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Focus on Australia
Written by Global Cement staff
01 March 2017
A couple of news stories from Australia this week give us a reason to look at the country’s cement industry. All the main producers have now released their preliminary reports for the second half of 2016, with the exception of LafargeHolcim, one of the joint owners of Cement Australia. Essentially, the picture is mixed from two of the three main producers - Adelaide Brighton and Boral - with falling sales revenues but growing sales in the east. In mid-2016 the Australian Industry Group Construction Outlook survey predicted that the infrastructure, commercial and residential sectors would start to recover in the second half of 2016 leading to an upturn in 2017, although falling mining and heavy engineering construction was expected to continue to contrast in 2016.
The local market is split in clinker production terms with most of the producers (relatively) concentrated in the south and east of the country. Cement Australia leads in cement production capacity with 2.8Mt/yr or 42% of the country's production base from two integrated plants. Adelaide Brighton then comes next with 2.3Mt/yr or 35% from three plants and Boral follows with 1.5Mt/yr from one plant since the closure of clinker production at its Waum Ponds Plant in Victoria in 2012. The cement grinding plant situation is more varied with Adelaide Brighton's Northern Cement plant in the Northern Territory and BGC Cement plant in Western Australia amongst the country's 12 units, according to Global Cement Directory 2017 data. This total also includes a few slag cement grinding plants such as the Australian Steel Mill Services' plant and the Cement Australia-Ecocem plant that are both in Port Kembla.
Adelaide Brighton reported that its sales volumes of cement were down in 2016 due to major declines in Western Australia and the Northern Territory. Here, volumes had fallen by around 20% year-on-year. Unfortunately, a revival in southern and eastern Australia in the second half of the year wasn’t enough to stem the tide of poor sales. Power supply issues in Southern Australia also caused disruptions at both the company’s own plants and at those of its customers, leading to reduced sales. The cement producer also said that its import volumes had fallen by 2Mt due to lower sales in Western Australia and the Northern Territory and that import costs had increased due to a drop in the value of the Australian Dollar. Adelaide Brighton's reliance on imports is interesting given that this week Semen Padang, a subsidiary of Semen Indonesia, announced that it had started exporting cement to Australia.
Meanwhile, Boral Australia said that its cement revenue had fallen by 3% year-on-year to US$95.3m for its first half to 31 December 2016. However, cement sales volumes grew by 3% driven by higher direct sales. It also noted that competition and energy costs had increased in the period. HeidelbergCement, the other joint owner of Cement Australia, along with LafargeHolcim, said that its operations in Australia had delivered solid development due to strong residential construction demand and strong demand on the East Coast that compensated for a weaker mining sector. LafargeHolcim confirmed this in its half-year report adding that road infrastructure projects had also helped. It also noted that benefits to its adjusted operating earnings before interest, taxation, depreciation and amortisation (EBITDA) had been accrued through energy savings and lower clinker import costs.
LafargeHolcim's financial results for 2016 are due later this week on 2 March 2017. Potentially they have big implications for the Australian cement market given the rumours that were swirling around a year ago about a potential divestment. Although the signs so far suggest that its subsidiary Cement Australia did okay in 2016, pressure elsewhere in the group might prompt a sale of its share. We discussed this issue in December 2015 but since then Adelaide Brighton publicly said it was working on an acquisition plan, including strategy on how to cope with any potential competition issues. All eyes will be on LafargeHolcim later in the week.
Tunisian government to sell stake in Carthage Cement 01 March 2017
Tunisia: Finance Minister Lamia Zribi has said that the Tunisian government has decided to sell its share in Carthage Cement. It owns an estimated 41% share of the cement producer, according to Tunis Afrique Presse. Zribi said that the decision was due to financial problems at the company as well as issues with production and export. Carthage Cement's chief executive Ibrahim Sanaa has blamed a rise in production costs on a poor construction market and production overcapacity.
Philippine cement sales rise by 6.6% to 26Mt in 2016 01 March 2017
Philippines: Cement sales rose by 6.6% year-on-year to 26Mt in 2016 from 24.4Mt in 2015 the Cement Manufacturers Association of the Philippines (CEMAP) has said. CEMAP president Ernesto Ordonez attributed the increase in sales to ‘continuing momentum for increased infrastructure,’ according to the Philippines Star newspaper. Despite this sales, volumes fell in the fourth quarter of the year. Ordonez blamed this on the run-up to the elections in 2016 and bad weather. Increased public and private infrastructure spending is expected to keep the local cement industry buoyant in 2017.
Indian credit agency predicts cement industry growth of 5% in 2017 - 2018 financial year 01 March 2017
India: The India Ratings and Research credit agency predicts that the cement industry will grow by 4 – 5% in the 2017 – 2018 financial year due to demand from infrastructure activities and a revival in housing demand in rural areas led by government spending. In a report it has revised downwards its growth estimates for the 2016 – 2017 period to 3 – 3.5% from 4 – 6% due to the negative effects of demonetisation. It added that, although the price of petcoke and coal has almost doubled since September 2016, it expects that stable cement demand will allow producers to pass these costs onto consumers in the 2017 – 2018 period.
Cement producers will add 50Mt/yr additional production capacity in the 2016 – 2018 period with the eastern region leading growth at 17Mt/yr followed by the north at 14Mt/yr. However, it fears that capacity increases in these regions may outpace demand. India Ratings said that the country’ cement production capacity utilisation rate was 70% in the 2015 – 2016 period and that it was likely to decrease to 65% following the effects of demonetisation. It is expected to rebound back to 70% in the next financial year.
Loesche receives first order in Myanmar 01 March 2017
Myanmar: South Korea’s Yojin Construction & Engineering has placed an order for two cement mills from Loesche for installation in Myanmar. The order for a cement and slag mill is Loesche’s first in the country. The mills will be used at a grinding plant owned by Yojin Myanmar Engineering in Thilawa. They will each produce 75t/hr of cement with a fineness of 3300 Blaine. Operation is scheduled for mid-2017. Yojin is building its new grinding plant in the Thilawa Special Economic Zone south-east of Yangon. The site has an ambition to produce 1Mt/yr of cement.