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Far East Memorandum: Japan and South Korea

World Cement,

Read part two of Far East Memorandum here.

Japan: timely resurgence

Three years ago this month, Japan’s largest earthquake struck the northeastern region of the country. It was followed by a massive tsunami with waves reaching up to 38 m that devastated large areas. Several nuclear power plants were damaged and the meltdown at Fukushima Daiichi resulted in heavy releases of radiation. The repercussions of this series of disasters are still being felt.

Until recently, Japan’s cement market had been shrinking, but there has been a resurgence in construction. In reply to a question put to Taiheiyo Cement on how the company viewed the cement industry, a spokesman replied, “Taiheiyo Cement is doing well in its buoyant domestic market, which is benefiting from the full scale reconstruction and restoration programme following the 2011 earthquake, as well as the preparation works for the 2020 Olympic Games and Paralympic Games. Taiheiyo is optimistic that it will be able to achieve strong domestic results during this period through the stable supply of cement whilst simultaneously contributing to a recycle-oriented society. Meanwhile, the company is looking to expand its overseas businesses in the countries in which it is already operational and would like to focus on opportunities utilising its expertise in the environmental and natural resource businesses. Taiheiyo would also like to look for opportunities in countries where it currently does not have operations, such as Myanmar, Indonesia and India”. While specific details are not available at this time, the company said it would consider establishing JVs with new partners and would hope that any new business would benefit from the deployment of its energy-efficient technologies and waste utilisation knowhow.

At the end of December 2013, Nikkei Asian Review reported that three major cement producers, including Taiheiyo Cement were expected to spend a combined US$94.3 million on acquiring new and used vessels this year. Taiheiyo Cement will add three large ships to its fleet for about 2 billion yen either this year or in 2015. Sumitomo Osaka Cement was scheduled to spend 6.8 billion yen, first adding a large ship that can carry 8000 t and then purchasing two 2000 t ships and one 5500 t ship after April 2015. While the company will decommission three older vessels, all told its fleet will expand to 20 ships with a combined capacity of 93 000 t, up from last year’s 19 vessels and 82 000 t. Last month (or even later), Ube-Mitsubishi Cement was scheduled to begin sailing three new large ships, each with a capacity of about 7000 – 12 000 t. The company is expected to spend about 1.5 million yen on the additions, two of which will be newly built and the other rented.

South Korea: some optimism

The end of 2013 and the beginning of 2014 have been tough times for the country’s cement industry. As has been well publicised, the Tong Yang Group, of which Tong Yang Cement is a member, applied for court receivership last October. At the end of January its Chairman, Hyun Jae-hyun was arrested on allegations of fraud and malpractice. In December, according to The Korean Economic Daily, South Korean cement companies suffered the loss of an estimated US$18.9 million as a result of a 22-day strike by railway workers.

The Financial Times mentions that there is a feeling of optimism following the news that the construction industry rebounded last year, rising to 6.9% after three consecutive years of contraction. Consumer confidence has been increasing in recent months on top of a pick up in property prices; analysts are predicting economic growth of 3 – 4% this year. On the nuclear front, South Korea has approved a US$7 billion project to build two nuclear plants, which will prove a boost for an industry that has been struggling to emerge from the shadow of Japan’s Fukushima disaster. The approvals will also encourage the country’s nuclear power industry, which still aims to export its expertise into a global market dominated by France, the US and Russia. This will be welcome news for the cement industry.

Written by Paul Maxwell-Cook. This is an abridged version of the full article, which appeared in the March 2014 issue of World Cement. Subscribers can view the full article by logging in.

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