Displaying items by tag: Tax
Clinker is the new gold in Kenya
08 May 2024Kenya-based East African Portland Cement (EAPCC) made the news this week with the reopening of the company’s Athi River cement plant after a month-long shutdown. The closure was conspicuous because the company is gradually working towards increasing the integrated plant’s production capacity. The first phase of the maintenance and upgrade project saw the replacement of the production line’s kiln shell in September 2022. The current aim is to increase the unit’s cement production capacity to 1Mt/yr by mid-2026. The recent shutdown appears to have been a more normal annual renewal and repair job but EAPCC has used it as a promotional opportunity. Notably, a spokesperson for EAPCC described clinker as the “new gold” in a recent video explaining what was going on.
It’s an improvement on the financial trouble EAPC found itself stuck within in the late 2010s before the government ended up taking a controlling share in the cement producer. On this front local media reported in July 2023 that the government had found a 'strategic investor' to buy a 30% stake in the company. Nothing more has been said on this topic since then though.
The highlighting of the recent shutdown is likely to be a public relations exercise intended to project stability, but that focus on clinker is telling given that the government introduced its Export and Investment Promotion Levy in July 2023. This legislation imposed a 17.5% fee on imported clinker in order to encourage the local industry. Cement producers that rely on imported clinker - including Rai Cement, Bamburi Cement, Savannah Cement, Ndovu Cement and Riftcot - attempted to lobby against the levy but it remains in place. This business environment helps to explain EAPCC’s renewed focus on clinker production.
One company that stands to benefit from the levy is National Cement, producer of the Simba Cement brand and a subsidiary of Devki Group. It made the news at the start of April 2024 when its subsidiary Cemtech commissioned a 6000t/day clinker plant at Sebit in West Pokot. National Cement already operates an integrated plant near Athi River, south of Nairobi. However, hot on the heels of the West Pokot plant, it is already considering building another integrated plant in the north of Kitui County, to the east of Nairobi. As reported in the local press this week, Cemtech has submitted an environmental impact assessment for the project to the local authorities.
The country has two other clinker producers: Holcim subsidiary Bamburi Cement and Mombasa Cement. The former company announced at the end of 2023 that it had signed a contract to build solar plants at its integrated plant in Mombasa and its grinding plant in Nairobi. The deal was framed as a money saver but additionally it may have been in response to a less than reliable local grid. It also said that it was removing Ordinary Portland Cement (OPC) from its product line from the start of 2024. This move challenged expectations about sustainability initiatives outside of richer countries. Yet, considering how Bamburi Cement argued against the clinker levy, there might have been some commercial thinking here too in order to sell products that use less clinker. Finally, despite completing its divestment of Uganda-based subsidiary Hima Cement for US$84m in March 2024, Bamburi Cement reported a loss of US$2.99m in 2023 compared to a profit of US$1.36m in 2022. Although it reported a rise in turnover and operating profit, it appears that taxes and legal costs related to the sale of Hima dragged the company into a loss.
Graph 1: Rolling annual cement production in Kenya, 2019 - September 2023. Source: Kenya National Bureau of Statistics (KNBS).
It’s been a difficult business environment in Kenya over the last decade given the number of companies that have faced serious financial difficulties. This list includes ARM Cement, EAPCC and Savannah Cement. The last of these companies, Savannah Cement, is currently in administration and is trying to sell its integrated plant. Yet, rolling annual cement production in Kenya has remained above 9.5Mt/yr since early 2022. The government is sticking to promoting local clinker production, and companies like Bamburi Cement, EAPCC and National Cement are making investments of varying scales. The focus, for now at least, is on clinker production in Kenya.
Polish cement industry advances with CCS technology
19 April 2024Poland: Polish cement producers are set to build carbon capture installations, supported by government policies. After a decline in production from nearly 19Mt in 2022 to about 16.5Mt in 2023, the industry is facing an increase in cheaper imports from outside the EU, particularly Ukraine, and CO₂ emission fees that account for 30% of the cost of 1t of cement, according to the Dziennik Gazeta Prawna newspaper. The EU has also introduced a carbon border adjustment mechanism (CBAM) for imports.
Despite these challenges, the Kujawy cement plant in Bielawy, owned by Holcim, is launching the large-scale implementation of carbon capture and storage (CCS) technology.
Holcim Polska's president, Maciej Sypek, said "The construction of carbon capture installations in our plants will cost between €320m and €400m. We received a €264m grant from the European Commission's Innovation Fund." According to Sypek, the project is currently in the design phase, with construction expected to start in 2025 and operations beginning in early 2028.
The implementation of CCS at the Kujawy plant could potentially lead to an industry-wide adoption of the technology, costing between US$3.7bn and US$4.9bn, according to the newspaper. Holcim Polska plans to liquefy the CO₂ and transport it by rail to a terminal in Gdańsk, where it will be shipped to the North Sea for underground storage. Cement producers are urging the Polish government to appoint a commissioner for CCS infrastructure and to enact legislative changes to support the construction of such installations. They also believe that rapid modernisation of the energy sector needs to occur to support the energy-intensive process of gas capture.
Vietnam: The Vietnam Cement Association (VNCA) has urged the government to address the cement industry's challenges, following a continuous decline in sales since 2022. Despite having 61 cement plants with a combined capacity of 117Mt/yr, the industry recorded sales of only 87.8Mt/yr in 2023, marking a 16% year-on-year fall in domestic consumption to 56.6Mt and a 1% decline in exports to 31.2Mt. The downturn in both domestic and export markets has resulted in excess inventory, leading many plants to reduce capacity or halt operations, with some facing bankruptcy or the risk of foreign acquisition.
Several factors have contributed to the industry's difficulties, including reduced domestic demand due to reliance on traditional construction techniques in major infrastructure projects, a stagnant real estate market, escalating fuel costs, and increased export taxes on clinker. To combat these issues, VNCA proposes promoting concrete use in high-speed infrastructure projects, especially in the Central region and the Mekong Delta. It also advocates maintaining or eliminating export taxes on clinker for the next two years and providing VAT exemptions. Additionally, VNCA calls for financial support, requesting banks to offer debt relief and reduced interest rates to cement companies. The association also advises against further foreign investment in Vietnam's cement sector.
10 sustainable cement and concrete technology developers launch the Decarbonized Cement and Concrete Alliance
18 January 2024North America: A new coalition for the scaling and deployment of low-carbon building materials, the creation of new clean cement and concrete jobs and the promotion of environmental justice launched earlier in January 2024. Called the Decarbonized Cement and Concrete Alliance (DC2), it comprises alternative cement developers Biomason, Brimstone, Chement, Fortera and Terra CO2, sequestration company Blue Planet Systems, circular concrete producer CarbonBuilt, biogenic limestone producer Minus Materials, hydrothermal processing technology developer Queens Carbon and electrified cement production technology developer Sublime Systems. DC2’s areas of engagement in policy will include tax credits, standards, ecolabeling and subsidisation, in line with the US Department of Energy’s Pathways to Commercial Liftoff: Low-Carbon Cement strategy.
CarbonBuilt’s government and community affairs manager Sal Brzozowski said “DC2’s platform of robust policy, standards and incentives to scale innovative solutions will not only accelerate deep decarbonisation, but also transform the concrete industry from one of the world’s largest CO2 emitters to one of the world’s largest carbon sinks.”
Uzbek government cuts limestone tax for cement producers
12 January 2024Uzbekistan: The government has reduced the tax on limestone for use as a raw material in cement production. Uzbekistan Newsline has reported that the tax rate has dropped by 73% to US$0.48/t.
India: The government’s Income Tax Department fined Shree Cement US$481m on 5 January 2024. The fine is for the company’s use of falsified bills in relation to a non-existent waste management plant to claim US$1.02bn-worth of tax deductions between April 2014 and March 2023.
The Economic Times newspaper, breaking the story, reported that neither Shree Cement nor the Income Tax Department has yet issued a statement.
JK Cement receives show cause notice requesting US$279,000
05 January 2024India: The Office of the Deputy Commissioner of Income Tax, Kanpur, Uttar Pradesh, has issued a show cause notice to JK Cement with regard to possible short payments, non-payments or erroneous refunds, including associated interest, worth US$279,000.
Reuters has reported that the company expects ‘no material impact’ on its operational, financial or other activities due to the notice.
Revenue authorities fine UltraTech Cement
05 January 2024India: UltraTech Cement says that it has received demand orders from two local revenue authorities for issues relating to its past tax payments. The Financial Express Online newspaper has reported that the producer must pay a total of US$86,600, including interest and fines. Office of the Deputy Commissioner of State Tax, Bhavnagar, Gujarat, demanded US$56,400 due to an allegedly ineligible input tax credit. Meanwhile, the Office of the Assistant Commissioner of Central Goods and Service Tax Division II, Punjab, demanded US$30,200 due to input service distributor credit not reflected in its statement for the 2018 financial year.
UltraTech Cement plans to challenge the orders, to wit the company said that it has a ‘good case on merit’ to present before appellate authorities.
Vietnam’s cement and clinker sales drop by 6% in 2023
02 January 2024Vietnam: Vietnam sold 89Mt of cement and clinker in 2023, down by 6% year-on-year from 2022 levels. Việt Nam News has reported that exports fell less sharply than domestic sales. The country exported 32.6Mt of cement and clinker, down by 2% year-on-year from 2022.
The Ministry of Construction is reportedly contemplating extending a 2% reduction in the rate of value-added tax (VAT) on cement in order to stimulate sales. Additionally, it has called for a reduction in the export tax on clinker back down to 5%, following a rise to 10% in 2023.
Mineral Products Association welcomes UK cement carbon border adjustment mechanism plan
19 December 2023UK: The Mineral Products Association (MPA) has welcomed government plans for the implementation of a UK carbon border adjustment mechanism for cement by 2027. The association urged the government to develop policy and business models for carbon capture, use and storage, including supporting a domestic carbon neutral and negative products sector.
MPA executive director for energy and climate change Diana Casey said “We cannot take our supply of cement for granted and neither can we put ourselves at risk of unstable international trading markets. That is why today’s commitment to a UK CBAM is so important. Levelling the carbon cost between domestic production and imports will help the UK attract the investment required to decarbonise and ensure our long-term security of supply. The Government’s commitment to bring in the UK CBAM by 2027 is very welcome, and ideally it should be introduced in 2026 to align with the EU scheme. This is the only way to prevent any detrimental impact of the EU CBAM on UK industry.” She added “As well as a CBAM on cement, the MPA would be interested in exploring a CBAM on lime. However, the challenge for the lime sector is ensuring that lime exports can compete in international markets.”