempiras sin incluir el flete.

En una cotización telefónica realizada por EL HERALDO se constató que el precio de venta anterior era de 159 lempiras más 11 de aumento, se estima un costo de 170, más el 12%, o sea 190.40 lempiras. El costo de insumo depende de la distancia a que se encuentre la ferretería de la planta de la firma colombiana Argos situada en Comayagua, así como de la ubicación de la ferretería hasta donde se encuentra la construcción.

El impacto

El presidente regional de la Cámara Hondureña de la Industria de la Construcción (Chico), Osmín Bautista, expresó que es difícil que el gobierno frene estos incrementos al precio de la bolsa de cemento gris. Es del parecer que se deben buscar opciones para impulsar a esta industria que genera empleo masivo.

Trascendió que en las últimas horas se han realizado reuniones en la Secretaría de Comercio para analizar el impacto de estos aumentos al insumo básico de la construcción, que sufrirá nuevas alzas vía

gravamen.

Alza oficial

En valores nominales, de acuerdo con lo explicado por Darío Mencía, gerente de Ventas de Cemento Argos Honduras, el incremento fue de 0.507 centavos de dólar, equivalente a 10.51 lempiras al tipo de cambio vigente en la subasta electrónica, que es de 20.73 lempiras por dólar. El acuerdo ministerial 784-2011 estableció que el precio en planta para Lafarge-Incehsa era de 142.50 lempiras por bolsa de 42.5 kilogramos. Con el reciente incremento, el precio en planta subió a 153.01 lempiras por bolsa.

KOREA: Korean cement hit by USD19m losses as railroad strike ends

The Korean railroad workers union called an end to its 22 day strike on December 30, leaving the domestic cement industry to count its losses.

The cement industry relies on railway transportation for more than 30% of its transportation needs. The cement companies estimate that their combined loss for the 22 days of strike would be KRW20bn (USD19m), according to a report in the Korea Economic Daily. This was far worse than the strike in 2009 which lasted just eight days.

The Korea Cement Association said its member firms suffered KRW800m to KRW900m of losses each day throughout the strike due to disruptions in transportation for bituminous coal input and cement output.

Asia Cement's plant in Jecheon was forced to scale down its operations from December 14, on the sixth day of the labor stoppage. The Yeongwol plant of Hyundai Cement had to move forward its regular maintenance schedule to be held in January and cease operation at one of its two cement kilns.

ETHIOPIA: North Holdings to build cement factory

An Ethio-American company based in the US, North Holdings Investment Inc., is to build a new cement factory with an outlay of USD 800 million in the Amhara Regional State near Dejen town.

North Holdings Investment Inc president, Temesgen M. Bitew, told The Reporter that his company is planning to build the factory in east Gojam, Dejen wereda, Menda locality. Temesgen said with two production lines the factory will have the capacity to produce 8.4 million tons of cement

The idea of building the cement factory was conceived in 2006. According to Temesgen, the feasibility study was completed. The company is to hire a Danish contractor called FLS that would build the factory, supply and install the machineries.

The cost of the investment is estimated at USD 800 million. Temesgen said the company will secure loan for the project from a London based investment bank. He declined to disclose the name of the bank. 

The project includes the establishment of a cement bag factory, a transport company and a coal manufacturing plant. “We want to transport the cement with a reasonable price. So we will establish a transport company,” Temesgen said.

With the view being energy self sufficient North Holdings plans to build a coal manufacturing plant in Gonder, Chilga locality where a coal deposit is found. According to Temesgen, the total cost of the investment will reach 1.1 billion dollars.

The company has secured a 250 hectares plot of land and hopes to commence work on the project in the New Year. When the whole project is realized fully it will create 15,000 jobs, according to Temesgen. 

The Ministry of Mines granted limestone mining license to North Holdings. Tolosa Shagi, state Minister of Mines, and Temesgen signed the mining agreement on Thursday at the Ministry of Mines. According to the Ministry of Mines the license area covers 24, 513 sq. km plot of land and the mining license will be valid for 20 years. 

North Holdings is a business corporation established by 12 business people in Delware, United States in 2006.

JAPAN: Japanese cement makers to boost shipping capacity

Cement manufacturers in Japan aim to upgrade their fleets to move more of the concrete ingredient throughout the country amid brisk demand from the reviving construction industry.

Starting early next year, three major producers are expected to spend more than 10 billion yen ($94.3 million) combined to acquire new and used vessels. Roughly 70% of cement is moved by sea.

Sumitomo Osaka Cement will spend 6.8 billion yen, first adding a large ship that can carry 8,000 tons in February and then purchasing two 2,000-ton ships and one 5,500-ton ship after April 2015. While the company will decommission three older vessels, all told, its fleet will expand to 20 ships with a combined capacity of 93,000 tons, up from this year's 19 vessels and 82,000 tons.

Ube-Mitsubishi Cement plans to begin sailing three new large ships, each with a capacity of roughly 7,000 tons to 12,000 tons, in February or later. The company is expected to spend about 1.5 billion yen on the additions, two of which will be newly built and the other rented.

Taiheiyo Cement will add three large ships for about 2 billion yen next year or later.

The Japanese cement market had been shrinking since the early 1990s, prompting manufacturers to slim down their fleets. The trend's reversal owes to resurgent construction in large cities, rebuilding after the 2011 earthquake and tsunami, and an anticipated uptick in demand ahead of the 2020 Tokyo Olympics.