In another vote of confidence underscoring the bullish forecast for economic growth, Lafarge yesterday became the third of SA’s four large cement makers to announce a major expansion. Lafarge said in a statement that it would add about 1Mt of annual capacity to its Lichtenburg works at a cost estimated at more than R1bn.
Barloworld subsidiary PPC Cement announced last week that it would build a new kiln to expand capacity by about 1-million tons at a cost of R1,36bn. Natal Portland Cement has already started a project to add 600,000t of product a year at a cost of about R700m.
Record sales over the past year, and expectations of growth in fixed investment over the next few years are driving the cement industry’s expansion phase.
Lafarge said the investment would allow it to maintain its market position. The project would raise Lafarge’s capacity of about 2.5Mt in SA by about 40 per cent, while PPC’s programme would increase its current 6Mta capacity by about 17 per cent. Both programmes were scheduled for completion in 2008.
Lafarge did not disclose the cost of the project in North West province. One construction analyst said a project of this magnitude would cost no less than R1bn, and was likely to be closer to R1,4bn.
Lafarge, like PPC, is taking interim steps to expand capacity to keep pace with cement sales which has been growing considerably faster than expected over the past year. Lafarge said it had commissioned a R120m project to increase grinding capacity at Lichtenburg by 30 per cent. The project would be completed next year. The construction analyst said most cement producers were running plants at close to full capacity at about 93 per cent.
PPC said earlier that demand in SA could grow to 16.7Mt in five years from the record 11.7Mt last year on the back of the interest rate-driven building boom in sectors such as retail, leisure and offices. SA’s total current cement capacity is 13Mta.