NAMIBIA: Durban for Bigger Stake in Ohorongo Cement

The Development Bank of Namibia is set to increase its stake in Ohorongo Cement this month, according to officials working on the new shareholding structure.

Foreign minority shareholders Development Bank of Southern Africa (which owns a 7,3% stake and IDC of South Africa (which owns 20%) are in the process of selling their shares to Namibian institutional investors such as pension funds.

According to sources who preferred to stay anonymous since the official announcement will only be made later this month, Schwenk Zement KG of Germany is the majority shareholder with about 60% stake.

DBN spokesperson, Jerome Mutumba declined to comment when asked if the bank was in the process of increasing its stake of 10% in Ohorongo.

The official announcement is expected to be made on 29 July during the ground-breaking of the composite cement production plant and the inauguration of a training centre at Otavi where the company operations are based.

In its invitation to the event, Ohorongo said a Namibian shareholding structure will be announced.

INDIA: Despite signs of revival, cement demand remains weak

Cement demand continues to remain lacklustre though there are signs of revival in the economy, what with the Reserve Bank of India thrice cutting key bank rates this year.

Many banks, laden with huge loan defaults, have not fully passed on the benefit of lower lending rates to borrowers. This apart, large infrastructure and real estate companies are extremely cautious on fresh investments, given the high debt on their books. However, government spending on infrastructure projects is expected to boost demand from the second half of this fiscal.

Monsoon watch

The industry is keeping watch on the progress of the monsoon, with hopes that better rains could push up demand in rural regions.

The demand in June was better compared to the preceding three months, with increase in spending on infrastructure projects by government. However the housing sector remains sluggish, said a cement dealer.

Amit Kumar Singh, Vice President, Choice Broking said there may be a slight revival in cement demand from the second half of the fiscal, but prices may still be under pressure as companies try to ramp up their capacity utilisation. “The price realisation in the northern States may be better than other regions as fresh capacity addition is lower compared to other places. We expect overall capacity to improve marginally by 72 per cent, compared to 71 per cent last fiscal,” he added.

Except for the southern region, cement prices are under pressure across regions as companies try to increase capacity utilisation by pushing in their produce at the slightest sign of demand revival. The capacity utilisation in the southern States has hovered around 40-45 per cent while it ranges between 70-75 per cent across other States, sources said.

Pick up in June

In June, cement prices rose in a few markets due to seasonal uptick in demand from infrastructure projects before the monsoon and supply discipline adhered by companies, said J Radhakrishnan, research analyst at IIFL Capital.

However, he added, the overall recovery in prices was muted compared with the increase in last few years in June as the monsoon was better so far this year.

CHINA: Cement firms in China's Hubei likely to pay millions to meet carbon obligations

Cement companies, including Huaxin, covered by the carbon market in China's Hubei province will likely be forced to spend millions of yuan on permits before Friday's compliance deadline after authorities rejected their pleas for leniency.

Last month, the firms asked regulators to let them borrow some permits from next year's quota, saying they could not afford to buy permits to cover their obligations for 2014. But their requests were rejected, easing market concerns that big emitters would be let off the hook.

Huaxin Cement, Hubei's biggest cement producer, has been under particular pressure to buy over the last few trading days as it has a shortfall of 1.15 million permits.

"Local officials have talked through the consequences of non-compliance with cement factories, so Huaxin approved a 40 million yuan ($6.44 million) budget to pay for permits," said a trader with direct knowledge of the matter, who did not want to be named as he was not authorised to speak to media.

Huaxin declined to comment.

Trading volumes on the Hubei carbon exchange have surged ahead of the deadline, in the absence of any indication the compliance date, initially set for May 31, may be pushed back for a second time.

The market closed on Thursday with prices at 24.39 yuan ($3.93), up from the launch price of 21 yuan. It has been hovering at around 25 yuan for the past week.

Daily trading volumes have averaged 385,000 this month, nearly 15 times more than in June.

However, as of Thursday, 44 companies, or 32 percent of the total 138 firms, did not have enough permits to cover their obligations, brokers said. Of these, 26 were cement producers.

A manager with Gezhouba Cement Group, Hubei's No.2 cement producer, said its permit allocation had been miscalculated.

Firms covered by the Hubei exchange are only obliged to buy a maximum of 200,000 permits, regardless of how much they overshot their cap. But Gezhouba has eight subsidiaries in the scheme, bringing its total permit demand to more than a million.

"The scheme is punishing big producers but not inefficient competitors," the manager said. "We pleaded with the government to re-issue permits and narrow the gap, but we have not got any reply. How can we spend tens of millions on carbon?"

The most active carbon market in China, the Hubei Emissions Exchange, has traded nearly 17 million permits since its launch in April 2014, representing 55 percent of the nationwide volume. But most was conducted by a small number of trading companies, with compliance buyers moving in only as the deadline loomed.

But shrinking industrial output has undermined the prospect of any larger price hike. "Many institutional investors bought at 21 or 26 yuan, hoping it would go above 30 yuan in anticipation of a bull run ahead the deadline," a broker said.

KENYA: SGR Contractor Denies Importing Cement

Standard gauge rail contractor, China Road and Bridge Corporation has defended itself over accusation of bypassing local cement producers in favour of imports in the construction of the railway.

In a statement seen by nation.co.ke, China Road and Bridge Corporation (CRBC) the firm has been procuring cement from local producers since construction of temporary facilities of the SGR began last year.

This followed the signing of purchase agreements with major cement manufacturers last year for supplies throughout the construction phase of the Standard Gauge Railway (SGR).

The firm said it has to date bought about 150,000 tonnes of cement from the local manufacturers including Bamburi Cement, East African Portland Cement, Athi River Mining Cement and Savanah Cement and it anticipates the volumes of cement consumed increase substantially in the coming months.

According to CRBC manager for external relations and cooperation, Julius Li, it is cheaper to buy materials locally as opposed to importing the same due to inflation of costs associated with logistical procedures.

"We have a principle where we first source for materials from the Kenyan market and only resort to international market when these are not available locally," Mr Li said.

PHILIPPINES: San Miguel spending $800M to put up 2 cement plants

Conglomerate San Miguel Corp. is investing around $800 million to build two new cement manufacturing plants, preparing to meet an expected surge in demand from big-ticket infrastructure and private construction activities in the years ahead.

One of the plants will rise at cement affiliate Northern Cement Corp.’s existing facility in Pangasinan and the other in Quezon province, SMC president Ramon S. Ang said Thursday after the stockholders’ meeting of SMC’s parent firm Top Frontier Investment Holdings Inc.

Each of the plant will have an annual production capacity of 2 million tons and cost $400 million each, Ang said. The first plant will be completed by June 2017 and the other by end-2017.

About 50 percent of the project will be funded by equity and 50 percent by loan, Ang said. As such, around $400 million will be raised from borrowings for the cement plants, he said. Ang denied reports that SMC was raising $400 million through a seven-year loan facility for the construction of a new 300-megawatt coal-fired plant in Bataan. He said the project financing for this project had already been completed.

Coincidentally, he said SMC was planning to borrow $400 million not for power plant projects but for the cement business.

It was earlier reported that SMC had invested in Northern Cement, a company owned by its chair Eduardo “Danding” Cojuangco, in 2013.

The entry into the cement business is seen in line with the company’s large infrastructure projects. Ongoing projects include the Tarlac-Pangasinan-La Union Toll Expressway (TPLEx), the Boracay airport rehabilitation, Metro Railway Transit-7, Naia Expressway and the Skyway Stage 3 which will connect the South and Northern Luzon Expressways.

At present, the group is already operating South Luzon Expressway, Skyway 1 and 2 and Southern Tagalog Arterial Road (STAR) tollways.