Displaying items by tag: Costa Rica

Costa Rica: Tang Heng, the Chinese Ambassador to Costa Rica, has confirmed that Sinocem China has ended all commercial relations with Sinocem Costa Rica. The statement was made due to an investigation into alleged irregularities and lobbying involving the owner of Sinocem Costa Rica, Juan Carlos Bolanos, and certain officials of state-owned bank Banco de Costa Rica, according to La Nación newspaper. According to Heng, Hangzhou Sinocem Building Materials said in July 2017 that Sinocem China had stopped supplying cement to Sinocem Costa Rica as the latter allegedly purchased cement from other Chinese cement suppliers and continued to use the Sinocem brand on packaging without its permission.

Costa Rica: Mexico’s Cementos Fortaleza and fibre cement producer Plycem will inaugurate a new plant at Barranca de Puntaneras by the end of September 2017. The two companies are part of Elementia, according to the La Nación newspaper. No value for plant has been disclosed.

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.

Costa Rica: According to a report released by the government trade promotion agency Procomer, imports of cement into Costa Rica expanded from 10,418t in 2014 to 107,294t in 2016, representing a growth of 930% in only two years. Approximately 97% of the 2016 figure corresponds to cement imports from China, which is now the main origin of imported cement in the country.

In value terms, cement imports reached US$18.3m in 2016, only 5.4 times more than in 2014. Cemex and Holcim are the main cement manufacturers operating in Costa Rica. If the import volumes and prices are to be taken at face value, domestic plants would appear to be under increasing price pressure from the imported cement from China.

Colombia: Cemex Latam Holdings' consolidated net sales fell by 11% year-on-year US$394m during the second quarter of 2015. The decline was attributed to currency fluctuations and lower sales. Operating earnings before interest, taxes, depreciation and amortisation (EBITDA), also adjusted for the currency fluctuations, increased by 2% year-on-year during the second quarter of 2015.

Operating EBITDA in Colombia decreased by 23% year-on-year to US$68m in the second quarter of 2015, with a 24% decline in net sales to US$198m. Adjusting for currency fluctuations, EBITDA in Colombia grew by 2% year-on-year. Consolidated cement volumes decreased by 3%, while ready-mix and aggregates volumes increased by 6% and 3%, respectively. In Panama, operating EBITDA fell by 3% to US$33m during the quarter and net sales grew by 9% to US$79m. Cement, ready-mix and aggregates volumes increased by 4%, 10% and 21%, respectively, year-on-year. In Costa Rica, operating EBITDA grew by 5% year-on-year to US$20m and net sales increased by 15% to US$46m. Volumes for the three main products grew at double-digit rates during both the second quarter and the first half of 2015. In the rest of Cemex Latam Holdings' region, net sales during the quarter reached US$76m and operating EBITDA fell by 7% year-on-year to US$20m.

In the first six months of 2015, Cemex Latam Holdings'cement volumes declined by 11%, while ready-mix and aggregates volumes increased by 4% and 2%, respectively. Compared with the first quarter of 2015, cement, ready-mix and aggregates volumes increased by 11%, 8% and 6%, respectively.

"We are pleased with the continued positive volume performance of our operations in Panama, Costa Rica and Nicaragua, where we are improving our volume guidance for the year. Additionally, our cement volumes in Colombia increased by 11% during the quarter compared with the first quarter of 2015," said Carlos Jacks, CEO of Cemex Latam Holdings.
"This year our priority is to continue working persistently towards improving our profitability, which has been affected by the depreciation of the Colombian Peso. Additionally, we continue to evolve as a company into a more customer-centric organisation, offering differentiated construction solutions to our specific customer segments."

Costa Rica: Amid the controversy generated by changes in the rules for marketing cement in Costa Rica, Sinocem has announced that the first Chinese import and sale of cement in the country generated 'good results.' It stated that it will import more. The company says that the first batch was sold in December 2014 at a price 20% lower than the competition.

Costa Rica: According to Central America Data, complaints have been made about the differences in the use by dates on cement bags misleading consumers. The cement bags in question were imported from China under the brand name Sinocem.

A label at the top of the sacks in question states that the packing date was 5 January 2015 and recommends its use by 5 July 2015. Another label on the same sack indicates that the product must be used within 45 calendar days following the date of packing, which would mean that the product has already expired.

The Consumers Association of Costa Rica has filed a complaint with the National Consumer Commission at the Ministry of Economy, Industry and Commerce over the imported Sinocem cement due to problems in product labelling that affect consumers.

"There is a deep concern that there is no clarity over use by dates for cement, which could even cause risk, because we do not know if the adhesives work well or even the exact date of the packing. With this cement being sold like this, consumers should be careful," said Gilberto Campos, vice president of the Consumer Association of Costa Rica.

Costa Rica: According to La Nacion, the Costa Rican technical standards institute, Inteco, has opened a public consultation process concerning new technical guidelines for both imported and locally-produced hydraulic cement. The agency seeks to establish a series of standards and guidelines for cement and its components.

Following a request from the Ministry of Finance, Industry and Trade (MEIC), Inteco launched a process to establish the new guidelines in 2014. The consultation process will be open until 27 July 2015 and will give players in the local cement market the opportunity to express their opinions. Cement producers Holcim and Cemex, as well as cement importer Sinocem, previously expressed their opposition to the MEIC's plans to introduce new certification requirements for cement to be approved by an internationally-accredited laboratory.

Costa Rica: Cemex and Holcim have appealed against the Ministry of Finance, Industry and Trade (MEIC) over new certification requirements. Cemex has explained that its cement has been accredited since 2005 and it presented all necessary documentation on 10 April 2015 following a request from the MEIC. Cemex believes that government authorities have made a series of errors in their procedures and asked for the necessary corrections, according to local media.

Holcim Costa Rica has made assurances that it adheres to technical requirements and every year the national technical standards institute (Inteco) certifies its cement. Holcim will appeal against the government decision for new certification. Cement importer Sinocem has not appealed against this resolution, so it will have to present its certification in six months.

Costa Rica: Costa Rica's national emergency commission (CNE) has prohibited Grupo JCB from using cement imported from China for the construction of a dam on the Nosara River in Nicoya. The works are being carried out by the CNE in order to contain water overflowing from the river.

The CNE has announced that the product does not have the certification of quality requested in the Technical Regulation for hydraulic cement. This document outlines rules to guarantee the durability of cement used in the country, as well as the safety of people who come into contact with the material during the construction process. CNE spokesperson Reinaldo Carballo said that this move does not signify the paralysis of the US$1.72m project, which is 72% complete.

The owner of Grupo JCB, Juan Carlos Bolanos, has expressed surprise at the decision and has assured that the cement does meet the requirements established by laboratory studies.