Displaying items by tag: Taiwan

Taiwan/Turkey: Taiwan Cement and Turkey’s Sanko Holding have signed a memorandum of understanding and a confidentiality clause about the company’s plan to invest in Sanko’s cement business. Taiwan Cement said it would continue talks with the Turkish business group about a strategic partnership and would make details public once the parties sign a definitive contract, according to the Taipei Times newspaper. The cooperation agreement was first announced in June 2018.

Taiwan/Turkey: Taiwan Cement has arranged a market strategy cooperation and development deal with Turkey’s Sanko Group, according to Reuters. No other details on the arrangement have been released do far. Following the growth of clinker exports to Africa and Europe the cement producer is hoping to sign a contract to export 0.25Mt of clinker in 2018 – 2019. The deal is expected to generate up to US$8.5m for the company.

Vietnam: Phuc Son Cement is under investigation for exploiting minerals. An inspection report by the State Audit Office has accused the cement producer of using mineral volumes higher than the amount it was licenced for in 1996, according to the Viet Nam News newspaper and Dantri. The report has been passed to the prime minister and the chairwoman of the National Assembly. The company has also been accused of causing pollution from its mining activities and not cooperating with the authorities over the investigation.

The State Audit Office estimates that Phuc Son Cement could face a US$11.7m fine for illegally exploiting natural resources and causing environmental damage. Phuc Son Cement, a joint venture between Taiwan’s Lucky Cement and a local partner, operates one of the largest plants in the country.

Taiwan: Protestors have called for the closure of Asia Cement’s quarry in Hualien. The government proposed an amendment to the Mining Act in December 2017 that would require quarries in aboriginal territories to obtain the consent of aboriginal communities, according to the Taipei Times newspaper. However, the quarry has been exempted because the Bureau of Mines extended the company’s mining rights by 20 years in early 2017. Aborigines from the Taroko National Park area said that the government’s approval of the amendment was ‘illegal’ and demanded that their traditional land, which is occupied by the quarry, be returned to them. Asia Cement said it would ensure that the mine is environmentally sound, that water sources near the mine are protected and that mining safety standards meet regulations. It added that it would also work with aboriginal communities and continue talks with them and the government as necessary.

Taiwan: Leslie Koo, the chairman of Taiwan Cement, has died from injuries sustained from a fall. Koo, aged 62 years, died on 23 January 2017 following suffering head injuries from falling down stairs at a hotel in Taipei whilst attending a wedding, according to the Tapei Times newspaper. He had led Taiwan Cement since 2003.

Nelson Chang has been appointed as the acting chairman of Taiwan Cement. Chang is Koo’s brother-in-law. He has also been appointed temporary chairman of two subsidiaries: China Synthetic Rubber and Taiwan Prosperity Chemical.

Check out this graph of Chinese cement prices from September 2015. An author at Business Insider attributes it to Larry Hu, the Chief China Economist for Macquarie. It pretty much sums up the mood analysts have at the moment regarding the Chinese cement industry.

Figure 1: China cement prices, 2012 – 2015. Source: CEIC, Bloomberg, Macquarie Research September 2015.

The recent announcement by the Assets Supervision and Administration Commission regarding the merger of China National Building Materials Group Corporation (CNBM) and China National Materials Group Corporation (Sinoma) comes hot on the heels of a series of poor half-year financial returns from China’s major cement producers. Attempts to tackle overcapacity in its local cement industry have been underway for a few years now. Actions taken include demolishing outmoded capacity, merging companies and expanding overseas. However as the construction markets have cooled in the country the scope of what the cement industry is facing has become clear, as revenues and profits have tumbled.

Now that the first half cement sales volume data has become available from the National Bureau of Statistics of China (NBSC) the response of the cement industry to its predicament has emerged. As can be seen in Figure 2 there has been a rough trend of sales decline throughout 2014 and 2015. The first half of 2016 has started to buck this trend as sales volumes have risen year-on-year for both quarters.

Figure 2 – Chinese cement production by quarter, 2014 – 2016. Source: National Bureau of Statistics of China.

Sales revenues have dropped for most of the major companies that have publicly released their results for the first half of the year. The exception is Taiwan Cement, which makes a large proportion of its sales revenue outside of China (People’s Republic of China). Its sales revenue in China barely rose year-on-year in the first half of 2016. However, the cement sales volumes for all these companies have started to show what is happening. They have risen for most of the producers examined. Essentially, each of these producers is producing more cement but making less money. As Digital Cement puts it, the industry is in a 'low-profit position.' Increased market competition and endemic industry overcapacity are causing this.

Mergers and acquisitions have been the big story for the European multinational producers following the economic crash in 2007. Returns from low growth markets have been substituted for efficiencies of scale, knowledge sharing and greater international reach. Lafarge and Holcim merged in 2015 and HeidelbergCement is due to complete its acquisition of Italcementi later this year. However, as LafargeHolcim's disappointing financial returns and its continued slew of divestments show so far, the merger has not worked as well as may have been hoped… yet.

Whether China's version of this works with its large state owned enterprises is uncertain. Mergers are meant to cut out inefficiencies through economies of scale. Yet the question remains: can even larger Chinese cement producers do this when they are state controlled and harangued by pressures outside the normal market, particularly when local regions try to preserve their industries. The last such big deal, between Anhui Conch and China Resources Cement, fell apart in July 2016. The plans for CNBM and Sinoma may fare better but if the price of cement keeps falling then the market may have other ideas.

For more information see the China country report in the September 2016 issue of Global Cement Magazine