Global Cement News

In the January 2013 issue of Global Cement Magazine, we featured a review of the Ethiopian cement industry. At the time we were hopeful with respect to the country's future cement demand, buoyed along by Ethiopia's own bold targets for development of the sector. It seemed only a matter of time before international and regional producers went to Ethiopia and cashed in on a cement plant-building bonanza.

Ethiopia's government is keen to further develop Ethiopia's cities and infrastructure and wants to increase its per-capita cement consumption from 35kg/yr at present to ~300kg/yr in the period to 2017. To do this, it is encouraging the cement sector to swell from its current capacity (7.4Mt/yr integrated capacity with additional grinding capability) to over 27Mt/yr by the same year. At the same time, the country has banned cement imports, a bold statement of intent designed to protect its own growing industry.

This week, we have learned that the country is hitting its bold production targets, largely without assistance from outside players. However, it seems that Ethiopia is incapable of consuming the volumes of cement that have been produced. As of 12 August 2013, the Ministry of Industry announced that Ethiopia made 12Mt of cement in the year to 7 July 2013, more than double the 5.4Mt/yr that it demanded over the same period. This revelation casts the government's future predictions for rapid cement demand growth in serious doubt.

While it takes effort to picture Ethiopia producing 27Mt/yr of cement by 2017, such rapid development is happening in west Africa, where Nigeria's Dangote Cement is achieving 'regional-giant' status.

However, it would take a very great leap of imagination to believe that Ethiopia could consume 27Mt/yr in 2017, five times what it does today, even with the development of major projects like the Millennium Renaissance Dam (a US$4.2bn hydroelectric project), major city and road-building projects and a rapidly growing population. Its cement capacity would have to grow by 4.9Mt/yr, representing average year-on-year cement demand growth of 52.5%/yr. Even with a cement industry the size of Ethiopia's, this represents almost impossible growth. To support this increase in demand, GDP/capita, which is often closely correlated to cement demand, would probably also have to raise fivefold, from US$374 to US$1870. This difference would take it from the bottom 20% of African nations well into the top third by this measure.

If this over-production trend continues, it does not bode well for Ethiopia's domestic cement industry. While exports may appear attractive, options are limited. Kenya to the south has a larger and more well-established cement industry, Somalia has major economic and security drawbacks and Ethiopia's relationships with Eritrea and Djibouti, both of which declared independence from Ethiopia, are tense. With no coast of its own, maritime exports will be difficult, especially with low-cost cement flowing from India, Pakistan and Iran. South Sudan, with its lack of cement production facilities, plentiful oil and major trade/border dispute with Sudan, could offer a small market for Ethiopian exports, but not enough to satisfy a ~20Mt/yr overcapacity.

Read Global Cement's January 2013 review of the Ethiopian cement industry here.

Vietnam: Hoang Mai Cement has announced that Dang Tang Cuong retired as deputy general director from 1 August 2013.

India: India Cements has reported that its net profit has fallen by 73% year-on-year to US$2.74m for the first quarter of the 2013 – 2014 fiscal year that ended on 30 June 2013. Its net profit for the same period in the 2012 – 2013 fiscal year was US$10.1m. The Indian cement producer attributed the weak performance to overcapacity in the south of the country, poor demand for cement and low prices, increasing energy costs and depreciation of the rupee against the US dollar.

India Cements' sales remained stable at US$201m in the first quarter of the 2013- 2014 fiscal year compared to US$196m of the same quarter in the previous year. Clinker production rose by 18% year-on-year to 2.08Mt from 1.80Mt. The combined volume of cement and clinker production rose by 11% year-on-year to 2.65Mt from 2.38Mt. The company also reported that its captive power plant at its Vishnupuram cement plant had been commissioned in July 2013 and is expected to stabilise operations in the autumn of 2013.

India: Dalmia Cement has announced details about the 2.5Mt/yr cement plant it is currently building in Belgaum, Karnataka. Mumbai newspaper DNA has reported that the Indian cement producer predicts that the plant will create over 1000 jobs when it opens in March 2014. Dalmia has invested over US$210m on the project.

"Though we have had a good presence in Tamil Nadu and Kerala, Karnataka has not been a great market for us so far. We have to address this state seriously by ramping up our presence here," said chief executive officer of Dalmia Cement, Vipin Agarwal. He added that the Indian cement producer intends to become one of the top three producers in the state. Currently, the top three cement producers in Karnataka are UltraTech, Zuari and ACC. The company's market share through sales is about 5% from Karnataka, compared to about 14% each from Tamil Nadu and Kerala.

Dalmia has three other cement plants in southern India, including two in Tamil Nadu (Dalmiapuram and Ariyalur) and one in Andhra Pradesh in Kadapa.

Brazil: Votorantim Cimentos has cancelled a US$4.8bn initial public offering (IPO) due to poor market conditions. According to Dow Jones, the leading Brazilian cement producer had initially delayed its IPO in July 2013 to September 2013.

"The IPO continues to be the company's plan and we will continue to monitor the evolution of the capital market conditions to be able to resume the offer," said chief financial officer Lorival Luz.