Displaying items by tag: Costa Rica

Costa Rica: Mexico’s Cemex has introduced its Cemex Go platform to the Costa Rican market. The new platform will enable customers to place orders, make payments, manage invoices and track deliveries in one place online. The new platform is available for mobile phones, tablets and computers. It has already been launched in nine countries and has over 13,000 users worldwide.

Costa Rica/Latin America: LafargeHolcim has opened the 1000th store in its Disensa retail network in Latin America. The milestone store opened in Costa Rica in late December 2017. Since expanding its Disensa network beyond Ecuador in April 2017, the company has added around 500 Disensa-branded stores in Argentina, Colombia, Costa Rica, El Salvador, Mexico and Nicaragua. LafargeHolcim plans to continue its network expansion in Latin America by opening its first store in Brazil in early 2018.

“The roll-out of the group’s retail strategy in emerging markets such as Latin America is enabling us to get even closer to consumers,” said Oliver Osswald, Head Region Latin America at LafargeHolcim.

The Disensa network is intended to offer self-builders and smaller contractors access to LafargeHolcim’s own building solutions as well as other construction materials and services, including microcredit and technical help. The concept was developed in Ecuador as a franchise scheme. The group also launched its Binastore brand of retail stores in the Middle East and Africa in mid-2017, opening stores in Algeria, Lebanon, Morocco, Ivory Coast, South Africa and Zambia.

After a couple of weeks looking at the capacity-rich cement markets of Angola and Vietnam, we turn our attention this week to some of those countries on the receiving end of overcapacity.

Costa Rica is an unlikely place to start but it came to our attention this week due to a short but significant news item. In summary, the amount of cement imported into Costa Rica increased by a factor of 10 between 2014 and 2016, from around 10,000t to over 100,000t. This is around 5% of its 2Mt/yr domesitic capacity, so the change is already fairly big news. The fact that an incredible 97% of this came from just one country, China, makes the story far more interesting as it shows the effects that Chinese overcapacity can have on smaller markets.

But when we look at how the value of the cement imports has changed over time, we see an even more dynamic shift. While the amount of cement imported into the country increased by nearly 10-fold, the value of the same imports only increased by around half as much between 2014 and 2016. If these figures can be taken at face value, the implication is stark. Taking the very low base as effectively ‘zero,’ each tonne of cement imported must cost around half as much as it used to.

Digging a little deeper and the picture gets more complicated. While they have fallen, Costa Rican cement prices have not fallen by 50% and why the sudden deluge of imports anyway? In 2015 the country changed its rules on cement imports to facilitate more flexible imports and lower prices for consumers. It did this by changing a regulation relating to how long cement can be stored, previously set at just 45 days, with the aim of allowing cement to come from further afield and, crucially, in bulk rather than bags.

The effects on price were immediate. Previously as high as US$13/bag (50kg) in December 2014, fairly high by global standards, Sinocem, the first Chinese importer, immediately sold its first shipment at US$10/bag. This effect of lower prices has now forced the average sales prices down to around US$10/bag across the country by 2017. This is good for consumers but not necessarily the local plants.

Back in 2015, the two local integrated plants operated by Cemex and Holcim warned that cement quality would suffer if cement bags were not used within 45 days. This apparently self-serving ‘warning’ went unheeded by the Ministry of Economy, Industry and Trade (MEIC), which pointed out that other countries in South America, as well as the European Union and United States, had no analogous short use-by dates for cement bags.

The rule remains in place, although discontent rumbles on. Indeed LafargeHolcim noted in its third quarter results for 2016 that ‘Costa Rica was adversely affected by increased foreign imports.’  This may well be a little bit of posturing and it doesn’t square with the fact that Costa Rica exported three times more cement that it imported in 2016. Of total exports of 0.34Mt, over 95% went to neighbouring Nicaragua, which has a single 0.6Mt/yr wet process plant owned by Cemex. It seems that the two Costa Rican plants have found a way to keep a little bit of the Chinese producers’ margin for themselves.

Of course, Chinese cement overcapacity doesn’t only affect the Central American market. It has been rippling all around the Pacific Rim. In July 2017, this column looked at the decision by Cementos Bío Bío to stop making clinker at its Talcahuano plant in Chile. It now favours grinding imported clinker from Asia. Before that, Holcim New Zealand closed its Westport cement plant in 2016, finally admitting that domestic clinker was not viable.

In the grand scheme of things, this all makes sense. The market has forced those operating on thin margins to adjust. Ultimately, the end consumer is likely to benefit from lower prices, at least for as long as reliable low-cost imports can be secured. What happens, however, if China actually gets round to curtailing its rampant cement capacity, or simply decides to charge more for its cement? Flexible imports, the main aim of the Costa Rican rule change, may then prove vital, as long as there is more than one international supplier of cement.

This week Beijing announced that it would close the last of its four largest coal-fired power plants, the China Huaneng Group Corp's 845MW power plant, in 2016. The four coal-fired plants will be replaced by four gas-fired plants with 2.6 times more electricity capacity than the former coal plants. China's policy makers are also encouraging increased use of hydroelectric power, solar and wind and is trying to restart its nuclear power programme.

In the same week, the Independent reported that Costa Rica had achieved a renewable energy milestone, having used 100% renewable energy for the preceding 75 days. The achievement was reportedly made possible by heavy rainfall, which powered four hydroelectric plants. Costa Rica has an impressive track record when it comes to energy sources. In 2014, 80% of its energy came from hydropower and 10% came from geothermal energy. In total, 94% of its energy requirements were met by renewable energy.

However, this week we also heard that Dangote is building the world's biggest oil refinery, which will process 650,000b/day. It will also be Nigeria's first oil refinery. Aliko Dangote, owner of Dangote Group, decided to up the initial design from 450,000b/day because he believes that Nigeria, as a leading producer of crude oil, should also be credited with local refining capacity. Currently, Nigeria produces crude oil, but has to buy refined products from abroad. The refinery is expected to be fully operational by 2017.

Efforts to increase renewable energy should be strongly encouraged - the benefits to the planet and its population are undeniable. However, renewable energy technology has a way to go (if ever) before it can entirely replace fossil fuel-derived energy, which makes Dangote's investment a safe bet. As renewable energy like solar and wind power is entirely reliant on nature, supplies can never be assured.

While sporadic supplies to houses and small businesses may be part of the price we eventually have to pay for a greener world, larger businesses like supermarkets and cement plants, which could lose millions (or billions) from power outages, will surely have something to say, and a lot of sway, when it comes to relying completely on renewable energy. In addition, power outages to essential services like hospitals are unthinkable when it comes to the health of our loved ones. Ultimately, the argument for relying on renewable energy may well be won by utilitarians' 'greater good' argument, but how would it feel to know that your sick child could have been saved by fossil fuel-derived energy?