PPC will import up to 10m bags of cement to cope with demand

PPC will import up to 10m bags of cement to cope with demand
Published: 15 January 2007

Pretoria Portland Cement (PPC) said it would import between 300,000 and 500,000t of bagged cement to alleviate shortages in South Africa, the first time that the cement producer has released figures of the quantities it plans to import this year. 
 
This translates into between 6 million and 10 million bags of cement. 
 
But John Gomersall, PPC’s chief executive, said in the firm’s annual report that the cement producer was not intending to subsidise these imports, meaning cement prices in some regions might have to be “raised slightly” to accommodate continued import supply to keep infrastructural growth on track. 
 
The government will invest more than R400bn in rail, electricity, roads and other infrastructure, including that related to the hosting of the World Cup soccer in 2010, the first in Africa. 
 
Demand for cement in the Southern Africa Customs Union (Sacu) has grown to 14Mta, which, according to Gomersall, was about 1.5Mt higher than the total cement demand in the UK in 2005. Sacu comprises South Africa, Lesotho, Botswana, Namibia, and Swaziland. 
 
“A scenario of a continued 5 per cent annual growth rate from the current market level implies that nearly 700,000tof new national capacity will be required per annum, or the equivalent of one new 1.5Mt production line coming on stream every second year. This additional capacity and modernisation of existing capacity will require significant capital investment over the next 10 years,” Gomersall added. 
 
PPC has taken delivery of the first cement shipments and others are planned for this year, although it is not clear how many bags PPC has received already. Attempts to get this figure drew a blank on Friday as Gomersall was said to be on leave and Orrie Fenn, the chief operating officer, was in a meeting. However, Bloomberg reported this week that PPC imported this cement from China. 
 
Late last year, PPC said it had signed a contract with an unnamed international cement company that would see it import cement bags over the next 12 to 24 months. At the time it did not reveal the exact quantity of cement bags it was intending to import.
 
It said importing cement would complement its current domestic volumes until its 1.25Mta expansion project came on track in 2008. 
 
“Until such time as the new capacity comes on stream for our Batswaledi project and future Western Cape expansion project, the company has implemented plans to import SA Bureau of Standards-approved cement, manufactured to our Surebuild specifications. 
 
“This cement is procured via a major international cement producer with which the company has had a relationship over many years,” Gomersall said in the report. But he said that these imports were sensitive to the rand dollar exchange rate and it was highly unlikely that PPC would make any margin on the imported product. “Our objective is to attempt to keep our customers supplied until the new capacity comes on stream.” 
 
Tony Phillips, the chairman of PPC, said that in an effort to ease pressure on PPC’s local factories, Surebuild was being supplied to the northern and central regions of Botswana by PPC’s Zimbabwe operation. 
 
“Our Zimbabwe operation has proved to be a useful resource in African production. While the investment has yet to realise its potential, we remain committed to … the venture and employees who make up our Zimbabwe team,” Phillips said in the annual report.