Displaying items by tag: Myanmar
A couple of news stories this week from Myanmar present an opportunity to look at the country. Lafarge has opened a cement repacking plant in the Thilawa special economic zone (SEZ). Upcountry meanwhile, Anhui Conch has had a joint venture approved by the government for an upgrade to an existing cement plant in Kyaukse.
Towards the end of 2013 the government announced that 13 companies were to establish joint ventures with the local state-owned cement plants. In addition the Myanmar Investment Commission had approved the construction of nine new cement plants with an aim of a target cement production capacity of 10.53Mt/yr. Following this, Siam Cement Group's on-going investment in a 1.8Mt/yr plant is due for completion in 2016. Semen Indonesia have been pushing for a joint venture since mid-2014 although it was still trying to agree terms in September 2014, according to local media. Italcementi's chief executive Carlo Pesenti also expressed his company's interest in setting up a joint venture in early 2014.
Association of Southeast Asian Nations (ASEAN) investment bank CIMB placed cement demand in Myanmar at 4Mt in 2012 and a local cement production capacity of 3Mt/yr. Cement consumption was placed at 76kg/capita for the country's population of 52.8 million. In contrast, Thai cement engineering supplier LV Technology reported demand of 6Mt in 2012. CIMB recorded Myanmar's capacity utilisation rate at 60%. Cement sales were broken down as 95% by bag and 5% by bulk.
This kind of supply-demand gap excites foreign investors. Neighbouring Thailand has a consumption of 515kg/capita, Myanmar imports cement from Thailand, Indonesia and India and the country's GDP growth rate is currently estimated to be around 8%.
Yet what's notable about Myanmar's industry are the high number of small, low production capacity cement plants. Many of them are wet process plants. Only one plant is reported as being capable of producing over 0.5Mt/yr with the Siam Cement plant project due to significantly bust this record when it is commissioned in 2016. Limited limestone deposits in the country may also make plants larger than 1.5Mt/yr unviable. Fuel is also an issue, with LV Technology advocating a wholesale industry conversion from state-subsidised gas to coal due to power shortages and impending competition issues.
In 2015 Myanmar is set to enact free trade tariffs from its ASEAN membership. Without protection or preparation, its cement plants could face serious consequences from cheaper imports from Thailand, Indonesia and Vietnam. The move by the government to encourage joint ventures with foreign partners looks like one way to mitigate this. In a market report in 2013 CIMB described the situation for investors as 'high-growth, high-barrier.' This seems to be an apt description given the experiences of Semen Indonesia.
Myanmar: Lafarge has opened a cement repacking and storing plant in Thilawa special economic zone (SEZ) in Myanmar. The plant cost an estimated US$10 - 20m. Lafarge owns 60% of the distribution depot, while two local firms own 20% each.
The depot, which is near Thilawa port, 20km outside Yangon, can store 20,000t of cement and will be able to expand capacity based on customer demand. The depot will mainly be used for repacking and storing cement, while the cement will be imported in bulk from Lafarge plants in the region, mainly from Malaysia and Vietnam. The company will primarily supply its cement to construction projects in the ongoing Japanese-backed Thilawa SEZ project and the rest to the local market.
Myanmar: The local Myint Investment Group has joined China's Anhui Conch Cement to upgrade the No 33 Kyaukse cement plant to 5000t/day of cement production capacity through a build-operate-transfer (BOT) system, according to the Ministry of Industry. The plant currently has a production capacity of 400t/day. The Directorate of Investment and Company Administration approved the joint venture, Myanmar Conch Cement Co Ltd, on 11 November 2014.
Myanmar: Cargotec's Siwertell has received an order from CITIC Heavy Industries Co Ltd (CITIC) for a rail-travelling ship unloader. The ST-640 M-type unloader has been ordered to support the energy production requirements for a new cement plant in Myanmar and will unload coal from barges at a rate of 800t/hr. The plant is being built as part of a collaboration between CITIC and Siam Cement's subsidiary, Mawlamyine Cement Ltd (MCL).
China: Anhui Conch's revenue rose by 22% year-on-year to US$4.68bn in the first half of 2014 from US$3.84bn in the same period in 2013. The group's net profit rose by 90% to US$945m. It attributed the growth in revenue and profit to increased sales volumes and prices.
During the reporting period, the group acquired four cement projects including Shaoyang Yunfeng New Energy Technology, Hunan Yunfeng Cement, Shuicheng Conch Panjiang Cement and Kunming Hongxi Cement. It started work on building three clinker production lines including Baoshan Conch Cement and ten cement grinding units, including Liangping Conch Cement, increasing its clinker and cement production capacities by 10.9Mt/yr and 17.7Mt/yr respectively. Outside of China, the installation of equipment at PT Conch South Kalimantan Cement in Indonesia was noted and a project in Myanmar was acknowledged as having made progress.
Four residual heat electricity generation units located at Guangxi Lingyun Tonghong Cement, Baoshan Conch and other companies were put into operation with an additional installed capacity of 36MW. The group continued to implement low-NOx staged combustion technology modification for clinker production lines and SNCR flue gas denitration technology modification. As at the end of the reporting period, the Group had completed technical upgrade of NOx reduction to 101 production lines, which are all reported to be running smoothly.
As at the end of the reporting period, the production capacity of clinker and cement of the group reached 200Mt/yr and 245Mt/yr respectively.
Myanmar: Thailand's Siam Cement Group (SCG) plans to invest US$400m in the construction of a 1.8Mt/yr capacity cement plant in Myanmar. The plant is expected to be complete in 2016.
"The priority we are focusing is to manufacture cement and later cement related products such as ready-mix concrete and precast concrete blocks," said Kan Trakulhoon, SCG's president and CEO. "Myanmar seems to be developing progressively and infrastructures are needed, so the cement market will be good. The investments made in the industry and housing construction sectors are increasing, especially in major cities like Yangon, Mandalay and Nay Pyi Taw." He added that the cement plant would use waste-derived fuel.
One of the ideas aired by several speakers at last week's 6th Brazilian Cement Congress was that using cement as a construction material is inherently a sustainable option.
The reasons for this included the durability of cement's construction products and the role cement plays in improving the living standards of a country. For example, under the onslaught of extreme weather like hurricanes, concrete structures are more likely to remain standing. Or, for a country like Brazil with sections of society living in long-term 'temporary' buildings in its favelas or shanty towns, providing affordable cement to help the country build better housing for its inhabitants is the only sustainable future that could be considered.
Perhaps in line with this concept of cement-as-sustainable-construction-material we see Semen Indonesia this week announcing expansion plans in three countries in South and Southeast Asia.
In West Sumatra a Semen Indonesia subsidiary has started building a 3Mt/yr cement plant in Padang. Then in Bangladesh Semen Indonesia revealed its intention to buy a 1Mt/yr plant. Finally, the state-owned Indonesian cement producer said that its Semen Gresik subsidiary was planning to build a new cement plant in Central Java at Rembang in June 2014. From previous press releases we can see that both new plants are FLSmidth builds. Both orders were announced in early 2014. Each has a capacity of 8000t/day.
The plans to expand outside of Indonesia echo reports that Semen Indonesia was set to buy a minority share in a Myanmar cement producer. Although the producer was unnamed as of early May 2014, Semen Indonesia CEO Dwi Soetjipto valued the stake at US$30m and the producer's production capacity at 1.5Mt/yr in comments to the Jakarta Globe.
Altogether the two new plants in Indonesia will place Semen Indonesia's total cement production capacity at 40Mt/yr by 2017 according to company figures. This would be enough to place the company within the top 20 of the world's largest cement producers by production capacity following the research from Global Cement's 'Top 75 global cement companies'.
In a nice coincidence, the company with a production capacity of 40Mt/yr on that list was Eurocement. Last week the Russian cement producer announced that it had signed contracts worth Euro387m with Chinese companies - including Sinoma, CNB, Sinomach and CAMC Engineering Co - to add 17Mt/yr cement production capacity across six plants in Russia. Another six or seven more construction agreements for cement plants are also expected to be signed in the coming months.
Certainly for the countries Semen Indonesia is focusing on – Indonesia, Bangladesh and Myanmar, with low gross domestic product per capita – providing the raw material for stronger and more durable buildings covers some of the sustainability bases. Yet if all these new plants only use fossil fuels and are subject to few environmental restrictions then that undermines some of this. However, whether all this expansion is sustainable or not, the cement industry never remains stationary.
Myanmar: Thailand's Siam Cement Group (SCG) aims to produce nearly 2Mt/yr of cement at its new plant in Myanmar once the US$400m plant starts operations in 2016.
"Our new plant in the country is expected to produce 5000t/day, which is about 2Mt/yr," said Chana Poomee, country director of SCG in Myanmar. "We see a lot of potential in Myanmar because we consider it an Asean 'mid-land.' There are very good opportunities here. We believe in the future of Myanmar, so we've decided to invest," he said. He noted that construction had progressed well, with full support from the government and Mon State.
A new 20km road is being constructed while the company repairs many roads in the state. The SCG country director also emphasised that the company had launched a number of corporate social responsibility (CSR) activities to improve the lives of people in Myanmar, which include public health and medical programmes, educational support for students and community-building activities. The firm's CSR activities also include building new schools near the plant, mobile clinics that will provide medical services to the people and renovation of pagodas in Mon State.
"We hope to be able to improve the livelihoods of people in Myanmar through economic, social and environmental development, just as SCG is doing in the other markets that it operates in," Chana said.
He added that the local residents were satisfied with the implementation of the new cement plant. "It took a long time for us to discuss the project with the government and the people. I am sure the local people will be satisfied with our plant thanks to our community-building programmes, which will be beneficial to all of them," said Chana.
In recent months, the firm has begun engaging with the communities around the plant site to inform them about the planned developments. "We will introduce environmentally friendly technology such as waste-heat power generation and greenhouse-gas reduction. It may be better than our plant in Thailand because of the up-to-date technology that will be used in this plant," Chana said.
Myanmar: Italcementi is considering entering the Myanmar market in the next few years, its chief executive has said. Carlo Pesenti said that the Italy–based international cement producer was negotiating with a local partner in Myanmar and studying the country's foreign investment law, in an interview with The Nation.
Italcementi is already active in Southeast Asia through its Jalaprathan Cement and Asia Cement subsidiaries in Thailand. In 2013 the country helped shore-up Italcementi's annual results with a rise in turnover of 18.1% year-on-year to Euro269m and earnings before interest, taxes, depreciation and amortisation (EBITDA) rose by 58.8% to Euro51.5m. Italcementi Thai cement shipments increased by 13.8% as an additional kiln was brought back on-stream.
There has been an interesting knock-on effect from further economic integration of the Association of Southeast Asian Nations (ASEAN) this week. Holcim Philippines may delay the construction of a 2.5Mt/yr cement plant in Bulacan province due to a drop in import tariffs in 2015. Vietnam or Indonesia were named as possible sources of clinker due to their excess capacity.
The ASEAN group comprises 10 countries including Brunei, Indonesia, Malaysia, the Philippines, Singapore, Thailand, Vietnam, Laos, Myanmar and Cambodia. Their respective cement production capacities range from 0.3Mt/yr at a clinker grinding plant in Singapore to Indonesia's integrated cement production capacity of 45Mt/yr. In total the ASEAN countries have a production capacity of around 220Mt/yr for a population of about 600m with national gross domestic products (GDP) per capita ranging from US$900 (Laos) to US$52,000 (Singapore).
One scenario for cement producers in the ASEAN countries is that they might be swamped by exports from places like Vietnam. That country had a production capacity of 73Mt/yr in 2013 with cement sales predicted to rise to 63Mt in 2014. Assuming the government released figures are correct, that leaves at least a 10Mt of cement production-sales gap that could torpedo a neighbouring country's cement industry in the free trade area.
Indonesia, the other potential source of clinker that Holcim Philippines mentioned, has seen construction growth slow and production capacity grow. Holcim reported in its nine-month report in November 2013 that, while national cement sales had risen by 5.3% to 41.6Mt, supply capacity had risen by 9% to 59Mt/yr. Assuming equal sales distribution throughout this suggests a capacity gap of 4Mt.
Some politicians in the region have complained that impending free trade area will create winners and losers. At a recent ASEAN meeting in Yangon, Myanmar a Myanmar planning minister raised the issue of a development gap within the ASEAN region calling for renegotiation for countries like Myanmar, Cambodia and Laos.
Meanwhile both the cement industries in Vietnam and Indonesia have clearly anticipated the implications of the ASEAN Economic Community. The Vietnam National Cement Association expects to remain competitive within the ASEAN region and against Chinese imports after 2015. In Indonesia State Enterprises Minister Dahlan Iskan stated this week that the cement industry was ready for the ASEAN Economic Community thanks to the government's strategy to consolidate its major cement producers within one company, Semen Indonesia. Consistent cement industry growth in South East Asia may be about to change.