Displaying items by tag: UBE

The two largest cement producers in Japan released their results for their 2023 financial years this week. Much like manufacturers elsewhere in the world they reported mounting sales revenues, but they also noted losses. Input prices such as coal rose in 2022 and these were passed on to consumers in the form of higher prices. However, this was insufficient to stop them making a loss.

In the case of Taiheiyo Cement, its domestic sales volumes of cement remained stable at 13.4Mt in the year to 31 March 2023. It made a loss at home in Japan but still reported a profit in its overseas businesses, despite export volumes falling by 41% year-on-year to 2.44Mt. The group also noted delays at construction sites due to a lack of workers. Recent domestic developments for Taiheiyo include an agreement in October 2022 to buy the cement business of chemicals company Denka. Outside of Japan, in China, the group suspended the production and sale of cement from its Jiangnan-Onoda Cement subsidiary in February 2023 citing a 'tougher competitive environment,' although it justified this decision as part of its strategy to refocus on Southeast Asia. Then, in late April 2023, the company was forced to stop its proposed acquisition of the Tehachapi cement plant in the US due to an inability to obtain regulatory approval.

Sumitomo Osaka reported a similar situation, with cement sales volumes also down year-on-year. Again, cement price increases were unable to catch coal prices made worse by negative currency exchange effects. Having got the bad news out of the way, it then it took the opportunity to outline its medium term strategy to 2035. It said that becoming carbon neutral was the key to this. In its 2022 financial year cement accounted for around 70% of total sales. However, it is now aiming to reduce this to 65% by 2025 and 50% by 2035. If this sounds familiar this is because it is similar to what Holcim is doing with its growing light building materials division and its diversification away from the heavy building materials trio of cement, concrete and aggregates. Sumitomo Osaka plans to invest over US$3.5bn towards this goal by developing its presence in the semiconductors sector, building its business in Australia and starting new ventures in decarbonisation.

Of the other cement producers, Tokuyama Corporation said in late April 2023 that it was considering suspending operation of one of the three kilns at its 4.54Mt/yr Nanyo cement plant as part of measures to strengthen profitability. It reported a growing loss for the current financial year that it blamed on raw material and fuel costs. Mitsubishi Materials and Ube Industries formed their merged cement businesses in April 2022 known as Mitsubishi UBE Cement Corporation. Ube said, as part of its latest financial results, that, despite a gradual decrease in the domestic market, cement sales had remained stable but that the business was “heavily affected” by rising energy prices such as coal. It added that demand for cement and concrete remain strong in its overseas market in North America.

Graph 1: Sales and exports of cement in Japan from 2013 – 2022. Source: Japan Cement Association.

The Japanese cement market peaked in the 1990s. Domestic sales of cement in Japan have declined over the last decade, as can be seen in Graph 1 above, but at a slower rate. Exports rose to a peak of just under 12Mt in 2017 but have slipped a little since then. Data from the Japan Cement Association placed production at 53.2Mt in 2022 compared to 61.7Mt in 2013. This trend explains the move by the cement producers towards decarbonisation, offshoring, diversification and consolidation. The bump in fuel prices over the past year may have accelerated this process, as examples such as Taiheiyo Cement’s takeover of Denka and Sumitomo Osaka’s new business strategy suggest. The race continues to keep cement production profitable in a changing business environment.

Japan: Equipment supplier UBE Japan instigated working-from-home for all employees as of 13 April 2020. Production is due to continue as normal, along with the supply of UBE products to Japanese cement producers. For necessary on-site workers, the company says that it has implemented flextime and staggered work schedules. The arrangement is currently scheduled to end on 10 May 2020.

Japan: Ube Machinery has made changes to its management team with effect from 1 April 2020. Hiroaki Furuya has been appointed as Managing Executive Officer. His previous role as Director & Executive Officer has been filled by Michiharu Takeda. Ube Machinery manufactures a range of products for the cement industry, including mills, kilns and dryers. Its parent company Ube also produces cement from its own plants.

Two of Japan's largest cement producers have reported reduced domestic cement sales in the country this week. First, Taiheiyo Cement revised its forecast for its 2017 financial year, ending on 31 March 2017, bringing its estimated net sales down by 2.3%. Then, Ube Group reported that its cement sales had fallen by 7.2% year-on-year to US$1.05bn in the first half of its financial year. Both producers blamed poor weak demand locally, but Ube also cited a poor export market.

Graph 1: Domestic and export cement sales in Japan, 2006 - 2015. Source: Japanese Cement Association.

This last point is interesting because it differs from the latest data released by the Japanese Cement Association (JCA). As can be seen in Graph 1 JCA figures show that exports of cement have been rising since 2013. So far this trend looks likely to continue in 2016. Ube's different experience may arise from its market mix and its distribution of cement plants and transport infrastructure. Both of its cement plants are based in the south of the country. Commentators have attributed the boost in exports to the devaluation of the Yen in 2015 as well as strong brand perception overseas. Unfortunately, this overall rise in exports has been matched by a fall in domestic sales at the same time and this is causing a headache for the major producers. Production too has started to drop since 2014 (Graph 2).

Graph 2: Cement production in Japan, 2006 - 2015. Source: Japanese Cement Association.

Japan's cement market is dominated by four producers - Taiheiyo Group, Mitsubishi Materials, Ube Industries and Sumitomo Osaka Cement - which hold nearly three quarters of the nation's production capacity between them. According to Global Cement Directory 2016 data, Taiheiyo Cement and its subsidiaries is the market leader with over 30% market share with the other three holding 10 - 20% each.

Graph 3: Cement production capacity share in Japan (Mt). Source: Global Cement Directory 2016.

Taiheiyo's downgraded forecast follows poor first quarter results, in which its net sales for its cement business fell by 16% to US$1.19bn. This follows a slight rise in net sales for its cement business in its 2016 financial year due to a boost in sales from its overseas subsidiaries, particularly in the US, that surpass a fall in domestic sales. Sales volumes were 14.7Mt domestically and 4Mt in exports in 2016. Mitsubishi Materials has posted a similar picture with cement sales and profits rising in 2016 before suffering in the first quarter of 2017. Mitsubishi Materials blamed the poor market on a delay in construction work mainly due to labour shortages and sluggish growth in demand from the public sector. Ditto Sumitomo Osaka Cement.

As highlighted by such decision as Tokyo Cement's move to resume exporting clinker to Sri Lanka in early 2015, Japan's cement industry is working hard to compensate for falling demand at home. Increasing exports in Asia Pacific among other massive exporters such as China, Vietnam and South Korea is impressive, although the prominent foothold by Japanese companies in the recovering US market may offer some advantage here. On-going weak demand in China though cuts out one major market for Chinese exporters. However, being a major exporter in a region of major cement producers must be a concern. Although commentators such as Ad Ligthart dismiss the chances of China flooding the world with cheap cement, if they are wrong and Japan continues its reliance on exports it may find itself in deep water. The other risk is if the US authorities decide to get tougher on foreign exports it may knock out one more market for Japanese exports. Too much reliance on exports is always dangerous. In this context, it’s no surprise that Japanese cement producers are blaming the government for insufficient infrastructure spending.

Japan: UBE Industries plans to install a generator powered by waste heat at its cement plant in Kanda, Fukuoka Prefecture. The generator will meet about 40% of the plant's electric power consumption reducing production costs. The US$52.1m project will start providing power as early as the second half of 2015.

The Kanda plant currently produces 11% of its own electricity using a diesel generator. UBE's decision follows similar schemes at UBE's two other domestic cement plants in Japan. The company previously put off this upgrade because of a lull in domestic demand for cement. UBE is acting now because Kyushu Electric Power Co. is preparing for a rate increase in April 2013 that will impact upon production costs.