Displaying items by tag: Sanghi Industries

Tensions have boiled over regarding imports of cement to Kenya in recent weeks as different importers have received opprobrium in the local press. Last week Dangote Cement was attacked for importing cheap cement into the country from Ethiopia, allegedly off the back of a cheap electricity deal. This week, Chinese imports have been in the firing line, following data reportedly seen by the Business Daily newspaper that showed that the value of Chinese cement imports rose tenfold year-on-year in the first half of 2016.

At the heart of these rows lies a strong demand for cement: Kenya had a cement production utilisation rate of 90% in 2015 according to Kenya National Bureau of Statistics (KNBS) data. It produced 6.35Mt in that year and used 5.71Mt for consumption and stocks. Its utilisation rate has been rising steadily since 2012. It was 93% for the first six months of 2016.

Unfortunately for the local producers this kind of demand attracts competition from within and without. Nigeria’s Dangote Cement is planning to build a 3Mt/yr plant at Kitui and Cemtech Kenya, a subsidiary of India’s Sanghi Group, is planning to build a 1.2Mt/yr plant at Pakot.

Local producer ARM Cement reported both falling turnover and a loss for the first half of 2016. It blamed this on increased competition in Tanzania. However, in 2015 it increased its turnover in Kenya by importing clinker over the border from its new Tanga plant in Tanzania. It also noted a ‘competitive landscape’ in Kenya and lamented the effects of currency devaluation on its financies as a whole. East African Portland Cement had a tougher time of it for its half-year that ended on 31 December 2015, issuing a profit warning of a loss and expected reduced profits despite a rise of 12% in sales revenue. By contrast, Bamburi Cement, LafargeHolcim’s subsidiary, reported both increases in revenue and operating profit in 2015. Although it too noted problems with interest rates and currency depreciation in the country during this period.

The focus on Chinese imports follows Chinese contractors winning some of the biggest infrastructure projects in the country. The China Rail & Bridge Corporation (CRBC), for example, is building a railway between Mombasa and Nairobi. The Business Daily newspaper has found data showing that Chinese cement imports worth US$19.8m to Kenya in the first half of 2016 compared to US$1.99m in the same period of 2015. The background to this is that China has more than doubled the value of all of its imports to Kenya since 2011 according to the KNBS. Total import volumes of clinker from all foreign countries increased by 51% in 2015 from 1.31Mt in 2014, the largest increase in at least five years.

If local cement producers are being locked out of supplying these kind of deals no wonder they are getting angry. However, another angle on what’s happening here might be that local producers who are suffering from increased competition, falling prices and a precarious national financial situation are lashing out at the easiest target. The local press doesn’t appear to have criticised ARM Cement for moving its Tanzanian clinker north of the border for example. Likewise, a Bamburi Cement spokesperson previously said that the producer had supplied 300,000t of cement to the rail project since September 2014, earning it nearly US$10m. Kenya needs cement as it builds its infrastructure. Fortunes will be made and tempers will be lost as it does so.

Zuari Cement's ground breaking of a new port-side packing terminal in Kochi, Kerala is the latest Indian cement news story with an eye on the sea. The Italcementi subsidiary's terminal won't be open until 2015 but the move shows that Indian producers are starting to tackle industry over-capacity through shipping lanes.

The Italcementi subsidiary holds two integrated cement plants and a grinding plant in Andhra Padesh and Tamil Nadu, two of India's biggest cement-producing states. In 2013 Italcementi reported that cement consumption fell for the first time in 10 years. Although Italcementi's cement and clinker sales rose by 1.6% in India in 2013, its revenue fell by 14% to Euro214m. Profit indicators like earnings before interest, taxes, depreciation, and amortisation (EBITDA) also fell. Targeting Kerala, one of the country's smallest cement producing states (0.6Mt/yr in 2013), makes sense.

Zuari Cement isn't the only Indian cement producer with its eye on shipping or on Kerala. At the end of March 2014, Gujarat producer Sanghi Industries announced plans to invest US$25m in ships and sea terminals. It plans to acquire six vessels in the next five years. It is also in the process of setting up terminals at Navlakhi port in Gujarat and at Mumbai port in Maharashtra.

Sanghi has stated that its aims are to find new markets, reduce fuel costs and increase its distribution networks. In an interview with Alok Sanghi, the director of Sanghi Cement, for a forthcoming issue of Global Cement Magazine, Sanghi revealed that Kerala is one of the four markets the producer focuses on within India (alongside Gujarat, Rajasthan and Maharashtra).

Neighbouring Pakistan is no stranger to exporting its cement around the world. Frequent complaints from east and south African press and cement producers attest to this. However, this week's story about plans to build the country's first 'dirty cargo' terminal at Port Qasim, Karachi marks a change from the normal narrative.

According to a Pakistan cement producer who Global Cement interviewed earlier in 2014, coal is the most common fuel used to fire cement kilns following a shift from gas in recent years. Subsequently coal prices rose, leading to higher cement prices in the country. A new terminal with the capacity to handle 12Mt/yr of coal (growing to 20Mt/yr in a second phase of the build) could certainly help cut input prices for the industry.

The producer also mentioned that most of the coal that Pakistan currently uses is imported from Indonesia and South Africa. So, indirectly, the South African coal industry appears to be making money helping to make Pakistan cement that eventually arrives back in South Africa to undercut local cement producers! They say that market always finds a way. Ships certainly help.