Chinese economy blamed for cement trade problems

Chinese economy blamed for cement trade problems
Published: 02 February 2004

China’s booming economy is claimed as responsible for the loss of 2Mt of Thai cement exports this year. It’s not the stronger baht, the artificially low Chinese yuan or the Chinese competing with Thai producers in cement. "China’s high growth has drawn in most ships and pushed up regional freight rates," said Chantana Sukumanont, senior vice president of Siam City Cement Plc, Thailand’s second largest cement producer. "The freight costs have doubled during the past few months, and the situation is expected to continue next year. There are no Panamax-size ships coming here as all now go to China," she said.

As a result SCCC projects cement exports will fall from 12.1Mt last year to 10Mt in 2004, a 17 per cent decrease. It would be the second consecutive year of cement export reduction after record amounts of 16.6Mt in 2002 and 2003.

Domestic demand, meanwhile, is expected to grow by 10 per cent this year to total 25.9Mt. Last year Thailand cement consumption increased by only 6 per cent due to the "false" growth recorded in 2002 of 21 per cent as buyers stocked up on cement during price wars, she said. Hence excess capacity of cement in Thailand is expected to stay at a high level at about 18.1Mt this year. Thailand’s total cement capacity is 54Mt. The average utilisation rate of cement plants will not change much from last year’s 68 per cent.

Given the excess capacity figures, Chantana questioned the merits of a plan by the third biggest producer, TPI Polene, to revive its fourth cement-plant project.  TPIPL has announced its intention to use funds raised from its recent public offering to increase its cement output by three million tonnes to 11.9Mt, getting closer to SCCC, which has a 14.5Mt capacity.. Thailand’s largest producer, Siam Cement, has a capacity of 23.2Mt.