Cement exports on the rise

Cement exports on the rise
15 April 2016

As global cement capacity continues to rise against a limited demand increase, there is a swell of cement producers chasing ever-smaller export markets across the globe. News this week that Saudi Arabia has lifted its ban on exports will increase pressure on prices in the Middle East region.

The Saudi Arabian export ban had been in place since 2012 when it was renewed from an earlier 2008 period of export control. While lifting of the ban provides a good opportunity for Saudi producers to shift some of their clinker mountain, which now stands at around 21Mt, growing cement surpluses are increasingly evident, placing pressure on utilisation rates and prices.

Finding markets further afield
For Saudi producers that are looking further afield to Africa, they may find their export potential limited. The emergence of large-scale capacity increases - led by Dangote Cement, which is fast becoming a dominant player to rival HeidelbergCement, LafargeHolcim and PPC in Africa - has seen incumbents lose market share and suffer price erosion. Dangote now aims to have at least 74Mta of cement capacity in Africa by mid-2019. However, such competition is welcomed in some African countries, such as Malawi, where the hope is that imports will lower prices.

Meanwhile, barriers to imports are on the rise: Lucky Cement (Pakistan) has decided to drop its South African court challenge regarding the imposition of anti-dumping duties by the International Trade Administration Commission (Itac) on Portland cement imports originating from Pakistan.
China may not be able to resist great exports

The slowdown in China too is likely to see a change in the relatively static export situation that we have seen between 2009-15 when the world's largest cement-producing country exported modest annual volumes of between 9-16Mta. Last year China exported 15.8Mta of clinker and cement, according to Deutsche Bank.

Anhui Conch has already announced that it aims to export 1Mt of cement each month from its eastern China facilities in 2016. The company exported 70-80 per cent of China's cement and clinker exports in 2015 and intends to increase its exports by 50 per cent in 2016, claims Deutsche Bank. At present only three per cent of Anhui Conch's 159.2Mta sales volume is for exports and overseas markets.

Where can exporters get a good return?
The drive for cement and clinker exports is encouraged by the high availability of cement carriers, which is pushing charter prices down. The Baltic Dry Index (BDI) has seen rates fall from more than US$11,000/t in 2008 to US$597/t on 14 April 2016, reflecting the surplus of Cape, Panamax, Supramax vessels on the market.

One market offering good export potential at present is the USA. According to the PCA, import levels increased 20 per cent in 2015, or by 1.7Mt. Import gains are expected to continue in the context of a strong dollar and low dry bulk freight rates.

The world's second-largest cement market, India, is less attractive in terms of export opportunities as only 1Mta of cement and clinker is currently imported (India itself exports 5Mta). Apart from a positive cement trade balance, brands also play a strong part in cement sales, which are around 90 per cent bagged. In addition, the physical infrastructure of the ports are largely owned by the incumbents and the economic viability of transporting cement inland more than 100km from the coast makes it hard to reach the major growing urban centres. However, this is not deterring China to start building capacity within India.

A forthcoming article in International Cement Review’s May issue reveals that the Mediterranean region has significant cement and clinker trade with many ports already seeing seaboard cement trade in excess of 1Mta, while overall cement and clinker exports reached 10.46Mt last year. Clinker exports increased by 7.15 per cent YoY. The big players are Turkey and Spain, while Morocco's is growing its export volumes, particularly to west Africa.

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