Displaying items by tag: Shortage

Sri Lanka: Lanwa Sanstha Cement has successfully commissioned its 2.8Mt/yr Hambantota grinding plant in the Mirijjawila Export Processing Zone. Daily News (Sri Lanka) has reported that the facility is equipped with two bridge ship unloaders and an automated stacker reclaimer yard. It will produce the company’s full range of cements, including ordinary Portland cement (OPC), Portland composite cement (PPC) and blended hydraulic cement (BHC) catering to the rising local demand from landmark projects including the Port City and the network of expressways.

Russia made imports easier last week. At the end of January 2022 an order from Rosstandart, the national standisation agency, relaxed inspection controls allowing for simpler imports from countries outside the Eurasian Economic Union (EAEU). Previously each such batch required a 28 day inspection period. This has now been dropped to encourage more imports of cement. Deputy Industry and Trade Minister Viktor Yevtukhov explained the reasoning behind the measure to InterFax, “In order to avoid problems in the domestic Russian cement market in the future, it is necessary to spur competition. It will balance the prices for this basic building material and will restrain their growth in case of such risks.”

Some idea of the situation facing the Russian cement market at the moment can be gleaned from market data supplied by CM Pro. Production rose by 7% year-on-year to 56.4Mt in the 11 months to November 2021. Imports rose by 26% to 1.6Mt at the same time. The Ministry of Industry and Trade has attributed this to a construction boom created by growth in both government-funded infrastructure projects and domestic housing. It also noted a local shortage and price increases in the Central Federal District in the autumn of 2021, although it said it redistributed cement from other regions to remedy the situation. This imbalance in the country’s main cement producing and consuming region, including Moscow, can also be seen in the figures. Production was about 2Mt below consumption in this area in 2019 and 2020. Yet so far, to November 2021, this gap grew to 2.7Mt. At the same time the price of cement reportedly jumped by 20% from November 2020 to December 2021.

Graph 1: Cement production in Russia, 2015 – 2021. Source: CM Pro and estimate from Global Cement.

It has been reported that the Ministry of Industry and Trade has also been wondering publicly why a study conducted in 2021 found that the national cement sector had an apparent operating capacity of 65Mt/yr compared to a total production capacity of 105Mt/yr, including mothballed and inactive plants and production lines. In other words the sector has been operating at a 62% production utilisation rate and the government is trying to coax it higher by opening up imports. And just to make sure that there was no confusion on the matter, Yevtukhov added, “I am sure that if the domestic producers will cope with the task of increasing the real volume of cement production and will not allow prices for their products to increase above the rate of inflation, the market will self-regulate, and additional imports of cement to Russia (which are traditionally small) will not be needed."

Given the country’s large size, imports seem to be mainly a threat to producers in the big population centres around Moscow and the Volga with good international transport links. Producers appear to have received and understood the message from the government as they have pledged to increase real operating capacity by 3 – 5Mt. The bear in the room for both Russian and European cement producers though is what happens in Ukraine in 2022. With North Atlantic Treaty Organization (NATO) members threatening economic sanctions and Russia supplying a significant share of Europe’s gas supply, any progression from the current rhetoric could cause discomfort to markets in both Russia and Europe. Turkish cement exporters, manufacturing in a NATO member country and hoping to take advantage of increased exports to Russia, could be in a particular bind if events heat up. All of this indicates that Smikom picked an interesting time to buy Russia’s largest cement producer, Eurocement, back in mid-2021. There’s an ongoing construction boom but also risks aplenty.

With apposite timing, LafargeHolcim Russia announced this week that it was going to reopen its integrated Voskresensk cement plant near Moscow. The unit was originally stopped in 2016. Now it plans to spend Euro23m on restarting the plant and building a dry construction mix unit at the site. Who says big government doesn’t work?

Russia: The Federal Technical Regulation and Metrology Agency (Rosstandart) has relaxed import rules for cement originating from outside the Eurasian Economic Union (EAEU). Under the new regulations the 28 day inspection period has been cut, according to InterFax. The Industry and Trade Ministry has taken the action to cope with a rise in cement consumption created by both government-backed infrastructure projects and domestic housing. It added that the Central Federal District experienced a shortage in the autumn of 2021 with associated price rises.

"We expect that the reduction of the procedure's duration may encourage importers of cement to increase the volume of its import into the country. And this, in turn, should in fact increase competition in the market and stabilise prices. This, I repeat, is the most important thing that needs to be achieved in the domestic building materials market for its balanced operation," said Deputy Industry and Trade Minister Viktor Yevtukhov.

Sri Lanka: Tokyo Cement has commissioned its new 0.45Mt/yr cement terminal at the Port of Colombo in Western Province. The company invested US$12.3m in the facility. It is equipped with three 6000t cement silos. The Daily News newspaper has reported that it will increase the company’s total import capacity to over 1Mt/yr from 0.6Mt/yr. Tokyo Cement says that this will ensure an uninterrupted supply of cement to customers in Western Province.

The cement producer also started work on a 1Mt/yr upgrade project at its Trincomalee plant in November 2021. The work is scheduled for completion in early 2023. Once finished the cement producer will have a total production capacity of 4Mt/yr.

Sri Lanka: Insee Cement says it has eased a local cement shortage by operating at maximum production capacity and optimising its distribution channels. It reported a record output of 0.7Mt for the third quarter of 2021, according to the Colombo Post newspaper. The company also introduced two new import ships to help the situation.

Gustavo Navarro, the chief executive officer of Insee Cement Sri Lanka said, “We continued to fully support government regulations and industrial policies to first stabilise the market, and were able to deploy our island-wide distribution and dealership network to ensure an uninterrupted supply across the island. The loyalty and patience of our customers gave us that extra encouragement we needed to overcome the challenge.”

Zimbabwe: Industry and Commerce Minister Sekai Nzenza says that the government will continue to issue cement import permits until local production returns to normal. The situation has been blamed on a breakdown at Lafarge Zimbabwe’s cement plant, according to the Herald Zimbabwe newspaper. The company is importing cement from Zambia to compensate. A roof collapse over the mill at Lafarge Zimababwe’s Manresa plant was reported in October 2021.

Malaysia: The Ministry of Domestic Trade and Consumers Affairs has blamed a shortage of cement in the state of Sarawak, Borneo on high demand and a lack of shipping. State director Datuk Stanley Tan noted that many major construction projects had restarted work in 2021 following disruption caused by the nationwide movement control orders (MCO) caused by the coronavirus pandemic in 2020, according to the Malay Mail newspaper. He added that imports of raw materials for cement production had also been affected due to the limited number of ships that could cross the South China Sea.

The local government plans to work with local producer Cahya Mata Sarawak Berhad (CMS) on solving the problem. Together they hope to end the shortage of cement by December 2021.

Iceland: Sementsverksmidjan has decided to sell cement from competitor Aalborg Portland Islandi due to a cement shortage in the country. It said it wants to help the local supply situation after seeking guidance from the local competition authority. Rival company Steinsteypan has made a formal complaint to the regulator. Sementsverksmidjan, a cement importing subsidiary of HeildebergCement, says that it also sold cement supplied by competitors earlier in the year.

The news from Sri Lanka this week is that Lanwa Sanstha Cement is preparing to commission a new 3Mt/yr grinding plant in January 2022. The timing is apposite given the current shortages in the country.

Some inkling of local problems can be seen in the cement news over the last few months. In August 2021 Insee Cement said that it was operating at full capacity utilisation across its network. Later, at the end of October 2021, the government intervened in the import market by opening up the use of Trincomalee Harbour. This was followed by the nation’s other main producer, Tokyo Cement, announcing that it too was operating its grinding plant at Trincomalee at full capacity. It also said that, at the government’s behest, it was going to increase its import rate.

The new Lanwa Sanstha Cement unit originally came to international attention when Germany-based Gebr. Pfeiffer revealed details in 2019 of an order of two MVR 5000 C-4 type roller mills from Onyx Group. Lanwa Sanstha Cement has since said that the plant will cost US$80m. Once operational the unit at the Mirijjawila export processing zone of the Hambantota International Port will manufacture ordinary Portland cement, Portland slag cement, Portland limestone cement and blended hydraulic cement. A further equipment order for the project was announced this week when the Chinese-run Hambantota International Port Group signed an agreement with Lanwa Sanstha Cement to build a conveyor from the port to the plant. The deal also includes two ship unloaders.

Other new cement units on the horizon include an integrated plant project from Nepalese businessman Binod Chaudhary that was announced in mid-2019. The US$150m plant was planned for Mannar in the north of the island. However, not much more has been heard since then. Chaudhary’s company CG Cement operates a grinding plant in Nepal. More recently, in October 2021, local press reported that the government had tentative plans to build a new plant at the old state-owned Kankesanthurai site, also in the north. The plant was originally built in the 1950s and production ran until 1990 when the military took over the unit amid the then on-going civil war. Earlier in 2021 the government agreed to sell off the machinery at the site. However, much of it has gone missing in the intervening period! Proposals to revive the plant have circulated since the mid-2010s.

Graph 1: Cement production and imports in Sri Lanka, 2015 – 2021. Estimate for 2021 based on January to August data. Source: Central Bank of Sri Lanka.

The Sri Lankan cement market has faced a tough time over the last two years. First, total local production and imports fell by 11% year-on-year to 7.2Mt in 2020 from 8.1Mt in 2019. Then, imports fell by 18% year-on-year to 1.83Mt from January to August 2021 from 2.24Mt in the same period in 2020. Local production has more than compensated though, leading to growth in the total so far in 2021. There have been general economic reasons for why the ratio of imports to local production has fallen in 2020 and 2019 and this is explained in more detail below. Yet, imports hit a high of 5.68Mt in 2017 and have been declining since then both in real terms and proportionately.

Insee Cement summed up the local situation in its third quarter results by blaming cement shortages on input cost rises, supply chain disruption and negative exchange rates effects. The first two problems are issues everywhere around the world as economies speed up again following the coronavirus lockdowns but the last one is more specific to Sri Lanka. The country has faced a recession in its economy because the pandemic shut down tourism. The government initially introduced import limits to try and control foreign currency reserves. It then imposed price controls on essential foods and commodities, including cement, in September 2021 to try and stop shortages but this plan was abandoned a month later. Focusing on cement, some idea of the input cost inflation facing the sector can be seen in Tokyo Cement’s latest quarterly financial results. Its cost of sales rose by 72% year-on-year to US$59.5m in the six months to end of September 2021 from US$34.5m in the same period in 2020.

Lasantha Alagiyawanna, the State Minister of Consumer Protection, said at the end of October 2021 that it would take three weeks to import the required cement into the country. Whether this is enough to end the shortage remains to be seen. Yet, whatever does happen, it is likely that more production capacity from the likes of Lanwa Sanstha Cement and others will be welcome in 2022 and beyond.

Iran: The Cement Industry Employers' Association has confirmed that cement plants will store heavy fuel oil to cope with a potential shortage of gas in the winter. The association told the Iranian Labour News Agency that plants had been granted permission to store up to 15 days worth of heavy fuel oil following negotiation with the Ministry of Oil. Fuel storage is a sensitive issue locally due to the potential for misuse in the black market. The cement sector faced gas and electricity shortages earlier in 2021.