Displaying items by tag: market
Update on Bangladesh, November 2022
16 November 2022The Infrastructure Development Company in Bangladesh announced this week that it had agreed to loan Crown Cement US$25m to help it add a new mill to its cement grinding plant at Munshiganj, south of Dhaka. If completed it will be the plant’s sixth mill. Originally known as MI Cement the plant has a production capacity of 3.3Mt/yr and the most recent mill was added in 2017. The plan to add a sixth mill dates back to 2019 but was revised in 2021 with a total investment of US$90m. Securing a loan marks a significant step forward for the project.
The timing to expand a cement plant in Bangladesh is interesting given the problems facing the local cement sector. In August 2022 Mohammed Alamgir Kabir, the president of the Bangladesh Cement Manufacturers Association (BCMA), told the Daily Star newspaper that cement producers were facing both falling investment in infrastructure development and private projects. The local cement industry imports 90% of the raw materials it uses and most of the country’s cement plants grind cement use imported clinker. However, the aftermath of the coronavirus pandemic created supply chain problems leading to higher costs of raw materials, dearer transportation charges and started to push up global energy prices. This was then exacerbated by the Russian invasion of Ukraine in February 2022 and negative currency exchange effects as the Bangladeshi Taka fell in value against the US Dollar. In words echoing cement associations in other parts of the world, Kabir suggested that cement producers now faced the option of either continuing to raise prices or simply shutting down production.
The local cement production capacity utilisation rate appears to be around 56% based on data from a recent feature in the Financial Express newspaper. It placed total production capacity at 83Mt/yr from 37 active plants but demand at only 47Mt/yr. This is similar to the reported utilisation rate of 54% back in 2017 from a total production capacity of 50Mt/yr. Data from the Bangladesh Bureau of Statistics (BBS) suggests that cement production picked up in 2021 but then declined on a monthly year-to-date basis between December 2021 and February 2022. However, the BBS only reports production from a sample of plants. Masud Khan, the chief advisor to Crown Cement and its former chief executive officer, placed the cost of all that unused capacity at US$40/t or something like an investment of US$1.46bn for idle manufacturing potential. In his view, the larger local producers forecast an increase in demand around five to 10 years ago and invested accordingly to avoid losing market share. However, some smaller companies may also have done the same.
The local sector has likely been able to cope with a relatively low capacity utilisation rate previously because it was ‘grinding heavy.‘ How the current problems have shown themselves on cement company balance sheets has been mixed though. LafargeHolcim Bangladesh’s sales revenue and profit grew by 8% year-on-year to US$166m and 7% to US$32.2m in the nine months to September 2022. It was probably able to do this, in part, due to the fact that it operates one the few integrated plants in the country and it has direct access to limestone reserves across the border in India. By contrast, HeidelbergCement Bangladesh’s sales fell by 3% year-on-year to US$90.7m in the first six months of 2021 and it made a loss of around US$2m. Aramit Cement’s revenue fell by 60% year-on-year to US$6.09m in the nine months to March 2022 and it reported a loss. Premier Cement Mills increased its revenue by 5% to US$99m in the same period, although its net profit dropped by 91% to US$387,000. Crown Cement’s revenue rose by 16% to US$13m but its net profit fell by 81% to US$1.32m.
Geopolitics, high energy prices and local problems are all combining to make life difficult for cement producers in Bangladesh. As the market adjusts to the current situation the determining factor here is likely to be the cost of grinding cement to end users versus just importing cement directly. Current conditions do not seem to be stopping Crown Cement though nor LafargeHolcim Bangladesh. The latter, for example, launched a new blended cement product, Supercrete Plus, earlier in November 2022. One way out for the others might be explore exports and the BCMA suggested just that to the government over the summer, although this doesn’t seem like the most obvious solution for a country that imports so much of its raw materials.
Holcim New Zealand takes receipt of Christian Pfeiffer ball mill
04 November 2022New Zealand: Holcim New Zealand says that it has received a mill for use in its upcoming Auckland cement replacement products import and distribution facility. The company opted for a Christian Pfeiffer ball mill for the project.
Holcim New Zealand says that alternative materials imported via the Auckland facility will eliminate 100,000t/yr of cement from New Zealand's 1.6Mt/yr consumption. The company expects that this will cut 78,000t/yr of CO2 emissions.
US: Martin Marietta Materials recorded revenues of US$4.68bn throughout the first nine months of 2022, up by 20% year-on-year from US$3.92bn. Cement sales contributed US$455m, 9.7% of total revenues, up by 27% from US$358m. Cost of revenues rose by 4% for the group, to US$3.62bn from US$2.92bn. Nonetheless, Martin Marietta Materials successfully recorded nine-month net earnings growth of 25% year-on-year, to US$638m from US$546m.
Chair and CEO Ward Nye said that double-digit price growth drove the company's record profitability. He said "Importantly, we expect a return to expanding margins in the fourth quarter of 2022, as the compounding effect of multiple pricing actions throughout the year offsets continued inflationary pressure and a slowdown in single-family residential construction. Martin Marietta's strategic coast-to-coast footprint is well positioned for long-term growth, driven by favourable population migration trends, housing shortages in our markets and a long-term federal highway bill complemented by healthy Department of Transportation budgets in the company's key states. Near-term, we expect affordability-driven headwinds in the single-family residential end market will be offset by a significant acceleration in public infrastructure investment and continued strength in large-scale energy, domestic manufacturing and multi-family residential projects."
China: Data from the National Bureau of Statistics of China shows that cement output fell by 12% year-on-year to 1.56Bnt in the first nine months of 2022 from 1.78Bnt in the same period in 2021. However, output started to pick up on a monthly basis in September 2022, with a year-on-year increase of 1% to 207Mt. Despite national increases in infrastructure development, the China Cement Association revealed that real estate development investment decreased by 8% to US$1.44tn in the first nine months of 2022.
China: The first nine months of 2022 brought a 6.1% year-on-year decline in China Shanshui Cement's sales to US$2.3bn, from US$2.45bn in the first nine months of 2021. Its net profit was US$142m, down by 43% year-on-year from US$248m.
India: Ambuja Cements sold 6.7Mt of cement during the second quarter of its 2023 financial year, up by 12% year-on-year. Its standalone revenues were US$443m, up by 13% from second-quarter 2022 financial year levels. Cost growth outstripped sales at 32% year-on-year, resulting in earnings before interest, taxation, depreciation and amortisation (EBITDA) of US$36.7m, down by 57% year-on-year.
CEO Ajay Kapur said "The cement industry has been facing significant margin pressure resulting from a steep rise in global energy prices. However, recent cooling off in energy prices and post-monsoon demand pickup appears to present a silver lining for the coming quarters."
Kapur said that Ambuja Cement's focus is currently on future capacity expansions, with the aim of becoming India's market leader.
UltraTech Cement's first-half 2023 financial year results show profit decline despite sales growth
20 October 2022India: UltraTech Cement's consolidated sales were US$3.51bn during the first half of the 2023 financial year, which began on 1 April 2022, up by 22% from US$2.88bn in the first half of the 2022 financial year. Its net profit was US$283m, down by 22% year-on-year from US$363m. This was due to a 32% cost rise to US$3.13bn from US$2.38bn. Power and fuel contributed 32% of costs at US$1bn, up by 68% from US$598m in the first half of the 2021 financial year.
UltraTech Cement said that it began to see signs of cement demand revival in September 2022, following traditionally subdued second-quarter demand due to seasonal rains.
Philippines: The Tariff Commission (TC) has ordered that new duties be applied to imported Vietnamese cement for a five-year period up to 2027. The Department of Trade and Industry concluded a dumping investigation into Vietnamese cement exports to the Philippines in mid-October 2022, according to the Manila Bulletin newspaper. It found that imports of ordinary Portland cement (OPC) and blended cement from Vietnam were not injurious to the domestic cement sector at present. However, it also found the threat of material injury to be 'imminent.' This is due to Vietnam's 'substantial' cement overcapacity, which may enable it to rapidly increase its exports. The conclusion provided the basis for the TC's latest order.
Any new duty will replace provisional 2.7 - 32% duties introduced in December 2021. Previously, strong competition reportedly prevented the measures from causing price rises. Commentators now predict that the TC's proposed measures will result in a rise in prices.
Ivory Coast: The local cement sector is preparing to reach a production capacity of 20Mt/yr by the end of 2022. Albert Kouatelay, director of deputy cabinet of the Ivorian Minister of Trade, Industry and Promotion of SMEs, made the comment at the launch event for LafargeHolcim Côte d'Ivoire's new white cement product, according to the Agence de Presse Africaine. The country has 13 cement plants and the latest boost is expected once a new cement unit starts operation. Domestic production capacity was reportedly 2.4Mt/yr in 2011, 12.5Mt/yr in 2019 and 17Mt/yr in 2022.
Pakistan: Pakistani cement companies sold 9.61Mt of cement during the first quarter of the 2022 financial year, down by 25% year-on-year from 12.8Mt in the first quarter of the 2021 financial year. Exports declined by 34% to 1.01Mt of cement, from 1.55Mt. The All Pakistan Cement Manufacturers Association (APCMA) said that current economic conditions impacted both domestic and export sales.
Separately, the APCMA has expressed its concern over State Bank of Pakistan limits on the use of letters of credit by companies for the purchase of spare parts and other machinery. The association says that present restrictive conditions will create operational difficulties for the industry.