INDIA: Cement firms offer discounts to meet sales target

The sharp rally seen in cement prices, post monsoon, has been arrested. This is being attributed to the discounts offered by top companies to reach sales target.

Prices of the building material touched an all-time high of Rs 280 for a 50-kg bag, in November. However, during this month the average price then declined to Rs 270 a bag.

Cement makers and industry analysts term it a normal phenomenon, and add that by January-end, prices are likely to rise again. According to analysts, the strategy of offering discounts is being adopted to push sales.

“Prices in Kolkata have slipped to Rs 300-310 per bag, from Rs 330 a month before,” said Hrriday Goswami, a stockist. Adding: “This is the month when cement companies, with a January-December accounting period, focus on meeting sales target rather than maintaining prices.

“ACC, Ambuja and Lafarge are selling cement in the wholesale market at Rs 295, while UltraTech is selling at about Rs 10 less than other players,” Goswami added.

The northern and eastern markets have taken a price cut of around Rs 20. In Delhi, cement is available at Rs 250, against Rs 270 a bag last month. In the East, prices are hovering around Rs 300 a bag, compared to Rs 320 in the previous month.

H M Bangur, managing director of north major, Shree Cement, said, “Prices have eased a little by Rs 10-15 per bag and are likely to stabilise in January. But we expect prices would move up from February-March.” A Mumbai-based research head agreed, “I do not think prices would correct further. I understand that by as early as mid-January the prices would rally again.”

Industry officials attributed the downward movement in price, to weak demand due to very cold weather. One of the dealers in Mumbai said, “Though prices in the western region managed to sustain, incremental supply from the northern market has gone up.”

Cement prices in Mumbai, have remained consistent at Rs 276 per bag for wholesale buyers and retail prices have increased to Rs 280-282 per bag. In Gujarat, cement is selling at Rs 255 per 50-kg bag.

In the South, Chennai is feeling the pressure, as prices are expected to come down from the present Rs 290 in the wholesale segment. In Hyderabad, prices remained unchanged at Rs 275-280 per 50-kg bag.

CHINA: Taiwan Cement: Demand in China to Slow in 2012

To implementation of macro-economic control and delayed execution of some infrastructural projects, cement demand in China in the fourth quarter of this year has slowed. Taiwan Cement Corp. predicts China’s demand for cement will grow 7% to 8% in 2012, compared to double-digit growth in the past few years, and annual production capacity in China to total around 2.2 billion tons in 2012. 

The China Cement Association predicts China will churn out 1.88 billion tons of cement in 2012, accounting for 56% of global output, with China’s cement production to reach 2.07 billion tons this year. 

Taiwan Cement said China’s cement sector will see moderate recovery in the second quarter of 2012 after an off-peak season in the first quarter, believing sizable demand growth will be in the third quarter of 2012. 

Despite the expected sagging cement market, Taiwan Cement still believes cement prices to remain stable in the first half of 2012 because several large cement producers will engage in annual repair and maintenance in the first quarter. 

Institutional investors say Taiwan Cement will score 1.12 billion renminbi in after-tax earnings in the first three quarters of this year, with annual earnings to reach 1.4 billion renminbi in 2011. 

Taiwan Cement said it will see annual production capacity reach 60 million tons in China in 2012, and will speed merger and acquisition to raise capacity, targeting to be a top-10 cement producer in China by 2016.

INDIA: Cement demand will pick up by 2014, says Maloo

NAGPUR: Murli Industries, a city-based business group, which recently forayed into cement sectorplans to double the capacity utilization of its plant to 80% by 2012.

The company came up with a 3 million tonne a year plant at Chandrapur in 2010 which is now being run at 40% capacity. A 50 MW power plant has also been set up as a part of the venture.

Company's executive director Murli Maloo was conferred with Emerging Entrepreneur for 2011 award by Power Brands at a function held in London. Power Brands is a private research firm on Indian business brands headed by management guru Arindam Chaudhari. The award was received on Maloo's behalf by a company's representative in London at a function held on December 12.

Talking to TOI after receiving the award, Maloo said that the cement industry was expected to remain sluggish in the country till 2014. However, the western region which includes Maharashtra and Gujarat has scope of growth due to considerable demand-supply gap in the region.

There is a total demand of 20 million tonnes a year in the western region but the production stands at 12 million tonnes. Chandrapur is a major cement cluster with Murli Industries being the only greenfield project here in last 10 years.

"The overall demand is sluggish due to low infrastructure work carried out throughout the country. The situation is expected to improve only after 2014. Another 50 million tonnes capacity is declared to be added in the country's cement sector. The present installed capacity is 200 million tonnes," said Maloo.

The plant at Chandrapur has been set up with an investment of Rs 1,000 crore of which 70% is debt. About the challenges faced by the industry, he said rising interest rates were hitting the margin. Supply of coal, which is the major raw material for the industry, has been a constraint too. Western Coalfields Ltd has not been providing adequate quantity under the linkage system. Linkage is assured coal supply to an industry.

However, linkage itself is fixed at 75% of total requirement and the amount supplied finally is even less at only 25% of the linked quantum, said Maloo. Rest of the requirement is met through e-auction and imported coal which is a costly proposition, he said.

Murli Industries, which started off with a solvent extraction plant in 1992, now has stake in paper business too, with the total turnover standing at Rs 1,000 crore.

AFRICA: Portland Cement severs clinker supply deal with Bamburi

East Africa Portland Cement Company (EAPCC) has severed a multi-million shilling clinker supply contract with Bamburi, its anchor shareholder, ending a four-year deal that had raised questions over potential conflict of interest due to common shareholding and market rivalry of the two listed firms.

The cement maker has signed a new deal for supply of the raw material with rival National Cement, which will see EAPCC save bout Sh270 per tonne. Information on the signing of a new contract with National Cement is contained in EAPCC’s annual statement, and was also confirmed by embattled managing director of the cement firm, Kephar Tande. “We found out that other players were offering lower prices which means we could leverage on lower clinker costs to improve our profitability,” said Mr Tande mid this month.

Although EAPCC is a listed firm, it is still considered a state corporation since majority of its shares are held by the government — making it difficult to import its own clinker due to stringent Public Procurement Oversight Authority’s rules.

EAPCC’s decision to single source the supply of clinker, a key raw material used in the manufacture of cement, from Bamburi raised eyebrows when it was signed in 2007. Bamburi, through its parent company Lafarge, controls 41.7 per cent of EAPCC.

Lafarge also holds a 73 per cent interest in Bamburi Cement and until 2009 held a 15 per cent stake in the country’s other cement maker, Athi River Mining. Cross ownership of the three cement companies has in the past led to accusations of unfair business practices, including collusion in setting prices. EAPC and Bamburi have previously been embroiled in battles over control, with EAPC seeking to cut back on Bamburi’s say on its strategy, especially on the procurement of clinker. Mr Tande said Bamburi’s prices were higher than the average market’s. Last year alone, EAPCC bought clinker worth about Sh256 million from Bamburi.

No formal contract

Officials of Bamburi said that the supply deal with EAPCC was on a need basis, where the clinker would be delivered after payment has been received, claiming that there was no formal contract.

The government controls more than half of EAPCC’s stake, 25 per cent directly and 27.5 per cent through the National Social Security Fund, NSSF.

National Cement imports its clinker but has announced plans to build a clinker plant in Kajiado at a cost of Sh10 billion, to be funded through a syndicated loan from KCB and Standard Chartered.

National Cement MD Raval Narendra said EAPCC was now their biggest client. “We are the biggest clinker importers in the region now because we have established contacts in Europe and the Emirates, we signed a supply contract with EAPCC for 150,000mt for this year,” said Mr Narendra.

EAPCC also plans to set up a clinker plant in Kitui next year after it acquires a limestone-rich parcel of land in the medium term to ensure self-sufficiency. Increased competition has pushed EAPCC, which is estimated to control about 25 per cent of the local market, to seek production efficiency.

PARAGUAY: Al reparar horno, INC gastó G. 2.000 a G. 3.000 millones

Entre 2.000 y 3.000 millones de guaraníes costaron a la Industria Nacional del Cemento (INC) las reparaciones del horno de clínker, los mantenimientos realizados así como los ajustes para su mayor producción, según datos oficiales de la estatal.

De acuerdo con los informes de gerencia industrial, en principio se había previsto gastar aproximadamente 1.500 millones de guaraníes, pero luego vieron que los 2.000 millones fueron fácilmente superados. Incluso, la suma pudo haber llegado a los 3.000 millones de guaraníes, según los datos de INC.

De acuerdo con las explicaciones, esta vez no se realizaron mantenimientos comunes que siempre se realizan al paralizar el horno, sino que también se hicieron ajustes para poder producir mayor cantidad de clínker, que finalmente se traducirá en más ganancia para la empresa.

De hecho, el horno está produciendo su capacidad nominal de 2.000 toneladas por día desde su reinicio, que se realizó el 21 pasado tras 35 días de paro, según lo informado por José Benítez, funcionario de la planta de Vallemí. 

La idea es llegar a la capacidad máxima de 2.200 toneladas por día a partir del lunes, agregó Benítez, ya que se realizaron todos los ajustes correspondientes y, sobre todo, se tiene el fueloíl necesario para asegurar la marcha del horno.

Stock para dos meses

En ese sentido, indicó que a Paraguay ya llegaron 12.500 metros cúbicos de fueloíl para la producción de clínker, de los cuales más de 3.500 metros cúbicos se encuentran en planta y lo demás está siendo trasladado desde el puerto de San Antonio hasta Vallemí, por vía fluvial.

Esta cantidad de fueloíl asegura la producción hasta fines de febrero, apuntó el funcionario de planta, por lo que desde marzo quedará a cargo de Petropar la provisión del combustible.