Displaying items by tag: Pakistan
South African authorities have started a new investigation into imports of cement from Pakistan. This time the inquiry will examine trade dumping allegations made by local producers including Afrisam, Lafarge, NPC Cimpor and PPC.
The application made by the cement producers provided evidence that the difference between the price of cement (the dumping margin) in Pakistan and for imports from Pakistan in 2013 was 48%. Or, in other words, the price of Pakistan cement imported to South Africa was nearly half that of what is was being sold for in the country that it was actually produced in.
The data submitted to the International Trade Administration Commission of South Africa comes from a report by Genesis Analytics on Pakistan cement prices in 2013 and tax information from the South African Revenue Service. Neither source is readily available for more detailed analysis here but data released by XA International Trade Advisors suggests that cement imports from Pakistan rose to 1.1Mt/yr in 2013 and at a value of US$59m. Roughly, this gives a price of US$55/t. This compares to an average price of US$90/t, from the All Pakistan Manufacturers' Association for the first nine months of the 2012 – 2013 Pakistani fiscal year, giving a dumping margin similar to the allegation by the South African cement producers.
Separate industry sources quoted by the Pakistan media on the story reported that the country supplies 1.5 - 1.6Mt/yr of cement to South Africa, its biggest export market, receiving a revenue of US$125m. Although this suggests a dumping margin lower than the one presented to the authorities it is still high.
Other information of note in the investigation notification is that the Pakistan cement imports are only competing heavily with the local bagged cement market in the Southern African Customs Union, which also includes neighbouring Botswana, Lesotho, Namibia and Swaziland. The notification discounts bulk cement imports from Pakistan as being 'prohibitively' expensive suggesting that the Pakistan cement producers have no import infrastructure in southern Africa or that something else is stopping them. For example, the country's market leader for production, Lucky Cement, has export facilities in Karachi with silos and automatic ship loaders. Yet it's only 'brick-and-mortar' presence overseas are projects building an integrated plant in the Democratic Republic of the Congo and a grinding plant in Iraq.
It may also be worth considering that South African industry newcomer Sephaku Cement hasn't joined the dumping allegation. The Dangote subsidiary was set to start producing clinker in late August 2014. This is out of character considering how prominent the Nigerian-based cement producer has been in campaigning against imports to its home nation. However, the Aganang plant in Lichtenburg, North West Province is over 700km from the coast and presumably safe from foreign imports at present.
One final question occurs. How are Pakistan cement producers able to dump bagged cement on the South African market at prices lower than what they are selling it for at home? If individual producers sold their excess at home at a lower price they could potentially undercut their competitors and make a profit. There are many barriers, from input costs to industry structural issues and other reasons that may be preventing this. However, if the South African cement producers succeed in their latest attempt to block imports from Pakistan it may add more impetus to remove such barriers.
South Africa: The International Trade Administration Commission (ITAC) is investigating claims by cement producers that cement from Pakistan is being dumped in the Southern African Customs Union (SACU), of which Botswana, Lesotho, Namibia and Swaziland are also members.
Afrisam, Lafarge, NPC Cimpor and PPC allege that bagged cement from Pakistan has been dumped at a 48% lower price than is the normal value in Pakistan. In 2013 imports from Pakistan accounted for just under 99% of all cement imports into SACU. According to statistics released by XA International Trade Advisors, annual imports from Pakistan alone were 1.1Mt in 2013.
Managing Director for PPC's cement activities, Richard Tomes, claimed that the dumping by Pakistan led to a decline in sales volumes, profit, output and the market share of producers in the region. He claimed that the effect of dumping included negative effects on cash flow and reduced levels of staffing in SACU cement producers, with the number of staff employed in the SACU cement industry decreasing by 15% between 2010 and 2013.
Pakistan: After posting cement dispatches of 3Mt/month between March and June 2014, Pakistan's cement dispatches were down to just 2.23Mt in July 2014. This compared unfavourably to dispatches of 2.6Mt in July 2013. Domestic dispatches of 1.75Mt were down by 6.5% year-on-year compared to July 2013. Cement exports dropped by a third from 0.75Mt in July 2013 to 0.5Mt in July 2014.
The poorer export performance was mainly attributed to a reduction in quantities sold to Afghanistan where against exports of 0.44Mt in July 2013 were reduced to just 0.18Mt in July 2014. According to industry experts, this trend is likely to continue in the coming months as NATO forces prepare to leave Afghanistan. The massive decline, over 58%, also indicates declining competitiveness of Paksistani cement in the global market where other regional players like Iran are making inroads.
Pakistan: Cherat Cement Company Limited will invest US$197m to install a new production plant at its existing site in Nowshera, Khyber Pakhtunkhwa Province. The new plant will have a 1.3Mt/yr production capacity and will be commissioned in 30 months, according to Abid A Vazir, executive director of Cherat Cement.
The term-loan for the project has been arranged and Cherat Cement has established a letter of credit for the foreign component of the loan. The plant will be acquired from China's Tianjin Cement Industry Design and Research Institute Company Limited.
Cherat Cement expects domestic cement demand to grow exponentially as the present government has planned spending on major infrastructure projects, with a special focus on constructing highways and hydropower and housing projects. Cherat Cement is also expecting huge spending by the private sector on construction-related activities, fuelled by inflows of remittances from expatriate Pakistanis.
Pakistan: Lafarge has announced that it will sell its 75.86% stake in Lafarge Pakistan Cement Ltd and will use the proceeds, estimated at Euro190m, to cut its debt. BestWay Cement has been announced as the buyer. The transaction still requires the approval of local market and anti-trust authorities.
Pakistan: The inauguration of the Dasu dam has reinforced optimism in the local cement industry, which has been banking on the continuous increase in local demand owing to mega construction projects.
The Dasu dam, one of the mega dam projects, is expected to increase cement demand in Pakistan by 1Mt/yr for the next five years. The 4320MW dam will be completed in two phases at an estimated cost of US$4.8bn. Since the Dasu dam is located in the north, the cement for the project will most likely be procured from nearby cement plants. Cement companies like Maple Leaf, Fecto, Bestway, Cherat, DG Khan, Fauji are the most likely to benefit from the dam construction.
Analysts say the construction of big dams like Dasu and Basha will supplement the already improving cement demand in Pakistan. "Dasu dam will add an additional 1Mt/yr of cement demand, which will be significant for the local industries," said BMA Capital analyst Sajjad Hussain. "It will increase the already escalating cement demand in the country."
"The launch of the Dasu dam is important for the cement industry in northern region of the country," said Standard Capital Securities analyst Saad Hashmi. "Other major infrastructure projects that are expected to start soon will further increase cement demand and it may jump 5% in fiscal year 2015."
Pakistan: The Federal Excise Duty (FED) on cement is likely to be rise by US$1/t in the upcoming budget for the 2014 - 2015 Pakistan financial year. Federal Board of Revenue (FBR) officials said that the government had reduced the FED on cement from US$7.6/t to US$5/t in the 2011 – 2012 financial year and from US$5/t to US$4/t in the 2012 – 2013 financial year.
According to local press the government promised local cement producers that the FED would be gradually reduced and phased out. However, FBR sources spoken to by the Nation reported that the FED was likely to be increased by US$1/t to US$5/t to make up for a shortfall in tax revenue. However no final decision has been made so far.
If the FED does increase during the next budget then the cost of cement is likely to rise for consumers.
Pakistan: The attempts for an ultimate buyout of Lafarge Pakistan Cement Limited (LPCL) intensified on 30 April 2014 as interested parties made public announcements of their intention to acquire shares. That was to comply with the requirements of Listed Companies (Substantial Acquisition of Voting shares and Takeovers) Ordinance 2002. Currently, Lafarge SA has a 73% stake in LPCL.
William Gordon Rodgers, authorised representative of Vision Holding Middle East Limited (VHMEL), made a public announcement of VHMEL's intention to acquire 75.86% of LPCL. He said, "The total number of issued shares of LPCL is 1.45bn. VHMEL intends to buy 1.10bn shares, constituting 75.86% of the total." Rodgers added that if VHMEL proceeds to buy the shares, it would make a public announcement of offer to acquire further ordinary shares of LPCL in accordance with the requirements of the Listed Companies (Substantial Acquisition of Voting shares and Takeovers) Ordinance 2002.
DG Khan Cement Company Limited (DGKC) also disclosed its interest in Lafarge. The company expressed its intention to acquire the 100% stake of Lafarge in LPCL. DGKC's company secretary, Khalid Mahmood Chohan, said, "The proposed transaction will be subject to the relevant approvals and legal formalities, including formalities under the Listed Companies (Substantial Acquisition of Voting shares and Takeovers) Ordinance 2002."
LPCL has an installed capacity of 2.4Mt/yr with its plant located in Chakwal, Chakwal District.
Sri Lanka: Work on a Thatta Cement project in Sri Lanka has ended because the Sri Lanka Ports Authority (SLPA) has not yet executed the Land Lease Agreement (LLA). Basic engineering for the cement grinding, storing and bagging plant has been completed but the project has been suspended pending legal issues.
Thatta Cement secretary Taha Hamdani has complained to capital market regulators about the SLPA also signing an agreement with another company whose operational area lies close to its cement project. It appears to obstruct setting up of the cement project within the layout originally planned by the SLPA. The company officials say further progress on the project would recommence 'as soon as LLA is signed with SLPA'.
Zuari Cement's ground breaking of a new port-side packing terminal in Kochi, Kerala is the latest Indian cement news story with an eye on the sea. The Italcementi subsidiary's terminal won't be open until 2015 but the move shows that Indian producers are starting to tackle industry over-capacity through shipping lanes.
The Italcementi subsidiary holds two integrated cement plants and a grinding plant in Andhra Padesh and Tamil Nadu, two of India's biggest cement-producing states. In 2013 Italcementi reported that cement consumption fell for the first time in 10 years. Although Italcementi's cement and clinker sales rose by 1.6% in India in 2013, its revenue fell by 14% to Euro214m. Profit indicators like earnings before interest, taxes, depreciation, and amortisation (EBITDA) also fell. Targeting Kerala, one of the country's smallest cement producing states (0.6Mt/yr in 2013), makes sense.
Zuari Cement isn't the only Indian cement producer with its eye on shipping or on Kerala. At the end of March 2014, Gujarat producer Sanghi Industries announced plans to invest US$25m in ships and sea terminals. It plans to acquire six vessels in the next five years. It is also in the process of setting up terminals at Navlakhi port in Gujarat and at Mumbai port in Maharashtra.
Sanghi has stated that its aims are to find new markets, reduce fuel costs and increase its distribution networks. In an interview with Alok Sanghi, the director of Sanghi Cement, for a forthcoming issue of Global Cement Magazine, Sanghi revealed that Kerala is one of the four markets the producer focuses on within India (alongside Gujarat, Rajasthan and Maharashtra).
Neighbouring Pakistan is no stranger to exporting its cement around the world. Frequent complaints from east and south African press and cement producers attest to this. However, this week's story about plans to build the country's first 'dirty cargo' terminal at Port Qasim, Karachi marks a change from the normal narrative.
According to a Pakistan cement producer who Global Cement interviewed earlier in 2014, coal is the most common fuel used to fire cement kilns following a shift from gas in recent years. Subsequently coal prices rose, leading to higher cement prices in the country. A new terminal with the capacity to handle 12Mt/yr of coal (growing to 20Mt/yr in a second phase of the build) could certainly help cut input prices for the industry.
The producer also mentioned that most of the coal that Pakistan currently uses is imported from Indonesia and South Africa. So, indirectly, the South African coal industry appears to be making money helping to make Pakistan cement that eventually arrives back in South Africa to undercut local cement producers! They say that market always finds a way. Ships certainly help.