This is an abridged version of the full article, which appeared in the February 2013 issue of World Cement. Subscribers can view the full article by logging in.
This article will focus on the mid-sized and small producers of cement in the Southeast Asian region such as the Philippines, Myanmar, Singapore, Hong Kong, Laos and Cambodia. According to the latest 2012 – 13 GDP growth projections by IMF, each should witness moderate to strong growth. With these countries experiencing strong domestic demand due to large-scale infrastructure projects such as airports, intercity roads, bridges and hydropower projects, they are facing the conundrum of whether to attempt to become self-sufficient in terms of cement demand or be reliant on imports.
Cement demand in the Philippines was 16 million t in 2011 and grew by 20% in the first half of 2012. The Philippines depends mostly on domestic production, which stood at 15.6 million t in 2011, to serve its cement demand. The country has a production capacity of 26 million tpa. Three firms, Cemex, Lafarge and Holcim, control 86% of domestic production. Such market concentration results in a higher ability to control prices. Holcim and Cemex have also announced investments of US$350 – 450 million for a 2 million tpa greenfield expansion project and US$65 million for a 1.5 million tpa brownfield expansion project, respectively, to expand their capacities. The price of cement in the Philippines is among the highest in Southeast Asia.
The country has followed a policy of zero tariffs on imported cement since 2009, an act which has stabilised cement prices, if not decreased them. High domestic logistical costs and the extra handling costs associated with importing bagged cement have deterred the imports of cement from neighbouring countries, even though the tariff is zero.
With a current overcapacity of 10 million tpa and geographically driven high logistics costs, the Philippines will continue to see consistently high prices in spite of the predicted medium-term demand increases.
The demand for cement in Myanmar was 6 million t in 2011 and growth of 10 – 12% is expected in 2012. Myanmar’s political and economic situation has improved considerably over the past year and the country’s GDP is forecast to grow at 6.2% in 2012 – 13. The demand for cement is driven by construction of international expressways for enhanced connectivity with neighbouring countries, a large-scale seaport south of Yangon and a hydroelectric dam in Shan state. The country is planning to spend US$10.9 billion on 24 road and bridge projects.
Myanmar has 14 cement plants, with a combined production capacity of 3.5 million tpa. Since the domestic demand exceeds the capacity, the country imports cement from Indonesia, Thailand and India. The domestic industry, which includes several government, semi-government and private players, is fragmented and there is considerable scope for operational improvement with the arrival of multinationals.
With the benefit of indigenous raw materials for cement production, Myanmar is moving more towards self-sufficiency. Over the next few years, with relaxation of foreign investment policies, more foreign firms will set up cement plants in the country and will reduce the current cement import level of approximately 2 million tpa.
The demand for cement in Laos was 2 million t in 2011 and the expected growth is 20%. An increase in construction projects such as hydropower projects and high-speed rail links, as well as greater investment in the real estate sector, has boosted the demand for cement in the country.
With domestic production of 1.5 million tpa from its six cement plants, Laos is dependent on imports to meet its growing demand for cement. It imports 0.5 million tpa of cement from China, Thailand and Vietnam. Laos Cement Industry Company currently supplies half of the total domestic production and has plans to double its current capacity of 1 million tpa.
Laos puts 5 – 8% tariff duties on imported cement; areas located far from the plants prefer to import cement from neighbouring countries because of domestic logistics constraints. With the likely inter-ASEAN and Chinese tariff elimination of the CMLV countries (Cambodia, Myanmar, Laos and Vietnam) in 2015, Laos cement would face strong competition from imported cement as imported products are much cheaper and of higher quality.
The demand for cement in Singapore was 5.5 million t in 2011 and the expected cement consumption in 2012 is 5.8 million t. Demand is expected to increase at 5% over the next few years. Almost all of Singapore’s cement demand is met through imports, with 50% of cement imported from Japan. Of the total imports, OPC comprises 80% and slag cement 20%. With three cement terminals for unloading under construction, zero trade tariffs and excellent logistics infrastructure, Singapore is likely to continue operating as a trade hub, importing cement from neighbouring countries to meet its domestic consumption.
The demand for cement in Hong Kong has remained between 2.8 – 3 million tpa over the past few years and the expected annual growth is approximately 5%. In its 2012 – 13 budget, the Hong Kong government has projected that total public spending on infrastructure will go up by 7.4% to HK$62 billion (US$7.9 billion) for the fiscal year ending 31 March 2013.
Hong Kong has only one integrated cement plant, owned by Green Island Cement, with a grinding capacity of 2.5 million tpa and clinker production capacity of 1.5 million tpa. The plant has the major disadvantage of needing to import all of its raw materials from Japan and the Philippines. To meet its excess demand over domestic supply, Hong Kong imports cement from China.
With excellent domestic infrastructure, lack of input raw materials for cement production, and zero tariff and VAT rates, Hong Kong is poised to depend on imports to meet its cement demand over the medium-term.
Cement demand in Cambodia was 2.5 million t in 2010 and is expected to grow at 10% over the next few years. As per IMF predictions, the country is expected to be one of the fastest growing developing economies in the Asia Pacific region.
Cambodia is dependent on imports to meet its excess demand over its domestic production. Thailand’s Siam Cement has its cement production facility in Cambodia and it produced 1 million t in 2010. The company has future plans to expand capacity to achieve total production of 2 million tpa. To fulfill its overall demand of 2.5 million tpa, Cambodia imports cement from Thailand, Laos and Vietnam.
Among the six countries evaluated above, the Philippines and Myanmar will primarily focus on domestic capacity expansion for meeting cement demand. Laos, Singapore, Hong Kong and Cambodia will continue to depend on imports for a variety of reasons, ranging from lack of raw materials to poor domestic infrastructure. Emerging capacity expansion and trade trends in these countries will also impact some of the big trading nations in the region such as China, Thailand and Vietnam. Cement manufacturers would benefit from incorporating these emerging trends into their country and regional expansion plans.
- Cement Manufacturer’s Association of Philippines, www.cemap.org.ph
- LV Technology Public Company Limited
- Asian Development Bank
- National Portal of Laos
- Cement and Concrete Association of Singapore
- IMF World Economy Outlook, October 2012 Update
- Bangkok Post, http://www.bangkokpost.com/
- Asia News Network, www.asianewsnet.net
- China Daily, www.chinadaily.com
- CemNet, www.cemnet.com
- Azom, www.azom.com
- Cement China, www.cementchina.net
- Lao Voices, www.laovoices.com
- Manila Bulletin, www.mb.com.ph
Written by Anuj Gupta and Peter Hopper, Strategic Decisions Group. This is an abridged version of the full article, which appeared in the February 2013 issue of World Cement. Subscribers can view the full article by logging in.
Read the article online at: https://www.worldcement.com/asia-pacific-rim/31012013/cement_southeast_asia_philippines_myanmar_laos_cambodia_02131/