Displaying items by tag: Uzbekistan

A few news stories in recent weeks have emerged concerning falling cement sales in Central Asian countries. Steppe Cement reported in mid-April 2016 that its cement sales had fallen by 12% year-on-year to US$5.98m in the first quarter of 2016 from US$6.79m in the same period in 2015. The cement producer noted an overall drop of 16% in the cement market in Kazakhstan, with a slowing reduction in March 2016 compared to the preceding four months. It forecast that the domestic cement market would contract by 1.1Mt in 2016 to 8.5Mt. The country has a cement production capacity of 11.85Mt/yr according to Global Cement Directory 2016 data. So on average this would see a drop in the capacity utilisation rate to 72% from 81%.

Likewise, Italcementi reported a fall in cement consumption in the fourth quarter of 2015 although overall in 2015 it reported consumption up by 9%. It is currently upgrading its Shymkent cement plant to a dry kiln with testing planned for early 2016. Meanwhile, HeidelbergCement – the other multinational present in the country, reported cement sales growth of over 9% due in part to the ramp-up of its new CaspiCement cement plant. How this will turn out after HeidelbergCement takes control of Italcementi remains to be seen.

Then, Holcim Azerbaijan reported that its sales had fallen by 37% to US$56m in 2015. It blamed the resultant loss it made on not being able to cut its production costs fast enough to match the falling revenue. The parent company LafargeHolcim blamed it on a ‘significant’ decline in public and private construction. Elsewhere, the World Bank reported a 13% drop in the construction sector in the second half of 2015 as the government cut investment.

Tajikistan may have broken this pattern as it reported that its cement production volumes rose by 33% to 373,000t in the first quarter of 2016. Over half of this output came from the 1Mt/yr Huaksin Ghayyur Cement plant that was commissioned in March 2016. The same news source reported government estimates that local demand will be 3.5Mt/yr in 2016. Similarly, Turkmenistan reported growing cement production in 2015 due to the opening of the 1.4Mt/yr Polimeks cement plant in Lebap. Otherwise there has been little reported recently from the cement industries in Uzbekistan and Kyrgyzstan although the World Bank has reported that their economies are in reasonable shape.

The multinational cement producers all noted the economic problems caused by low oil prices in the Central Asian countries in which they operate. In February 2016 this was reinforced by the International Monetary Fund after its latest visit to Azerbaijan. The World Bank also expects little growth in gross domestic product (GDP) in the region in 2016. Low oil prices have followed economic problems in Russia that have also impacted upon the region due to its economic ties with that country and membership of the Commonwealth of Independent States (CIS).

This is bad news for the local markets but it is especially bad news for the Chinese cement industry. As China has faced production overcapacity and falling prices at home, its suppliers and producers have sped off down the Silk Road to seek expansion prospects elsewhere. With this route blocked, the Chinese industry faces one fewer opportunity to avoid the crunch at home.

For more information of the cement industries in Central Asia read Global Cement's feature on the region from January 2016

Uzbeksitan: Uzbekistan has put on sale state shares in Kyzylkumcement. According to the State Committee of the Republic of Uzbekistan for Privatization, Demonopolization and Development of Competition, the government wants to sell a 35.9% state shares or 160,658,567 shares in Kyzylkumcement for a total of over US$160m. Sales of the state-owned cement producer will be handled by the block-trading section of Uzbekistan Stock Exchange.

Kyzylkumcement was launched in 1977. It is the largest cement plant in Uzbekistan with a production capacity of 3.1Mt/yr.

Uzbekistan: Qizilqumsement and Bekabad Cement intend to conduct energy saving projects at their plants by the end of 2020, according to local press.

Bekabad Cement, in partnership with the World Bank, is upgrading its aeration system and the products transportation system at its cement silos. The upgrade will save more than 3MkW/hr of electric power per year. The plant is also installing a new cement ball mill with a capacity of 135 – 150t/hr. This is planned to reduce power consumption by 20%.

Qizilqumsement plans to reduce its gas consumption by 46.6Mm³, and power consumption by 57MkW/hr. A clinker silo will be built, the clinker plant will be upgraded and the closed circuit cement milling will be launched for mill #7.

Uzbekistan: Uzbekistan's Ahangarancement JSC increased its cement production by 4.1% to 1.77Mt in 2015. Its clinker production grew by 3.4% to 1.28Mt. In 2015 the company sold 1.77Mt of cement, a 3% year-on-year increase.

Uzbekistan: Uzbekistan plans to increase cement production from 7.5Mt/yr in 2014 to 7.9Mt/yr in 2015. Production is expected to reach 8.9Mt/yr by 2019. Within a programme of measures on structural reforms, modernisation and diversification of cement plants will take place in 2015 – 2019. Kyzylkumcement will invest US$30.7m to update equipment, while Bekabadcement will invest US$5.5m to modernise its milling technology.

Uzbekistan/Turkey: The Turkish Dal Engineering Group plans to commission a new 1.5Mt/yr cement plant in Surkhandarya by late 2017. A Turkish company and Almalyk Mining and Metallurgical Combine (AMMC) have signed a memorandum on cooperation for the construction of the cement plant.

The US$225m cement plant will potentially be financed by a US$90m loan from the Fund for Reconstruction and Development of Uzbekistan, commercial banks loans totalling US$110m and the equity of AMMC, worth US$24.4m.

Uzbekistan currently has six cement plants with a total installed capacity of more than 7Mt/yr. The largest of them are Kyzylkumcement (3.08Mt/yr), Akhangarancement (1.74Mt/yr) and JSC Kuvasaycement (920,000t/yr). Cement production in Uzbekistan in 2014 increased by 5.1% to 7.35Mt.

Uzbekistan: The Higher Economic Court of Uzbekistan has upheld a penalty tax on excess profit of Ahangarancement JSC (a subsidiary of Russian Eurocement Group JSC) from 2009 to 2014 and penalties for its late payment.

Ahagarancement stated that it would appeal the decision because it calculated the excess profit tax in accordance with the laws of the country. It added that the calculation had been confirmed as correct by the ministry of finance and the expert council at the State Tax Committee.

"The decision significantly changes the legal practice on issues of the formation of profits of cement companies, significantly encumbers the plant with an additional tax burden, leads to a reduction of investment opportunities of the enterprise and jeopardises the implementation of the project of modernisation of the enterprise," said the company in a press release.

The tax authorities of Uzbekistan have not commented on the situation.

Uzbekistan: Ahangarancement, which is owned by Russia's Eurocement Group, achieved record production figures in August 2015. The company said that it produced 164,000t of cement from 127,205t of clinker in August, rises of 2.5% and 12.2% compared to the same month of 2014. The enterprise shipped 164,863t of cement to consumers in August 2015, a 1.2% year-on-year rise.

The past few weeks have been notable for the high number of cement plant projects announced. Aside from further Dangote developments in Africa, (which doesn't seem to be able to go a week without announcing some 'milestone' or another,) a growing number have been in 'new' markets, especially in Central Asia.

The list from the past month or so is impressive. In east Asia Myanmar's Ait Thit Man group has announced that it will double its capacity from 5000t/day to 10,000t/day. In the south, Shree Cement wants to build another new facility in India. In west Asia, Pakistan, a country that has not seen significant cement capacity investment in the past few years, will be getting a new plant in Salt Range courtesy of China's Yantai Yantai Baoqiao Jinhong.

Turkmenistan looks set to build a 1Mt/yr plant as part of a massive government industrial stimulus package. China's Jilong Group wants to build a 0.8Mt/yr plant in Issyk Kul, Krygyzstan. Another Chinese producer, Xinjiang Tianshan will be bringing a 1.2Mt/yr plant to Georgia. Even today (Wednesday 30 September 2015), we have heard that there will be further Chinese investment, this time by Shangfeng Cement. It has announced financing for two new plants: in Tajikistan and Uzbekistan. Both are set to be 1.2Mt/yr facilities.

Two trends are clear from this. 1. Land-locked Central Asian and other relatively undeveloped countries elsewhere in Asia are finally coming to the cement plant party. 2. It is the Chinese producers that have the upper hand in these markets. This is based partly on cultural, political, geographical and historic links between China and these former Soviet nations. It is partly due to the lower 'face value' cost of Chinese equipment compared to European manufacturers. (The efficiency with which the lower cost equipment is installed and its running costs remain potential pitfalls, according to the Europeans.) Finally, it has a lot to do with the collapse of domestic demand for cement plants in China itself, where the economy continues to teeter on the brink.

The steady rise of the Central Asian cement sector and the increasing international activities of Chinese cement plant manufacturers have been 'on the cards' for years. To date, they have been trends waiting to happen, but 2015 looks to be the year that these factors finally combined and translated into large numbers of projects.

For Central Asian countries the prospects that come with a larger and more dynamic cement industry should enable greater independence, accelerated infrastructure development and economic growth. For the Chinese, setting up cement plants in Central Asia is a natural expansion of its multi-billion dollar activities in the African cement sector, where Sinoma recently signed a massive deal with Dangote Cement. As noted previously in this column, Africa can't continue to add capacity at the current rate forever.

For European manufacturers of cement plants, the other side of this story is not as pretty. AGAB, the large plant manufacturing group of Germany's Verband Deutscher Maschinen- und Anlagenbau (VDMA), has recently released its Status Report 2014/2015, which reports on activities from 2014. AGAB members' cement plant order volume fell by an incredible 63% in 2014 to Euro198m. This is a fall from Euro529m in 2013 and six times lower than the Euro1.2bn peak of 2008. Some of this is domestically driven but the vast majority of it is export markets.

The same report also shows that, for construction of all types of large industrial plants, Chinese producers have increased their global market share from 5% in 2006 to 17% in 2014. Over the same period, Western European producers have seen their share fall from 45% to 33%, although an increase in overall project volumes mean that these producers received roughly the same value of orders in each year. US suppliers, although not a major consideration for the cement sector, saw their share of orders fall from 22% to 20%. Japan also lost a third of its stake over the same period, falling from 15% of sales in 2006 to just 10% in 2014.

While AGAB's report anticipates increased competition from Chinese producers, it is by no means all 'doom and gloom' for Europe's traditional large plant manufacturers. It highlights the fact that Russia, the largest single market for heavy plant in 2014 and a significant consumer of European-made cement equipment, has decided against Chinese equipment in some cases. It also highlighted that the weakness of the Euro helps exports from Germany and the rest of the Eurozone and suggests that the sector should look to increase its service and consultation offering in order to build on its existing reputation for high quality equipment.

Tajikistan/Uzbekistan: Chinese cement producer Shangfeng Cement plans to raise US$240m through a non-public share offering. It will be used to partly fund investments in Central Asia. A total of US$130m will be invested in projects in Tajikistan, US$137m will be invested in projects in Uzbekistan and US$16m will be used to replenish working capital.

The first phase of the Tajik project, with a construction period of 18 months, will be capable of producing 0.96Mt/yr of clinker and 1.2Mt/yr of cement. Its products will be sold in southern and central Tajikistan, Uzbekistan and northern cities in Afganistan.

The Uzbek project will be the same size, with its products sold to eastern Uzbekistan, southern Kyrgyzstan and northern Tajikistan.