Universal Cement mulls allying with Taiwan Cement to tap Mainland China market

Universal Cement mulls allying with Taiwan Cement to tap Mainland China market
Published: 06 November 2007

Universal Cement Corp., one of Taiwan’s listed cement firms, has recently resolved to speed up investments in mainland China. The company currently has a production base in Longmen of Huizhou of Guangdong Province.  
 
It is expected the Huizhou Development Zone will demand 12 million metric tons of cement in the five years to come.  
 
Universal president Lee Kuo-tung said his company is now building a second kiln in the Longmen plant which is expected to be completed in 2010. With the addition of the second kiln, the company will see the plant boast an annual production capacity of three million metric tons of cement.  
 
Universal Cement said it would seek a strategic alliance with  Taiwan Cement Corp.’s Yingde plant in a bid to tap downstream ready mixed concrete industry.  
 
Lee noted the demand for cement has been increasing in the Huizhou Development Zone over the past several years. The zone demanded only four million metric tons of cement in the past two years and the amount will be expected to grow to six million metric tons this year. The annual demand will jump to 12 million metric tons in the next five years, almost close to Taiwan’s annual domestic demand.  
 
Lee said the Huizhou plant will have an annual production capacity of three million metric tons of cement in 2010 after the completion of the second kiln, triple that of Universal’s parent plant in Taiwan. With the addition of the second kiln, the Huizhou plant will reach economy of scale, allowing it to reduce production costs.  
 
Thanks to booming demand, the prices for cement in the Guangdong province have been on the rise over the past several months. For instance, the quoting price for the P.042.5-type cement has jumped 27% to RMB355 (US$47.33) per metric ton at the end of October from RMB280 (US$8.64) quoted in the beginning of this year. It is expected the cement price will continue to rise till the end of this year if demand doesn’t wane.  
 
Lee predicted his company would turn profitable in 2008. He said the Huizhou area will see production capacity decrease by 4.2Mt in the next three years because of mainland authority’s endeavor to slash production of inferior-quality cement, prompting Universal to speed up production of high-quality cement in the mainland.  
 
In addition to the increase in cement production, Universal said it would invest US$12m to set up five ready-mixed concrete plants in Huizhou. The company estimated its total annual production capacity of ready-mixed concrete in Huizhou will amount to two million cubic meters in 2010.