Displaying items by tag: Export

South Korea/Egypt: The South Korean government plans to implement a 72% import duty on white cement from Egypt. Yonhap News has reported that the Korea Trade Commission (KTC) recommended the duty as an anti-dumping measure, following its investigation into the impacts of Egyptian imports on the South Korean white cement industry. This consists of Union Corporation’s 200,000t/yr Chongju white cement plant in North Chungcheong.

South Korea consumed 100,000t of white cement in 2022. Egyptian white cement commanded a 10% (10,000t) market share. The domestic cement industry complained to the KTC against Royal El Minya Cement and Albatros International Cement Trading in March 2023. An additional probe will now follow to assess the correct rate for the duty.

The core of the Caribbean cement industry consists of the Dominican Republic (with 5.9Mt/yr in integrated capacity), Cuba (4.7Mt/yr) and Jamaica (3.5Mt/yr). Haiti and Trinidad & Tobago also command small, single integrated plants, while there are numerous grinding plants and cement terminals along the region’s extensive coastlines. The industry has been the subject of new commercial and capital expenditure-related announcements in the past fortnight. Regarding the Caribbean’s cement producers, these developments seem to lack a single clear direction.

Caribbean market leader Cemex revealed that it was considering selling up in the region’s largest market, the Dominican Republic, on 1 September 2023. Bloomberg cited unnamed sources stating that the Mexico-based cement giant hired financial services JPMorgan Chase to explore the possible divestment of local subsidiary Cemex Dominicana. Exactly one year had passed since Cemex completed its sale of Cemex Costa Rica and Cemex El Salvador to Guatemala-based Cementos Progreso for US$329m. Sources clued in on the latest development reportedly expect Cemex Dominicana to command a selling price three times greater than the Central American divestments combined.

Cemex has discussed its scattered disposal of global assets since 2019 as a strategic realignment towards its main markets, in particular those in North America and Europe. On this understanding, the Caribbean straddles an invisible line between Cemex’s strategic core in North America and Central America on its periphery.

Just to the north of the line lies Jamaica. There, Cemex subsidiary Caribbean Cement will expand its Rockfort cement plant by 30% to 1.3Mt/yr through a US$40m upgrade, scheduled for completion in early 2025. Late last week, Caribbean Cement told investors that the upgrade will equip the plant with new equipment, including a new dosing system. The producer expects this to help the Rockfort plant to further increase its alternative fuel (AF) substitution rate. It co-processed 5.6% AF in its kiln during the first half of 2023, more than double its first-half 2022 substitution rate of 2.7%. Caribbean Cement began exporting cement to Turks and Caicos on 16 September 2023, and plans to increase its shipments there and elsewhere. Managing director Yago Castro reassured Jamaicans that Caribbean Cement would also continue to help meet domestic demand.

Currently, Caribbean Cement and fellow Jamaican producer Cement Jamaica compete in the domestic market against imports, including some cement from Dominican Republic-based Domicem. This enters the country via Buying House Cement’s Montego Bay terminal. Montego Bay Cold Storage, an affiliate of Buying House Cement, shared plans for a second, US$8m cement terminal in the city earlier in 2023. The facility is expected to help meet growing demand from residential and hospitality sector construction.

More new production capacity is soon to come online in the form of a 1.23Mt/yr grinding plant in the Dominican Republic. Cemento PANAM will own and operate the plant, while Germany-based Gebr. Pfeiffer will supply a 3750 C-4 vertical roller mill via engineering, procurement and construction contractor CBMI Construction.

In a market where the nearest cement exporter is only a short sail over the horizon, producers have to compete fiercely for their market shares, even at home. Disputes over Caribbean Community member states’ rights to protect domestic cement production have gone as high as the Caribbean Court of Justice. It ended Barbados-based Rock Hard Cement’s hopes of resuming exports to Trinidad & Tobago last year.

The Caribbean’s cement producers will be acutely aware of Cementos Argos’ planned expansion of its north-facing Cartagena, Colombia, cement export facility, hot on the heels of a previous, US$42m expansion. The South American giant says that it is targeting the US, where it anticipates an upcoming construction boom. Caribbean countries present other possible markets for producers like Cementos Argos, yet their cement industries might equally emulate any successes it enjoys in the US. Like Argos in Colombia, Jamaica’s Caribbean Cement is part of a group with an existing presence in the US. Its on-going investments in the Rockfort plant signal a readiness to catch the trade winds rapidly picking up in the Caribbean.

Jamaica: Caribbean Cement plans to increase its exports of its cement. The Gleaner newspaper has reported that the company announced its successful despatch of a 3400t shipment of cement to Turks and Caicos on 16 September 2023. The shipment consisted of 2267 jumbo bags of its higher early strength cement.

Managing director Yago Castro reassured Jamaicans that Caribbean Cement would continue to prioritise the domestic market. He continued “However, there is a market out there for us. We will actively look for opportunities to reallocate the spare capacity to the export market."

Belarus: Belarusian Cement Plant produced 940,000t of cement during the first half of 2023. The figure corresponds to a year-on-year rise of 3.1%. The Respublika newspaper has reported that the company more than doubled its exports of cement to 719,000t – 76% of its production. Russia was the main destination for the producer’s cement exports. Belarusian Cement Plant recorded a capacity utilisation rate of 94% throughout the six-month period.

Nepal/India: Chaudhary Group has signed a memorandum of understanding (MoU) for a strategic partnership with India-based conglomerate Adani Group. According to the MoU, Adani Group will support the Nepal-based cement producer in its distribution of cement into neighbouring states of India.

The Kathmandu Post newspaper has reported that Chaudhary Group’s managing director Varun Chaudhary said "This collaborative effort stands as a pivotal milestone, underlining our commitment to augmenting economic cooperation and trade relations between the two nations.” He added “Through this strategic collaboration, we aspire to fortify the harmonious rapport that characterises the Nepal-India relationship, while actively contributing to the growth and development of the adjoining states."

Dangote Cement felt compelled to issue a statement clarifying its prices at the end of August 2023. In the release it stated what its ex-factory price was in Nigeria and added that transport costs and the location of a delivery could add additional expense. It made the declaration in response to alleged “misinformation” on social media channels that the company had been selling its cement more cheaply in the neighbouring country of Benin. A subsequent investigation by the This Day newspaper reported that Dangote Cement does not officially export cement to Benin and that the average price in the country was actually slightly higher than the end prices Dangote Cement provided. Competitor BUA Cement wasted no time though in saying at its annual general meeting that it would ‘crash the price of cement.’

All of this may sound familiar because a similar argument broke out in early 2021. At that time prices were rising following the outbreak of Covid-19, although other factors were at play. Then as now, Dangote Cement, the largest domestic producer, defended itself by publishing its prices and BUA Cement made another showy claim saying 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 government also became involved with the Senate of Nigeria discussing the matter in relation to potential legislation at the time. Part of the problem here has been that Dangote Cement is the biggest producer and it has gradually started exporting cement from Nigeria in recent years and, regardless of any effects to the domestic market, it leaves it exposed to the kind of unsubstantiated scuttlebutt it has faced recently. Back in 2021 it briefly stopped exporting cement for a while before resuming it again in May 2021.

Graph 1: Half-year sales revenue from selected large cement producers in Nigeria. Source: Company reports.

Graph 1 shows how some of the large cement producers in Nigeria did in the first half of 2023. Dangote Cement is the market leader by a considerable margin and the figures here do not even include its sales elsewhere in Sub-Saharan Africa. Despite its market dominance its sales revenue has fallen so far in 2023 and the company blamed election uncertainty, a “cash crunch”, negative currency exchange issues and the weather. That said though it did manage to increase its earnings through initiatives such as using alternative fuels, making efficiencies at its plants and utilised compressed natural gas in its truck fleet.

BUA Cement and Lafarge Africa provided less descriptive context in their release. Both BUA Cement’s revenue and profit after tax rose year-on-year but Lafarge Africa’s profit after tax fell. This may have been due to a rise in fixed production costs such as staffing, by-products costs and electricity, although depreciation was also an issue.

For all of BUA Cement’s talk of “crashing the cement price” it is preparing to commission two new 3Mt/yr production lines at its Obu and Sokoto plants respectively in the first quarter of 2024. Given everything else that is going on in the Nigerian economy, such as inflation, and the large size of the country it seems unlikely to lower the price although it might slow down the rate by which the price continues to rise. In its 2022 annual report BUA Cement’s managing director Yusuf Haliru Binji said that the new production lines would enable it to potentially increase its exports. This is the logical next step for a local sector outgrowing its domestic bounds and this is exactly what Dangote Cement has done. Yet, as the recent price debacle has shown, the price of cement matters to Nigerians. If the price keeps going up all of the local producers may end up facing negative attention whether warranted or not.

Pakistan: Data from the All Pakistan Manufacturers Association (APCMA) shows that local cement industry recorded a 37% year-on-year surge in dispatches during August 2023, with total shipments reaching 4.52Mt, up from just 3.29Mt in August 2022. While impressive on the surface, this appears to represent a return to normality following nationwide disruption due to massive flooding in the summer of 2022.

The APCMA’s data shows that a significant driver of this growth was the domestic market, where cement dispatches rose by 30% to 3.79Mt, compared to 2.91Mt in August 2022. Simultaneously, exports surged by 87%, with volumes growing from 387,440t in August 2022 to 724,777t in August 2023.

Cement plants in the north of Pakistan dispatched 3.25Mt in August 2023, marking a 25% increase from the 2.0Mt dispatched in August 2022. In the southern region, plants dispatched 1.27Mt of cement, an 81% rise compared to the 700,436 tonnes in August 2022.
Exports from northern-based plants increased by 79%, from 91,963t in August 2022 to 164,195t in August 2023. Similarly, southern mills reported a significant increase, with exports surging by 90% to 560,582t in August 2023, up from 295,477t during the same month in the previous year.

An APCMA spokesperson emphasised the industry's challenges, including rapid currency depreciation, soaring petroleum prices and rising electricity tariffs. These factors are driving up production costs and affecting transportation, potentially impacting consumer prices. The spokesperson urged the government to address these issues to support the industry as it navigates this ‘challenging terrain.’

Vietnam: State-owned Vicem Ha Tien has despatched its first shipment of cement to the US. The Vietnam government says that Vicem Ha Tien will continue to further diversify its markets.

Domestic-focused cement producers like Vicem Ha Tien have experienced increased competition in the past year due to a slowdown in the Chinese market.

US/Colombia: Colombia-based Cementos Argos is carrying out expansions to two cement plants in South Carolina and West Virginia. While not specifically named, these would appear to be the 1.1Mt/yr Harleyville and 1.8Mt/yr Martinsburg cement plants. The producer says that the expansions will increase its cement capacity in the eastern US by 450,000t/yr.

Additionally, Cementos Argos plans to expand the capacity of its Cartagena cement terminal in Colombia by 35% to 4Mt/yr. The producer says that this will serve as a platform for subsequent growth. It is targeting the US market, where an expansion is also underway at its import facility in Houston, Texas. The Cartagena terminal achieved its current capacity following a recent US$42m expansion.

The Hungarian government recently enacted Emergency Decree 320/2023, taxing all CO₂ emissions from the country’s 40 or so largest industrial enterprises. The government used emergency powers to set up a new taxation scheme, which undercuts existing free allowances under the EU emissions trading scheme (ETS). The scheme additionally penalises the trade in ETS credits. Cement producers announced that the new regulations will make it impossible for them to keep operating.¹

With regard to Hungary’s six active cement plants, the scheme comprises:

1 – A Euro20/t tax on CO₂ emissions, effective retroactively from 1 January 2023, payable by any large enterprise that uses EU Emissions Trading Scheme (ETS) free allowances to cover the majority of its CO₂ emissions. Plants that decrease their production, or that carry on non-CO₂-emitting activities at over 10% of their operations, will pay a higher rate of Euro40/t of CO₂.

2 – A 10% transaction fee for the sale of free allocations under the EU ETS, payable to the Hungarian Climate Protection Authority.

Less than three years ahead of full implementation of the EU carbon border adjustment mechanism (CBAM), the Hungarian government has seemingly moved unilaterally against cement production – this in a country surrounded by seven other cement-producing countries. Multiple foreign cement producers connected to the major market of Budapest by rail, river and road will be watching developments with interest. These include CRH, which, besides two smaller plants inside Hungary, operates the 800,000t/yr Cementáreň Turňa nad Bodvou plant, immediately over the border in Slovakia.

This comes at a time when the domestic cement industry is facing historically high costs and low demand, with a 30% year-on-year decline in construction activity in July 2023, following double-digit inflation throughout 2022 and the first half of 2023.

Catastrophising may be a common symptom of environmental regulation in industry associations, but one can understand on this occasion. The Hungarian cement and lime industry association, CeMBeton, backed its members’ gloomy announcement about their future with an estimate for extra annual taxes of ‘several billion forints’ (1bn forint = US$2.84m), in a statement following the decree. Assuming annual CO₂ emissions of 565kg/t across its 5.4Mt/yr cement capacity, the sector might expect to pay US$61m/yr in CO₂ rates alone.^{2, 3} According to analyst ClearBlue, the government will raise additional tax revenues worth US$278m/yr across all of the 40 aforementioned heavy emitters in Hungary.⁴

It may seem surprising that CeMBeton did not even draw up a projected tax bill during consultations over the new tax scheme – but, in fact, no such consultations took place. In its most recent statement, the association said “We do not know the government’s intentions.” Outside of official releases, Hungary’s cement producers have not always been so reserved about the government’s perceived aim.

Global Cement reported in April 2023 that the Hungarian government was allegedly interfering in the cement sector to make producers sell up – as per accusations by an anonymous industry executive.⁵ There is arguably a course of action on the government’s part which, more or less, appears consistent with this aim:

October 2020 – The Hungarian Competition Authority (GVH) starts competition supervision proceedings against CRH, Duna-Dráva Cement and Lafarge Cement Magyarország.

July 2021 – Emergency Decree 2021/404 imposes a 90% tax on producers’ ‘excess’ profits, based on threshold cement sales revenues of Euro56/t. Additionally, producers must report their exports.

September 2021 – GVH finds insufficient evidence to support the initiation of competition supervisory proceedings in the cement industry.

January 2023 – (Retroactive) entry into force of CO₂ emissions tax.

May 2023 – The government of Hungary reportedly initiates negotiations to acquire Duna Dráva Cement and Holcim Magyarország, according to the Hungarian builders’ association, National Professional Association of Construction Contractors (ÉVOSZ). Duna Dráva Cement owners Heidelberg Materials and Schwenk Zement state that they have entered into no such negotiations, while Holcim declines to comment.

July 2023 – The Act on Hungarian Architecture lets the government dictate producers' volumes and prices and require them to supply cement to National Building Materials Stores (a proposed state-owned construction materials retail monopoly).⁶ Additionally, the government gains a right of first refusal over the divestment of any asset by the cement industry’s foreign owners.

20 July 2023 – The government enacts Emergency Decree 320/2023. ETS transaction fees enter into force.

The government can now expect a legal challenge to its latest move. CeMBeton’s first ally may be the font of all emissions legislation – the EU itself. Within the EU ETS framework, tax rates are down to member states to determine. However, the introduction of a transaction fee may constitute an illegal restriction to free allowances, OPIS News has reported. The association has also indicated its readiness to mount a constitutional challenge, specifically with regard to the legislative retrofit involved in the CO₂ emissions tax. The Fundamental Law of Hungary does not generally permit legislation to apply retroactively, though how courts will balance this consideration against the rights of the government is untested.

The government amended the constitution to provide for new emergency powers, and subsequently adopted them in May 2022, in response to the ‘state of danger’ created by Russia’s war in Ukraine – though its actions on the international stage suggest careful neutrality, if not ambivalence. At home, the war has brought a consolidation of the government’s control over various areas of life, including the economy, according to Human Rights Watch.⁷

Climate protestors around the world might be glad to see governments wield emergency powers against their own heavy industries. In Hungary, however, the wider sustainability goals are not yet clear with regard to a policy that seems, at least partly, politically motivated.

References

1. CeMBeton, Sajtónyilatkozat, 21 August 2023, https://www.cembeton.hu/hirlevel/2023-08-21/202308-mozgalmas-osz-ele-nezunk/116/sajtonyilatkozat/668

2. Heidelberg Materials, ‘Energy and climate protection,’ 2022, https://www.heidelbergmaterials.com/en/energy-and-climate-protection

3. Global Cement, Global Cement Directory 2023, https://www.globalcement.com/directory

4. OPIS News, ‘Hungary's New Carbon Tax Unlikely to Set EU Precedent, Say Analysts,’ 16 August 2023

5. Global Cement, 'Update on Hungary,' April 2023, https://www.globalcement.com/news/item/15572-update-on-hungary-april-2023#:~:text=Heidelberg%20Materials'%20subsidiary%20Duna%2DDr%C3%A1va,the%20country's%20active%20national%20capacity.

6. Daily News Hungary, ‘Hungarian government’s new nationalising plan could violate EU law,’ 27 February 2023, https://dailynewshungary.com/hungarian-govts-new-nationalizing-plan-could-violate-eu-law/

7. Human Rights Watch, ‘Hungary’s New 'State of Danger',’ 8 June 2022, https://www.hrw.org/news/2022/06/08/hungarys-new-state-danger