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The Australian cement market: Boral Cement’s clinker plant closure

World Cement,

Following the news of 03 December 2012 that Adelaide Brighton (AB) had bought a 30% stake in Aalborg Portland Malaysia, its rival, Boral Cement could well be maneuvering towards mirroring this in the direction of imported clinker.

Boral has announced that will be closing its clinker plant at Waurn Ponds, Geelong. The company’s CEO, Mike Kane cited high Australian dollar and low shipping costs as reasons for the relative cost increases to domestically produced clinker as compared to imports. Though the closure of this plant, and its associated quarry will see 90 jobs lost, the company has already engaged with the Australian Workers Union (AWU) on matters of labour redistribution in order to limit the eventual number.

Recently, the Australian construction market has taken a turn for the worse, and cement demand has dropped considerably as building projects are shelved and reconsidered. This has led to overcapacity issues for companies such as Boral, with the result being the underutilisation of its manufacturing assets.

While Boral has not yet announced whether it will invest overseas as AB has, the different operational paradigm the company has shown in the decision to close its Waurn Ponds facility raises some questions about the future of AB’s own domestic clinker production. Clinker imports from the new Malaysian interest will likely take care of the company’s needs in Western Australia, but that puts a question mark over whether the continuation of clinker production at its Munster plant, just outside of Perth.

Local industry analyst, Nathan Zaia, has said that he expects the trend of cheaper imports from Asia to continue. Indeed, since Boral Chairman, Bob Every, warned that any potential benefits from a local and US housing market recovery would not be seen until 3Q13 at the earliest, foreign investment in the growing Asian markets seems to be the sensible option. Buoyed at the moment by cheap shipping and a strong AU$, the window is open, and with domestic power and labour costs on the up, it might be considered prudent to strengthen imported supply under the current, favourable circumstances.

Written by Jack Davidson.

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