Displaying items by tag: Chile

Chile: Cemento Polpaico, part of LafargeHolcim, reported a profit of US$5.93m in the first half of 2018, a 52.6% rise with respect to the US$3.9m profit it achieved in the first half of 2017. Its operating revenues from continuing activities were US$120.7m, a 32.2% year-on-year increase.

The company reported that the higher operating revenues were mainly due to an increase in sales volumes of cement and concrete, driven by the greater economic activity.

Chile: Union workers at Cemento Polpaico have gone on strike following negotiations. 162 workers, or around 15% of its employees, have taken industrial action, according to the Diario Financiero newspaper. The cement producer is unable to estimate the impact of the strike on its financial results.

Chile: Fuchs Group has purchased a controlling stake in the lubricants business of Comercial Pacific. The agreement will see it hold 65% of the company with Comercial Pacific retaining the remaining 35%. The acquisition focuses in particular on the customer base and workforce. Comercial Pacific is a long-standing Fuchs distributor in Chile in the mining, food, paper and cellulose industries. The company employs 13 people in sales and application engineering.

Chile: Cementos Bicentenario (BSA) has signed a deal with energy company Engie to supply its Quilicura grinding plant near Santiago with renewable energy. All of the energy supplied to the plant will come from renewable sources including solar and hydroelectric. The contract, equivalent to 35GWh, will see the plant achieve the I-REC certification.

Chile: Cementos Bío Bío plans to start production at its new 0.15Mt/yr grinding plant at Arica in September 2018. The project has an investment of US$15m, according to the Economia y Negocios newspaper. The company wants the unit to reach its production capacity by 2021, with plans to subsequently double it to 0.3Mt/yr. The project is part of a US$150m investment that the cement producer is undertaking in the period to 2022.

Chile: Cementos Bío Bío is considering expansion plans in Argentina and Peru, according to the El Mercurio newspaper. The plans are part of its 2021 strategy. It also wants to consolidate its leadership in its local market.

Chile: Hurtado Vicuna Group has asked its minor shareholders to support a merger between its subsidiaries Cementos Bicentenario (BSA) and Cementos Polpaico. Hurtado Vicuna holds a 57.1% share in Cementos Polpaico, according to the Diario Financiero newspaper. However, two of the company’s major shareholders, Volcan and Megeve, may oppose the merger. If successful the merger would create Chile’s largest cement producer. As part of its acquisition of Cementos Polpaico, Hurtado Vicuna agreed to sell some of BSA’s assets. This potentially could involve the divestment of BSA’s 26 concrete plants.

Chile: Cementos Melon financial results for 2017 have been hit by a contraction in the local construction market. Both cement and concrete sales volumes were reduced, according to the Diario Financiero newspaper. Its sales fell by 14% year-on-year to US$298m in 2017 from US$345m in 2016. Its profit dropped by 54% to US$14m from US$30m. The company says that it has constrained fixed costs, logistics and administration to compensate.

Chile: Cementos Bío Bío has appointed Katia Trusich as director and member of the Directors Committee. Her appointment follows the resignation of André Roberto Leitão. Trusich has held of number of private and public sector roles, including working as the Under Secretary of Economics for the Chilean government between 2014 and 2016. Most recently she has been the Corporate Affairs Manager for CGE.

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.