Cement Australia warns price wars will hurt the industry

Cement Australia warns price wars will hurt the industry
Published: 29 August 2007

A decision by Wagner Group to build a $125m cement-grinding plant at Pinkenba in Brisbane’s outer northeast, has the potential to badly destabilise the market, in the view of Queensland’s biggest cement maker.

The Toowoomba-based diversified concrete and quarrying company plans an annual capacity of some 530,000t and it has scheduled a second-hand plant – which industry sources suggest it has secured from Germany – to be operating "in the second half of next year".

But Cement Australia chief executive Chris Leon said this week his organisation would have a new 1Mta plant up and running in Gladstone by the fourth quarter next year.

Sunstate, which already has a 500,000tpa plant at Gibson Island, all but opposite Wagners’ riverside land, has also announced that it is adding 500,000t of capacity.

Mr Leon says Cement Australia "found a slot in the manufacturer’s schedule" and that means its new mill will be up by the fourth quarter of next year – ahead of Wagners’, he believes.

If all the plans go ahead together, they will double southeast Queensland supply, something Mr Leon fears could seriously disrupt the market.

He says Cement Australia is "amazed at the growth" in the local market – but denies there is any serious shortfall.

"We are constantly refreshing our forecasts of demand and are just amazed at how well the market’s going, at how well it’s holding up," he says.

He says Wagners is "a formidable competitor and a good customer of ours" – buying most of the cement for its concrete operation from Cement Australia.

"We are happy to compete with whoever is in the market," he says. "But what is scary about it is that a capacity overhang will start to affect pricing.

Wagners’ plant – which director Denis Wagner says it can underwrite through its own concrete business – is part of a push to significantly expand its footprint in the southeast, as the state gears up for an $80bn, 20-year infrastructure program.

Already the southeast’s biggest independent concrete supplier, Wagners is looking at significantly expanding its quarrying and concrete plant capacity in the Brisbane-Gold Coast corridor.

Wagners has major concrete plants at Toowoomba, in the Brisbane suburbs of Everton Park and Wacol and in Townsville and Darwin. And it has a string of regional plants across Queensland.

It also has approval for a new major plant at Murarrie in Brisbane’s outer east and has identified a number of other sites in the Sunshine Coast-Gold Coast corridor.

At the same time, the group, whose major Brisbane quarry has been at Keperra, in the city’s outer northwest, is looking at new quarrying operations at Ormeau, south of Brisbane and at Narangba to the north.

Applications for planning approval are understood to have been lodged for these sites.

Wagners also has its Wellcamp Downs quarrying operation outside Toowoomba, which insiders say can go on "forever" and where it is testing a major new materials handling conveyor system, fabricated as a demonstration of the expertise of another Wagner arm, its composite materials operation.