Displaying items by tag: China

Malaysia: Makin Teguh and Borneo Oil have held a ceremony to mark the firing up of the kiln at the 0.23Mt/yr ILPP cement plant being built in Sabah. The new plant is next to a limestone quarry owned by Borneo Oil and it is set to further benefit from the oil company’s other limestone assets via long term supply contracts, according to the Borneo Post newspaper. Borneo Oil increased its stake in Makin Teguh to 38% in May 2022.

A China-based supplier has built the new plant. It includes a waste heat recovery (WHR) unit and it reportedly the first integrated cement plant in Malaysia to use alternative fuels such as heavy fuel oil derived from refined recovered oils, palm kernel shells and bio char.

Taiwan: Hsing Ta Cement has reduced its paid-in capital by 0.2% to US$108.9m from US$109.1m. The reduction is the result of the company’s cancellation of treasury shares.

Zimbabwe: Government capital controls are delaying the handover of a new vertical cement mill ordered from China-based CBMI to Lafarge Zimbabwe. The cement producer still owes the supplier US$5.2m but has been unable to make the payment due to economic measures the government has taken to avoid depreciation of the local currency, according to the The Insider newspaper. The subsidiary of Switzerland-based Holcim is unable to obtain a certificate of completion from the supplier until the transaction has been completed. CBMI handled the order and Germany-based Gebr. Pfeiffer supplied the mill. The outstanding debt to CBMI may also delay Holcim’s deal to sell Lafarge Zimbabwe to Fossil Mining, which was announced in June 2022.

Vietnam: Cement producers and exporters will pay an additional 5 – 10% tariff on their exports of cement and clinker from 1 January 2023. Viet Nam News has reported that the move aims to bring down local cement prices by increasing supply in the country. These have risen over the past six months, while export prices have remained level.

The Vietnam National Cement Association (VNCA) says that its members are struggling to increase exports in a highly competitive export market. In the six months up to the end of August 2022, China, the Philippines, Bangladesh, Malaysia and Taiwan all reduced their imports of Vietnamese cement. The decline included a ‘substantial’ reduction of imports by China and the Philippines. Exporters faced logistical difficulties in shipping cement to the Philippines, while China’s consumption dropped due to new Covid-19 restrictions and low residential construction activity there.

The VNCA forecasts cement production of 108Mt in 2022, against a national demand of 65Mt. It projected that a series of infrastructure projects will bolster domestic consumption between 2022 and 2025.

Bangladesh: The high rate of the US Dollar against the Bangladeshi Taka is forcing local cement producers to raise their prices despite an increase in imports of volumes of raw materials. The country imported 5.12Mt of clinker, granulated slag, limestone, gypsum and fly ash in July and August 2022, a rise of 34% year-on-year, according to the Daily Star newspaper. Golam Kibria, the general manager of Premier Cement, said that the negative currency exchange effect was the main cause of local price rises for cement since the cost of raw materials on international markets had remained stable in recent months.

The country imported 36.1Mt/yr of raw materials for cement production in the 2021 – 2022 financial year. These materials mostly came from Thailand, Vietnam and China through ports in Chattogram and Mongla. This compares to imports of 16.8Mt in the 2017 – 2018 financial year.

China: Sichuan Yadong Cement’s plant in Sichuan has restarted production following a suspension of electricity to industrial users due to a heat wave. The local authorities stopped supplying industrial plants in late August 2022. The subsidiary of Taiwan-based Asia Cement Corporation also reduced staff levels at the plant to cope with the extreme weather event.

China: Tangshan Jidong Cement’s operating income rose by 3% year-on-year to US$2.44bn in the first half of 2022 from US$2.36bn in the same period in 2021. However, its net profit fell by 7% to US$165m from US$178m. Its sales volumes of cement and clinker dropped by 20% to 38.4Mt from 48Mt. It has a reported clinker and cement production capacity of 110Mt/yr and 176Mt/yr respectively. The cement producer said that demand for cement was weak, especially in April and May 2022, with no seasonal rebound. It blamed its falling profits on geopolitics, coronavirus and a downturn in the real estate sector.

China: Dongwu Cement recorded consolidated sales of US$25.9m in the first half of 2022, down by 26% year-on-year from US$34.8m in the first half of 2021. The company’s loss was US$2.54m, compared to a US$3.76m profit in the previous period. At 30 June 2022, Dongwu Cement’s cement segment’s borrowings were US$14.8m, down by 4.5% from US$15.5m at the beginning of the year.

The larger cement producers in China have published their half-year financial results and the numbers are looking grim. Starting with data from the National Bureau of Statistics of China, cement output in the country fell by 14.5% year-on-year to 979Mt in the first half of 2022 from 1.14Bnt in the same period in 2021. This is the lowest first half output figure since 2012. The decline on a monthly basis started in May 2021 and has carried on consistently since then. Rolling cumulative annual output hit a low of 2.18Bnt in July 2022, the lowest figure since at least the start of 2019 and well before the coronavirus pandemic started.

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China.

The financial figures from the cement producers have mostly followed this trend. Of the companies covered here, Anhui Conch’s drop in sales revenue was the most distinct at 30% year-on-year to US$8.14bn. However, Jidong Cement actually managed to increase its revenue and Huaxin Cement’s decrease was fairly small, possibly due to its growing stable of overseas projects. None of these companies could avoid falling cement and clinkers sales volumes though. Again, Anhui Conch is the outlier here with a larger fall in sales volumes proportionally at nearly 40% compared to around 20% for the rest. Chen Bolin, the deputy secretary-general of China Cement Association (CCA), told the 21st Century Business Herald newspaper that of the 20 or so listed cement companies that have published their half-year reports by the end of August 2022, more than half had reported falling sales revenue and net profit and only one company had managed to increase its net profit.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports. Note: Cement revenue shown only for CNBM & Taiwan Cement.

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.

The financial reports from the Chinese cement companies detailed here have been fairly light on the reasons for the current state of the sector. Repeated coronavirus outbreaks, instability in the real estate market, a lack of funding for infrastructure projects, growing energy and raw materials costs, pressure on prices and a generally weak economy have all been blamed for the situation. Media channels outside of China have continued to scan the country’s real estate sector for signs of collapse following Evergrande’s problems in 2021. However Chen Bolin diplomatically held back by describing the real estate market as not yet stabilised and a drag on cement demand. Instead he hoped that large-scale infrastructure projects would offer some form of relief.

One last point to note, that both the CCA has made and could be seen in some of the company reports, is that some of the Chinese cement companies are already starting to diversify their businesses. This is in parallel to what some of the larger western-based multinational cement producers have also been doing in recent years with forays into concrete, light building materials and construction chemicals. CNBM already has large concrete, light building materials and engineering subsidiaries. However, Huaxin Cement and Anhui Conch have also started to branch out recently into aggregates, concrete and new energy generation, in the case of the latter company. Things may get worse before they get better, especially depending when or if the Chinese government decides to act on the real estate market. However, whatever kind of adjustment the cement sector may face, there are some signs present already of what some of the companies may do next.

China: CNBM has blamed declining sales of cement on repeated coronavirus outbreaks, a decline in the real estate market, lack of funding for infrastructure projects and a generally weak economy. Its cement sales revenue fell by 10% year-on-year to US$7.80bn in the first half of 2022 from US$8.65bn in the same period in 2021. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 39% to US$1.72bn from US$2.82bn. Cement and clinker sales volumes decreased by 17.8% to 128Mt and 14.6% to 18Mt respectively. Sales volumes of concrete decreased by 24% to 39.5Mm³.

Overall, the group’s revenue fell by 11% to US$15.8bn in the first half of 2022 from US$17.6bn in the same period in 2021. Its adjusted EBITDA dropped by 23% to US$2.87bn from US$3.71bn.