Displaying items by tag: Price
Fijian government issues price controls for cement
25 June 2021Fiji: The Fijian Competition and Consumer Commission has issued a price control order for cement with effect from 22 June 2021. It applies to the ex-factory, wholesale and retail supply of cement products in all qualities, quantities, grades and classes, according to the Fiji Times newspaper.
Update on Argentina
23 June 2021Two news stories merit a closer look at Argentina this week. Firstly, Loma Negra fired up the kiln on its new 2.7Mt/yr production line at the L’Amalí cement plant in Olavarría. Work on the US$350m started in 2017 but was delayed due to the coronavirus pandemic. Notably, engineers from China-based Sinoma International Engineering, who built the plant, caused a stir when they arrived in Argentina in full personal protective equipment in late 2020 to continue work on the project. Full commissioning of the second line at the plant is scheduled for July or August 2021.
Almost at the same time, the Argentine government announced it had persuaded local building materials producers to stick to reference prices for construction materials, including cement, in order to control inflation. Loma Negra, Cemento Avellaneda and Petroquímica Comodoro Rivadavia (PCR) were said to be on board with the ‘voluntary’ plan. Building materials prices generally were reported to have risen 85% year-on-year in May 2021 compared to a national inflation rate of 49%. The new arrangement is planned to last until the end of 2021 with revisions to the reference prices every two months.
Graph 1: Cement sales in Argentina including imports and exports, 2016 – 2021. Note that the 2021 figure is an estimate. Source: Asociación de Fabricantes de Cemento Portland (AFCP).
Data from the Asociación de Fabricantes de Cemento Portland (AFCP) doesn’t show any obvious signs of disruption from inflation so far in 2021. Cement sales grew by 50.5% year-on-year to 4.55Mt in the five months to May 2021 from 3.02Mt in the same period in 2020. The cement market in Argentina didn’t shut down but it hit a low of 0.41Mt in April 2020 before compensating with a strong second half of the year, most likely due to pent-up demand as the economy reopened following local coronavirus-related lockdowns. At the time of writing the AFCP has forecast that cement sales will reach 11.3Mt in 2021, a slight rise over the 11.1Mt reported in 2019, when the market was more stable. However, cumulative sales to May 2021 are slightly behind similar sales in 2019.
Loma Negra’s upgrade at its L’Amalí plant follows Holcim Argentina’s inauguration of a new 0.5Mt/yr clinker production line at its Malagueño cement plant in Cordoba in May 2021. This project also added a 0.63Mt/yr cement grinding unit at the site as well as a new 120,000 bag/day despatch unit. Altogether it had a price of US$120m. This followed the announcement in late April 2021 that the subsidiary of LafargeHolcim was planning to open 1000 new branches of its Disensa retail chain in the country by 2024.
Loma Negra reported a 13% drop in sales to US$436m in 2020 from US$500m in 2019. However, its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3% to US$139m from US$136m. This was partly aided by the sales of its Paraguayan operations during 2020. At face value, Cemento Avellaneda had a tougher time of its in 2020 with its sales down by 22% to Euro111m and EBITDA down by 9% to Euro37m. However, once adjusted on a like-for-like basis with constant currencies and without a hyperinflation adjustment, its sales and earnings actually rose by 22% and 45% respectively.
Holcim Argentina’s director Christian Dedeu was interviewed by national news agency Télam in May 2021 around the time of the upgrade at the Malagueño cement plant was officially completed. When asked by the company had made the investment he said that the country had potential for both the residential and infrastructure sectors. He also pointed out that the subsidiary of Switzerland-based LafargeHolcim had been forced to import clinker at times of high demand previously. The announcements for both the Loma Negra and Holcim Argentina new lines were made at the end of 2017 when the market hit a high in sales volumes. Since then the country has faced rocketing inflation, further delays to it debt repayment programme to the International Monetary Fund (IMF) and the coronavirus pandemic. Producing more commodities, such as clinker, domestically certainly seems enticing with high inflation and unfavourable foreign currency exchange rates. So, the new production lines from Loma Negra and Holcim Argentina are well timed in this sense unless they get hit by any mounting input costs, from imported raw materials for example. On the other hand the government’s measures to curb inflation such as reference prices for cement may constrain the cement producers’ flexibility. As the local construction industry slowly recovers after 2020, continued uncertainty lies ahead.
Kuwait: The Ministry of Commerce and Industry has banned all export and re-export of cement and other construction materials from Kuwait. However, it has allowed individual citizens to import construction materials for personal use. The ban is part of a raft of a measures intended to stem the increase in building material prices. The Kuwait News Agency has reported that cement prices rose after the resurgence of the coronavirus outbreak in India suspended Indian imports.
The ministry subsidises building materials including cement and concrete. In May 2021 it paid US$45m towards such subsidies. It continues to monitor the cement market and cement production for ‘unlawful’ price rises.
Kuwait’s cement production capacity is 9.0Mt/yr, while 2020 consumption was 6.0Mt.
Mozambique: Carlos Mesquita, the Minister of Industry and Trade, has said that the government was expecting the price of cement to fall following the opening of the Chinese-backed Dugongo Cement plant at Matutuine in Maputo province. He made the comment in response to a letter by other cement companies asking for government intervention to keep the price high, according to the Journal Notícias newspaper. They alleged that the newcomer is breaking competition legislation. The price of cement has reportedly dropped by as much as 70% since the new plant opened in May 2021.
“We, as a government, know what we’re doing,” said Mesquita. “We have been saying, with regard to cement and to other industries, that we have to assess the costs of production in order to arrive at adequate profit margins and a reliable final price.” He added that Dugongo Cement is the only cement producer currently producing clinker locally.
Argentina: The Ministry of Internal Trade has secured an agreement from national building materials producers, including Loma Negra and Cemento Avellaneda, to restrict the price of building products such as cement. The Clarín newspaper has reported that average building materials prices rose by 85% year-on-year in May 2021, nearly double the inflation rate. The primary cause is a rise in domestic construction. Currency effects have further increased the cost of building due to the dollarization of materials such as steel.
The ministry previously negotiated concerted price reductions in September 2020 and December 2020. Minister for Internal Trade Paula Español urged building materials producers to maximise their capacity utilisation to meet demand and protect the domestic market.
South India Cement Manufacturers’ Association works with Tamil Nadu government to keep cement available to all
21 June 2021India: The South India Cement Manufacturers’ Association (SICMA) has assured the public that it is collaborating with the Tamil Nadu government to implement concessionary cement prices for lower income homebuilders. The Business Standard has reported that the association and government aim to keep cement available to all. Domestic cement production capacity utilisation has been reported as low as 60% during the second wave of Covid-19 in the country with a 35% month-on-month production drop in April 2021. Increased input costs caused a price rise in the first quarter of the 2022 financial year. Cement prices are reportedly forecast to remain high in the medium term.
Bangladesh: Cement producers are warning of price rises due to a ‘significant’ rise in international freight rates. The Bangladesh Cement Manufacturers Association (BCMA) has expressed concern about the situation, according to the New Nation newspaper. Freight rates to transport clinker from Indonesia, Vietnam or the Middle-East have increased by up to 30% in the last few months. The BCMA has called on the government to cut import duties to keep consumer prices low.
Ivory Coast sets caps on price of cement
19 May 2021Ivory Coast: The Ministry of Commerce and Industry has set caps for the ex-factory and retail price of cement. Maximum prices have been designated for 32.5 and 42.5 grades of Ordinary Portland Cement in both urban and rural areas, according to the Agence de Presse Africaine. The ministry said that arrangements had been made with producers to keep the market supplied. It added that failure to comply with the designated prices would lead to penalties.
New Zealand: The New Zealand Ministry of Finance plans to launch a commission to investigate high building materials prices. The New Zealand Herald newspaper has reported that finance minister Grant Robertson said that New Zealanders pay too much for building materials. Robertson indicated that any probe would look into cement, among other building materials. The Productivity Commission previously estimated that average national building materials prices are 20 – 30% higher in New Zealand than in Australia.
The price of cement in Nigeria
28 April 2021For those not following the news in Nigeria, a nationwide row has broken out about the cost of cement in the country. Two of the three main local producers have been forced to publicly defend their pricing. Alongside this, the Senate of Nigeria has implored the federal government to encourage further local investment in cement production with the goal of keeping the end price down.
The current debacle started to take form in the autumn of 2020 when the price of cement leapt up by 35%. Builders and those immediately affected started complaining then but the argument really heated up in April 2021 when the local press started comparing the price of cement in Nigeria unfavourably against neighbouring countries. Dangote Cement, one of Africa’s largest cement producing companies and a Nigerian-based one at that, immediately defended itself by pointing out that its ex-factory price was the same or lower than in other African countries. It added that it could not control the price of cement between its factory and the end-consumer with dealers and middlemen benefiting from the gap. A week later the Senate of Nigeria intervened with its members discussing the issue in relation to a bill intended to liberalise the sector. This week, BUA Cement said publicly that it had no plans to raise the ex-factory price of its cement at the present time or in the future, “…barring any material, unforeseen circumstances.”
The roots of the current crisis go back to the mid-2010s when Nigeria declared itself ‘self-sufficient’ in cement after building up its domestic production capacity. At the same time it discouraged imports and embraced exports. Today, the country’s cement production capacity is around 49Mt/yr and annual demand is around 21Mt. This self-sufficiency path reached one milestone for Dangote Cement in 2020 with clinker exports starting from its Apapa terminal and the commissioning of its Onne Export Terminal in Port Harcourt. Under the old narrative for the sector this was a moment for congratulation. Suddenly though, instead of being seen as the saviour of the industry, members of the legislature were asking whether it was a good thing for Dangote Cement to hold a 60% share of the local market with most of the rest shared between Lafarge Africa and BUA Cement.
The price row has seen Dangote Cement promptly suspend exports from those new terminals. It also said it had reactivated its 4.5Mt/yr Gboko plant in Benue State, which was reportedly mothballed in 2018. It is worth noting here that the Gboko plant was part of that national capacity total above despite being mothballed until fairly recently. Aside from the middleman argument, the producer said that its production costs had risen over the past 15 months due to negative currency effects but that it hadn’t increased its ex-factory prices since December 2019.
A survey by the News Agency of Nigeria in the north-east of the country revealed all sorts of speculation about why the price was so high but few facts. Some of the opinions expressed included: the coronavirus outbreak; low production rates at the plants; market middlemen; and transport costs. What is clearer is that the country’s cement production capacity is more than double that of its demand. On paper at least the nation should be able to satisfy its own needs and then export the same again with plenty spare. Yet somehow this isn’t happening. If the government really believes in self-sufficiency it may be time to take another look at the cement sector, the challenges it faces and the needs of the end consumers.