Asia Cement eyes benefits from power shortages

Asia Cement eyes benefits from power shortages
Published: 31 May 2011

Asia Cement (China) Holdings Corporation expects its cement sales this year to grow by 23-28 per cent from 2010 as the company looks to benefit from higher prices caused by reduced cement supply due to power shortages on the mainland.

In a media briefing on Monday, Chairman Douglas Tong Hsu said the company expects to sell 24-25Mt of cement in 2011, up from 19.5Mt in 2010.

The bright forecast is in part due to the prediction that cement supply will be tight this year as a result of the phasing out of outdated capacity and power shortages imposed by the central government on cement makers, particularly those in eastern China. Asia Cement sold 4.55Mt of cement in the first three months of the year to March 31.

Cement makers that operate production bases in Zhejiang, Jiangsu and Anhui provinces will thus be the most affected by the government’s power-saving aims.

But for Asia Cement, which has operations in Sichuan, Hubei and Jiangxi provinces, electricity shortages will be less of a problem, according to Hsu.

And tighter supply in eastern China will also mean stronger demand for cement makers such as Asia Cement who operate beyond the region, Hsu said.

Still, the imposed power shortages can buoy prices, he noted.

Felix Lam, an analyst at Daiwa capital markets, is bullish on the cement sector as a whole. "I expect a steady rice in the price of cement (this year)," said Lam. But when it comes to demand, Lam said he is a little bit concerned about the expected slowdown in the construction of mega projects such as high-speed railways.