Tuesday, 05 July 2011 02:00

2011 cement volumes to replicate 2010

Cement producer Lafarge South Africa has reported an uptick in daily sales however the group noted that it expected 2011 volumes to be similar to 2010

Wednesday, 18 August 2010 02:00

Cement industry recovery in 2nd half 2011

Lafarge SA says that it expects the cement industry to recover in the second half of 2011, says CEO.

Venezuelan President Hugo Chavez ordered the creation of a state-run cement company, a year after seizing control of 90% of the local industry in expropriations.

Construction IndustryVenezuelan President Hugo Chavez ordered the creation of a state-run cement company on Wednesday, a year after seizing control of 90% of the local industry in a wave of expropriations. The decree said the Corporacion Socialista de Cemento was being established with ten million bolivars ($4.65 million) capital "for the production, sale and marketing of cement and its derivatives." In August 2008, the Venezuelan government ordered the expropriation of Mexican-owned Cemex's local subsidiary, and agreed to pay $267 million for an 89% stake in the Venezuelan subsidiary of the French group Lafarge. It also agreed to pay $552 million for an 85-% share of Swiss-owned Holcim's Venezuelan subsidiary. However, the companies have not been paid yet, and Cemex and Holcim have filed complaints with a World Bank body that arbitrates disputes between countries and private companies. Chavez has said the shortage of housing in Venezuela justified the nationalizations. On average, about 40,000 to 50,000 houses have been built per year since 2004, while the demand is for double that amount, according to industry sources. Chavez, an ally of the communist regime in Cuba, has since 2007 nationalized a whole host of companies in other strategic sectors such as telecommunications, oil and electricity.

 

Wednesday, 04 July 2007 02:00

Bags of opportunity?

Women's empowerment group Wiphold and a Cape Town-based construction company, Coessa, say they will start to import cement from China at "competitive prices" in coming months.

Construction IndustryWiphold finance director Tryphosa Ramano says it is not possible to calculate a stable price for the cement because it is exposed to the rand-dollar exchange rate. It is currently possible to land cement in Durban for US$40/t. "But this doubles with handling and bringing the cement up to Gauteng," Ramano says.

Wiphold has formed a joint venture with Tangshan Jidong Cement (Jidong) to import a cement called Dunshi.

Coessa director Adam Essa says since news broke of his company's supply deal with Singapore-based Evermont International, he has taken at least a dozen orders totalling tens of thousands of tons.

He will not divulge the landed cost of the product but says he expects to sell it for about $93/t. At the present rate of R7,13, a 50 kg bag of this cement will sell for R33,50. Local building suppliers are charging R50-R60. A year ago the price was R36.

Evermont MD Lim Hong Siang has "conservatively calculated" SA's annual cement shortage to be over 5 Mt. "The four big companies in SA are currently producing 13 Mt-14 Mt annually. According to statistics, total usage is set to be around 20 Mt this year."

Independent industry analyst Mark Kingham disputes these numbers. "I don't know where they get them," he says. "The SA cement market is broadly in balance. The supply situation is tight, I agree, but we are nowhere near a 5 Mt shortage."

Kingham says new capacity which will start to come on stream in the next nine months will gradually reduce the need for imports. Already it appears that Pretoria Portland Cement (PPC) will need to import only half the cement it previously predicted. Kingham adds: "If you're importing cement, you're transporting a dead weight. These container ships also leak like colanders, so even if the bags don't break there is a good chance there is going to be spoilage."

Lafarge SA CEO Albert Corcos says a previous attempt by his company to import Chinese cement "translated into a loss". Lafarge's experience shows that if it had managed to get all its logistics right, even cement supplied to coastal regions would have been cost-neutral. "As soon as you start hauling it, you start losing money. Transport is not cost-effective."

JP Morgan analyst Marc ter Mors says it is possible to make money on Chinese cement imports but doubts it can be achieved consistently. A rise in shipping rates from China or a dip in the rand's strength would wipe out profits. "It's a low-margin business and it is likely that they will make margin only in the coastal areas," Ter Mors says.

He agrees with Corcos that once cement is moved to Gauteng, where demand is strongest, transport and handling costs are too high.

"It is possible that at a certain point in time you will be able to make money on the imports but it is questionable whether that can be done sustainably."

He adds that companies have gone bust in Namibia after underestimating the complexity and cost of importing cement. "I think it would be quite difficult to build a sustainable business out of this." However, he adds that if local companies continue to push up prices - some have risen by as much as 20% this year - importers will have a better chance of profit.

Wiphold appears to be aware of some of the challenges. "SA is not geared for the importing of cement," admits Ramano, but she says that because Wiphold has no overhead costs associated with importing the product, there is less pressure on margins.

She admits Wiphold has not yet found any customers. "You don't get commitments until you can guarantee continuity of supply," she says.

Wiphold expects to take delivery of a first shipment in October. It hopes customers will make their own collection and transport arrangements. If not, it hopes to get Grindrod or Spoornet to offer bulk services.

Lack of customers is not the only problem facing Wiphold. Ramano says the Durban port's warehouse facilities are limited and can handle only 25 000 t/ month of cement.

Importing cement from China is Wiphold's first step to cash in on the rapid acceleration in infrastructure investment. Ramano says it is investigating the possibility of building a cement-making plant with Jidong.

Until then, the partners will have their work cut out bringing in the cement. Kingham says: "If it was easy to make money by importing cement, the big guys would have done it ages ago. "

 

Tuesday, 30 May 2006 02:00

Lafarge taps George construction boom

Global construction material producer Lafarge has firmed its foothold in the booming Garden Route construction market.

Tuesday, 03 May 2005 02:00

Demand triggers record cement sales

Domestic cement producers have benefited handsomely from the strong rise

CEMENT producers have been caught off-guard by rapid growth in demand over the past year and SA may face a shortage of cement by 2007.

Wednesday, 15 October 2003 02:00

Business and concrete ideas do mix

Construction chemicals are increasingly playing major roles in the construction of commercial and industrial property.

Pretoria - The Competition Commission would look into price increases by cement makers, due to come into effect next year, if concerns were expressed about them, it said at the weekend. 


Construction IndustryThe commission's comments follow complaints by some buyers that the three biggest cement producers in the country - PPC, Alpha and Lafarge - had notified them of price increases above 20 percent from next year.

Peter Lord, the owner and chairman of concrete product manufacturers Echo Floor, Echo Prestress and Fastfloor, said: 'I don't know how they can justify it. PPC has just announced a 45 percent increase in attributable profit.

'What is a surprise is that the cement cartel was abolished in 1996 but cement manufacturers seem to be acting in concert.

'They're all talking about the same increase, which seems remarkable, and all have come up with the same reasons at exactly the same time. I understood that was anti-competitive.'

Peter Nelson, PPC's financial director, described suggestions that its cement prices would increase by more than 20 percent next year as nonsense.

'Normally, we have two price rises in a year and take into account cost inputs and what is happening in the market. It has been a responsible approach and our price increases have been around the producer price index and inflation mark.

'Obviously the currency has also impacted on the cost of fuel and imported consumables.'

Geoff Parr, the chief economist at the Competition Commission, said the commission normally responded to a complaint submitted to it by somebody affected by price rises or collusion.

But provisions of the Competition Act with regard to restrictive practices allowed the commission to initiate a complaint.

'If there is concern, we will look into it. It's too early to tell if price increases are excessive and we aren't aware that they will all be implemented simultaneously and of any collusion.'

Parr added that it had been reported that many of the cement manufacturers' customers were on long-term contracts and increases of 20 percent to 30 percent were 'not so bad if prices were set many years ago'.

Friday, 01 November 2002 02:00

Cement price hikes 'hurt building sector'.

Members of the building industry are reeling from the shock of a proposed 20% hike in the price of cement. This follows a double digit price rise in the past year.

Construction IndustryThe proposed price rise is likely to lead to a substantial increase in building costs. Stellenbosch University's Bureau for Economic Research (BER) warned yesterday that, together with higher interest rates, a weighty rise in the price of cement would contribute to building work being less affordable and would lead to a slowdown in demand.

Ultimately, this will have a negative effect on the economy.

Cement producers PPC, Alpha and Lafarge would not comment on what their price hikes would be yesterday. However, a number of concrete product manufacturers have said that PPC, for one, had indicated a 20% price rise in January.

The rise would not be applicable to all clients, because prices vary between clients and cement product types, but double-digit rises were expected all round.

The BER's Charles Martin said cement sales were on the rise for the first time in years, and that now would be considered an ideal time for cement producers to introduce substantial price hikes.

PPC and Alpha said their price hikes were based mainly on increases in their input costs, which were affected by the depreciation of the rand. Capital equipment and spares, for instance, were sourced mostly from the US and Europe.

PPC also fingered Spoornet's prices and inefficiency as contributing factors to rising cement prices. Colin Jones of PPC said problems with rail availability had forced the cement producer to switch to more expensive road transport in some instances.

PPC and Alpha said price shifts were not based on attempts to come in line with international pricing or to move towards import parity pricing.

Lafarge declined to comment on price strategy issues.

The cement buyers said the reasons given for the increases were reasonable, but 20% was beyond what could be justified.

Several cement buyers have also accused producers of continuing to operate in a cartellike fashion. PPC, Alpha and Blue Circle operated as a cartel until 1996, when it was officially disbanded. A price war ensued in an attempt by the producers to secure market share.

 

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