Displaying items by tag: Thailand

Predictably, the recent investigation by the Tariff Commission in the Philippines on whether to maintain duties on imported cement recommended that the safeguard duty be kept. It even suggested raising the rate to nearly US$6/t from US$4/t at present. The report has been passed to the Department of Trade and Industry (DTI), which will make the final decision on the matter.

Graph 1: Market share of the Philippines cement industry between local producers and traders, 2013 - 2018. Source: Tariff Commission of the Philippines.

As the commission built its argument it released a great snapshot of the local cement industry and it’s well worth a read for anyone who is interested. One key graph here was the speed at which the market share of cement sold by local producers fell compared to importers from 2013 to 2018. As Graph 1 shows above, traders imported 0.29Mt in 2015 and this rose to 4.66Mt 2018. Imports by local producers also grew during this time but at a far slower rate. They were 0.45Mt in 2015, grew to a high of 1.65Mt in 2016 and then stabilised at around 1Mt/yr since then. Seven of the top 10 cement exporters were Vietnamese companies followed by two from China and one from Thailand. However, the local producers were importing clinker on a far larger scale during this period. 16.8Mt of clinker was imported from 2013 to 2018 led by Holcim Philippines with 5.54Mt or a 33% share. In Holcim’s case this was coming from China, Indonesia, Japan, South Korea, Malaysia, Thailand and Vietnam.

Elsewhere, the report established the various production capacity upgrades the local cement producers had invested in or were planning to in the near future. Taiheiyo Cement Philippines, for example, was reported as planning an expansion to its Cebu plant production line from 2022 to 2025. It then looked at kiln capacity utilisation rates, prices and how profits have changed amongst much else. It concluded that the import surge from 2015 to 2018 had depressed prices and decreased the profitability of the local producers. This fitted its definition of ‘serious injury’ as one reason to impose a safeguard duty on imports.

Importers presented a different scenario to the commission during its investigation and afterwards. Phinma, for example, told local press that the commission’s comparison calculation of the costs behind local and imported cement didn’t take into all the costs the importers endured such as a local distribution and handling once in the country. The Philippines Cement Importers Association reiterated the view of its members that they were simply meeting market demand, that local producers had caused their own problems through overcapacity and that profits varied considerably amongst local producers, amongst other arguments. This has been borne out by some of the half-year results amongst the local producers. Eagle Cement, for example, saw its earnings before interest, taxation, depreciation and amortisation (EBITDA) grow by 21% year-on-year to US$80.6m.

With the publication of the commission’s report the DTI has been handed the impetus to hold up or even raise the duty on imported cement. Based on its actions in recent years the ministry seems likely to do so. This presents a contrast to Trinidad & Tobago where importer Rock Hard Cement won a legal battle earlier in August 2019 against competitor and Cemex-subsidiary Trinidad Cement over the classification of imported cement products. These kinds of trade conflicts are likely to proliferate whilst global production capacity outstrips demand but the outcomes may vary.

Thailand: Siam Cement Group (SCG) is promoting a blockchain electronic accounting method for procurement and payment with its suppliers and partners to improve efficiency. Its Procure to Pay platform was started in 2018 and it has 240 suppliers using it at present, according to the Bangkok Post newspaper. The company aims to reach 2400 suppliers by 2020.

Thammasak Sethaudom, vice-president for finance and investment at SCG, said that the system had helped suppliers reduce processing times by 50% from 70 minutes to 35 minutes per purchase order. The platform speeds up the time required to issue invoices. The system also helps SCG’s partners to track transactions in real time.

Procure to Pay was developed with Digital Ventures, the corporate venture capital arm of Siam Commercial Bank. SCG has invested over US$0.3m on the project so far. Expansion to SCG’s subsidiaries in Indonesia, Myanmar, Laos and Vietnam is being considered.

Thailand: SCG’s sales from its cement business rose by 3% year-on-year to US$3.04bn in the first half of 2019 from US$2.94bn in the same period in 2018. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 7% to US$410m from US$382m. Cement sales in the second quarter of 2019 were driven by the non-government sector. Overall the group’s sales and earnings fell due to poor performance from its chemicals division, which it blamed on the on-going US-China trade war.

South Korea/Thailand: Austria’s Unitherm Cemcon has commissioned a MAS kiln burner at a cement plant in South Korea. The order was issued in late 2018 for three MAS burners. The first burner was delivered in February 2019 and the other two in March 2019. In May 2019 Unitherm Cemcon says it supported the commissioning of the first burner.

The scope of supply included two 43MW MAS/4/KO SO type burners for coal and heavy oil and one 87MW MAS/7/KO SO.X type rotary kiln burner for coal, heavy oil and solid secondary fuels. All three burners have been executed with a divisible burner jacket tube. One MAS/7/KO.SO.X is already successfully operating in another line, firing up to 6t/hr of coal and around 10t/hr of solid secondary fuel.

The burner manufacturer has also been awarded a contract to supply a hot gas generator for a plant in Thailand. The scope of supply includes: engineering and manufacturing drawings for the hot gas generator combustion chamber; a combined 45MW oil and coal burner; a primary air fan; a gas electric pilot burner; a flame monitoring device; and an oil valve train with burner management system.

Thailand: Siam Cement Group’s (SCG) cement division’s sales grew by 4% year-on-year to US$1.51bn in the first quarter of 2019. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 10% to US$222m. It attributed the growth in earnings on increased cement prices and cost savings. Overall, the group’s sales and earnings fell due to poor performance from its chemicals division.

One of the long running trends in the cement industry is that of production overcapacity. Sure enough more than a few news stories this week covered this, as various players reacted to international trade in clinker and cement. The Bangladesh Cement Manufacturers Association wants its government to cut import duties on clinker. Algeria’s shift from an importing cement nation to an exporting one continues.

Armenia and Afghanistan are coping with influxes of cement imports from neighbouring Iran. Pakistan’s cement exporters, who have been losing ground in Afghanistan, are once again lobbying to remove anti-dumping measures in South Africa. The argument between Hard Rock Cement and Arawak Cement in Barbados may have swung Hard Rock Cement’s way as the Caribbean Court of Justice (CCJ) has ruled in favour of lower tariffs for imports. Last week it was reported that the Rwanda Bureau of Standards had blocked cement imports from Uganda on quality requirement grounds.

The summarised version is that all this excess clinker and cement can cause arguments and market distortions as it finds new markets. Typically, the media reports upon the negative side of this, when the representatives of national industries defend their patch and speak out about ‘quality concerns,’ potential job losses and blows to the local economy. However, it isn’t always like this as the Afghan story shows this week. Here, although the Chamber of Commerce and Industries wants to promote locally produced cement, imports are welcome and the relative merits of different sources are discussed. Ditto the situation in Bangladesh where a predominantly grinding-based industry naturally wants to cut its raw material costs.

We’ve covered clinker and cement exports more than a few times, most recently in September 2018 when the jaw-dropping scale of Vietnam’s exports in 2018 started to become clear. Yet as the continued flow of news stores this week makes clear it’s a topic that never grows old.

Graph 1: Top cement exporting countries in 2018. Source: International Trade Centre.

Looking globally raises a number of issues. First, a warning. The data in Graph 1 comes from the International Trade Centre (ITC), a comprehensive source of trade statistics. Most of its figures are in line with data from government bodies and trade associations but its export figure is around a tenth of the estimated export figure for Iran of around 13Mt for its 2018 - 2019 year. Last time this column looked at exports similar issues were noted with a discrepancy between Vietnam’s exports from the ITC compared to government data.

Iran aside, all the usual suspects are present and correct. A point of interest here is that the list is a mixture of countries that make the headlines for their exports, like Vietnam, and those that are quietly just getting on with business. Japan for example exported 10.7Mt in 2018. More telling are the changes in exports from 2017 to 2018. Exports fell in Japan, China and Spain. They rose in Vietnam, Thailand, Indonesia, Pakistan and South Korea.

Looking globally, China is the elephant in the room in this topic given its apparent massive production overcapacity. The industry here is structurally unable to export cement on the scale of other countries but, as its major companies expand internationally, this may change. Despite this China still managed to be the third biggest exporter of cement to the US in 2018 at 2Mt and the fifth biggest in the world. Yet, as the ITC data shows, its exports fell by 30% year-on-year to 9Mt in 2018.

Vietnam, Pakistan and Turkey continue to be some of the key exporting nations with production capacities rising in defiance of domestic realities. Pakistan, for example, is coming off a building boom from the China–Pakistan Economic Corridor infrastructure project and all those plants are now looking for new markets. Vietnam says it is benefitting from industry consolidation in China. Its exports grew by 55% year-on-year rise to 31.6Mt. It shipped 9.8Mt to China in 2018. Its main export markets in 2019 are expected to be the Philippines, Bangladesh, China, Taiwan and Peru. Turkey, meanwhile, struggled with general economic issues in 2018. Its cement exports fell by 6% to 7.5Mt in 2018 according to Turkish Cement Manufacturers Association data. Once again this is at odds with ITC data, which reports nearly twice as many exports.

This touches the tip of the iceberg of a big issue but while production over-capacity continues these kinds of trade arguments will endure. Vietnam, for example, may be enjoying supplying cement in China as that country scales down production. Yet, what will happen to all of those Vietnamese plants once Chinese consumption stabilises?! Similar bear traps lie in wait for the other major exports. Alongside this many of the multinational cement companies are pivoting to concrete production. This may be in recognition of the fact that in a clinker-abundant world profits should be sought elsewhere in the supply chain. A topic for another week.

For an overview of some of these themes and more read Dr Robert McCaffrey’s article ‘The Global Cement Industry in 2050’ in the May 2019 issue of Global Cement Magazine and his forthcoming keynote presentation at the 61st IEEE-IAS/PCA Cement Conference 2019 at St Louis in Missouri, US.

Indonesia: Exports drove Semen Indonesia’s cement sales volume growth in 2018. Its local sales volumes of cement grew by 1.2% year-on-year in 2018 to 27.4Mt from 27.1Mt in 2017 but exports increased by 68% to 3.16Mt from 1.87Mt. Sales volumes at its Thanh Long Cement subsidiary in Vietnam grew by 7.9% to 2.57Mt from 2.39Mt due to a sharp increase in exports. The group’s revenue rose by 10% to US$2.17bn from US$1.96bn. Its net profit nearly doubled to US$218m from US$117m.

Semen Indonesia completed its acquisition of Holcim Indonesia for US$1.75bn in February 2019. Prior to the purchase it had a cement production capacity of 38.2Mt/yr and Holcim Indonesia had a capacity of 14.8Mt/yr.

France/Thailand: SCG Cement has signed a Memorandum of Understanding with France’s Constant Energy to build 50MW of solar photovoltaic (PV) units at its plants and associated companies. The target is to deploy and commission the solar PV plants over the next three years, through rooftop-based, ground-mounted and floating solar PV plants. Engineering of a first solar PV plants has started and the pre-construction permitting and licensing process will be handled in the second quarter of 2019, followed by construction.

Thailand: Fitch Ratings forecasts that demand for cement will rise due to recovery in the private construction sector. It is expected to grow by over 5% in 2019, according to the Bangkok Post. Cement sales rose by 3.7% year-on-year in the third quarter of 2018, the first quarterly growth in 10 quarters. Data from the Office of Industrial Economics showed that this was followed by a rise of 2.8% in the fourth quarter of 2018.

The forecast said that local cement producers were expanding regionally due to domestic oversupply and a profitability gap between domestic sales and exports. Government infrastructure projects are expected to continue to drive sales, with nearly US$100bn planned on projects from 2018 to 2026.

Cambodia: Siam Cement Group’s (SCG) sales in Cambodia grew by 15% year-on-year to US$396m in 2018 due to higher sales of cement. The Thai company operates six subsidiaries in the country, including Kampot Cement, according to the Phnom Penh Post newspaper. Chiv Sivpheng, general manager of the Cambodia Constructors Association, said that demand for construction materials had been increasing annually as the population increases and urbanisation intensifies.