AfriSam planning plant in Saldanha Bay Vredenburg.September 4, 2012 by: admin
MAJOR South African cement producer AfriSam says notwithstanding the weak state of SA’s construction industry, it is resuming planning for a R2,2bn integrated cement plant in the Saldanha Bay area to meet future demand.
SA’s cement industry, though, is reeling from four years of consecutive declines, and has been hit hard by the ending of large projects related to the Soccer World Cup.
A seriously depressed housing market started its slide in late 2007, and was further battered by the effects of the global downturn.
While SA’s construction and mining industries are major players in the growing southern African region, exporting cement to cross-border projects is costly.
And demand for cement in SA is a paltry 11-million to 12-million tons a year out of installed capacity of between 16-million and 17,5-million tons, including some imports.
But on Friday, the self-professed leading black-controlled construction materials group in southern Africa – with operations in SA, Botswana, Lesotho, Namibia and Swaziland – said that it wants to take advantage of its large limestone deposit near Saldanha, and improve market penetration in the Western Cape. “With continued population growth and the need for housing and infrastructure, there are indications that the local market will benefit from the presence of an additional cement supplier,” a press release quoted CEO Stephan Olivier as saying last week.
However, AfriSam also says the proximity of Saldanha’s deep water port will facilitate exports, and that means it can scale up the plant to achieve the environmental and production efficiency associated with large-scale international plants.
But the company was coy , saying it is too early to discuss export volumes, customers and destinations.
“We are seeking approval (to build the plant) by means of an environmental impact assessment, and sometimes these things take years and sometimes they never come (about),” Mr Olivier told Business Day yesterday .
Other cement producers are bemused by the news, especially because AfriSam intends to construct its new plant in a province that has seen building and construction demand fall 50% since its zenith in mid-2007.
And Pretoria Portland Cement (PPC), under the leadership of CEO Paul Stuiver, is already adding about 500000 tons a year to its existing 1,4-million tons annual capacity near Cape Town, spending about R3bn over the next six years. “What on earth for?” says Anton Weavind, CEO of Continental Cement (Conticem).
“Capacity demand in the Western Cape is 600000 tons a year, and PPC is already augmenting supply. (That demand) is insufficient to absorb PPC’s future output..”
Conticem is part of a Chinese- backed cement syndicate, led by the Jidong Development Group and the China-Africa Development Fund, which, along with another new entrant, Nigerian-backed Sephaku Cement, is one of two multibillion- rand empowerment ventures set to add another 5-million tons to SA’s annual cement production.
“I know AfriSam needs to expand, but the worst place they could possible do this is in the Western Cape. There is not much money in exporting cement,” Mr Weavind says. He says that once cement is transported beyond a distance of about 200km, the profit becomes marginal.
With annual cement production capacity of 4,6-million tons, AfriSam runs second to industry stalwart PPC, which can produce about 8-million tons a year.
Along with French group Lafarge and NPC (Cimpor) , these companies are the biggest producers in the southern African region.
According to industry reports, SA’s construction industry is a major player in the Southern African Development Community. Between 2006 and 2009, about $128bn was spent on infrastructure in the region, including equipment and services associated with power generation.
Sephaku Cement’s Nigerian backer, the Dangote Group, says it will invest $3,9bn in cement plants across Africa, including in Ethiopia, Tanzania, the Republic of the Congo and Zambia, as part of its vision of a continent that is self-sufficient in cement production.
AfriSam says the proposed Saldanha project will commence with the expansion of its nearby limestone quarry, and construction of a cement milling and packing plant at a cost of about R600m. Ultimately, a fully fledged cement manufacturing plant will be built alongside at a further cost of about R1,6bn.
By 2009, SA’s rapidly growing demand for cement put pressure on supply, and this resulted in all players increasing production capacity.
And although the market has since plummeted, it takes at least 30- months to build a cement plant.
So planned new production will more than likely be absorbed by new demand in coming years.
“The market (nationally) has bottomed out. By the end of next year we will be back with shortages,” Mr Weavind says.
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