Displaying items by tag: AFKO Group

When a small cement market sits just off the coast of one of the world’s biggest producers, it’s not a recipe for a lot of column inches. Sri Lanka’s cement market, is particularly small, ranked 128th out of 141 clinker producing nations according to the Global Cement Top 100 Report 2015, and is dwarfed by a very dominant neighbour in India. Therefore, when two stories about plant projects and divestments came in from Sri Lanka this week, our interest was suitably piqued.

The first story came from global giant LafargeHolcim, which announced the planned divestment of its 0.6Mt/yr integrated Holcim Lanka plant at Puttalam, its 1.0Mt/yr grinding plant in Galle and associated packing facilities. The second story came from South Korea’s AFKO Group GMEX (AFKO), which has expressed strong intentions to reopen the Kankesanthurai plant in the north of the country.

LafargeHolcim stated that its move was part of its wider divestment strategy following the 2015 merger of Lafarge and Holcim. Considering that the company currently controls 1.6Mt/yr of Sri Lanka’s 3.6Mt/yr cement capacity (around 44%) the potential ramifications are big - A huge position is up for grabs.

Local newspaper The Nation stated that three locally-owned groups were already circling the assets as of Saturday 4 June 2016, but it’s still early days. A major player could easily step in to grab some high-quality assets in this rapidly-growing market, which grew by 4.5% in 2014 and is investing strongly in infrastructure. With its recent history or major purchases, CRH could certainly be interested. Larger Indian and Pakistani players, stifled by continued overcapacity at home, could also be in line to snap up the assets.

Up in the north, the AFKO project sounds massive. It could also have large implications for the shape of the Sri Lankan cement sector but there is a lot of work to be done. The Kankesanthurai plant produced its last cement in 1991 as the civil war raged in the north of Sri Lanka. It had a capacity of just 0.12Mt/yr at that time. However, AFKO chairman Keun Young Lee stated that the company was, “Ready to enter with US$450m as a start.” This is far more than the amount needed to re-start a small, presumably wet process cement plant. The amount strongly suggests an entire new, state-of-the-art facility, but no capacity has been announced.

AFKO sounds very serious but other projects have previously run into trouble on the island. A restart at Kankesanthurai has previously been mooted twice, once by a domestic player and once by a company from the UAE. Meanwhile Thatta Cement has suspended construction of a US$15m, 0.1Mt/yr grinding plant at Rajapaksa, Hambantota. It will be very interesting to see how the AFKO project develops over the coming months – It will also be seeing how the eventual price-tag for the project compares with the revenue that LafargeHolcim raises from its own divestment.

While Sri Lanka remains a small player, its cement sector is very similar to that of India when we take populations into account. Both have room for expansion. India has 310Mt/yr (according to the Global Cement Directory 2016) but, with a population of over 1.25 billion, it has a per-capita capacity of around 250kg/capita. Sri Lanka, with 3.6Mt/yr of capacity and 20.2 million inhabitants, comes in at just under 200kg/capita. There is clearly room for growth in both of these figures and further projects could yet be on the horizon for Sri Lanka. If they play their cards right, AFKO and the successful bidder for the LafargeHolcim assets could be in a great position to benefit from the island’s strong continued growth.

Sri Lanka: South Korean conglomerate AFKO Group GMEX has expressed interest in reopening the Kankesanthurai cement plant located in the Northern Province of Sri Lanka, the country’s Industry and Commerce Ministry has said, according to the Daily Mirror.

“AFKO specialises in cement projects. We are keen to partner in the Kankesanthurai Cement Project and are ready to enter with US$450m as a start. We shall also bring in all the necessary machinery and technology and can start from scratch. We only need Sri Lanka’s land and labour,” said AFKO Group GMEX chairman Keun Young Lee at a meeting with Industry and Commerce Minister Rishad Bathiudeen in Colombo. Lee also expressed interest in cement production elsewhere in Sri Lanka.

AFKO intends to start a feasibility study shortly. Ssangyong C&T is the favoured engineering company to start construction at the site. AFKO Group, which merged with Korea’s multinational Hyundai Group in 2008, runs its own construction and cement projects in Africa and elsewhere.

The Kankesanthurai cement plant started operations in 1950 under the Department of Industries and was converted to a public corporation in 1956, being named as Kankesan Cement Works. It closed in 1991 due the civil war. At that time it had a production capacity of 115,000t/yr. In 2011 – 2012 Sri Lanka Cement Corporation and Lanka Cement Limited were planning to resume bagging at the plant. Previously, UAE-based cement company Ras Al Khaimah had been linked to a US$100m investment plan in the plant.