Displaying items by tag: Government
Update on Egypt, May 2021
12 May 2021Reporting from Egypt this week suggests that the government may be finally taking action to aid the country’s beleaguered cement sector. Sources quoted by Reuters indicate that a production cut of at least 14% has been proposed. One of the cement industry sources broke it down into a 10.5% baseline reduction with a further 3.7% reduction per production line at a cement plant with an additional cut of 0.7% per year of operation. The Ministry of Trade and Industry has declined to comment on the story.
Graph 1: Cement production and capacity utilisation in Egypt. Source: Cement Division of the Building Materials Chamber of the Federation of Egyptian Industries.
Graph 1 above shows the key problem facing the sector: cement production has fallen each year since 2016. Added to this, local capacity utilisation took a knock when the 13Mt/yr government/army-run El-Arish Cement plant at Beni Suef opened in 2018. Before it opened the natural utilisation rate was around 80%. By 2020 it had sunk to 60%.
The coronavirus pandemic was another problem that the building materials market didn’t need and the last time this column covered Egypt (GCW 475), HeidelbergCement was restructuring its local subsidiaries in the country. Most producers were holding on for better days in the future but hoping for some form of government intervention such as production limits or an export subsidy programme. Meanwhile, analysts have been waiting for divestments. However, the prospect of the situation becoming worse was also present, in the guise of the Egyptian Cement Group’s new integrated 2Mt/yr plant, scheduled to open at Sohag later in 2021. Since then there’s not been much of a change until now.
Some very rough calculations by Global Cement suggest that the alleged government measures could have created an artificial utilisation rate of 78% in 2020 before the age of the plants was taken into account. For example, the El-Arish Cement plant with its six production lines would potentially see its production cut by around 33% and capped at 8.7Mt/yr. In theory a measure like this could better share out the market between the smaller producers or those with less market share. However, how this would play out with actual plant running costs or existing market share is unknown, although, as mentioned above, some of the multinational producers have been publicly calling out for these kinds of controls.
Playing around with the proposed caps could potentially create some absurd situations. For example, if a single line plant had been running for over 120 years (!) then it wouldn’t be allowed to produce any cement at all. It is lucky then that the earliest plant in the country opened in 1911 and it’s likely long gone. It’s a silly example, but the point is, if production limits do come in, there are likely to be winners and losers. The question for the local producers then is whether a system like this would be better than the current situation.
Egypt: The Egyptian government has reportedly proposed that cement companies cap production by at least 14%. Multiple sources quoted by Reuters reveal that a formula was discussed in April 2021 proposing that cement plants cut production by a base amount of 10.5%. An additional cut of 3.7% would then be made for each production line a plant has and another 0.65% for each year they have been in operation. However, it is unclear how the age of a plant or production line would be determined. The Ministry of Trade and Industry has not commented on the story.
The measures have been suggested in order to help the sector cope with falling consumption and production overcapacity. Cement sales fell by 5% year-on-year to 41.7Mt in 2020 from 43.8Mt in 2019. However, two of the cement executives quoted said that the proposed cuts seemed unfair on multinational companies like their own that had older plants.
Dzata Cement bagging plant to open in mid-2021
12 May 2021Ghana: Dzata Cement, a 1.2Mt/yr bagging plant based in Tema, plans to start commercial production by June 2021. The unit cost US$100m and includes a two line bagging and packaging equipment supplied by Germany-based Haver & Boecker, according to the Ghana News Agency. It will use imported cement. Proposed later phases at the site will see an upgrade in bagging operations to 2.4Mt/yr and the eventual installation of two 3Mt/yr vertical roller mills. As a safeguard against surges of cement imports the government has also introduced new export and import legislation requiring licenses for imports from outside the Economic Community of West African States (ECOWAS) region.
The plant’s founder Ibrahim Mahama is the brother of former Ghanian president John Dramani Mahama. In November 2020 the Ghana News Agency reported that Kofi Amoabeng, the former chief executive officer of UT Bank, said that loans made to companies including Dzata Cement had contributed to the bank being declared insolvent in 2017.
New Zealand: The New Zealand Ministry of Finance plans to launch a commission to investigate high building materials prices. The New Zealand Herald newspaper has reported that finance minister Grant Robertson said that New Zealanders pay too much for building materials. Robertson indicated that any probe would look into cement, among other building materials. The Productivity Commission previously estimated that average national building materials prices are 20 – 30% higher in New Zealand than in Australia.
North Korea: The North Korea government says that it will supply 10,000t/yr of cement to every city and county in the country. The new target will help to fulfil the aims of the January 2021 Five Year Plan, under which the state aims to build 10,000 apartments/year in Pyongyang and 5000 apartments/year in Komdok. The 38 North project has reported that in order to realise this vision, it plans to establish 8.0Mt/yr of new capacity via upgrades and new projects by January 2026.
In March 2021 a North Korean delegation visited a Chinese cement plant to learn about modern cement production.
Government considering sale of Oman Cement
05 May 2021Oman: The government is reportedly considering selling its majority stake in Oman Cement. Unnamed sources quoted by Bloomberg say that the authorities have been discussing the matter with financial advisors but that no final decision has been reached. The government owns a 54% stake in the cement producer through the Oman Investment Authority.
In separate reporting, Oman Cement Company has postponed its proposed US$250m Duqm cement plant project while it confirms the availability of fuel. In March 2021 the cement producer issued a tender for a related power plant project, according to the Muscat Daily newspaper. The proposed plant will have a clinker production capacity of 5000t/day.
Kazakhstan: The Technical Regulation and Metrology Committee (KTRM) of the Ministry of Trade and Integration is preparing to introduce new standards for imported cement. The new rules will come into place in July 2021, according to the Kazakhstan News Agency. Following their introduction all participants in the cement industry market, including importers, will be required to perform compulsory qualification confirmation in accordance with the national standards. The KTRM has also started setting up a testing laboratory with a site granted accreditation in late April 2021. The Ministry of Integration and Integration and the Kazakhstan Cement and Concrete Manufacturers Association (QazCem) have also held a meeting recently to discuss key industry concerns and the measures required to combat the spread of counterfeit cement products.
Belarus: The Belarus Energy Minister Viktor Karankevich has met with energy research institute Belgiprotopgaz to discuss the latter’s plans for the transition to the use of peat as fuel for cement production. Business World Magazine has reported that the country launched a major modernisation of peat production for 2021 – 2025 in late 2020. If successful, the domestically produced resource will replace imported natural gas in cement kiln lines.
Australia: Adbri says that it expects growth in domestic cement demand to continue beyond a present residential construction boom. The Australian Financial Review newspaper has reported that Adbri chief executive Nick Miller believes that house building has undergone a nationwide ‘pull-forward’ in the wake of the coronavirus outbreak. The producer says that the government’s planned US$116bn infrastructure spend would insure a medium-term increase in cement demand. It gave as an example the Western Sydney Aerotropolis, which will require 500,000m3 of concrete. The company currently derives 45% of sales from non-residential construction.
Republic Cement expects strong growth in the Philippines
30 April 2021Philippines: Republic Cement has said that it expects the cement sector in the Philippines to grow strongly in 2021 following a 10% decline in demand in 2020. Speaking to local press, the company’s president and chief executive officer Nabil Francis said that the drop in demand in 2020 was actually less severe than the expected 15%. He added, “We strongly believe that we will get back to 2019 level in 2021. That means 12% growth compared to 2020.” Francis added that the industry is expected to sell 35Mt of cement during 2021. The main driver is the bagged cement segment, with infrastructure and the non-residential, likely to grow less rapidly.
Francis additionally said that he welcomed the Department of Trade and Industry’s investigation into alleged dumping of cement into the Philippines from Vietnam. He said that the imported cement is sold at very low prices, its production having been subsidised by the Vietnamese government. He said the influx of imported cement has injured the local industry.