Cement imports into the South African market are accelerating. This is as local producers scurry to finalise applications to the International Trade Administration Commission (Itac) for the imposition of tariff protection, and to the Department of Trade and Industry (dti) for the designation of cement.
The designation of cement will make it mandatory for local cement to be used in all government contracts.
David Metelerkamp, a senior economist at construction market intelligence firm Industry Insight, says cement imports during the first 11 months of last year increased 7.6% year on year to 971 623 tons after having escalated 84% year on year in 2018.
The volume of imports has remained at a very elevated level and is even higher than the surge seen in 2018, he says, while the currency has remained relatively unchanged.
Countries of origin
Metelerkamp says imports of cement clinker increased by 137% in the first 11 months of last year to 210 485 tons. The origin of these imports has changed from mainly Vietnam in 2017 to the United Arab Emirates and Saudi Arabia in 2018 and 2019.
He adds that cement producers in Pakistan reported a 22% year on year increase in export volumes during the second half of 2019 to 4.38 million tons compared with an increase of just 3.5% in domestic consumption.
Metelerkamp says there was a notable increase towards the end of last year in the number of proposals for the construction of new cement plants in Pakistan.
“After being hit by tariffs imposed by South Africa on Pakistan cement imports, Pakistan exported 40 000 tons to South Africa in October 2019 [first time since May 2019] and a total of just over 80 000 tons in 2019 compared to a total of 201 680 tons in 2018.
“A total of 34 million tons was exported from Vietnam during 2019, representing an increase of 6.3% year on year.
“Vietnam is currently the largest threat to local cement producers,” says Metelerkamp.
It is responsible for over 70% of total imports into South Africa, with a total of 687 284 tons imported into the country up to November 2019, he adds.
Sub-Saharan Africa demand to grow
Despite the threat from imports, Industry Insight reports that World Cement Association chief executive Ian Riley expects the cement industry in sub-Saharan Africa to grow faster than any other region over the next 30 years.
Morag Evans, chief executive of Databuild, a knowledge hub for construction and related industries, says local cement manufacturers are being severely undermined by cheap imports from countries such as China, Vietnam and Pakistan.
Evans adds that government’s failure to stem the influx of these products could have a severe detrimental impact on an already struggling industry.
“In an industry already in the grips of a severe downturn owing to the decline in infrastructure development, not only are these imports negatively impacting the competitiveness of our local manufacturers, but independent studies have shown the quality of these international products to be inferior,” she says.
Evans adds that allowing sub-standard products to be released into the market is unacceptable because the long-term health, safety and environmental implications could be severe.
She says government should urgently consider imposing stricter cement standards while cement producers need to continue educating users on the importance of using cement that has been certified as compliant with technical regulations.
Threat to the economy
“At a time when South Africa’s unemployment rate is at an all-time high, the nation cannot afford the downfall of an industry that is indispensable to our economic development and which provides employment to thousands of South Africans,” she says.
“Government needs to level the playing field for our local cement producers so that they can focus their efforts on expansion rather than struggling to survive.”
South Africa’s cement industry, represented by The Concrete Institute (TCI), has applied to Itac for tariff protection and for the designation of cement.
TCI MD Bryan Perrie says the institute submitted an application to Itac, but it came back with a deficiency letter stating that more information was required.
Perrie, who was speaking on Monday, says TCI is now in the process of obtaining all the additional information requested by Itac and expects to submit it in the next week or so.
Perrie says his understanding of the process is that if Itac believes there is merit in the tariff protection application, it will then decide to conduct an investigation during which it will consult widely with government, the industry and unions.
He says Itac will obviously also check that any tariff protection imposed will not be against World Trade Organisation (WTO) rules and South Africa’s bilateral agreements with other countries.
“They will then take a decision, which can take quite a long time,” he adds.
TCI reported last year that imported cement was undercutting the industry by up to 45%.
Perrie says TCI also submitted information to the dti for the designation of cement and the department requested a lot of additional information, which has now been provided.
He says TCI will follow up with the dti in the next few weeks on the progress of the designation application.
The law of unintended consequences …
Evans says TCI’s petition to government to impose import tariffs on cement imports could go a long way toward protecting local manufacturers from cheap imports.
However, the risk of such a move is that it could lead to an upsurge in the price of cement and ultimately increase inflation, which will not bode well for the country’s economic growth.