Displaying items by tag: Tax

China: Henan Province has announced a planned rise in water and energy tariffs for cement producers that fail to meet current emissions standards and clean transportation requirements. Reuters News has reported that companies subject to the measures will pay US$0.07 – US$0.14/m3 more for water and up to US$0.01/kWh more for electricity. Henan enacted ‘ultra-low’ emissions limits of 10Mg/Nm³ of dust, 50Mg/Nm3 of NO_x and 100Mg/Nm³ of SO₂ in 2018. Cement plants in the province produce 105Mt/yr of cement.

Bangladesh: The Bangladesh Cement Manufacturers Association (BCMA) has suggested the removal a 3% non-refundable advance income tax (AIT) and a 3% import duty on raw materials, as well as the reduction of a US$5.88/t import duty on clinker by 40% to US$3.53/t. The Dhaka Tribune newspaper has reported that BCMA members are struggling to pay their dues due to the impacts of the coronavirus lockdown, which caused the sector a loss of US$353m between 21 March 2020 and 21 June 2020.

BCMA President Mohammed Kabir said, “To generate taxes and revenue from this sector, the government should save our businesses and meet our logical demands in the final budget. We are really frustrated that our demands were unaddressed in the proposed budget. Our working capital will dwindle if the government keeps charging the AIT.” He added, “If the government does not remove the 3% non-adjustable AIT, then at least it should be declared as adjustable tax.”

Honduras: The government says that it will not raise import duties on cement so as not to impact negatively upon “the construction industry and consumer.” The La Prensa newspaper has reported that Minister of the Secretariat of Economic Development María Antonia Rivera said, “The Government is defining regulations on the quality of imported cement and cement made in Honduras. We have no plans to increase tariffs; rather we are promoting price stability.”

UK: Mineral Products Association (MPA) chief executive Nigel Jackson has written to the Chancellor, Rishi Sunak, welcoming his deferment of value added tax (VAT) and urging the extension of this deferment to Employer National Insurance (ENI), Corporation Tax and Business Rates. “What business needs now are fast and simple solutions that enable them to keep cash in their businesses and their employees in their jobs,” said Jackson. “Fixed costs are very high. Once the recovery starts the pent-up demand will be immense.”

Armenia: The Armenian government has announced that it plans to extend the duration of state duties on cement imported from Iran and several other countries until 1 July 2020. The decision was made on the basis of analysis that confirmed an extension of the customs duties was appropriate. The government said that it would continue to monitor the situation.

According to the RA Statistical Committee Armenia produced 0.59Mt of cement in 2019, 8.1% more than in 2018. The RA Customs Service reported that the country imported 0.31Mt in 2019, a year-on-year increase of 70.5%.

Vietnam: Cement producers in Vietnam are reported to be facing a ‘double whammy’ due to falling domestic demand from a slowdown in the domestic property and infrastructure sectors, as well as a marked decline in exports due to the ongoing Novel Coronavirus (COVID-19) epidemic.

However, Nguyen Quang Cung, chairman of the Vietnam Cement Association (VNCA) said that demand is expected to remain high throughout 2020 as a whole. The Ministry of Construction (MoC) currently stands by its autumn 2019 forecast that Vietnam will produce 103Mt of cement during 2020. It expects domestic consumption to be around 70Mt, with exports of 33Mt.

To help firms overcome the current difficulties, Cung proposed that the government, the State Bank of Vietnam and other parties offer support to manufacturers in the form of tax cuts and lower interest rates.

Global Cement is sceptical that Vietnam’s cement producers will meet the MoC’s 2020 forecast. In January and February 2020 the country’s domestic sales were 40% lower year-on-year compared to 2019, while exports fell by 49% year-on-year.

India: The Confederation of Indian Industry (CII) has lobbied the government in its Pre-Budget Memorandum 2020-21 over customs duties. The body is suggesting a reduction on the customs duty on packaging for use in bagging cement to 5% from 10%. There is currently no import tax on cement and duties of 5% and below on various clinker constituents.

Last month Soyuzcement, the Union of Russian Cement Producers, reported that cement production was on course to grow by 8% year-on-year to 58Mt in 2019. This estimate was based on growth from January to October 2019 followed by a modest rise in November.

Graph 1: Cement production in Russia, 2010 – 2019. Source: CM Pro, Ernst & Young.

The pickup is significant because it’s the country’s first annual resumption of growth since 2014. At that time low commodity prices, a worsening economy and international sanctions broke a fairly steady growth cycle that had started in 2000. The only blip in that run was the global economic downturn around 2008. In the medium to long term Soyuzcement’s review pinpointed growth drivers as being government-backed residential housing schemes, integrated land development projects and an increase in the construction of concrete roads. This increase has been driven by consumption growth in most regions, led by a 12% rise in the Central Federal District although the Volga Federal District started to slow in the second half of 2019.

Figure 1: Russian Federal Districts by cement production in 2016. Source: Soyuzcement.ru.

Anecdotally, this change in the fortunes of the Russian cement industry can be seen in the volume of news coverage on the Global Cement website over the last few years. The mean number of news stories on the country in 2016 and 2017, increased by half in 2018 and then again in 2019. Partly this is down to our attempts to increase our coverage of the region but it also shows a general trend. In the news specifically there haven’t been many new plant projects domestically but there has been a steady stream of upgrades and maintenance related stories. For example, Eurocement subsidiary Kavkazcement reported in recent weeks that it had installed a replacement dry kiln. This has been part of a group of upgrades that Eurocement has started in 2019. On the supplier side both Germany’s Gebr. Pfeiffer and Italy’s Bedeschi opened subsidiaries in Russia in 2019.

One thing that didn’t seem to slow down the growth were mounting tariffs on Russian exports into Ukraine. Russia’s neighbour first blocked imports of cement from Russia in May 2019 due to, what it said was a Russian ban on imports. It then followed this with an antidumping rate of 115% for imported clinker and Ordinary Portland Cement (OPC) from Russia. It also penalised imports from Belarus and Moldova, although at lower rates. Russia’s cement export rates seemed untroubled by this, rising by 13.5% year-on-year to 0.8Mt in the first 10 months of 2019. Exports hit of high of just below 2Mt/yr in 2014 but have since stabilised at around 1Mt/yr. Imports reached around 5Mt/yr in the early 2010s and have been slowly declining since then, reaching 1.5Mt in 2018.

The lowered production rate that the Russian cement industry has faced over the last five years has been noteworthy given the apparent low capacity utilisation rate. The Global Cement Directory 2019 records the country as having a production capacity of 111Mt/yr. This gives Russia a capacity utilisation rate of 48% in 2018! Unlike, say, the countries in southern Europe that have had to rationalise their cement industries following the post-2008 decline, Russia may have structural aspects to the industry that have helped protect it from lower utilisation rates. These include relatively low export-import rates and the large size of the country with limited sea access to many regions. Most of its production capacity is located in the west but a sizable minority of plants are based further east across the Ural, Siberian and Far Eastern regions. Even under subdued economic conditions, plants in these places are likely to be less susceptible to foreign imports, for example.

Looking ahead, the question is whether the current growth that the cement industry is enjoying is viable once government spending slows down. Alongside this the industry could also focus on sustainability. As the government announced in early January 2020, the country expects to face both negative and positive effects from climate change. The cement industry could be at the front of this trend if it decides to clean up production and/or move into new markets as the Arctic region opens up.

Ukraine: Antidumping duties on clinker and Ordinary Portland Cement (OPC) from Russia, Belarus and Moldova introduced by Ukraine in mid-2019 have benefitted local producers. Mykola Kruts, the chairman of the board of Ivano-Frankivskcement, said that his company has been operating at a 90% capacity utilisation rate, according to Interfax-Ukraine.

Costa Rica: The government plans to approve legislation charging a 5% tax on both locally produced and imported cement by the end of December 2019. The new rules will standardise existing laws that have only been applicable to the provinces of Cartago, San José and Guanacaste so far, according to the La Republica newspaper. The previous system was only being levied on two of the three cement companies with a presence in the country based on the location of their operations.