Displaying items by tag: Government

Russia: Vostokcement Group has warned both federal and regional government that its on-going legal troubles will delay infrastructure projects in the Far East district, including the Zvezda shipyard, Vostochny Port coal terminal, Sila Sibiri gas pipe and a bridge over the River Amur. It said it also might be unable to pay up to 5000 workers. The cement producer previously said that office of the Prosecutor General of Russia had seized the financial accounts at Spasskcement, Teploozersk Cement and other subsidiaries in relation to a civil legal case where the defendants are trying to recover Euro44.5m.

Colombia: Cemex Colombia has been accused by the news division of Caracol Televisión of allegedly making payments to the Juan Manuel Santos presidential campaign in 2014 in return for preferential treatment on construction contracts. Santos subsequently won the 2014 presidential election and served until 2018.

Sources, quoted by Noticias Caracol from a US police investigation into the company, say that it paid US$1m in cash and contributed cement to local candidates. They say that the local candidates then sold the donated cement at a discount for additional campaign funds. The Office of the Attorney General of Colombia is also investigating the matter. The report by Noticias Caracol follows an expose by Semana magazine.

The Malaysian Competition Commission took the rather ominous step this week of saying it was taking extra care to watch the cement industry. Ouch! It said that had taken note of recent price rises by both cement and concrete producers and that it was working with the Ministry of Domestic Trade and Consumer Affairs as it met with the sector. It also said it was well aware of the recent merger between YTL and Lafarge, “...which had led to the market being more concentrated at the upstream and downstream level.”

The background here is that at least one unnamed cement producer announced a price hike of 40% in mid-June 2019. End-users panicked and the local press took up the story. The Cement and Concrete Association of Malaysia then defended price rises in general, when it was asked for comment, due to all sorts of mounting input costs. Although, to be fair, to the association the Malaysian Competition Commission acknowledged the price pressures the industry was under due to input costs in a report it issued in 2017.

Back in the present, the government became involved and Saifuddin Nasution Ismai, the head of the Domestic Trade and Consumer Affairs Ministry, calmed the situation down by saying that producers had agreed not to raise their prices after all and that any future planned price adjustments would be ‘discussed’ with the authorities first. Finance Minister Lim Guan Eng then followed this up with calls for an investigation into prices in Sarawak state in Eastern Malaysia. In response, Suhadi Sulaiman, the chief executive officer (CEO) of CMS Cement, batted this straight back by blaming industry mergers in Peninsular Malaysia and saying the company had no plans ‘anytime soon’ to raise its prices.

As the Malaysian Competition Commission kindly pointed out, this entire furore took place about a month on from the competition of LafargeHolcim’s divestment of its local subsidiary to YTL. The commission agreed to the acquisition of Lafarge Malaysia by YTL knowing that it was giving YTL ownership of over half of the country’s production capacity. With this in mind it is unsurprising that the commission might have wanted to look tough in the face of even a whiff of market impropriety, whether it was real or not.

The problem, as the Malaysian Competition Commission alluded to in its statement, is that the local industry suffers from production overcapacity. On top of this local demand has been contracting since 2015. The country has 11 integrated cement plants with a production capacity of 27.1Mt/yr, according to Global Cement Directory 2019 data. Production hit a high of 24.7Mt in 2015 and then fell year-on-year to 18.8Mt in 2017. Data from the Cement and Concrete Association of Malaysia painted a worse picture taking into account both integrated and grinding capacity reporting an estimated production capacity utilisation rate of just 59% in 2016. Lafarge Malaysia reported a loss before tax of US$97.7m at the end of 2018 as well as declining revenue. Shortly thereafter it announced it was leaving the country, as well as neighbouring Singapore.

In theory the buyout by YTL should have been one step closer to solving Malaysia’s overcapacity woes as either it gained synergies through merging the companies or shut down some of its plants. Certainly, the system appears to be working at some level, as the proposed 40% price rise hasn’t happened. Yet, if the government is reacting to voters rather than the market it could prolong the capacity-demand gap indefinitely. Under these conditions LafargeHolcim’s decision to exit South-East Asia may prove prescient.

Malaysia: Suhadi Sulaiman, the chief executive officer (CEO) of CMS Cement, says that the company does not intend to increase its prices ‘anytime soon.’ He said that any potential enquiry into a differene in prices between Peninsular Malaysia and Sarawak would show that the cement producer had not riased its prices since early 2016, according to the Borneo Post newspaper. He made the comments in a reponse to a call by the Finance Minister Lim Guan Eng for such an enquiry.

“We welcome the enquiry for two reasons... Firstly, it will show that the disparity in prices is purely due to the recent aggressive price war, which led to industry mergers and acquisitions in Peninsular Malaysia,” said Suhadi. “Secondly, an enquiry of this nature will also serve to show once and for all that Sarawak is not, and never has been, a cement monopoly.”

Lim said previously that an investigation was necessary to determine whether cartel-like behaviour was responsible for higher cement prices in Sarawak. He noted that the price was ‘significantly’ higher in the state than in Peninsular Malaysia.

Bangladesh: The Bangladesh Cement Manufacturers Association (BCMA) says a new import tax on raw materials and a distribution levy will increase the price of cement and place a burden on the construction industry. The new duties will add 8% to the existing 15% of value-added tax (VAT) already liable on raw materials, according to the Daily Sun newspaper. The association is lobbying against the government’s proposed budget for 2019 – 2020. It has described the new budget as business friendly but not favourable for the cement sector. Any additional taxes are also expected to worsen the effect of growing international prices of raw materials.

Rwanda: South Africa’s PPC is considering buying the government’s stake in Cimerwa. Cimerwa chief executive Bheki Mthembu said that PPC Group is performing a share valuation excersise, according to the East African newspaper.
Soraya Hakuziyaremye, the Minister of Trade and Industry, announced the sale in mid-June 2019, after the divestment was first proposed in March 2019.

PPC already owns a 51% stake in the cement producer. The government owns a 16.5% stake and other shareholders include the Rwanda Social Security Board with 20.2%, Rwanda Investment Group with 11.5% and Sonarwa Group 0.8%. The entire 49% stake is currently for sale. Potential buyers have until 5 July 2019 to register their interest.

Vietnam: Xuan Khiem Group is seeking government approval to build a US$214m cement plant in Hoa Binh province. The Xuan Son plant will have a production capacity of 2.3Mt/yr and it is scheduled to be completed in 2020, according to the Viet Nam News newspaper. The People’s Committee of Hoa Binh province and Xuan Khiem Group signed a memorandum of understanding to build the plant in late 2018.

Vietnam: Vicem Hoang Mai plans to build a 3Mt/yr cement plant in Nghe An province with an investment of US$286m. The unit will be built in the province’s Hoang Mai 2 Industrial Zone, according to the Vietnam Economic News newspaper. The project was approved in principle by the Provincial People's Committee in May 2019. It is part of the country’s cement industry development plan in 2030.

Ethiopia: A new bag-packing unit at Dangote Cement Ethiopia’s Mugher plant in Oromia is unable to start operation due to a lack of raw materials. The US$20m polypropylene bag plant was completed in April 2018 but it is restricted by government controls on foreign currency that are limiting its import of input materials, according to the Reporter newspaper. The unit can produce up to 120 million bags per year.

The cement producer has also suspended plans to build a second 2.5Mt/yr production line at the plant. An agreement was signed with China’s Sinoma International for the project but it has since been abandoned due to a shortage of foreign currency, a lack of electrical power and general security issues. Deep Kamara, the country manager of Dangote Cement Ethiopia, was killed in an gun attack in mid-2018. No one has been arrested in relation to the murder.

Argentina: Loma Negra has signed an agreement with the Asociación Obrera Minera Argentina (AOMA) union and the government to keep the Barker cement plant open. The deal follows three months of negotiations, according to La Nacion newspaper. The cement producer wanted to reduce the number of shifts at the grinding plant. It previously said it had started to close the plant in early-June 2019. The plant will continue to operate with 160 staff working a reduced workload amongst other concessions.