SUDAN: Qalaa eyes almost double capacity in 2016

Egyptian-based Qalaa Holdings, an African leader in infrastructure and industry, is to boost the production capacity of the cement production plant in Sudan to 800,000 tonnes in 2016.

Abdalla ElEbiary, Managing Director of Qalaa, announced Thursday the company's plans to boost Takamol cement plant's production capacity within the coming year.

By the end of 2014, Takamol's current capacity recorded 430,000 tonnes, ElEbiary said. Qalaa is to carry out such a scheme through the establishment of a new coal mine for the plant within the current phase.

The plant is 51 percent owned by ASEC Cement, Qalaa Holdings' cement platform company, and 49 percent controlled by the Sudanese Social Security Investment Authority (SSIA), the entity that manages all pension funds in Sudan.

Takamol is located on the west bank of the River Nile, 320 kilometres (198.8 miles) north of the Sudanese capital Khartoum. The plant was in operation in mid 2010.

SENEGAL: La production de ciment augmente de 77.000 tonnes à fin avril 2015

La production de ciment du Sénégal a connu une augmentation de 77.000 tonnes durant les quatre premiers mois de l’année 2015 comparé à la même période de 2014, selon la Direction de la prévision et des études économiques (DPEE).

Cette production est passée de 1.752.400 tonnes en 2014 à 1.829.400 tonnes, soit une progression de 4,4%. Les ventes locales se sont légèrement repliées de 6,4%, s’établissant à 1.051.500 tonnes contre 1.123.000 tonnes en 2014. Quant aux ventes à l’exportation, elles ont connu une hausse de 22,1% se situant à 801.500 tonnes contre 656.500 tonnes en 2014.

CHINA: Anhui Conch in Mix for China Cement Crown

The historic building boom that made China the world’s largest cement user left cracks among its cement makers. So it is encouraging that government-led consolidation is now providing an opportunity for the industry to emerge with a stronger foundation.

Hong Kong-listed Anhui Conch, one of the country’s largest cement producers, last week said it would buy 16.7% of West China Cement, also Hong Kong-listed, for about $200 million. The two companies combined have half of the market in a key central Chinese province.

The deal follows at least three others in the cement industry this year, plus 12 in 2014. This burst is long overdue. Cement is a naturally oligopolistic business where too many companies in one region can’t chop up rocks profitably.

On average globally, three companies control 71% of cement capacity, says Deutsche Bank’s Johnson Wan. But China has 593 cement producers, with the top three accounting for only 30% of nationwide capacity. Marginal factories have squeezed industry profits, and emitted too much pollution.

That is why as part of its antipollution efforts, the government in 2013 banned new cement projects. It also tightened emissions and product standards to the detriment of small producers. Banks cut credit to small players, too.

Skeptics will note that China has tried and failed to consolidate the industry before. But the environment this time is more favorable. China’s housing downturn has hit cement sales, driving prices down by roughly 20% in some cases from a year ago. National inventories climbed to a record high in mid-June, says Jefferies.

Investors could play potential takeover targets such as Hong Kong-listed TCCI International Holdings, which operates plants in eastern and southern China and trades at an undemanding 10.2 times forward earnings. But given that listed companies make up just 5% of China’s cement makers, most targets may not be in the public eye.

The other option is to focus on the listed potential buyers. State-controlled Anhui Conch has the strongest balance sheet in the industry, its net debt at 8% of equity as of December, compared with an average 164% at its five closest peers. With operations across China, it can benefit from lower competition in many parts of the country, too.

There is always the risk that in the short term, Anhui’s stock will be punished over fears it is overpaying as it sweeps up targets. But the longer-term advantages seem worth it, especially if Beijing also stimulates investment that boosts cement sales.

And Anhui Conch’s Hong Kong shares, flat for the year, have missed China’s stock mania. They go for just 10.5 times forward earnings, less than the 13.2 times average at eight other Hong Kong- and Taiwan-listed cement makers, not to mention its own 15-year average. They are a cheap option for investors to consider as China finally tries to cement ties in this oversupplied industry.

MOZAMBIQUE: Cimentos de Mocambique to build new plant in Nacala

Cimentos de Mocambique (Cement of Mozambique) has announced that it is to build a cement production facility in the northern port city of Nacala at a cost of around 250 million US dollars.

Production at the new plant is expected to begin in 2018 with an annual output of 1.5 million tonnes of cement.

Cimentos de Mocambique currently employs 1,200 workers and produces 3.1 million tonnes of cement per year. It is owned by the Portuguese company CIMPOR, which is part of the multinational group InterCement.

The announcement came in the same week that Turkish company Limak Holding pledged to invest 150 million dollars in a cement factory in the southern city of Matola. This will employ at least five hundred workers in the first phase with a capacity of 600,000 tonnes of cement per year. In the second phase output will increase to two million tonnes a year.

AFRICA: Demand for cement in East Africa remains strong

Demand for cement in the East African Region is anticipated to remain strong in the medium term, supported by the resurgence in infrastructure and housing sectors.

Also, apart from the associated energy costs and the availability of cheap imports from some Asian countries, demand for cement in East Africa has continued to rise.

The growing demand for cement is expected to boost investments in new cement production in line with the retrofitting of old cement plants and the expansion of existing cement production capacity.

Tanga Cement Managing Director Mr Reinhardt Swart said in an interview that there is huge potential of investing in the cement industry due to rising demand for the commodity in the region.

“Despite the increased cement plants in Tanzania and other countries in the region, there is still huge demand for cement to cater for increase investment in infrastructure projects,” he said after receiving certificate recognising his company as one of the tops superbrands.

He said the award is sign of the efforts put by the company to maintain quality of the product that made customers to vote and give positive feedback.

Investing heavily on cement production was insufficient if the products are of low quality that does not meet market expectations and international standards.

Mr Swart said the sprout of many cement factories in Tanzania and the rest in the region was a challenge and opportunity to capitalise at the same time.

“It makes scrutinise at ways to remain in the market competing and raising the quality of the cement products,” he said. He also shared the manufacturers and cement makers concern over increasing importation of cheap cement from China and Pakistan into East Africa, saying it is creating excessive competition in the market.

Leading cement producers with highest market share in East Africa include Twiga Cement, Tanga Cement, Bamburi Cement in Kenya and East Africa Portland Cement Co.

The sub-Saharan Africa’s largest cement producer, Dangote, currently is building a 500-million US dollars cement plant in Mtwara Region, Tanzania. Overall, in East Africa, capacity additions by 2018 are expected to increase the region’s cement capacity to 13.45 million [metric tons] per year.

Certain high-growth markets - such as those in the DRC , Rwanda, and Burundi - which are characterised by low cement consumption per capita, are expected to continue to grow and attract imports from cement manufacturers based throughout East Africa.

Key drivers for cement demand in East Africa are infrastructure development, urbanisation, high regional gross domestic product (GDP) growth rates, and high population growth.

“The increasing demand is fuelled by an upsurge in commercial projects, housing developments and mega government infrastructure projects, such as ports, railways and road-cement manufacturers, in East Africa,” he said. Most countries from this group have had political instability, which has curtailed the development of the infrastructure and construction sectors.

The implementation of sustainable cost optimisation strategies focusing on alternate fuels, lowcost technology, and value-adding models are expected to reinforce the local producers’ presence and competitive positioning in the East African cement industry.

Modernisation at the plants, improvement of plant processes, and absorption of the best practices in mining and manufacturing - in the pursuit of cost efficiency - is required if East African cement producers are to compare favourably to leading global cement producers in terms of profitability.

East Africa’s average consumption is low and the process of catching up with international averages will drive future growth. The Democratic Republic of the Congo (DRC ), Kenya, and Burundi are expected to display the most rapid consumption growth.

Cement consumption per capita in East Africa is significantly below the global average of 500 kg, with the region’s largest markets in Kenya (80 kg) and Ethiopia (61 kg) - both indicating significant potential for growth.

This reflects high domestic prices, which have constrained demand. By way of comparison, in sub- Saharan Africa, Nigeria remains the largest consumer, with an estimated 18.3 million MT consumed in 2013, followed by South Africa, with 12.2 million MT. Together these two countries represent half of sub-Saharan Africa’s cement consumption.

Angola, Ethiopia and Ghana all together consume between 5-6.5 million tonnes while mile Kenya (3.7 million MT) and Tanzania (3 million MT) are East Africa’s leading cement consumers.

The rapid expansion of production capacity across Sub-Saharan Africa has led to a sharp drop in cement imports, reversing the deficit that has built up over the past decade.

Nigeria, which as recently as 2010 was importing 500 million US dollars worth of cement each year, has seen imports slump to 139 million US dollars in 2012, while Ethiopia’s imports have fallen by 75 per cent, to just 43 million US dollars over the same period.

This reflects the steady tightening of both countries’ import regimes, where the governments are phasing out licences to import cement and encouraging investment in local production.

ALGERIA: Moving Towards Self-Sufficiency in Cement, Steel Products, Says Minister of Industry and Mines

Algeria is moving towards "self-sufficiency in cement and steel products thanks to the new facilities to be operational in the short term," Minister of Industry and Mines, Abdeslam Bouchouareb said Sunday in Biskra.

Speaking during a meeting with local economic operators, at the headquarters of Biskra prefecture where he was on a working visit, the minister said that Algeria, which imports about 3 million tons of cement per year, "will manage to cover its needs and even over produce by 2016."

It will be the first time since independence that the country will cease to import cement, he noted.

The entry into operation of two new cement plants in the province of Biskra, of a total production capacity of 4 million tons, will, besides the national network of operating cement plants, meet the demand of the domestic cement market, stressed Bouchouareb.

In the commune of Branis, the Minister had laid the first stone of a private cement plant, "La biskrie des ciments", which will be operational in December 2015 with an annual capacity of one million ton.

NIGERIA: Sokoto Cement to build $600m plant

The Cement Company of Northern Nigeria (CCNN), Sokoto, is to build an additional power plant to make it self-sufficient in power supply to enhance its production capacity. The plant will cost about $600 million.

The company generates 12 megawatts (MW) of electricity but has gone into partnership with a Chinese company, CBMI to build a new plant to increase its generation to 16MW, the Head, Public Communications, Bureau of Public Enterprises (BPE), Alex E. Okoh, has said.

Okoh said the Principal Manager, Corporate Affairs, CCNN, Alhaji Sada Suleiman, stated this while explaining the company’s activities and plans when the post- privatisation monitoring team of the Bureau of Public Enterprises led by Mr. Ibrahim Babagana visited the plant.

He said earlier, CCNN’s plant does not generate sufficient power to take the full load when running the plant on full capacity utilisation. He said CBMI of China has started the construction of a new production line which has a production capacity of one million tons of clinker per year, and that the line should be commissioned by the end of next year to increase the company’s capacity by about 200 per cent.

The BPE team was also told that the company is being operated by the core investor with total staff strength of 383 of which only two are expatriates.

The Cement Company of Northern Nigeria’s prime market area covers six states of the Northwest zone, including Sokoto, Kebbi, Zamfara, Katsina, Kano, and Kaduna. The company is leading supplier within its geographical market area.

The firm was founded by the late Premier of the Northern Region, Alhaji Sir Ahmadu Bello. It was incorporated in 1962 and commenced production in 1967 with an initial installed capacity of 100,000 tons per annum at the Kalambaina plant.

The need to meet the increasing demand for cement necessitated an expansion of the plant with the commissioning of a second line with an installed capacity of 500,000 tons per year in 1985, by the then Head of State, Major-General Muhammadu Buhari. Thereafter, in 1986, the first line was shut due to its uneconomic mode of operation, thus leaving the plant with a rated output of 500,000 tons per annum.

Under the privatisation and commercialisation programme of the Babangida Administration in 1992, the Federal Government disinvested about 20 per cent of its holding in the company and sold it to the Nigerians. But under the civilian administration of Chief Olusegun Obasanjo, the Company was earmarked as one of the companies to be fully privatised. In 2000 therefore, public bidding for the company was concluded and Scancem International ANS of Norway, a member of Heidelberg Cement Group was appointed as core investor and technical partner of the Company. Following a strategic re-orientation, Heidelberg Cement Group divested its CCNN shares in 2008. A Nigerian company Damnaz Cement Company Limited later became CCNN’s new core investor and assumed full responsibility as with its technical/administrative experts.

In 2010, Messrs BUA International Limited acquired Damnaz Cement Company Limited and became indirectly the majority shareholder in CCNN and its technical partner. The ownership structure has core investors owning 50.7 per cent of the company; State Governments over the years reduced their shareholding from 36.8 per cent to 7.6 per cent; while other private shareholders retain 41.7 per cent.

The BPE team expressed satisfaction with the success story of the privatisation and the company is doing to remain competitive.

GHANA: Cedi’s depreciation pushes cement prices up

Citi Business News can confirm all three local cement producers in Ghana have increased the prices of their products on the market.

According to the sales and marketing manager of Dangote Cement Joseph Abu , “a bag of Dangote Cement effective today will be sold at 29 cedis 30 pesewas, representing a 9.6% increase in price”.A 50 kilogram bag of Dangote Cement for example has been increased by 2 cedis, 6 pesewas effective today June 22nd, 2015.

The same bag was earlier being sold at 26 cedis, 70 pesewas.

According to Joseph Abu, the increase has been necessitated by the rate at which the cedi is depreciating against the dollar.

Ghacem limited increased their ex-factory price effective June 13,2015 while Diamond cement increased their prices effective June 17, 2015.

Ghacem Limited has also sanctioned a 2 cedis 80 pesewas increase in the price of a 50kilogram bag of their product.

According to a price list on the company’s website, the ex factory price of their product is 29 cedis, 37.5 pesewas.

The same product was earlier being sold at 26cedis, 55.5pesewas.

Ghacem Limited also cited the current cedi depreciation as reason for their latest move.

Another local cement company is Diamond Cement; they have also increased their prices by 2 cedis 82 pesewas.

The head of the commercial department at Diamond Cement Ghana Limited said,”the ex-factory price of a 50 kilogram bag of Diamond cement is now 28cedis 43.5pesewas’.

All three cement producers sometime last year increased the prices of their products because of the consistent slide of the cedi against major foreign currency.

But later in the second half of 2014, the companies reduced the prices of their products by different margins because the cedi gradually was appreciating against the dollar and other major trading currencies.

INDIA: Cement prices firm despite monsoon

Cement prices remain firm despite the arrival of the monsoon as prices have corrected sharply in the recent months and there is very little room left for further correction.

While last year around this time, cement prices in the country on an average was Rs 300 per 50 kg bag, currently it is ruling at around Rs 270 levels.

Analysts said while there will be some correction in prices going forward, this year they will be less as cement companies are already operating at squeezed margins.

“Usually, every year prices starts getting corrected by the end of May as construction activities slowdown with the arrival of monsoon. This year cement prices have corrected sharply before monsoon, which may be late by a week. Cement prices have corrected so sharply that they are selling lower than what it was last year after price correction in the monsoon,” said Ravi Sodah, an analyst at Elara Capital.

A senior official from Cement Manufacturers Association also said that this year cement prices have corrected sharply before monsoon while demand has not yet revived. While cement companies may look at cutting prices from next month, the quantum is likely to be low.

Sharp correction of cement prices has been witnessed in the last couple of months so there is not enough space for further price correction.

Shrenik Gujrathi, an analyst at Angel Broking, said, “Cement prices fell to around Rs 270 per 50-kg bag in the last couple of months compared to the high of around Rs 320 per 50-kg bag. Usually cement prices rise steeply during January to May every year as this is the peak season for cement demand and starts declining in monsoon. This cement prices got corrected during the peak season as demand did not revive. After such sharp price correction, there is very little room left for further decline in prices.”

However, analysts feel that demand is expected to revive from the second half of this financial year as rural economy is expected to perform well with healthy monsoon in the country.

Gujrathi said that healthy monsoon would result is revival in rural economy, which would help in demand revival. Further, infrastructure and construction activities are expected to revive in the second half of the year, further boosting demand.

During the quarterly results, cement companies like ACC, Ambuja, UltraTech and JK Lakshmi Cement had cautioned that the sector will be under stress in the short-term but is likely to witness uptake in demand from the second half of this financial year.