Friday, 13 May 2016

CEMENT FIRMS FACE CLOSURE

LOCAL cement producers have warned of possible scaling down of operations and closures owing to an influx of cheap imported products from the region, saying protectionist measures could save the industry, businessdigest can report.



 Zimbabwe has become an attractive market for cement as well as other imports as regional currencies depreciate against the United States dollar. The country adopted the multi-currency system currently dominated by the greenback in 2009 following record hyperinflation.

According to a position paper presented to the ministry of Industry and Commerce by the Cement and Concrete Institute of Zimbabwe, cement manufacturers are lobbying government to ban imported cement, among other interventions, saying the market is currently oversupplied. Industry players say this could paralyse the domestic industry.

Among some of the measures that industry is pushing for are a protection tariff to equate the landed price of imported cement to the cost of local manufactures (US$50/t cement), granting of import licences to local producers, cancellation or review of all issued permits that are circulating in the country (estimated at 5000 tonnes/month or 5% total demand) and lowering duty on raw materials.
The granting of import permits comes at a time the region is in oversupply of the commodity. A surplus of 8MT in the region against an installed capacity of 24,8MT has resulted in some countries exporting to Zimbabwe. Countries exporting cement to Zimbabwe include South Africa, Mozambique, Zambia and Botswana.

The country’s main producers — Lafarge, PPC and Sino Cement — currently have installed capacity of 1,85 metric tonnes (MT) against demand of 1,17 in 2016. Cement market registered a growth of 3%.

The local cement producers fear the influx of cheap imports into the market could weigh down on their plans to recoup their investments.

Official figures show that all three players invested nearly US$185 million in the last five years in kiln upgrades, packing, grinding and other cement processes in order to improve efficiency to the existing equipment and reduce cost of manufacturing.

Sino has finished a significant upgrade at a cost of US$4 million, making a total of US$15 million in the last five years.

PPC has on its part invested US$53 million on kiln and mill upgrades and quarry otimisation at its two existing operations and is setting up a new grinding plant at a cost of US$80 million. Lafarge invested US$37 million over the last five years in quarry rehabilitation and equipment, cooler upgrade and systems automation.

“The direct cement import threat to Zimbabwe is estimated at about three million metric tonnes which is within an economically viable distance to the market. For example, Mozambique’s capacity is 1,6 MT but the country receives around 500 000 of imports given its vast coastline placing pressure on the existing players to offload their products in Malawi and Zimbabwe,” reads the paper in part.

“The local industry cannot compete with imports leading to potential closure of business. Local prices and sales have been negatively impacted by the cheap imported cement leading to operating losses for local industry.”

Industry and Commerce minister Mike Bimha said government had removed cement together with other products from the general import licence to protect domestic industry.

“Our policy is to ensure that local industries continue to be operational and create employment. So we have removed products such as cement, sugar and cooking oil from the general import licence to ensure that this happens,” Bimha said.

“We can only grant import licences when we are satisfied that there is a gap between supply and demand. But before douing that we seek to establish why there is that gap. We may thus assist the companies in procuring raw materials so that they produce and meet that demand.” independent

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