Monday, January 24

Cement imports soar by 51% in the first eight months of 2021


Cement imports increased by 51% to 749,671 tonnes with a free on board (FOB) value of R445 million in the first eight months of this year compared to the same period in 2020, but it was then that the blockade restrictions of Covid-19 hampered imports.

However, cement imports during this eight-month period were also 3% higher than for the same pre-Covid period in 2019.

Elsie Snyman, CEO of the construction market intelligence firm Industry Insight, said that 1256984 tonnes of cement were imported into South Africa in the past 12 months and that imports are well on track to peak in early 2015, when more than 1.4 million tons were imported. during the 12-month period through February 2015.

However, Snyman said the cement designation, which prohibits the use of imported cement in public sector projects, will have a major impact on suppliers of imported cement.

Read: The Treasury bans the use of imported cement in all government-funded projects

The National Treasury has banned the use of imported cement in all government-funded projects as of November 4, 2021.

‘Great victory’

Snyman said the ban is seen as a huge victory for local cement producers, as the new rule requires all invitations to tender to use locally produced cement from locally sourced raw materials.

“With more than one million tonnes of cement imported each year and 330,000 tonnes of clinker, local cement producers hope to increase sales volumes and improve profitability in the industry, improve capacity utilization and protect job sites. job.

“The announcement supported investor sentiment, with PPC and Sephaku Cement share prices increasing between 20% and 40%,” Snyman said.

“This added a total of R2.26 billion to the market capitalization values ​​of the two cement producers. While imported cement can still be used in private construction projects, these are not public sector funded projects, ”he said.

Infrastructure boost

The designation of cement produced in South Africa has grown in importance due to the massive investment plan in infrastructure planned by the government.

In July 2020, the government unveiled 50 Strategic Infrastructure Projects (SIP) and 12 special projects, involving a total investment of R340 billion, as the first tranche of a massive infrastructure spending program to boost the effort of economic recovery after Covid-19.

Earlier this month, the government unveiled the second tranche of projects, comprising a portfolio of 55 new catalytic infrastructure projects from various sectors valued at approximately R595 billion.

Read:

First recovery infrastructure projects published after a pandemic
The government presents a portfolio of R595bn of new infrastructure projects

JSE-listed Sephaku Holdings, whose portfolio of construction and construction materials assets comprises subsidiary Métier Mixed Concrete and associate Dangote Cement South Africa (SepCem), said this month that the Infrastructure Fund had reported that it had submitted four projects. , collectively valued at R21 billion, for National Treasury Approval and will contribute R5.4 billion through financing from public and private resources.

He said that these projects have allegedly been approved by Infrastructure South Africa, which is tasked with overseeing the government’s infrastructure investment plan, and that the Infrastructure Fund is apparently finalizing four projects worth roughly R85 billion for presentation at 2022.

Bryan Perrie, CEO of Cement & Concrete SA (CCSA), told Moneyweb earlier this month that the cement designation will help protect the local cement industry from unfair competition.

Exposure of importers to the public sector

Snyman said a The Industry Insight survey indicated that more than 80% of the supplied cement was used in public sector contracts, “suggesting that this ban on imported materials will have a significant impact on suppliers of imported materials.”

He said Cemza, a joint venture between South African company Osho Cement and Germany-based Heidelberg Cement, which makes cement using imported clinker, is also affected by the ban because it includes the use of raw materials.

“Their exposure, according to the results of our survey, shows about 45% to public sector contracts,” he said.

Snyman added that while the ban on imported cement is justified, the ban on the use of imported raw materials is perhaps a bit more questionable because this is common practice for many other local manufacturers in other sectors, including steel.

It said imported cement, including cement supplied by Cemza, contributed about 3% domestically to public sector infrastructure projects based on Industry Insight survey results, with the largest contribution in the Northern Cape at 11%. .

Source: Industry Insight

He said imports were largely sourced from Pakistan, but that since then Vietnam has been in the spotlight because it is now responsible for the majority of cement imports into the country, while no cement imports from China were recorded in the countries. first eight months of the year.

Importers of imported cement face new threats because the International Trade Administration Commission (Itac) in December 2020 accepted a Cement industry request for sunset review of import tariffs on Pakistani cement five years ago.

The cement industry also continues to wait for Itac to finish a Application first filed in August 2019 for “safeguard measures” against cheap cement imports, particularly from countries such as China and Vietnam.

Price, investment concerns

Snyman said pricing concerns have already arisen because some feel that a ban on imported cement may support further price increases by local producers, as localization tends to drive up costs while at the same time discouraging sales. investment.

This will reduce the funds available for infrastructure and increase construction costs, he said.

“It must also be taken into account that this government announcement could have a negative impact not only on the sector directly affected. [namely cement]But investments in other manufacturing sectors, where investors may fear a similar reprimand from the government in the future.

“However, local cement producers invest billions in the South African economy, providing thousands of job opportunities and, as a sector, it must be protected, without discouraging much-needed foreign direct investment or unintended consequences such as price spikes. “, said.

Data from Statistics SA reveals that cement prices increased by a average of 11.5% in 2019, slowing to a average of less than 2% in 2020, as the sector was heavily affected by the Covid-19 pandemic, and has increased by a 6.9% average in the first eight months of this year.


www.moneyweb.co.za

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