Displaying items by tag: Overcapacity
Italy: Italian cement producer Italcementi plans to stop production at three of its Italian cement plants, bringing the total of its dormant plants in the country to nine. Italcementi director general Giovanni Battista Ferrario made the announcement at a shareholders' meeting, blaming the move on overcapacity in the face of a huge slump in domestic demand
The company expects to save Euro110m through the closures as part of an efficiency drive. It posted losses of Euro362m in 2012, most of it due to poor Italian demand. Lay-offs for over a quarter of Italian staff were announced in December 2012. It said the Italian market "continues to be marked by productive over-capacity compared to a demand that has dropped to the levels last seen at the end of the 1970s."
Italcementi had 17 operational plants in 2012. It has since then sold one and halted production at five others. However, CEO Carlo Pesenti told the meeting that the company plans to invest up to Euro150m on upgrades at its Rezzato plant and has plans to develop its Calusco plant.
Vietnam cement producers lost US$80m in 2012
12 April 2013Vietnam: Cement producers in Vietnam lost at least US$80m in 2012 in a bid to undercut each other, according to Tran Van Huynh, Chairman of Vietnam Building Material Association. Huynh made the comment as he warned that producers face 'huge' losses from attempts to clear surplus inventory by exporting cement and clinker. In 2012 local firms incurred losses of between US$8 - 10/t of exports.
Huynh asked local cement producers to cooperate instead of undercutting each other to keep export prices above domestic ones. He also recommended that the Vietnam Cement Association set reasonable export prices as well as help firms penetrate large markets.
Due to cement output exceeding demand, the Ministry of Construction has requested local cement firms to seek further export markets. However, local producers face difficulties in exporting cement due to poor infrastructure, high transport costs and a lack of competitiveness. In addition Vietnam lacks ports capable of docking ships over 50,000t that are necessary to carry goods to distant overseas markets.
Vietnam is predicted to face a huge cement inventory of 14 – 15Mt by 2015. By that time the country's cement output will reach 90Mt whilst demand is estimated to be 75 – 76Mt.
Half the picture in China?
03 April 2013Last week's news that Sinoma is considering European acquisitions may seem a little odd considering that Sinoma saw its profit halve in 2012. Yet the Chinese cement equipment builder and cement producer's income (US$3.42bn) puts it level with the likes of European producers, like Italcementi (US$5.75bn) and Buzzi Unicem (US$3.58bn), and the company still made a sizeable profit (US$123m).
Now what really seems odd is the amount by which each of the major Chinese cement producers' profits fell in 2012. Each of the top five producers by capacity, including Sinoma, saw their profits decrease by 40% to 50%. CNBM 'forgot' to report its profit drop but in November 2012 it recorded a 40% fall. Anhui Conch Cement's profit fell by 45.6% to US$1.03bn. Jidong Cement hasn't released any figures but was expecting a 50% drop in late October 2012. China Resources' profit fell by 44.4% to US$300m. Compare that with the diversity of profits reported by the top five European cement producers.
As has been clearly signposted by the Chinese government, the country is overproducing cement. Just how much we can't be sure but the Ministry of Industry and Information Technology declared that 220Mt/yr of 'obsolete' capacity was eliminated in 2012. The country's entire output was placed at 2.18Bt in official figures.
Outmoded capacity is being shut down and industry consolidation encouraged for the main players. Given the state-owned nature of Chinese heavy industry some level of coordination between bad results is to be expected. To give readers an idea of the challenge facing Chinese central planners, Anhui Conch added 28.3Mt/yr of additional cement production capacity in 2012. This is equivalent to the entire capacity of Nigeria or Germany!
Of interest here are China's cement export figures that the government's General Administration of Customs recently released. Exports hit a peak of 33Mt in 2007 and then declined by 68% to 11Mt in 2011. In 2012 they increased slightly to 12Mt. That's 20Mt of cement not leaving the country any more. Plus, the 'Shenzhen sea-sand in concrete scandal' can't be helping the industry's reputation abroad either.
Also of note last week, a Kyrgyzstan minister proposed restricting imports of Chinese cement to his country. Cement produced at Chinese-owned plants will be much harder to block. The next prong of the Chinese plan to tackle its cement industry is direct overseas expansion and this is what we're seeing from the likes of Sinoma and Anhui Conch. Sinoma, as mentioned above, appears to have cash to spend and in 2012 Anhui Conch began its first international project in Indonesia.