Displaying items by tag: China
Huaxin Cement’s half year results bounce off higher prices
01 September 2017China: Huaxin Cement’s sales revenue rose by 63% year-on-year to US$1.43bn in the first half of 2017 from US$874m in the same period of 2016. It attributed the growth to an increase in the price of cement. The cement producer also benefited from its acquisition of Lafarge China Cement’s plants in Yunan, Guizhou and Chongqing. During the reporting period its cement and clinker sales rose by 33% to 31.8Mt.
Half-year update on China
23 August 2017There is plenty to mull over on the Chinese cement market at the moment as the half-year reports for the major cement producers are being published. Anhui Conch revealed this week a glowing balance sheet with a 33% jump in its sales revenue to US$4.79bn. It attributed the boost to a ‘significant’ increase in prices and continued discipline with production and operation costs. Although CNBM is scheduled to release its results at the end of August 2017, Anhui Conch appear to be well ahead of its next largest rivals locally as can be seen in Graph 1.
Graph 1: Sales revenue of major selected Chinese cement producers. Sources: Company financial results.
Beyond the headline figures it is interesting to pinpoint the areas in China where Anhui Conch says it isn’t doing as well. Its South China region, comprising Guangdong and Guangxi provinces, suffered from competition in the form of new production capacity, which also in turn dented prices. Despite this ‘black spot’ in the company’s regional revenue still grew its sales in double-digits by 14%.
The other point to note is the growing number of overseas projects with the completion of a cement grinding plant in Indonesia, new plants being built in Indonesia, Cambodia and Laos, and projects being actively planned in Russia, Laos and Myanmar. The cement producer also opened seven grinding plants at home in China during the reporting period. It’s not there yet but it will mark a serious tipping point when the company starts to open more plants outside of China than within it. With the government still pushing for production capacity reduction it can only be a matter of time. On that last point China Resources Cement (CRC) reckoned in its half-year results that only four new clinker production lines, with a production capacity of 5.1Mt/yr, were opened in China in the first half of 2017.
After a testing year in 2016 CRC’s turnover has picked up so far in the first-half of 2017 as its sales revenue for the period rose by 17% to US$1.67bn. Despite its cement sales volumes falling by 9% to 33.6Mt, its price increased. Given that over two thirds of its cement sales arose from Guangdong and Guangxi it seems likely that CRC suffered from the same competition issues that Anhui Conch complained about.
Graph 2: Chinese cement production by half year, 2014 – 2017. Source: National Bureau of Statistics of China.
Graph 2 adds to the picture of a resurgent local cement industry suggesting that the Chinese government’s response to the overcapacity crisis may be starting to deliver growth again. After cement production hit a high in 2014 in fell in 2015 and started to revive in 2016. So far 2017 seems to be following this trend.
Returning to the foreign ambitions of China’s cement producers brings up another story from this week with news about the Nepalese government’s decision to delay signed an investment agreement with a Chinese joint venture that is currently building a cement plant in the country. With the prime minister visiting India the local press is painting it as a face-saving move by the Nepalese to avoid antagonising either of the country’s main infrastructure partners. This is relevant because the cement industries of both China and India are starting look abroad as they consolidate and rationalise. Once China’s cement producer start building more capacity overseas than at home, conflicts with Indian producers are likely to grow and present more awkward situations for states caught in the middle.
Anhui Conch half-year sales fly following price hike
22 August 2017China: Anhui Conch’s sales revenue rose by 33% year-on-year to US$4.79bn in the first half of 2017 from US$3.60bn in the same period in 2016. Its sales volumes of cement and clinker rose by 4.6% to 134Mt. Its gross profit rose by 37% to US$1.48bn from US$1.08bn. The cement producer attributed its result to ‘significant’ increases in prices and continued discipline with production and operation costs.
By region the company reported particular increases in sales in East and Central China due to increased sales volumes and prices. In West China it increased its sales due to increasing market demand and the promotion of off-season production. South China was the company’s weakest region, with an increase of 14.3% in sales revenue, due to new production capacity.
During the reporting period Anhui Conch put seven new cement grinding plants into operation. Its Merek grinding plant in Indonesia has started operation and construction continues at plants Conch North Sulawesi in Indonesia, Battambang Conch Cement in Cambodia and Luangsprabang Conch Cement in Laos. Preliminary work for new plants in Russia, Laos and Myanmar is also in progress.
Nepal: The Investment Board Nepal has delayed signing a Project Investment Agreement (PIA) with China’s Hongshi-Shivam Cement due to ‘technical reasons.’ The joint venture is currently building a US$360m cement plant at Nawalparasi. The deal, which would have protected the interests of the foreign investor, has been deferred while Prime Minister Sher Bahadur Deuba visits India in late August 2017, according to the Kathmandu Post newspaper. Sources quoted by the newspaper attribute the delay to tensions perceived by the Nepalese government regarding infrastructure projects backed by India and China. The agreement is expected to be signed on 3 September 2017.
Chinese ripples on the Pacific Rim
16 August 2017After a couple of weeks looking at the capacity-rich cement markets of Angola and Vietnam, we turn our attention this week to some of those countries on the receiving end of overcapacity.
Costa Rica is an unlikely place to start but it came to our attention this week due to a short but significant news item. In summary, the amount of cement imported into Costa Rica increased by a factor of 10 between 2014 and 2016, from around 10,000t to over 100,000t. This is around 5% of its 2Mt/yr domesitic capacity, so the change is already fairly big news. The fact that an incredible 97% of this came from just one country, China, makes the story far more interesting as it shows the effects that Chinese overcapacity can have on smaller markets.
But when we look at how the value of the cement imports has changed over time, we see an even more dynamic shift. While the amount of cement imported into the country increased by nearly 10-fold, the value of the same imports only increased by around half as much between 2014 and 2016. If these figures can be taken at face value, the implication is stark. Taking the very low base as effectively ‘zero,’ each tonne of cement imported must cost around half as much as it used to.
Digging a little deeper and the picture gets more complicated. While they have fallen, Costa Rican cement prices have not fallen by 50% and why the sudden deluge of imports anyway? In 2015 the country changed its rules on cement imports to facilitate more flexible imports and lower prices for consumers. It did this by changing a regulation relating to how long cement can be stored, previously set at just 45 days, with the aim of allowing cement to come from further afield and, crucially, in bulk rather than bags.
The effects on price were immediate. Previously as high as US$13/bag (50kg) in December 2014, fairly high by global standards, Sinocem, the first Chinese importer, immediately sold its first shipment at US$10/bag. This effect of lower prices has now forced the average sales prices down to around US$10/bag across the country by 2017. This is good for consumers but not necessarily the local plants.
Back in 2015, the two local integrated plants operated by Cemex and Holcim warned that cement quality would suffer if cement bags were not used within 45 days. This apparently self-serving ‘warning’ went unheeded by the Ministry of Economy, Industry and Trade (MEIC), which pointed out that other countries in South America, as well as the European Union and United States, had no analogous short use-by dates for cement bags.
The rule remains in place, although discontent rumbles on. Indeed LafargeHolcim noted in its third quarter results for 2016 that ‘Costa Rica was adversely affected by increased foreign imports.’ This may well be a little bit of posturing and it doesn’t square with the fact that Costa Rica exported three times more cement that it imported in 2016. Of total exports of 0.34Mt, over 95% went to neighbouring Nicaragua, which has a single 0.6Mt/yr wet process plant owned by Cemex. It seems that the two Costa Rican plants have found a way to keep a little bit of the Chinese producers’ margin for themselves.
Of course, Chinese cement overcapacity doesn’t only affect the Central American market. It has been rippling all around the Pacific Rim. In July 2017, this column looked at the decision by Cementos Bío Bío to stop making clinker at its Talcahuano plant in Chile. It now favours grinding imported clinker from Asia. Before that, Holcim New Zealand closed its Westport cement plant in 2016, finally admitting that domestic clinker was not viable.
In the grand scheme of things, this all makes sense. The market has forced those operating on thin margins to adjust. Ultimately, the end consumer is likely to benefit from lower prices, at least for as long as reliable low-cost imports can be secured. What happens, however, if China actually gets round to curtailing its rampant cement capacity, or simply decides to charge more for its cement? Flexible imports, the main aim of the Costa Rican rule change, may then prove vital, as long as there is more than one international supplier of cement.
Costa Rican cement imports soar 10-fold
15 August 2017Costa Rica: According to a report released by the government trade promotion agency Procomer, imports of cement into Costa Rica expanded from 10,418t in 2014 to 107,294t in 2016, representing a growth of 930% in only two years. Approximately 97% of the 2016 figure corresponds to cement imports from China, which is now the main origin of imported cement in the country.
In value terms, cement imports reached US$18.3m in 2016, only 5.4 times more than in 2014. Cemex and Holcim are the main cement manufacturers operating in Costa Rica. If the import volumes and prices are to be taken at face value, domestic plants would appear to be under increasing price pressure from the imported cement from China.
Nepal: Hongshi-Shivam Cement plans to start cement production at its new plant in Nawalparasi from March 2018. Shiva Ratna Sharada, director of the joint venture company, told the Xinhua News Agency that construction at the site is underway. Once operational the plant will have a production capacity of 6000t/day, making it the largest site in the country. The company is planning to export cement to India, China and beyond with plans to expand the unit to 12,000t/day considered.
Uzbekistan: President Shavkat Mirziyoyev has issues a decree detailing the construction of a new 1.2Mt/yr cement plant. The US$204m unit will be built at Bulakbashy, Andijan by 2019, according to the Trend News Agency. Shangfeng-Bridge of Friendship, a Uzbek-Chinese joint-venture, will manage the project. Investment for the scheme will come from foreign direct investment and loans, a loan from Uzpromstroybank and from Shangfeng-Bridge of Friendship directly. Tax and customs relief will also be offered to Shangfeng-Bridge of Friendship as part of the project.
China: Qi Shengli has resigned as a supervisor and the chairman of the supervisory committee from Anhui Conch Cement. His resignation will take effect upon the appointment of a successor. The recruitment process is continuing at present.
Yang Kaifa has resigned as a company secretary. Chiu Pak Yue Leo remains a company secretary. Zhou Bo, an executive director and chief accountant, will aid him. A new company sectary to replace Yang is being recruited.
Iraq: China North Industries Corporation (Norinco) has signed a US$445m deal with Jabal Bazian Co for General Trading to build a cement plant. The contract includes the plant's production line design, purchasing, construction management, operational work as well as assorted administration buildings, dormitories, dining halls and other facilities, according to the Global Times newspaper. The plant is scheduled for completion in the second half of 2019.