Displaying items by tag: Vietnam
Vicem and FLSmidth target sustainable cement production
10 February 2020Vietnam: The Vietnam National Cement Corporation (Vicem) and Denmark-based supplier FLSmidth have announced a cooperation agreement with the aim of radically reducing the greenhouse gas emissions from cement production and improving air quality. The cooperation will consist of Vicem implementing solutions pioneered by FLSmidth. FLSmidth said that a key focus of the cooperation will be Vicat’s use of ‘municipal and other waste streams as alternative fuel sources,’ with the aim of achieving 100% substitution using FLSmidth solutions, in accordance with FLSmidth’s ambition ‘to enable cement companies to operate with zero emissions by 2030.’
A reordered South African cement industry?
05 February 2020There have been rumours in the press this week that LafargeHolcim is weighing up its options in South Africa. Reports in the local press allege that the building materials company has tasked Credit Suisse Group with finding a buyer for its business. This may or may not be true, only time will tell, but South Africa certainly feels like a market where LafargeHolcim should be considering its future.
As a prominent but smaller producer in the country, Lafarge South Africa is behind PPC and AfriSam in terms of clinker production capacity. InterCement’s subsidiary Natal Portland Cement and Dangote’s subsidiary Sephaku Cement have a similar production base with an integrated plant each and one or two grinding plants. Halfway through 2019 LafargeHolcim was describing market conditions as ‘difficult’ in the country with it being the sole Sub-Saharan market holding back regional growth for the group. By the third quarter the situation had reportedly improved but net sales and cement sales volumes were flat for the year to date. A clearer picture should emerge when LafargeHolcim publishes its fourth quarter results at the end of February 2020.
PPC provided its view of the market in its half-year results to 30 September 2019. Its estimate was that the South African cement industry declined by 10 - 15% for the period, creating a competitive environment. It added that the situation had been, ‘exacerbated by imports and blender activity.’ Both its revenue and earnings fell year-on-year, although a 30% rise in fuel costs didn’t help either. Sephaku Cement suffered a similar time of it, with a 19% fall in cement sales volumes during the first half, although it reported improvement in the subsequent quarter. Overall, it blamed falling infrastructure investment for pressurising the market and allowing blending activity to mount. Sephaku Cement was also wary of the local carbon tax that started in June 2019 warning of a potential US$2.8m/yr bill.
PPC noted that cement imports had risen by 5% to 0.85Mt in the year to August 2019. This followed a lobbying effort by The Concrete Institute (TCI) in mid-2019 to implore the International Trade Administration Commission (ITAC) to look into rising imports levels. At the time the TCI’s managing director Brian Perrie expressed incomprehension that a country with six different cement production companies with an over-capacity rate of 30% could be facing this problem. This latest broadside tails South Africa’s previous attempt to fend off imports when it instituted anti-dumping duties of 17 – 70% against importers from Pakistan in 2015. Imports duly fell in 2016 but rose again in 2017 and 2018, mainly from Vietnam and China.
All of this sounds familiar following LafargeHolcim’s departure from the ‘hyper-competitive’ South-East Asian countries in 2019. Those countries also suffered from competition and raging imports. Bloomberg pointed out in a report on the local industry in 2016 that PPC’s, AfriSam’s and LafargeHolcim’s kilns had an average age of 32 years, suggesting that efficiency and maintenance were going to be concerns in the future. Also of note is LargeHolcim’s decision to move its South African operations from one subsidiary, Lafarge Africa, to another, Caricement, in mid-2019.
Some level of market consolidation would certainly help local overcapacity. Plus, surely, LafargeHolcim’s mix of inland integrated capacity and a grinding plant near the coast could prove enticing to some of the Asian companies pumping out all of those imports. The thought on the minds of potential buyers everywhere must be, if LafargeHolcim chief Jan Jenisch was bold enough to sell up in South-East Asia, how can he not in South Africa?!”
SCG sales fall 5% in Vietnam
04 February 2020Vietnam: Thailand-based Siam Cement Group (SCG) said its revenue from sales in Vietnam dropped by US$64.7m in 2019, a fall of 5.8% year-on-year to US$1.27bn. The figure accounted for 9.0% of SCG’s total revenue of US$14.1bn for the year. In the fourth quarter of 2019, SCG earned US$319m in revenue in the Vietnamese market, a fall of 11% year-on-year, appearing to indicate acceleration in the rate of decline. A possible contributing factor to the lower sales is Vietnam’s huge cement overcapacity, although SCG operates across a wide range of other sectors in addition to cement production.
Vietnam’s bloated cement sector reliant on exports
22 January 2020Vietnam: Maintaining exports will be critical for the Vietnamese cement industry amid rising production output and anticipated sluggish domestic sales in 2020, according to Nguyễn Quang Cung, President of the Vietnam Cement Association (VCA).
Cung also reported that two new cement plants will go into operation during 2020: a 2.5Mt/yr plant in Tân Thắng Commune in the central province of Nghệ, and a 4.6Mt/yr plant in Bỉm Sơn Commune, Thanh Hóa. These new facilities will give the domestic cement industry a total production capacity of more than 100Mt/yr, with local demand estimated to be closer to 70Mt/yr. “Maintaining exports will be critical for the cement industry this year,” said Cung, but domestic projects are likely to remain ‘sluggish’ due to stagnant infrastructure projects.
Over the medium term, Cung said that cement exports would fall to 25Mt in 2021 form 34Mt in 2020, based on an expectation that domestic sales will increase.
Vietnam produces 96.5Mt of cement in 2019
02 January 2020Vietnam: Vietnamese cement producers increased their output of cement by 7.9% year-on-year to 96.5Mt in 2019. Volumes in December 2019 were 8.7Mt – up by 12% from 7.8Mt in December 2018, when the country produced 90.2Mt throughout the year. Vietnam News Brief Service has reported that in 2019, 34Mt of cement and clinker was exported from Vietnam – up by 6.3% year-on-year from 32.0Mt in 2018 – with a total value of US$1.39bn – up by 11% from US$1.25bn.
New Tan Thang Cement plant to open in 2020
18 December 2019Vietnam: Tan Thang Cement has announced that it will commission its 2.0Mt integrated Nghe An cement plant in 2020. Its total investment in the plant, which is installed with equipment from Bedeschi, Lilama and Vinaconex, is US$211m.
Viêt Nam News has reported that this will help raise the total number of Vietnamese cement production lines to 86 in 2020, with a combined installed capacity of 106Mt/yr.
Vietnam’s November cement production rises by 9.6% year-on-year
02 December 2019Vietnam: The General Statistics Office has reported an estimated 9.6% year-on-year rise in cement production in November 2019 to 8.7Mt from 7.9Mt in November 2018. Vietnam News Brief Service has reported that, if December delivers on the previous month’s volumes, this would yield a production total for 2019 of 96.6Mt, up by 7.1% from 87.9Mt in 2018.
Update on Indonesia in 2019
06 November 2019Semen Indonesia’s third quarter results this week give us a reason to look at one of the world’s largest cement producing countries, Indonesia. As the local market leader, Semen Indonesia’s financial results have been positive so far in 2019 following its acquisition of Holcim Indonesia at the start of the year. Analysts at Fitch noted that gross margins for Semen Indonesia and its rival Indocement grew in the first half of 2019 as coal prices fell and cement sales prices rose.
Sales volumes, however tell a story of local production overcapacity and a move to exports. Domestic sales volumes fell by 2.05% year-on-year to 48.8Mt in the first nine months of 2019. Cement and clinker exports nearly compensated for this by rising by 15.4% to 4.8Mt. This is brisk growth but slower than the explosion of exports in 2018. Semen Indonesia’s local sales from its company before the acquisition fell faster than the national rate at 4.9% to 18.7Mt. The new sales from Solusi Bangun, the new name for Holcim Indonesia, partially alleviated this. It’s been a similar story for HeidelbergCement’s Indocement. Its sales revenue and income have risen so far in 2019. At the mid-year mark its sales volumes fell by 2.3% year-on-year to 29.4Mt.
Graph 1: Indonesian cement sales, January – September 2019. Source: Semen Indonesia.
Geographically, Indonesia Cement Association (ASI) data shows that over half of the country’s sales volumes (56%) were in Java in the first half of 2018. This was followed by Sumatra (22%), Sulawesi (8%), Kalimantan (also known as Indonesian Borneo, 6%), Bali-Nusa Tenggara (6%) and Maluku-Papua (2%). By cement type the market is dominated by bagged cement sales. It constituted 74% of sales in September 2019. The main producers have been keen to point out growth in bulk sales as its share has increased over the last decade.
Graph 2: Indonesian cement sales by type, 2010 – 2019. Source: Semen Indonesia/Indonesia Cement Association.
Previously the main story from the Indonesian market has been one of overcapacity and this has continued. It had a utilisation rate of 70% in 2018 from production volumes of 75.1Mt and a capacity of 110Mt, according to ASI data. This was likely to have been a major consideration in LafargeHolcim’s decision to leave the country and South-East Asia (see GCW379) with no end in sight to the situation in the short to medium term. At the end of 2018 it felt like consolidation was in progress following this sale and the reported sale of Semen Panasia. So far though this has been all and perhaps the upturn in the second quarter might buy the producers more time.
As mentioned at the start, another aspect of the Indonesian market deserving comment is that it is one of the first countries with a large cement sector where a Chinese company has made a significant entry. Conch Cement Indonesia, a subsidiary of China’s Anhui Conch, became the third largest producer following the acquisition of Holcim Indonesia. Semen Indonesia and Indocement control 70% of local installed capacity across both integrated and grinding plants with 51Mt/yr and 25.5Mt/yr respectively.
Conch Cement Indonesia is the next biggest with 8.7Mt from three integrated plants and a grinding unit. It’s in a tranche of three smaller producers locally, along with Semen Merah Putih and Semen Bosowa. Fitch also picked up on this in a research report on the cement sector published in August 2019. It pointed out that, although Holcim Indonesia and Indocement had gained pricing power through their leading market share, this is being eroded by local producers owned by Chinese companies.
Depending on how you look at it, Indonesia has the ‘fortune’ to be only the second largest producer in South-East Asia, after Vietnam. China, the world’s largest producer, is not too far away either. As can be seen above this can be a mixed blessing for local producers as the market changes. Overcapacity abounds, a major multinational has moved out, a local firm has consolidated the market as a result and Chinese influence grows steadily. Indonesia could well be an example of things to come for other markets.
Vietnam: SCG Cement – Building Materials Vietnam and Ho Chi Minh City University of Technology have signed a memorandum of understanding for a three-year collaboration on innovation including research, development and human development. The agreement follows work between the two organisations over the last year, according to The Vietnam Investment Review newspaper. They will now form a collaborative expert group to carry out research projects in line with the needs of SCG, to improve product quality, increase labour productivity and accelerate the application of new technologies in production and construction.
South Africa imports 293% more cement year-on-year in July
24 September 2019South Africa: South Africa imported 0.1Mt of cement in July 2019, 293% more than in July 2018. The Algeria Press Service has reported the value of July 2019’s imports as US$4.85m. This represents a decrease from the June 2019 figure of US$6.73 of 28%. Vietnam continues to be the main contributor to the June and Julyimport figures, with Pakistan notably absent in both months. In the record seven months to 31 July 2019, South Africa imported 0.6Mt of cement at a total cost of US$29.6m.
Njobo Lekula, managing director of PPC, has stated that cement prices are ‘critically’ low for domestic producers, whose 18Mt/yr capacity faces a domestic demand of 13Mt/yr. In August 2019, South Africa’s major cement producers applied to South Africa’s International Trade Administration Commission (ITAC) for a tightening of cement standards, which may take the form of a blanket tariff on imports.