Ecuador's cement sector has to deliver

Ecuador's cement sector has to deliver
22 April 2016

Ecuador has been in the news for all the wrong reasons following the devastating 7.8-magnitude earthquake which hit the South American country last Saturday. With more than 570 people known to have died and 25,000 people in temporary shelter, the country is expected to take years to rebuild the homes, bridges and roads destroyed by the quake, President Rafael Correa said on Wednesday. The estimated funds required for the rebuilding work amounts to US$3bn and the President has already announced that there will be a one-off tax on millionaires and a day's pay for anyone earning more than US$1000 a month and for those earning more than US$2000 a month a contribution of two day's pay etc.
It is the cement industry that will be at the forefront of any rebuilding strategy going forward, and only last week, Cementera Chimborazo, part of Unión Cementera Nacional (UCEM group), announced plans to construct a new US$230m clinker line in Riobamba. Sacyr Industrial of Spain will carry out the design, construction and assembly of the 2600tpd clinker line, which is expected to take 30 months to construct.

UCEM also owns the Azogues plant and currently has a total cement capacity of 1.45Mta. It has major backing from Cementos Yura, owned by Peru’s Gloria Group, which holds 63.5 per cent of the shares in UCEM. UCEM itself is an amalgamation of ex-state enterprises, Cementos Chimborazo and Cementos Guspán.

Cement demand slides
Last year the country saw construction growth more than halve and cement demand fall for the third year in a row, due to the slowdown in Ecuador’s infrastructure programme as the country faced a widening budget deficit, triggered by the sustained low oil price. The Instituto Ecuatoriano del Cemento y del Hormigón (Inecyc) reports that in 2015 Ecuador achieved cement sales of 5.84Mt. In the 1Q16 cement sales continued to fall by 19.7 per cent, to 1.14Mt compared to 1.42Mt in 1Q15. This year’s March sales were down 20.8 per cent at 399,954t compared to 504,682t in March 2015.

Activity in the cement industry
In spite of weakening demand, Ecuador remains reliant on clinker imports, and the country’s industry is uprating its existing capacity.

In addition to the new Riobamba project, Holcim Ecuador SA recently modernised its Guayaquil plant, backed by a US$125m loan from the CAF Development Bank. The project will increase clinker capacity at the plant by 1.4Mta to 3.4Mta, and eliminate the company’s need to import costly clinker to its grinding station at Latacungo (Cotopaxi province).

Hormicreto Cia Ltd also invested in new capacity, with a new grinding mill put into operation last October to replace its two aging ball mills. The new grinding station has a Gebr Pfeiffer MPS 2500 BC swing mill and SLS 2250 BC classifier.

The domestic industry is still adjusting following Lafarge’s divestment of its cement operations for US$533m last summer to Union Andina de Cementos SAA (UNACEM) of Peru. The 1.4Mta integrated Otavalo cement plant in the north is now under UNACEM's ownership and will increase competition in the sector, which together with the new capacity improvements will be good news for consumers and rebuilding efforts in the years ahead.

Published under Cement News

Tagged Under: Ecuador Weekly Newsletter