Displaying items by tag: Iran

Iran: Iran is gradually losing its domestic and foreign cement markets, according to Abdolreza Sheikhan, secretary of Iran's Cement Industry Employers Association. Iran's cement industry has lost some 8% of its domestic market and 20% of its export markets in the first five months of current fiscal year (21 March 2015 to 22 August 2015).

"Cement supply and demand is not balanced in the market and this has created problems for producers," said Sheikhan. However he did not disclose exact statistics about the country's cement sales. However, each cement producing plant is permitted to store clinker equal to two months output. This means that up to 5Mt of surplus clinker could be stored in the country at any one time.

South African cement producers may be cheered this week with the news that Iranian cement is causing grief in Pakistan once more. Imported cement from Iran is allegedly undercutting local product in Pakistan through massive 'under-invoicing.' Sources quoted in Pakistan – itself a cement exporter (!) – described the situation as 'incomprehensible.'

The issue here is that Iran is doing to South Africa what Pakistan is doing to South Africa: selling cement cheaper than locally produced product. It's especially ironic this week because one Pakistani cement producer, Lucky Cement, is taking the fight against South African anti-dumping duties to the courts.

A report from July 2015 reckoned that Pakistan's cement exports might drop by 10 – 15% at the start of 2016 as economic sanctions on Iran are lifted. The report had a bit more sense than the usual scaremongering. It predicted that removing sanctions in Iran would not affect competition in Afghanistan as Iranian producers generally targeted Kandahar.

Despite this, cement exports to Afghanistan from Pakistan hit a high of 4.73Mt in the 2010 – 2011 financial year, according to All Pakistan Cement Manufacturers Association (APCMA) data. Since then they dwindled slightly for the next couple of years before decreasing more sharply from mid-2013. Overall exports fell by 11.57% to 7.2Mt in the 2014 – 2015 period. Pakistan's exports to Afghanistan may have been hit by the departure of North Atlantic Treaty Organisation (NATO) forces and a new cement plant in neighbouring Tajikistan.

In part the battle seems to be about tax. In June 2015 the APCMA lobbied the Pakistan government to cut duties. At the time these included a 5% federal excise duty and a 17% general sales tax on the retail price of cement. One APCMA spokesman reckoned that these taxes added US$1.56 per bag of cement. More recently the APCMA rallied against a tax on cement exports and an increase in import duties on coal. In this climate, repeated news stories on Iranian exports to Pakistan dodging taxes don't sound so good.

Meanwhile, back in South Africa, Lucky Cement has started to take legal action against anti-dumping duties imposed upon its cement exports by the International Trade Administration Commission of South Africa (ITAC). The ITAC imposed provisional anti-dumping duties of 14.3 – 77.2% on Portland Cement originating in or imported from Pakistan from 15 May 2015 for six months. The duty was imposed on bagged cement. Pakistan-based cement producers may defend themselves by saying that they are following the laws of the countries they are exporting to. In theory Iranian exports to Pakistan that pay the correct taxes should be the same price as Pakistani products.

What this debacle shows is that things could get a whole lot worse for coastal cement markets within easy reach of Iran once the sanctions fall. National bodies like the ITAC across the Middle East, South Asia and East Africa should start tightening up their import policies now.

Pakistan/Iran: The Pakistani cement industry has once again spoken out against imported cement from Iran and alleged massive under-invoicing across the border. Industry sources said that the Iranian cement, which was earlier being smuggled, is now entering Pakistan at very low rates due to under-invoicing. They say that importing cement into Pakistan, itself a cement exporter is 'incomprehensible.'

Taha Khan Javed, Elixir Securities Pakistan's head of research, said that the government needs to realise that this lax attitude towards under-invoicing and the 'rampant' import of Iranian cement is hurting both the government and the local cement industry. Pakistan already has surplus capacity and its exports are falling due to a slowdown in exports to Afghanistan and other regions. In the case of Afghanistan this is also, in part, due to Iranian imports.

Pakistan/Iran: Pakistan's cement exports may drop by 10 – 15% at the start of 2016 as more Iranian cement will enter on the world market after sanctions have been lifted, according to Dawn.

Pakistani manufacturers will have to increase their export market destinations. However, local Pakistani cement industry officials believe that 'quality-conscious' countries like the UAE, India, Qatar and Sri Lanka may still prefer Pakistani cement as it is 'better' than its Iranian counterpart.

The officials are optimistic that the budget allocation for Public Sector Development Programme (PSDP) may play a positive role in incrasing domestic cement consumption and may dilute to some extent the negative impact posed by the anti-dumping duty in South Africa on Pakistani cement and influx of Iranian cement on the international market. Around 60 – 65% of Iran's cement exports go to Iraq, 10 – 15% to Afghanistan and the remaining to other countries including Pakistan.

The removal of sanctions is not expected to aggravate competition in Afghanistan, as it is only feasible for Iranian producers to target the Kandahar region closer to the border. The main market for Pakistani producers is Kabul and Jalalabad, where Iranian cement will not be competitive due to the higher transportation cost.

Iran is the fourth largest manufacturer of cement in the world with a capacity of around 80Mt/yr. This capacity is set to rise in the next two years. The country's cement production stands at 66Mt/yr, around 84% capacity utilisation, out of which 28% is exported.

At today's official launch of LafargeHolcim, CEO Eric Olsen was asked to comment on the group's position in Iran. It doesn't have one, but that won't necessarily always be the case given events in Austria this week.

On Tuesday 14 July 2015, Iran and the P5+1 countries (US, UK, France, China, Russia and Germany) agreed an historic deal to limit Iranian nuclear activity in return for a significant lifting of existing trade sanctions at a meeting in Vienna. The country's cement industry will be delighted by this agreement. The talks, in progress since 2006, could mark what has been termed a 'new chapter' in relations between Iran and the rest of the world by Iranian President Hassan Rouhani. For his part, US President Barack Obama stated that the deal would ensure that 'every pathway to a nuclear weapon is cut off' for Iran, but critics from the US, Iran, Israel and elsewhere, suggest that cutting all routes will not be possible. They are alarmed and have warned that the deal could lead to an arms race between Iran and Saudi Arabia, amid increasing animosity in the Middle East.

While the geopolitical implications of the deal are huge, the lifting of trade restrictions will greatly improve Iran's ability to deal internationally. This includes allowing increased oil exports. An article by Reuters anticipates that Iranian oil production could increase drastically from around 1 million barrels per day (mbpd) at present, possibly to its former peak of 3mbpd. (What this might do to the global oil price could be the subject of an entirely separate column). The easing of banking restrictions will make Iranian products more competitive and increase trade in many sectors.

Against this backdrop sits the Iranian cement industry, the world's third or fourth largest by production in 2014, depending on your source. It has an incredible 84.4Mt/yr of cement production capacity in a country of 77.5 million people. Assuming that it could produce and consume all of that cement at home, this would represent consumption of around 1100kg/capita/yr, far above the 600-800kg/capita/yr rate that is typical of a rapidly-developing economy.

Of course, Iran has not been consuming anything like this level of cement recently. According to figures released by its Employers Guild Association this week, Iran made 66.4Mt of cement in its 1393 calendar year, which ended on 21 March 2015. Assuming the above capacity, this gives Iran a cement utilisation capacity of around 78%.

Much of the cement made in Iran was exported in 2014 and so far in 2015. The country exported an incredible 18.4Mt/yr of cement and clinker in the year to 21 March 2015, up from 18.8Mt a year earlier. A large amount of this cement was available at low cost, to the extent that Iran has been accused (along with Pakistan) of dumping cement in the Middle East and East Africa. (Pakistani producers have even pointed out that Iranian cement is making inroads into the Afghan market, more traditionally a target for exports from Pakistan).

So what might happen to the cement trade dynamic in the region? Some suggest that the easing of sanctions can only increase the potential for Iranian cement imports in the region. Trade should become easier, facilitating exports.

Indeed, this is a factor, but it is only part of the equation. Instead, it is likely that, having earned foreign exchange via increased oil sales, Iran will be able to spend more at home. Reuters anticipates that demand for steel and cement will skyrocket as the country undertakes much-needed construction and infrastructure works. This situation would be similar to Saudi Arabia and other Gulf Cooperation Council (GCC) states. How Saudi Arabia reacts to this, both politically and in terms of cement trade, will be of high interest in the region and around the world.

Instead of increasing cement exports, the effect of the lifting of sanctions may decrease them. This will surely be welcome news to local producers currently being undercut in East Africa, as well as exporters in Pakistan, India and elsewhere. Could Pakistan even find itself exporting to Iran? If a US-Iran nuclear deal is possible, anything can happen...

Iran: The Ministry of Industry, Mines and Trade has announced that in the first three months of 2015, cement production reached 15.8Mt and clinker output was 19.3Mt. In the same period, more than 12.7Mt of cement was distributed inside the country and 4.34Mt of cement was exported.

The Employers Guild Association for the cement industry said that, in the Iranian year 1393 (to 21 March 2015), cement and clinker exports exceeded 18.9Mt, up from 18.8Mt in 1392. Iran produced 66.4Mt of cement in the year and 70Mt of clinker.

Pakistan: Cement exports fell by 26.1% to 560,000t in May 2015 as cheap Iranian cement is eating Pakistan's market share in Afghanistan, according to the All Pakistan Cement Manufacturers Association (APCMA). Pakistan exported 750,000t of cement in May 2014.

"Iranian cement is fast making inroads into Afghanistan," said an APCMA spokesperson. APCMA data showed that exports dropped by 10.8% to 6.64Mt between July 2014 and May 2015. Cement makers exported 7.44Mt in the same period of the 2013 – 2014 financial year.

The APCMA appealed to the government to support local manufacturers in winning back the Afghan market by withdrawing duties, which would enable them to compete with highly-subsidised Iranian cement. There is a 5% federal excise duty and a 17% general sales tax on the retail price of cement. "The taxes are equal to around US$1.56/bag," said the spokesperson. "The incidence of high taxation encourages evasion and negatively impacts consumption." He added that the government should gradually bring federal excise duty to zero, as announced by the previous government.

Exports from the south increased by 4.5% in the July 2014 to May 2015 period. These exports go via the sea. However, exports from the north decreased by 18.3% due to the Iranian cement factor, as exports from the north usually go to Afghanistan. The spokesperson said that Iran is also dumping its cement in Balochistan, Pakistan and that cement smuggling from Iran to Balochistan is resulting in substantial losses to national exchequer. "Policy makers ignored warnings from the cement industry over the inundation of Iranian cement in Afghanistan," he said. "It has penetrated our local market." He said that full taxes are not paid on Iranian cement imports.

A road trailer entering Pakistan from the Taftan border carries up to 60t of cement. A transporter issues two different weight loads receipts, one for the customs department and another one for freight purposes. The APCMA said that if taxes are fully paid, the price of Iranian cement is equal to that of domestic cement.

Pakistani cement manufacturers dispatched 2.49Mt of cement in May 2015 compared to 2.3Mt in May 2014, up by 8%. Cement sales were 25.5Mt in the 11 months that ended on 31 May 2015, compared to 23.6Mt in the corresponding 2013 – 2014 period, depicting over 8% growth.

Iran: Iranian cement producers owe €600m to the country's National Development Fund, according to Abdolreza Sheikhan, the secretary of the Union of Iranian Cement Industry Employers. Sheikhan also cited studies supporting that the price of cement should be increased by 17%, due to transportation and production costs, in order to present cement plants being closed.

"Presently, Iran with an output capacity of 70 million tons of cement a year is the world's fourth largest producer of cement after China, India and the United States," said Sheikhan. Iran could become the world's third largest cement producer if its 75Mt/yr nominal production capacity becomes its actual capacity, he noted. In May 2014, Sheikhan said that cement prices might be increased by 22%.

Pakistan/Iran: The All Pakistan Cement Manufacturers Association (APCMA) has condemned the illegal import of cement from Iran and tax evasions at the import stage by misdeclaration, which is seriously affecting Pakistan's cement industry. The APCMA has urged the government to stop the trade immediately.

An APCMA spokesman said that the quantity of cement being imported from Iran has been found understated on the Customs Goods Declaration form, resulting in a substantial loss to the national exchequer. This is done via the collusion of dealers with Customs departments officials and transporters. Not all of the necessary tax is being paid on Iranian cement imports.

"At present, the country's surplus cement production capacity is more than 20Mt/yr and it is coming under further pressure because of the illegal imports of cement. It is not only damaging the local industry, but also through misdeclaration it is giving a substantial loss to the national exchequer," said the APCMA spokesman. He urged the government to include cement in a negative list of import items so that the country's surplus production capacity could be used to the maximum. "This would help to increase economic growth in the country and will also curb malpractices at different levels."

Iran: Iran produced roughly 60Mt of cement in the last Iranian calendar year, which started on 21 March 2014. Of the total, 18Mt was exported, of which 80% went to Iraq, according to Shahriar Geravandi, a member of Iran's Cement Industries Association Board of Directors. He added that Iran is seeking new export markets. According to Geravandi, there are 68 cement plants in Iran.