Displaying items by tag: Tanzania
Predicting the future of cement markets
14 December 2016This week the US Portland Cement Association (PCA) revised down its forecast for the rise in cement consumption in 2016 to 2.7% from 4%. It also lowered its prediction for 2017, blaming political uncertainty around the presidential election, inflation and slower construction activity. Global Cement Magazine editorial director Robert McCaffrey pointed out on LinkedIn that he was surprised by the revision down in 2017 given the rhetoric by president-elect Donald Trump to invest in large infrastructure projects.
Clearly the PCA is playing it cautious as a politically unknown entity, Trump, slides from campaign trail promises to executive power delivery. Backing them up are the latest figures from the United States Geological Survey (USGS) that show that both cement production and shipments fell slightly in the third quarter of 2016. In the quarter before the election in November 2016 the cement market slowed down. The hard bit is working out why. As we pointed out in a review of the US cement industry in the May 2016 issue of Global Cement Magazine the PCA had previously downgraded its forecast in 2016 due to economic uncertainty despite strong fundamentals for the construction industry. Then, as now, the great hope for the US cement industry was infrastructure spending down the pipeline, at that time the Fixing America’s Surface Transportation Act. At this point it doesn’t seem to have had much of an effect.
Industrial and economic forecasters aren’t the only ones who have a hard time of it in 2016. Political pollsters have also been caught out. Surprises came from the UK’s decision to leave the European Union and the election of Trump. Neither result was widely expected in the media. As explained above, should Trump make good on his building plans then if any cement company based its plans on a forecast dependent on a Hilary Clinton win then it may have lost money.
The power of forecasts has even greater potential effects in developing markets where the corresponding financial risks and rewards are higher. After all, why would any cement company invest tens of millions of US dollars for a cement grinding plant or hundreds of millions for an integrated plant unless there was some whiff of a return on investment?
This then leads to the problems Dangote has reportedly been having with its plant in Tanzania. Amidst a flurry of local media speculation in late November 2016 about why its Mtwara plant had a temporary production shutdown, Dangote’s country chief clarified that it was due to technical problems. It then emerged this week that Dangote’s owner Aliko Dangote met with President John Magufuli to agree a gas supply agreement to the plant. The point here being that even if the market conditions and demographics seems conducive to profit, as is the case in Tanzania, if the local government changes any incentives agreed at the planning stage then everything can change. At this point forecasts based on data become moot.
There’s a great quote from the US pollster Nate Silver that goes, “The key to making a good forecast is not in limiting yourself to quantitative information.” In terms of election campaigns run at a time of upheaval that might mean listening to people more than looking at polling data. In terms of a cement company operating in Africa that might mean fostering links with the local government to ensure no sudden policy changes catch you off-guard. And in the US that might just mean cement company analysts have to follow Donald Trump’s Twitter account.
Dangote strikes gas deal with Tanzania
12 December 2016Tanzania: Nigeria’s Dangote Cement has struck a deal with the government-run Tanzania Petroleum Development Corporation (TPDC) to supply gas to its cement plant. Company chairman Aliko Dangote met with President John Magufuli on 10 December 2016 to negotiate the agreement, according to Reuters. The agreement follows a dispute between Dangote and the TPDC over the price of gas. Magufuli said that Dangote could now buy gas directly from TPDC. No price details were released. In late November 2016 Dangote’s representative in the country denied that a stoppage at its plant was related to high production costs.
EAM, Mamba and Sungura to enter cement industry in Tanzania
09 December 2016Tanzania: EAM, Mamba and Sungura are planning to invest in the cement industry. Industry, Trade and Investment Minister Charles Mwijage said that the companies have all requested to enter the industry at the Dar es Salaam International Trade Fair, according to the Tanzanian Daily News. EAM wants to build a 3Mt/yr plant in the Tanga region on condition that the government lets it export cement internationally. It has also requested other conditions that are in discussion with the government. Mamba and Sungura are also in discussion with the government regarding their projects.
Tanzania: Minister for Industries, Trade and Investments Charles Mwijage has confirmed that the government’s investment arrangement with Dangote Cement that were granted by former President Jakaya Kikwete's administration are still in place. He said that the government would do nothing to compromise Dangote Cement’s investment in the country and described its entry as a ‘game changer’ by reducing the price of cement, according to the Citizen newspaper. The comments were made in response to media speculation regarding a production shutdown at cement producer’s Mtwara plant.
Mwijage said that Dangote Cement could cut its production costs by using local coal or gas. The Tanzania Petroleum Development Corporation has been in negotiations since October 2016 to supply gas to the cement producer. He also added that another cement producer, Engro, is considering building a cement plant and that the government is willing to offer it the same incentives as those given to Dangote Cement.
Dangote Cement defends temporary production shutdown in Tanzania
30 November 2016Tanzania: Dangote Cement has clarified that a temporary production shutdown at its Mtwara plant has been made due to technical problems. Country chief executive officer Harpreet Duggal made the announcement in response to claims that the stoppage was due to high production costs in the country, according to the Tanzania Daily News newspaper. The plant is expected to resume production in a few days.
Duggal described operating costs in Tanzania as ‘high’ due to the producer’s dependence on diesel generators. He also cited high transport costs due to the plant’s distance from its key markets.
Lake Cement to build 1.4Mt/yr plant in Tanzania
28 November 2016Tanzania: Lake Cement plans to invest US$150m towards building a new 1.4Mt/yr cement plant in Bagamoyo. Construction will start in the middle of 2017 and commissioning is planned for mid-2018, according to the Citizen newspaper. The Indian-owned cement company has operated a 0.5Mt/yr at Kimbiji since 2014. Its Nyati Cement brand is sold locally and exported to Rwanda, Burundi and the Democratic Republic of Congo.
Nigeria: Dangote Cement’s pre-tax profit has fallen by 10.9% year-on-year to US$466m in the first nine months of 2016 from US$523m in the same period in 2015. Its earnings before interest, taxation, depreciation and amortisation (EBTIDA) fell by 16.3% to US$559m from US$667m. However, sales revenue rose by 20.9% to US$1.38bn from US$1.14bn. It blamed the drop in profitability on falling prices in Nigeria, negative currency effects and on rising fuel and power costs.
“Nigeria has achieved record volume growth and our non-Nigerian operations are performing well across Africa. Our switch to coal in Nigeria will have an immediate impact on margins now that we have abandoned the use of low pour fuel oil (LPFO), improving fuel security and reducing the need for foreign currency. Furthermore, our new pricing will offset the impact on costs of the devalued Naira,” said the chief executive officer, Onne van der Weijde. He added his company’s strong performance in sales had been hit by poor economies in the countries it operates in and by heavy seasonal rains in West Africa.
The producer reported that its sales volumes of cement sold grew by 28.1% to 11.9Mt in Nigeria and by 72.9% to 6.5Mt elsewhere in Africa. Sales outside of Nigeria were bolstered by production ramp-up in Ethiopia and Zambia, new operations in Tanzania and improved sales in Ghana. Plants in the Republic of Congo and Sierra Leone are due to become operational in mid-November 2016.
Tanga Cement Launches Mkomboz Cement brand
21 September 2016Tanzania: Tanga Cement has launched its Mkomboz Cement brand. The 32.5N cement class is an all-purpose cement aimed to meet the construction needs of Tanzanians in infrastructure and residential housing in particular.
“Tanga Cement’s new cement brand is yet another step by the company to approach Tanzanians with an innovative product that is affordable to the people yet with an assured high quality product and technological superiority that has been the trademark of Tanga Cement”, said Tanga’s National Sales Manager Leslie Massawe.
Tanzanian cement producers asked to complain to government
19 August 2016Tanzania: Charles Mwijage, the Minister for Industry, Trade and Investment, has advised local cement producers to complain to the government regarding imports of cement and a ban on imported coal. Mwijage made the comments at the inauguration of Tanga Cement’s second clinker production line, according to the Tanzania Daily News newspaper.
"We ask the government to either stop the imports or at least impose higher tariffs on imported clinkers. We are also pleading with the government to ensure clinkers on transit reach their destinations. This will remove unfair competition in the market," said Reinhardt Swart, the managing director of Tanga Cement.
The cement producer has complained to the government previously about the same issues. He added that the some of the cheap products were clinker on transit that are diverted to the local market and then sold cheaply because they are not taxed. In addition the government ban on coal imports has raised the company’s energy costs. Swart said that the company is also appealing to the government to secure more reliable electricity supplies.
Tanga profit up despite competition
15 August 2016Tanzania: Tanga Cement has seen its net operating profit rise by 55% in the first six months of 2016, despite intense competition from other cement companies and cheap imported products from abroad. The company more than doubled its clinker production, from 0.45Mt to 1.23Mt, after commissioning the second clinker line at its plant.
Lawrence Masha, Chairman of the Board, said, "In this year, the business is focusing on profitability, driven by operational efficiency and overall business effectiveness. This will enable the company to absorb the increase in production related costs, as far as possible, in order to remain competitive in challenging market conditions.”
Masha said the cement sector is witnessing fierce competition due to the new market entrants. He said imports of cheap cement from companies that enjoy tax benefits in their home countries further erode the local market and are causing significant injury to local producers.