Displaying items by tag: Peru

Our latest look at South America starts by posing the question: how far can the market in Brazil keep growing? As Graph 1 shows below, cement sales skyrocketed through the coronavirus pandemic, due to a general recovery locally that started in 2018 and relatively weak lockdown measures compared to other countries. Rolling annual totals on a monthly basis from the National Cement Industry Association (SNIC) suggest that this growth period tailed off from May 2021. SNIC was also keen to point out that, despite nearly hitting nearly a 20% growth rate at one point, the sector was still 11% behind where it was before the lull that lasted from 2015 to 2018. As ever the association has an eye on potential risks. At present these include legislative reforms, price inflation and carbon pricing. It noted that Mexico, Colombia, Chile and Argentina all price carbon already but said that the country ‘has a great ally in the Brazilian cement industry’ on the issue.

Elsewhere the big story in Brazil has been the ongoing sale of Holcim’s local assets. The latest news at the start of August 2021 was that the bidders included CSN Cimentos, Cimentos Mizu, Cimento Apodi, InterCement and Votorantim. The first three companies were reportedly working in a consortium in an attempt to buy 10 production plants while InterCement and Votorantim were focusing on smaller bids to avoid the ire of the competition regulators. Aside from this, CSN Cimentos agreed to buy Cimento Elizabeth for US$220m in July 2021 and Companhia Nacional de Cimento (CNC), part of Italy-based Buzzi Unicem’s 50% subsidiary BCPAR, acquired CRH Brasil following approval by the regulators. Of note on the production side, Votorantim Cimentos started operation of a new production line at its Pecém grinding plant in Ceará in July 2021.

Graph 1: Cement sales in selected South American countries in first half of year, 2019 – 2021. Source: Local cement associations and national statistics offices.

Over in Peru the now familiar gap-tooth pattern of stunted growth in 2020 can be seen in the sector’s cement sales, but sales rebounded far stronger than comparable sized markets in Argentina and Colombia. Sales nearly doubled to 6.42Mt in the first half of 2021 from 3.33Mt in the same period in 2020 and were significantly higher than the 4.94Mt recorded in the first half of 2020. Imports are also worth watching. Combined cement and clinker importers nearly doubled from 0.76Mt in the first half of 2019 to 1.4Mt in the first half of 2021. Clinker imports made up about two thirds of this figure and the Association of Cement Producers (ASOCEM) noted in June 2021 that 88% of the imported cement came from Vietnam while about two thirds of the clinker came from Japan and Indonesia.

Away from the market data, both Cementos Pacasmayo’s and Unión Andina de Cementos’ (UNACEM) financial results bounced back in the first half of 2021. Cementos Pacasmayo attributed the rebound to sales of bagged cement to the self-construction sector and public sector reconstruction demand. UNACEM also noted the effect of the self-construction sector and said it expected its ‘solid’ cement despatches to continue for the rest of the year despite the risk of a third wave of coronavirus in the country and the messy presidential elections. Other stories of note so far in 2021 include new developments in Cementos Interoceanicos long-held plans to build a 1.0Mt/yr cement plant in Puno and a major upgrade planned to Yura’s integrated plant in Arequipa.

In Colombia local cement despatches grew by 34% year-on-year to 6.20Mt in the first half of 2021 from 4.61Mt in the same period in 2020. Cementos Argos reported major improvements in sales, sales volumes of cement and earnings due to the lockdown in 2020. However, a national wave of protests calling for social reform that started in the spring of 2012 forced the company to shut down its integrated Yumbo plant for over a month. This represented 18% of its national sales. The output of other plants in the country was also negatively affected by roadblocks created by the unrest. Cemex reported the same problems in the country.

Finally, Argentina’s cement despatches rose by 44% to 5.52Mt in the first half of 2021 from 3.83Mt in the same period in 2020. Loma Negra reported that its sales, sales volumes and earnings were all up by a similar rate. The subsidiary of Brazil-based InterCement started up the kiln on its new 2.7Mt/yr production line at the L’Amalí cement plant in Olavarría in June 2021 and commissioning of the new mill and despatch centre on the line were reportedly coming soon in early August 2021. Earlier in the year, in May 2021, Holcim Argentina inaugurated a new 0.5Mt/yr clinker production line at its Malagueño cement plant in Cordoba. These expansion projects were ordered long before coronavirus appeared so it will take a while to see their effects upon the local market. However, the government intervened in June 2021 when it persuaded some building materials producers to agree to reference prices in a bid to curb mounting inflation.

This is what recovery looks like so far in 2021 in the larger cement producing countries in South America. The Brazilian market’s growth phase may be waning after a furious period that even coronavirus wasn’t allowed to slow. Peru’s potential seems set to take off, Colombia’s rebound should have been greater (but it was dented by social unrest) and Argentina seems to be resetting to its usual level. Whatever else happens in the coming months the story to watch going forward will be which company picks up Holcim’s assets in Brazil.

Peru: The Directorate for Research and Promotion of Free Competition (DLC) of the Peruvian National Institute for the Defence of Competition and Protection of Intellectual Property (INDECOPI) has launched administrative proceedings against Gloria Group subsidiary Yura. The El Comercio newspaper has reported that nine Yura employees face allegations of participating in, planning and executing anti-competitive conduct. Logistics partner Racionalización Empresarial is also subject to the investigation.

Peru: Cementos Pacasmayo’s sales have revived following a coronavirus-related lockdown in the second quarter in 2020. It attributed the rebound to sales of bagged cement to the self-construction sector and public sector reconstruction demand. It also noted that sales revenue and volumes in the second quarter of 2021 were ahead of comparable figures in the same period in 2019 before the pandemic started. Its sales revenue more than doubled to US$229m in the first half of 2021 from US$105m in the same period in 2020. Its consolidated earnings before interest, taxation, depreciation and amortisation (EBITDA) nearly tripled to US$49.4m from US$16.9m. Production volumes at the cement producer’s plants grew to 1.79Mt from 0.79Mt.

Peru: Cement production in the 12 months ending on 30 June 2021 was 12.2Mt, up by 43% year-on-year from 8.54Mt in the previous 12 months. Data from the Association of Cement Producers (ASOCEM) shows that local dispatches totalled 11.9Mt, up by 42% from 8.41Mt.

Cement exports recorded a drop, down by 7% to 0.16Mt from 0.17Mt, while clinker exports rose by 44% to 0.52Mt from 0.36Mt. High demand led to an increase in imports to 0.94Mt of cement, up by 59% from 0.59Mt, and 1.41Mt of clinker, almost triple the previous year’s volume of 0.48Mt.

Peru: Chile-based CBB, formerly Cementos Bío Bío, has reduced the budget for its planned Matarani cement grinding plant near Arequipa by 79% to US$8.95m from US$42.5m. According to the Gestión newspaper, the producer had previously secured and environmental permit for the unit.

Peru: Police in Lima have raided a facility in Comas district where workers were packaging adulterated cement into branded cement bags. The La República newspaper has reported that authorities said "We have had the visit of representatives of these cement companies, and they have certified not only that these containers are not original, but also that the final product is not the one they offer to the community."

Two fairly serious investments in Peru made the industry headlines this week. The first was Yura’s plans to upgrade its Arequipa cement plant at a cost of US$200m. The project will involve increasing the plant’s clinker production capacity as well as installing a new mill and a 4.3km conveyor. The second was the latest instalment in Cementos Interoceanicos’ long held ambition to build a plant. It has struck a deal with France-based Satarem to build a 1Mt/yr plant near Puno. The deal also includes Satarem buying a 30% stake in Cementos Interoceanicos and plans to construct two lime units as well.

Graph 1: Local cement sales in Peru, January 2020 to February 2021 compared to January 2019 to February 2020. Source: ASOCEM.

These projects follow a squeeze for the local industry due to coronavirus-related containment measures. Data from the Association of Cement Producers (ASOCEM) shows that cement sales collapsed during the lockdown to just 11,000t in April 2020 before recovering in the autumn. Total annual local sales fell by 17% year-on-year to 9.7Mt from 11.6Mt. Sales have also remained high in January and February 2021.

The experience from the larger cement producers mirror the data from ASOCEM. Cementos Pacasmayo’s sales revenue fell by 7% year-on-year to US$354m in 2020 and its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 21% to US$86.3m. Unión Andina de Cementos’ (UNACEM) income fell by 14% year-on-year to US$467m in 2020. Despite this, UNACEM managed to sign a deal to buy Cementos La Unión Chile for US$23m in December 2020. The purchase consists of a 0.3Mt/yr cement grinding plant and a 0.34Mm³/yr ready-mix concrete business with multiple concrete plants and trucks. UNACEM described Chile as its main clinker export destination and it holds concrete and precast subsidiaries in the country.

Yura’s general manager Ramón Pizá reportedly called his company’s plans a “vote of faith in Peru.” This is not an understatement considering the market shocks caused by coronavirus in 2020. The country implemented public health measures relatively early during the pandemic but still ended up with one of the worst death rates per capita in Latin America so far. As the British Medical Journal (BMJ) pointed out earlier this month, the timing was right but tragically the application of public health measures has been found wanting. Yet, the fundamentals for the Peruvian cement market are strong. Annual sales mounted from 2017 to 2019, and were showing signs of continuing this in early 2020 before the lockdown shut the market down. This growth pattern has continued so far in 2021.

Peru: Cementos Interoceanicos has contracted Switzerland-based Satarem to establish a 1.0Mt/yr cement plant in Puno. The Gestión newspaper has reported that Satarem intends to buy a 30% stake in the producer. The scheduled completion date for the work, which also includes setting up two new lime plants, is mid-late 2022. The total estimated cost of the project is US$158m.

The producer is reportedly seeking to expand its area of operations in other areas within Peru.

Peru: Yura plans to upgrade its Arequipa cement plant at a cost of US$200m. The planned upgrade will increase the plant’s clinker production capacity to 8000t/day from 5000t/day. The La República newspaper has reported that the sustainability-enhancing expansion involves the installation of a new vertical roller mill, packing, storage and dispatch equipment and a 4.3km raw materials conveyor. General manager Ramón Pizá called the modernisation a “vote of faith in Peru.”

Peru: Cementos Pacasmayo recorded sales of US$354m in 2020, down by 7% year-on-year from US$381m in 2019. Consolidated earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 21% to US$86.3m from US$110m. Sales volumes of cement, concrete and precast shipments fell by 1% to 2.58Mt from 2.61Mt. Cement production capacity utilisation was 45%, down by 2% from 47%. In the fourth quarter of 2020 cement dispatches rose by 37% year-on-year.

The company said, “Despite political changes, the economic recovery continued its course during the fourth quarter of 2020. Thanks to the economic relief measures taken by the government and the fast adaptation of the private sector, an important part of the productive capacity was preserved. Public investment in particular has played an important role in the economic recovery, and it is expected to continue to do so during 2021.” It added, “The uncertainty around the end of the Covid-19 pandemic continues, but what is certain is that the world has been forever changed. The capacity to adapt quickly and efficiently in an increasingly digital world is key to success and will prevail long after this pandemic is behind us. We believe that the steps we have taken in that direction have both helped us weather the storm and given us a promising future. We are confident that we are better equipped to face another year that may prove challenging and continue to generate value to our stakeholders.”

The Good Employers Association (ABE) recognised the company in the Leadership category at its ABE Awards 2020.