SCC Asean expansion on track

SCC Asean expansion on track
18 November 2015

Thailand's largest cement producer Siam Cement Co (SCC) said it is on course to bring 6.3Mta of new cement capacity online in its key target markets of Cambodia, Indonesia, Myanmar and Laos between 2015-17.

In an update on its strategy for its cement & building materials unit, reported on by SCB Securities in The Nation (Thailand), SCC said the investment programme is expected to not only provide SCC with high demand growth and a good margins but also offer a borderless network, lower logistics costs and enhanced operational flexibility, according to the company.

SCC targets EBITDA margin from its new Asean plants to be close to local cement margins in Thailand. With a fragmented cement market in Vietnam (market leaders account for 34 per cent of market share), the company is looking for an investment opportunity via M&A.

Thai operations
Thailand's cement supply will increase by 4Mt to 60Mta following the completion of TPI Polene's new line later this year. SCC does not expect a severe impact on the industry from the addition since the entire industry is running at its highest ever utilisation rate of 85-90 per cent. Moreover, the amount is very small against the local sales of 40Mtand exports of 10Mt this year, it notes.

SCC expects local cement demand growth to be flat this year but forecasts a long-term demand growth of five per cent per annum to 55Mt in 2020 from 40Mt in 2014. Based on the span of eight years for the government's THB2trn infrastructure projects, the company estimates direct impact on cement usage at 10-16Mt (1.3-2Mta without/with high-speed railway) with an even larger indirect impact via stimulating private investment.

Asean export potential
Despite the start-up of new cement plants in neighbouring countries, SCC will export to these markets as regional demand is growing rapidly and it will often be simpler and cheaper to ship from Thailand to buyers near the borders. Cement consumption in its main export destinations (Myanmar, Cambodia, and Laos) is expected to grow 7-12 per cent per annum to 26Mt in 2020 from 14Mt in 2014.

Published under Cement News