Global Cement News

Cameroon: Construction of a US$109m Dangote cement plant in Duoala has been halted following an order from the Douala City Council (DCC), raising fears that the 18-month timeline for the construction of the plant may not be met.

DCC delegate Fritz Ntone Ntone halted work on the site following complaints from Ngondo cultural officials. He explained that part of the site allocated for the plant belongs to the DCC and will be used for the construction of an urban park. He added that much of the site is traditionally used as land for the Ngondo cultural celebrations. During the Ngondo General Assembly on 10 March 2012 Sawa Chiefs resolved not to release the land for any reason.

In September 2011 an agreement was signed between the Cameroonian government and Dangote, which authorised the construction of a US$109m cement plant in Douala with a capacity of 1Mt/yr along the shorelines of the River Wouri. The disputed land was contracted from the government through a lease of 30 years. On 13 March 2012 a Dangote delegation from Nigeria announced that the company was ready to renegotiate in order to keep the venture going.

Demand for cement in Cameroon is currently rising rapidly, increasing by 8% in 2011. According to government data the country imported at least 0.5Mt in 2010 but demand is estimated at 4Mt/yr. In addition to Dangote two companies from Korea have also signed investment agreements with the government.

Indonesia: Chinese cement giant Anhui Conch Cement plans to begin construction of a plant in South Kalimantan later in 2012, with an anticipated investment of US$400m.

"The planned plant in South Kalimantan will be able to produce 2.5Mt/yr," announced Industry Minister MS Hidayat as he met with a business delegation from China's Anhui province at the ministry's office. The output will be used for domestic purposes.

Anhui Conch Cement is currently awaiting the completion of its land acquisition process and a license to be issued by the South Kalimantan administration so that the plant can be built in Tanjung, Tabalong. The plant will be equipped with a cement-grinding plant, a seaport, a 60MW power plant and other supporting infrastructure.

Hidayat added that Anhui Conch Cement is also preparing to acquire land in Manokwari, West Papua, in 2013 for another cement plant that would require US$400m. It is expected to meet cement demands in the surrounding areas.

Last week Lafarge received a US$20m slap-in-the-face for cartel-like activity in South Africa. The case, which has been running since 2008, has investigated dealings at Lafarge, Pretoria Portland Cement, AfriSam and Natal Portland Cement-Cimpor. Yet the question remains: are cartels ever a good thing for the industry?

Back in December 2011 we covered the Common Price Agreement (CPA) in an article on cement price trends in the UK in Global Cement Magazine. This legally-approved cartel, operated by the UK Cement Makers' Federation, ran from 1934 until 1987. It was dissolved to allow UK producers to compete with cheaper foreign imports. Its supporters argued that it kept prices down in remote areas and stabilised the industry, a situation that cement buyers faced with escalating prices in Tanzania and Saudi Arabia might sympathise with this week. Despite this, prices in the UK fell after the CPA ended in 1987.

An uncited 'fact' on Wikipedia – itself a virtual monopoly on online knowledge – suggests that the median price increase achieved by cartels over the last 200 years could be 25%. Lafarge's fine represented 6% of its 2010 annual turnover in the region. Depending on how Lafarge's sales relate to its turnover this raises the possibility that even with its hefty fine Lafarge may still be in profit over the venture.

Cartels dog the cement industry given the prevalence of small groups of sellers in many markets. Throw in the current economic pressures in regions with over-capacity and the temptation must be irresistible. When one makes a link from this week's story from Pakistan about over-capacity to January's headline of 'inexplicably high' prices, the feeling occurs that Lafarge's chastening in South Africa is just the tip of the iceberg.

What do you think? Join our discussion on cartels in the Global Cement LinkedIn Group

Switzerland: Wolfgang Reitzle has been proposed to the Annual General Meeting on 17 April 2012 for election to the board of Holcim Ltd. Reitzle, aged 63 and a German citizen, studied engineering and economics at the Technical University of Munich and holds a degree and a PhD in mechanical engineering.

From 1976 to 1999 he worked for the car manufacturer BMW, where in 1987 he was appointed as a regular member of the Executive Board, responsible for research and development. In 1999, Reitzle took over as CEO of the Premier Automotive Group and Vice President of the US car manufacturer Ford. In 2002, he joined the Executive Committee of Linde, a world-leading gases and engineering company, and became CEO in 2003.

India: The Cement Manufacturers Association of India (CMA) has asked the Railway Board of India to reduce the cost of freight haulage. The CMA raised the issue in the wake of the board's decision to raise freight rates by 24%, which came into effect on 6 March 2012.

The CMA highlighted the disparity in the transportation costs of cement by rail compared to road. Other key concerns included the need to reduce the total cost by suitably lowering the classification for cement and clinker and by curtailing penalties, wharfage/demurrage charges and terminal charges.

The CMA now expects that cement prices will rise. "With this steep hike, the rail transportation cost of cement, which is already very high, will go up further including the transportation cost of input materials like coal, slag, gypsum assuming an average rail lead of 600km for the cement industry," said the CMA's President MMAR Muthiah.

According to Muthiah, transportation contributes about 20% to the operating cost of the cement industry. In addition, the industry has been highly taxed at over 60%. In the last couple of years railways have revised the classification of cement and clinker consistently from class 130 to 150 resulting in indirect freight hikes. In addition, a further burden on cement industry has been imposed by levy of various surcharges like a busy season terminal surcharge and development surcharge in the last few years.