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Cement industry insight: Asia

World Cement,

In its top 10 economic predictions for 2013, IHS Global Insight indicated that weak economic growth in the United States, recessions in Europe and Japan, and a soft landing in China took a toll on growth in a number of emerging markets in 2012. However, with prospects for the world economy looking a little brighter, the outlook for emerging markets in 2013 is improving. This is especially true in Asia (and particularly the ASEAN economies).

Cement market: Indonesia

The world’s 16th largest economy by GDP is Indonesia. It is predicted to become the seventh largest by 2030. The World Bank predicts that the country’s economy will grow by 6.6% this year, outperforming many other emerging powers. The cement industry is certainly benefiting from such confidence, with predictions that the market will grow at a double digit rate in 2013.

For example, the country’s largest cement producer, Semen Indonesia (formerly Semen Gresik), achieved record production last year with an increase of 18%. The company expects to produce 28.3 million t of cement this year, helped by plans to build a new plant in Rembang, Central Java, and the recent acquisition of a cement manufacturer in Vietnam. It has set aside US$400 million for capital expenditure this year. A major competitor is, of course, PT Holcim Indonesia. In looking to claim a bigger market share in East Java, it is moving rapidly to the launch of its new plant in Tuban in November of this year. It will have an annual production of 1.7 million t. As a further boost, Holcim has begun production of a second plant, Tuban II. This 1.7 million tpa facility is expected to be completed in 2015. ThyssenKrupp Resource Technologies is involved in the construction of both plants.

The country’s second largest producer, PT Indocement Tunggal Prakarsa is said to have set aside US$260 million – US$320 million for capital expenditure this year. The company is developing a new plant with a total production of 4.4 million t in Citeurep, West Java. The Sinoma Group is involved with equipment procurement and construction work. It is scheduled for service in mid-2015. Feasibility studies are in hand for two additional plants, one in Central Java and another outside Java. Operations at PT Semen Bosowa Maros’ 5.2 million tpa plant in South Sulawesi are expected to begin in 2014. In the meantime, Thailand’s Siam Cement Group will further expand its presence in Indonesia by building a new plant in Sukabumi, West Java, with a total investment of US$356 million. The plant should be operational by 2015.

Cement market: Thailand

In 2011, Thailand was hit by its worst floods in 50 years. This natural disaster seriously affected manufacturing and tourism, but last year domestic consumption surpassed expectations, and investment picked up to repair flood damaged manufacturing capacity. The country’s GDP growth for 2013 is forecast to be 5% and infrastructure spending is expected to gather pace later this year, particularly on water management projects. Post-flood reconstruction work boosted cement consumption towards the end of 2012 and that, coupled with planned large infrastructure projects, will ensure a healthy future for the country’s cement industry. Thailand’s third largest cement manufacturer, TPI Polene, has announced plans to spend THB10 billion from 2013 to 2016 to develop its fourth production line in Saraburi and expand into renewable energy.

Cement market: Philippines

An 18% increase in cement production last year, together with the boom in property development, infrastructure spending and post-flood reconstruction work in the Philippines has resulted in cement plants running at 85% capacity. This is prompting companies to make additional investments to increase capacities. Leading the way is Holcim’s plan to build a 2 – 2.5 million tpa plant in Bulacan, which is scheduled to be onstream in 2017. It has already brought back online the 1 million tpa plant in Mabini, Batangas.

Other reports indicate that Lafarge Republic is increasing production capacity by about 1 million tpa by refurbishing a grinding plant in Danao, Cebu, and its mill in the plant in Norzagaray, Bulacan.

Cement market: Vietnam

In April, reports from Vietnam said that the country’s Prime Minister had approved the proposal by the Construction Ministry to stop production at nine cement plants to balance supply and demand, and save natural resources. Seven planned projects will be delayed until at least 2015. Lack of funds, poor locations in terms of raw materials and environmental protection strategies were given as reasons for the postponements. In 2012, Vietnam’s cement plants had a designed capacity of about 70 million t, while demand was 56 million t, including 8 million t for export.

Cement market: Myanmar

Economic growth in Myanmar is predicted to rise gradually to 6.5% this year and 6.7% in 2014, according to the Asian Development Bank. Improved economic reforms have set off a surge of interest from foreign investors. The country’s cement industry is reported to be booming, although there is a shortfall, mostly at present made up by imports from Thailand. In March, LV Technology (LVT) announced that it had secured two contracts from the Max Manufacturing Group, to upgrade and convert two old plants (Max 1 and Max 2) from wet to dry process. The production capacity will be raised from 500 tpd to 2100 tpd at each plant. The Max Manufacturing Group will become the country’s largest cement producer by the end of 2014 when modification of the plants has been completed. In January, PT Semen Indonesia, said that it was approaching local partners in Myanmar to create a joint venture with a view to building a new plant by the end of this year.

Cement market: Sri Lanka

Demand for cement in Sri Lanka is currently running at about 4% above last year’s figure, but in the Hambantota area of the country demand has grown by 8%. To meet this demand, Pakistan’s Thatta Cement Company (Pvt) is setting up a cement grinding and bagging plant at Magam Ruhunupura Mahinda Rajapaksa Port. At the same time, arrangements are in hand to recommence operations at the Sri Lanka Cement Corporation’s plant at Kankesanthurai, which was damaged during the war.

Cement market: India

In April, Sinoma International Engineering (Hong Kong) Co. Ltd announced that it had entered the Indian cement market by purchasing a stake (68%) in LNV Technology Pvt Ltd. With this venture, LNV Technology expects to be the leading supplier of cement equipment in India within the next five years.

Cement market: China

Recent reports from the National Bureau of Statistics in China claim that cement output in the country reached 417 million t in the first quarter of 2013, a rise of 8.2% y/y. China’s Ministry of Industry and Information Technology announced that 73.5 million t of obsolete cement production capacity will be eliminated in 2013. Analysts suggest that cement demand this year will grow at 6 – 7%.

Written by Paul Maxwell-Cook. This is an abridged version of the full article, which appeared in the July 2013 issue of World Cement. Subscribers can view the full article by logging in.

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