Displaying items by tag: Tax

Australia: Industry groups, including cement producers, are lobbying against a new import tax, the Biosecurity Imports Levy. They allege that that new tariff will increase costs by 3000 - 5000% on the inputs for cement, steel and aluminium production, according to the Australian newspaper. The new levy was introduced in the May 2018 budget for implementation in July 2019. It intends to tighten the country’s biosecurity.

Industry lobbyists complain that it will impose a US$0.7/t levy on ‘non-containerised’ cargo for biosecurity inspections, dramatically increasing the cost of inspection for bulk imports of materials. They also deny that it will improve biosecurity outcomes.

Cement Industry Federation chief executive Margie Thomson said that the tax unfairly punished non-containerised cargoes. “It shouldn’t be a tonnage levy, when the biosecurity risk is not­associated with the product.”

Nepal: A limestone ban in the Katari municipality has hit Saurya Cement and Cosmos Cement. The local government has banned cement producers from extracting and transporting limestone on tax grounds, according to the Himalayan Times newspaper. However, Saurya Cement said that the authorities had stopped the transportation of limestone without consultation. Krishnaraj Dulal, the director Cosmos Cement, added that the company was not required to pay tax locally as it was paying the Department of Mines at the national level.

India: Shailendra Chouksey, president of the Cement Manufacturers Association, has complained about imports of cement from Pakistan damaging the local industry. He told the Indo-Asian News Service that cement from Pakistan was up to 15% cheaper than Indian cement. There has been no customs duty on cement imports from Pakistan since 2007, making it competitive in comparison to local production, especially in states that neighbour Pakistan. By comparison, imports of cement to Pakistan face a duty of 11%.

Data from the Directorate General of Foreign Trade shows that 1.68Mt of cement was imported into India during the 2017 – 2018 financial year that ended in March 2018. 1.27Mt or 76% of this total was imported from Pakistan.

Indian producers have also complained about the high rate of the local Goods and Services Tax (GST) in the country. They are hoping to reduce the rate to 18% from 28% at present.

Republic of Congo: Cement producers have expressed concerns about government plans to increase Value Added Tax (VAT) on cement to 18% from 5%. Cement prices are expected to rise as manufacturers pass the extra cost on to consumers, according to the Central African Information Agency. An industry source quoted by the agency said that local cement plants are doing badly due to a capacity utilisation rate of 10 – 20%. The country has five cement plants with a production capacity of 3.2Mt/yr but cement consumption was only 0.7Mt in 2017.

US/China: The Office of the US Trade Representative has started implementing a 10% tariff on mineral and other products from China, including cement, following a consultation period. Mineral products affected by the proposed tariffs of interest to the cement industry include limestone flux, quicklime, slaked lime, gypsum, anhydrite, clinkers of Portland, aluminous, slag, supersulphate and similar hydraulic cements, white Portland cement, Portland cement, aluminous cement, slag cement, refractory cements, additives for cement, cement based building materials and more.

The latest tariff list follows an earlier decision by the US government to tax imports from China worth US$34bn that came into force in early July 2018.

Pakistan/Afghanistan: Pakistan’s cement industry has urged the government to increase the customs duty on the import of clinker to support local manufacturers. It also wants a reduction in the cost of doing business in the country to encourage domestic sales. The industry stakeholders said that Pakistan has been losing ‘a major chunk’ of its market in Afghanistan to Iranian cement, due to its higher energy costs.

The costs of electricity and gas in Pakistan are reportedly the highest in the region, while additional duties on coal imports have nullified the lower cost of coal on the global markets. Locally, high government taxes have encouraged imports of under-invoiced Iranian cement imports, resulting in drop in domestic sales.

According to the latest data, domestic consumption has dropped by almost 14% over the past three years. The domestic cement dispatches in the first two months of the current fiscal year declined by 5.3% year-on-year. In the north, cement dispatches declined by 8.8% while in south zone they declined by 10.9%. In July 2018 the overall growth in the industry was 5.1%, while in August 2018 the overall decline was 8%.

The industry recommended that imports of cement should not be allowed until the importers register themselves with the Pakistan Standards and Quality Control Authority to certify the quality of their cement.

China/US: China’s Ministry of Commerce has proposed placing retaliatory tariffs on products from the US, including cement. The list covers 5207 items and proposes adding import taxes of up to 25% on them. It includes clinker, white cement, limestone, quicklime, slaked lime, gypsum, refractory products and cement packaging machinery. The ministry said that the new tariffs will take effect at a date to be announced later on.

The US government proposed placing tariffs on cement this week as part of its slowly-escalating trade war against China. The latest list will face a 10% tariff from the end of August 2018 following a consultation period. Of relevance to the cement industry, it will include limestone flux, quicklime, slaked lime, gypsum, anhydrite, clinkers of Portland, aluminous, slag, supersulfate and similar hydraulic cements, white Portland cement, Portland cement, aluminous cement, slag cement, refractory cements, additives for cement, cement based building materials and more.

Graph 1: Imports of hydraulic cement and clinker to the US from China, 2012 – 2017. Source: United States Geologic Survey (USGS).

Graph 2: Major exporters of hydraulic cement and clinker (Mt) to the US in 2017. Source: United States Geologic Survey (USGS).

At face value it seems unlikely that the tariffs will do much direct damage to the cement sectors in either China or the US. United States Geological Survey (USGS) data reports that the US imported 2Mt of cement and clinker from China in 2017 out of a total of 13.6Mt of imports. China was the third-largest exporter of cement to the US after Canada and Greece. Given the mammoth size of the Chinese cement industry - it sold 2.3Bnt in 2017 according to National Bureau of Statistics of China - it is unlikely that losing this export stream will cause the sector to lose much sleep. If the exports are coming from smaller producers though it might well impact upon them disproportionally. Any potential shortfall in the US is likely to be met by any number of the world’s overproducing cement nations. Vietnam, Iran (!) and Indonesia are the first few candidates that spring to mind.

The other point to consider from the USGS data is that the value of the cement imported from China in 2017 was on the cheaper side. Altogether the value of Chinese imported cement came to US$132m in 2017. Yet it was the fifth cheapest for cost, insurance and freight per tonne out of 32 importing countries. Add a 10% tariff to that and it is still only the eighth cheapest. If these figures represent reality then it seems unlikely that tariffs will cause the Chinese imports to slow down much.

All of this pretty much fits the general impression of China as a country that produces the most cement in the world but it actually exports very little of it. Consultancies like Ad and Marcia Ligthart’s Cement Distribution Consultants have made a point of downplaying China’s export market in recent years due to a lack of deep water terminals for plants and a general inward focus. Yet the sheer amount of production capacity could have big implications if it ever does get properly connected to the sea.

Other products facing the new tariffs that have relevance for the cement industry include input materials like gypsum or secondary cementitious materials (SCM) like slag and fly ash. Gypsum isn’t likely to be a concern given the presence of established exporters in Canada, Spain, Thailand, Oman and the like. SCMs are more mercurial but don’t appear to be too intrinsic to the US market. Ferrous slag imports grew to 2Mt in 2015 according to USGS data but the main sources were Japan, Canada, Spain and Germany. Charles Zeynel of ZAG International at the Global Slag Conference 2018 posited that Chinese exports comprised up to 6Mt or 25% of the world market of traded international slag.

All of this suggests a symbolic nature to the US tariffs on Chinese cement and related products. Perhaps the real news story to have noted this week was the framework agreement signed between Denmark’s FLSmidth and China’s China National Building Material (CNBM), the world’s largest cement producer and one of its larger cement equipment manufacturers.

Typically many of the new cement plant projects Global Cement has reported upon recently involve a Chinese contractor that may or may not be using European engineering from companies like FLSmidth who previously would have been managing the build themselves. The point here is that new plants, production lines and upgrades at US cement plants might well be built by a Chinese company through its European partners. The new upgrade to Lehigh Hanson’s Mitchell plant in Indiana has been budgeted at US$600m. This is far more than the value of Chinese cement imported into the US in 2017.

US/China: The Office of the US Trade Representative has proposed placing a 10% tariff on mineral and other products from China including cement. The list includes over 600 items and it will come into force following a period for public comment in August 2018.

Mineral products affected by the proposed tariffs of interest to the cement industry include limestone flux, quicklime, slaked lime, gypsum, anhydrite, clinkers of Portland, aluminous, slag, supersulfate and similar hydraulic cements, white Portland cement, Portland cement, aluminous cement, slag cement, refractory cements, additives for cement, cement based building materials and more.

The inclusion of additional products to a tariff list follows an earlier decision by the US government to tax imports from China worth US$34bn that came into force in early July 2018.

Philippines: Eagle Cement expects to save up to US$9.9m from a three-year income tax holiday for its new cement production line at its Barangay plant in Bulacan. The cement producer says it has been granted the tax exemption from the Board of Investments as it’s the only company expanding its production capacity, according to the Inquirer newspaper. Its competitors have been expanding their distribution capacity instead. Other savings are also anticipated from importing equipment from outside the country.

The company started producing cement on its third production line at its Barangay plant in April 2018. The upgrade added 2Mt/yr to the company’s total production capacity. It expects to reach its full capacity by the third quarter of 2018. The company is also building a new 2Mt/yr cement plant at Cebu is scheduled to be completed in 2020.