Displaying items by tag: Indonesia

Indonesia: Semen Indonesia’s cement sales volumes grew by 19% year-on-year to 8.89Mt in the first three months of 2019 from 7.45Mt in the same period in 2018. The company’s acquisition of Holcim Indonesia in February 2019 drove the growth. The cement producer’s domestic sales fell by 3.5% to 5.98Mt although export sales grew significantly. Both domestic and export sales from its Vietnamese TLCC subsidiary fell by 32% to 0.41Mt. Overall national cement sales volumes increased by 3.2% to 17Mt in the reporting period.

Jan Jenisch and the team at LafargeHolcim only went and bloody did it! Apologies for readers not wanting yet more column inches on LafargeHolcim but when the world’s largest cement producer leaves an entire sub-continental market it deserves mention.

First Indonesia, then Malaysia and now the Philippines. LafargeHolcim will soon no longer produce clinker in Southeast Asia. That’s a region with 651 million inhabitants or around 8% of the world’s total population. All of those people need cement and other building products as their nations build houses, infrastructure and so on. And LafargeHolcim is no longer there.

The reason, of course, is local production overcapacity in many of these countries and rampageous importers pulling in cheaper product from elsewhere. The Association of Southeast Asian Nations (ASEAN) includes Thailand and Vietnam, two of the world’s largest cement exporters. The region also borders China, the place which could produce 40% of the world’s cement if it so wanted. So, understandably, LafargeHolcim pulled the plug. Note that the recent divestments in the region didn’t include its seabourne trading wing, LafargeHolcim Trading. Oh no! Clearly, if you can’t beat them, you join them instead.

So, what to say about the Philippines sale? Unlike the divestments in Indonesia, this sale has valued the production base more highly. LafargeHolcim’s integrated production capacity, including the upgrade at its Bulacan plant, is being sold for over US$175/t with the partial share factored in. And that’s not even including the grinding plant at Mabini. The sale in Indonesia was US$120/t or lower. The Duterte administration’s infrastructure drive (Build, Build, Build) and muscular government action on imports have doubtless played their part here. Yet still LafargeHolcim sold. In the words of chief executive officer (CEO) Jan Jenisch the area was ‘hyper competitive.’

Back home at the group’s headquarters in Switzerland, the potential revenue of over US$4bn from the three ASEAN divestment is poised to trickle onto the balance sheets for 2019. If it were all to go towards debt reduction then these proceeds could pile drive the group’s net financial debt to below Euro10bn. This would be good place to be if the on-going Chinese-US trade tiffs became a little hotter, say, or in the case of a fresh banking crisis. Alternatively the group could pick a new region for development and start all over again or focus on diversifying its business along the building materials chain. And let’s not forget the potential legal bill from the on-going investigation into Lafarge Syria’s conduct during the Syrian civil war.

Throughout this whole exercise, from the outside looking in at LafargeHolcim’s actions, the thought has persistently been: what do they know that everyone else doesn’t? The answer, it may turn out to be, nothing. Yet, rightly or wrongly, we’re marvelling at the bravado of it all.

Indonesia: Indocement’s revenue grew by 8.5% year-on-year to US$262m in the first three months of 2019 from US$242m in the same period in 2018. Its net income rose by 50% to US$27.9m from US$18.6m.

One of the long running trends in the cement industry is that of production overcapacity. Sure enough more than a few news stories this week covered this, as various players reacted to international trade in clinker and cement. The Bangladesh Cement Manufacturers Association wants its government to cut import duties on clinker. Algeria’s shift from an importing cement nation to an exporting one continues.

Armenia and Afghanistan are coping with influxes of cement imports from neighbouring Iran. Pakistan’s cement exporters, who have been losing ground in Afghanistan, are once again lobbying to remove anti-dumping measures in South Africa. The argument between Hard Rock Cement and Arawak Cement in Barbados may have swung Hard Rock Cement’s way as the Caribbean Court of Justice (CCJ) has ruled in favour of lower tariffs for imports. Last week it was reported that the Rwanda Bureau of Standards had blocked cement imports from Uganda on quality requirement grounds.

The summarised version is that all this excess clinker and cement can cause arguments and market distortions as it finds new markets. Typically, the media reports upon the negative side of this, when the representatives of national industries defend their patch and speak out about ‘quality concerns,’ potential job losses and blows to the local economy. However, it isn’t always like this as the Afghan story shows this week. Here, although the Chamber of Commerce and Industries wants to promote locally produced cement, imports are welcome and the relative merits of different sources are discussed. Ditto the situation in Bangladesh where a predominantly grinding-based industry naturally wants to cut its raw material costs.

We’ve covered clinker and cement exports more than a few times, most recently in September 2018 when the jaw-dropping scale of Vietnam’s exports in 2018 started to become clear. Yet as the continued flow of news stores this week makes clear it’s a topic that never grows old.

Graph 1: Top cement exporting countries in 2018. Source: International Trade Centre.

Looking globally raises a number of issues. First, a warning. The data in Graph 1 comes from the International Trade Centre (ITC), a comprehensive source of trade statistics. Most of its figures are in line with data from government bodies and trade associations but its export figure is around a tenth of the estimated export figure for Iran of around 13Mt for its 2018 - 2019 year. Last time this column looked at exports similar issues were noted with a discrepancy between Vietnam’s exports from the ITC compared to government data.

Iran aside, all the usual suspects are present and correct. A point of interest here is that the list is a mixture of countries that make the headlines for their exports, like Vietnam, and those that are quietly just getting on with business. Japan for example exported 10.7Mt in 2018. More telling are the changes in exports from 2017 to 2018. Exports fell in Japan, China and Spain. They rose in Vietnam, Thailand, Indonesia, Pakistan and South Korea.

Looking globally, China is the elephant in the room in this topic given its apparent massive production overcapacity. The industry here is structurally unable to export cement on the scale of other countries but, as its major companies expand internationally, this may change. Despite this China still managed to be the third biggest exporter of cement to the US in 2018 at 2Mt and the fifth biggest in the world. Yet, as the ITC data shows, its exports fell by 30% year-on-year to 9Mt in 2018.

Vietnam, Pakistan and Turkey continue to be some of the key exporting nations with production capacities rising in defiance of domestic realities. Pakistan, for example, is coming off a building boom from the China–Pakistan Economic Corridor infrastructure project and all those plants are now looking for new markets. Vietnam says it is benefitting from industry consolidation in China. Its exports grew by 55% year-on-year rise to 31.6Mt. It shipped 9.8Mt to China in 2018. Its main export markets in 2019 are expected to be the Philippines, Bangladesh, China, Taiwan and Peru. Turkey, meanwhile, struggled with general economic issues in 2018. Its cement exports fell by 6% to 7.5Mt in 2018 according to Turkish Cement Manufacturers Association data. Once again this is at odds with ITC data, which reports nearly twice as many exports.

This touches the tip of the iceberg of a big issue but while production over-capacity continues these kinds of trade arguments will endure. Vietnam, for example, may be enjoying supplying cement in China as that country scales down production. Yet, what will happen to all of those Vietnamese plants once Chinese consumption stabilises?! Similar bear traps lie in wait for the other major exports. Alongside this many of the multinational cement companies are pivoting to concrete production. This may be in recognition of the fact that in a clinker-abundant world profits should be sought elsewhere in the supply chain. A topic for another week.

For an overview of some of these themes and more read Dr Robert McCaffrey’s article ‘The Global Cement Industry in 2050’ in the May 2019 issue of Global Cement Magazine and his forthcoming keynote presentation at the 61st IEEE-IAS/PCA Cement Conference 2019 at St Louis in Missouri, US.

Indonesia: Indocement is aiming for 4% growth in sales year-on-year to around US$1.12bn in 2019 due to sluggish cement consumption. This compares to 5% growth in revenue in 2018. The subsidiary of Germany’s HeidelbergCement expects demand to increase in the second half of 2019 following elections, according to the Jakarta Post newspaper. It predicts that cement consumption will be driven by government infrastructure projects and the construction of residential projects and buildings. It plans to spend up to US$70m towards setting up a quarry in West Java and completing new cement terminals.

The cement producer is also preparing to increase its thermal substitution rate with alternative fuels like refuse-derived fuel (RDF). This follows a 50% rise in production costs due to coal in 2018. In September 2018 to agreed to buy 500t of RDF from the West Java government.

Indonesia: Exports drove Semen Indonesia’s cement sales volume growth in 2018. Its local sales volumes of cement grew by 1.2% year-on-year in 2018 to 27.4Mt from 27.1Mt in 2017 but exports increased by 68% to 3.16Mt from 1.87Mt. Sales volumes at its Thanh Long Cement subsidiary in Vietnam grew by 7.9% to 2.57Mt from 2.39Mt due to a sharp increase in exports. The group’s revenue rose by 10% to US$2.17bn from US$1.96bn. Its net profit nearly doubled to US$218m from US$117m.

Semen Indonesia completed its acquisition of Holcim Indonesia for US$1.75bn in February 2019. Prior to the purchase it had a cement production capacity of 38.2Mt/yr and Holcim Indonesia had a capacity of 14.8Mt/yr.

China: Anhui Conch’s revenue grew by 70.5% year-on-year to US$19.1bn in 2018 from US$11.2bn in 2017. Its sales volumes of cement rose by 25% to 368Mt. Its net profit increased by 88% to US$4.44bn from US$2.36bn. The cement producer attributed this to ‘significant’ growth in its prices.

During the reporting year the group commissioned four cement grinding units for its Yueqing Conch Cement and Jiande Conch subsidiaries. It also acquired Guangdong Qingyuan Cement, increasing its production capacity of clinker and cement by 2.7Mt and 4Mt respectively.

Outside of China, the group completed and commissioned two clinker production lines and four cement grinding units at Battambang Conch Cement in Cambodia and PT Conch North Sulawesi Cement in Indonesia. Its Luangprabang Conch Cement project in Laos has moved to the equipment installation phase and construction of Myanmar Conch Cement (Mandalay) in Myanmar has begun. Preliminary work has also started for the Vientiane Conch Cement project in Laos and the Qarshi Conch Cement project in Uzbekistan.

At the end of 2018 the group has a clinker and cement production capacities of 252Mt/yr and 353Mt/yr respectively.

Germany: HeidelbergCement expects increasing sales volumes for its cement, aggregate and ready-mix concrete products in 2019. It plans to raise its prices to regain margins it lost in 2018. The building materials producer also intends to continue the cost cutting programme it started in November 2018. It said that energy cost inflation, improvements in Indonesia, Europe and North America, and new state infrastructure projects should result in a ‘solid result improvement.’

“In view of our strong positioning in raw material reserves and production sites in attractive locations, the unique vertical integration, our excellent product portfolio, and our industry-leading margin management, we believe we are well equipped for the opportunities and challenges of 2019,” said Bernd Scheifele, chairman of the managing board of HeidelbergCement. He added that the group will continue the digitalisation process of its entire value chain in order to further improve operational excellence.

Indonesia: Semen Indonesia’s sales export volumes grew by 68.7% year-on-year to 3.16Mt in 2018 from 1.87Mt in 2017. By comparison its local sales rose by 1.2% year-on-year to 27.4Mt from 27.1Mt. Overall, including the group’s Thanh Long Cement subsidiary in Vietnam, sales volumes increased by 5.8% to 33.2Mt from 31.3Mt.

Company Sigit Wahono said that domestic sales had been ‘undermined’ by oversupply in the local market, according to the Antara news agency. However, he said that the state-owned cement producer was planning to expand its export market to countries in Southeast Asia, South Asia, Africa and the Middle East, as well as Australia. The group has a production capacity of 53Mt/yr following its acquisition of Holcim Indonesia in early 2019.

Indonesia: Semen Indonesia has renamed Holcim Indonesia as Solusi Bangun following its takeover. Semen Indonesia’s corporate secretary Agung Wiharto said that the acquisition was aimed at increasing the country's cement plant network and strengthening its supply chain, according to the Jakarta Post newspaper. He added that the purchase would also benefit the company’s ready-mix concrete business. Lowered distribution and raw material costs are also anticipated.