Global Cement explores three small cement sectors in mainland South East Asia...
Cambodia, Laos and Myanmar are three contiguous nations in mainland South East Asia. Their populations represent a vast array of cultures, sandwiched between better known and more powerful neighbours such as China, India and Thailand.
Each of the three has a colonial past, with independence gained between 1948 and 1953. However, all three have since been marred by political instability and / or oppression. In 2020 the three have low indices for press freedom and human development.
Introductions
Cambodia
The Kingdom of Cambodia covers 181,035km2 in the south of the Indochina Peninsula. It borders Thailand to the west, Laos to the north and Vietnam to the east. For 600 years its territory was the base of the Khmer Empire from 800 to the mid 1400s, after which it saw its powers decline. Cambodia was under French control from 1863 to 1946, with full independence gained in 1953.
Upon independence the new country’s leaders adopted a policy of neutrality in the ongoing Cold War proxy conflicts in the region. However, parts of its territory were used as bases to supply Communist North Vietnamese forces. This resulted in a series of air-strikes by the US that gave rise to significant anti-US sentiment and support for Communist policies.
This ultimately led to the Khmer Rouge regime led by Pol Pot in 1975. The regime was extremely nationalistic and took communism to its extremes. It demanded that all towns and cities be abandoned, with everyone sent to work as farmers in rural areas. Many were poorly equipped for the transition and thousands died before the first harvests. All indications of Cambodia’s former civil, religious and military were to be eradicated, with death for those that stood in the way. ‘Crimes’ worthy of the death penalty included wearing glasses, speaking foreign languages and crying over the death of loved ones. After a rebellion close to the Vietnamese border, Pot ordered the deaths of around 1.5 million ‘Cambodians with Vietnamese minds.’ In 1979 the Vietnamese army and rebel forces overthrew the Khmer Rouge, with Vietnam occupying until 1993. Around 1.5 - 2.0 million are thought to have perished in just four years between 1975 and 1979.
Today, Cambodia is unusual in that its Monarch is elected rather than succeeding via bloodline. The country is also one of several in the region that enshrines Buddhism as the state religion. Its constitution officially places power in an elected Prime Minister. Despite this the country’s politics have been dominated by Prime Minister Hun Sen and the Cambodian People’s Party (CPP) since the early 1990s. In its 2018 elections, deemed flawed by external observers, the CPP won all seats in parliament. Political opposition remains oppressed and the press is restricted, with a Press Freedom rank of 144 of 189 in 2020 according to Reporters Without Borders.
Laos
The land-locked territory that constitutes today’s Lao People’s Democratic Republic has come under the control of numerous empires and external forces over the centuries, including by Siam (Thailand) and Vietnam. In the late 1800s the French, who already controlled Vietnam and Cambodia, sought to expand their influence in the region. The Protectorate of Laos was established in 1893, under control of the French from Vietnam.
The French continued the exploitation of Laos that had become well established under the Siamese and Vietnamese periods before the Second World War. During the 1940s Lao nationalism gained in prominence. The French were first successful in regaining control over the country after a declaration of independence in 1945, but a full transition to independent rule was made by 1953.
In the second half of the 20th Century, Laos attempted, like Cambodia, to maintain a neutral stance with respect to ongoing events in neighbouring Vietnam. Two coalition governments collapsed in the 1950s and early 1960s, before incursions by the North Vietnamese forces led, as in Cambodia, to massive US bombing and an embrace of communism. Following the end of the war in 1975, the Lao government regained control of its borders, but was heavily influenced by Vietnam. Support from Vietnam and the USSR remained until the latter’s collapse in 1991. Since then, Laos has become more independent, with some market reforms. However, the Communist Lao People’s Revolutionary Party (LPRP) remains dominant in national politics. The press and internet are severely restricted, with Laos ranked 172 out of 192 countries in the Press Freedom Index of 2020. Its Human Development Index rank was 140 out of 189 in 2018.
Myanmar
Myanmar, formerly known as Burma, is a large nation in the west of the Indochinese Peninsula, centred around the Irrawaddy River and its Delta. Its location at the crossroads between China, India and South East Asia is borne out by periods of war with both Siam (Thailand) and China. In a search for further expansion, Burma headed west in the late 1800s, engaging in wars with Britain, which controlled India and Bangladesh at that time. This backfired, with Britain adding Burma to British India in 1886. The British violently crushed remaining dissent in the north by 1890 and systematically undermined Burmese culture. Dominance was given to British and Indian companies, with Burmese businesses forced out.
The onset of the Second World War disrupted this undesirable status-quo, with rising anti-British sentiment and increased support for Communism. The Communist Party of Burma was established by Aung San in 1938. The Communists sought an alliance with those in China but received a counter offer from Japan in support of a national uprising, followed by independence. The defeat of Japan at the end of the war led to the formation of an independent Burma in 1948, following three years of talks with the British. The 1950s and early 1960s were an unstable time for Burma, with successive insurgencies by rival factions. A coup established a socialist state in 1962 leading to nearly three decades of ongoing political disputes and material and food shortages, with the military taking control of the country in 1988. In 1989 it changed the name of the country to Myanmar.
Free elections in 1990 were overwhelmingly won by the National League for Democracy, but the military prevented the new government from being established. It placed Aung San Suu Kyi (the daughter of Aung San) and Tin Oo, the leaders of the NLD, under house arrest as the military hung on to power for 26 more years. Aung San Suu Kyi was released in 2010, taking up the position of State Chancellor (similar to Prime Minister) in 2016.
However, Myanmar’s transition to a full democracy has not been secured due to ongoing political disputes, economic hardship and ethnic clashes. The most notable example of this is the continued oppression of the Rohingya Muslim population, who are formally denied citizenship of Myanmar, with restrictions on movement, jobs and education. Myanmar ranked 139th in press freedom in 2020, and was ranked 145 out of 189 countries for human development in 2018.
Cement sector
The three nations in this review have small cement industries in global terms, sharing a modest 24.3Mt/yr across 35 plants and 77.1 million inhabitants. This works out at 315kg/capita, around half the level commonly seen in rapidly-developing economies. Production facilities are generally small by international standards, with many also somewhat dated. Most plants are domestically owned, although regional players, notably from Thailand and China, have entered the market in recent years as strategic joint venture partners. Most capacity is now at least partly owned by Chinese or Thai interests.
Cement in Cambodia
There are five integrated cement plants in Cambodia, which share a capacity of 6.4Mt/yr. Each is partly or fully owned by a foreign producer. The relatively young age of the country’s cement production infrastructure means that it is arguably the most developed among the three industries considered here.
The largest cement plant is a 1.8Mt/yr Chinese-built facility at Phum Sdao. It is operated by Battambang Conch Cement, a joint venture owned by Anhui Conch (60%) and Cambodia’s Battambang KT Cement (40%). Established in 2016, the company held true to its promise to construct and commission its project within two years, first firing the kiln in July 2018. The company now supplies cement to Pursat, Pailin, Banteay Meanchey and Siem Reap provinces.
The second-largest cement producer by installed capacity is Chip Mong Insee Cement, which operates a 1.6Mt/yr plant at Touk Meas, 125km south of Phnom Penh. The plant is a US$260m joint-venture between Chip Mong Group (60%), one of Cambodia’s largest construction firms and the Thai cement maker Siam City Cement (40%). It fired up its kiln for the first time on 30 September 2017 and has since installed a waste heat recovery system from China’s CITEC Heavy Industries. As part of its ongoing environmental efforts, the plant commissioned a 9.8MW solar power system provided by Cleantech Solar in February 2019. The system includes a 2.8MW floating solar power plant deployed on the plant’s reservoir and 7MW installed across multiple rooftops of the site. The deployment of the floating solar system will shield the reservoir from wind and the direct hot midday sun which is expected to reduce water loss through evaporation, contributing to water conservation efforts.
The third-largest producer by installed capacity in Cambodia is Cambodia Cement, which has been 40% owned by Huaxin Cement since 17 June 2014. It operates a 1.1Mt/yr integrated plant at Chakrey Ting. The plant, the first cement plant to be built in Cambodia, traces its history back to an investment by Huaxin Cement in 1961, first as the Liu Shaoqi Cement Factory in honour of the Chinese Chairman at the time. The plant was extensively overhauled with a US$100m investment in the early 2010s, with production restarting in 2015.
The fourth largest producer, also in Kampot, is Kampot Cement, a joint venture between Siam Cement Group (92.5%) and Khaou Chuly Group (7.5%). It was established in 2005 and has a capacity of 0.9Mt/yr.
The fifth and final cement plant is operated by Thai Boon Roong Cement, a joint venture between local and Chinese investors. Despite the name, there is no Thai involvement. At the plant’s opening on 14 November 2019, Cambodian Prime Minister Hun Sen, said that its opening would ensure that Cambodia’s cement demand could be met entirely by domestic production.
One further plant, from Southern Cement Cambodia, is under construction. The company was established in 2017 but the current status of the project is unclear.
Cement in Laos
Laos has 15 integrated cement plants. Due to the fact that most are fairly small, they only combine to give a capacity of 10.7Mt/yr.
The largest producer by installed capacity is Lao Cement Public Company, which operates 3.4Mt/yr of capacity across four plants. Three are in the capital Vientiane and one is in Khammouan Province. The company is jointly operated by China Yunnan Corporation for International Technological & Economic Cooperation and the Lao State Agriculture Industry Development Enterprise for Imports, Exports & General Services via a loan from China. It is controlled by the government. The company’s major product is ‘Kating Thong Portland cement clinker and ‘Kating Thong High grade portland cement. This is classed as a Type I cement based on ASTM C-150, ISO 9001:2015 and 32.5 based on the GB175-1999 test standard. It supplies mainly to the capital Vientiane, as well as the Provinces of Vientiane, Xiengkhuang, Luangphabang and others surrounding the capital.
The second-largest cement producer by installed capacity is Khammouane Cement, a 100% subsidiary of Thailand’s Siam Cement Group. Its 1.8Mt/yr plant at Khammouane was built
in 2017.
The third-largest producer in Laos is Luang Prabang Cement, a joint venture by Anhui Conch and local investors. It operates three cement plants, all at Luang Prabang (0.1Mt/yr, 0.2Mt/yr and 1.0Mt/yr). The third and largest plant is the most recent. It fired its kiln for the first time in December 2019.
There are three companies in Laos that have 1.0Mt/yr of capacity. Jixiang Cement was built by Yunnan Energy Investment Corporation in 2015 following a three year project. Powerchina Resources operates a plant at Khammouane and Oudomxay Cement Factory operates a 1.0Mt/yr plant in Namor.
There are two companies in Laos that are fifth-largest in terms of cement capacity: Wanrong Cement and Salavan Cement, both with 0.5Mt/yr of capacity. Wanrong Cement is another Chinese joint venture and is Laos’ oldest producer of cement. It began its Wanrong Cement Plant 1 at Vangvieng, Vientiane in 1994. The company’s Golden Bull cement brand is popular in the country, emphasised by the inclusion of the first Wanrong cement plant on Laos’ 5000 Kip banknotes issued in 1997. Wanrong started a second plant, also at Vangvieng in 2002, before the addition of a third in Savannakhet, in 2003.
Cement in Myanmar
There are 15 active integrated cement plants in Myanmar, which share a total capacity of 7.2Mt/yr.
The largest producer by installed capacity is Mawlamyine Cement, a subsidiary of Siam Cement Group from Thailand. It has a capacity of 1.8Mt/yr but, as of 21 July 2020, was reported to be not producing cement due to a ‘lack of raw materials.’ Local press reported that some workers thought the plant would close for good, due to a dispute over limestone mining. Others reportedly insisted that it would restart production soon. The plant began production in 2017.
The second-largest cement producer in Myanmar is Arr Thit Man, which operates a 1.6Mt/yr plant in Mandalay. It earlier stated that it would increase its capacity to 3.2Mt/yr via the installation of a new line but this appears not to have transpired to date.
The third-largest producer is Myanma Ceramic Industries, the only producer in the country to operate more than one plant. It has four, with a combined 1.5Mt/yr of capacity. A further 10 cement producers each operate a single plant, as shown in Figure 2.
New plants have constantly been in the offing in Myanmar in recent years. Semen Indonesia was in the process of setting up a joint venture in 2015 but eventually shelved the project when it could not find a suitable partner.
In July 2020, Young Investment Group Industry Company Limited (YIGICL) entered into a joint venture with China-based China Gezhouba Group Cement (CGGC) and China Gezhouba Group Overseas Investment (CGGOI) with the aim of establishing an integrated cement plant in Mandalay, Mandalay region. The joint venture, which is held 30:70 by YIGICIL and the Chinese partners respectively, will also set up a limestone mine.
Also in the summer of 2020, U Aung Kyaw Thu, a representative of Mon State Parliament and chairperson of the Public Budget Scrutiny, Finance Planning and Economic Matters Review Committee warned that cement plant projects granted licences by the Myanmar Investment Commission (MIC) that had not implemented their plans will not be granted permission to extend their licences.
For example, during a meeting with legislators, local farmers from Kaw Won Village, Kyaikmaraw Township in Mon State complained that the Myanmar-Korea Cement Group should not be allowed to extend its permit, as they had not implemented anything yet, according to the Mons News Agency. Normally companies that have received a permit are allowed to build at the site for three years. They can then extend this by up to three years if they provide a ‘legitimate reason.’
The June Cement Industry project has reportedly finished 15% of its construction and the Myanmar-Korea Cement Group project has finished 10% of its construction. The companies have blamed operational difficulties on the delays. They were granted permits by the MIC in 2016 and 2017 respectively.
Elsewhere, Switzerland-based LafargeHolcim says it is liquidating its subsidiary in Myanmar. The group says it decided to exit its operations in Myanmar in 2017. Subsequently, it wound the company down in 2018, with no local employees and no product sales. Its cement repacking plant in Thilawa special economic zone originally opened in 2014.