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Imported cement volumes up a staggering 293%

Year-on-year increase has local producers in a fight for survival.
South Africa’s major cement producers want ‘special designation’ local cement to be used in state infrastructure projects. Image: Moneyweb

Imports of cement into South Africa increased by 293% year-on-year in July – and are 17.5% higher for the first seven months of this year – despite the lack of major infrastructure projects and the severely depressed construction and building environment in the country.

Construction market intelligence firm Industry Insight says cement imports in June were again predominantly from Vietnam with, notably, none from Pakistan during the past two months.

It says 104 099 tons of cement with a customs value of about R72 million was imported into South Africa in July.

This was marginally lower than the 149 522 tons with a customs value of almost R100 million that was imported into the country in June, the highest level of cement imports in one month since February 2015.

A R440m punch in the stomach

Industry Insight says a total of 631 059 tons of cement with a customs value of more than R440 million had been imported into South Africa in the first seven months of this year.

It says this followed an overall 85% increase in cement imports in 2018.

South Africa’s major cement producers, in an initiative driven by The Concrete Institute (TCI), reported last month that they had applied to the International Trade Administration Commission of SA (Itac) for what they refer to as “safeguard action” against cheap cement imports.

A letter was also sent to the Department of Trade and Industry (Dti) to advise the department of their plans to seek approval for “special designation” of South African-produced cement to be used in state infrastructural projects.

‘Puzzling’ aspect

Industry Insight economist David Metelerkamp says the high level of cement imports at a time when the construction environment is so depressed has puzzled him some degree.

Metelerkamp believes Vietnam and Pakistan saw South Africa as an easy target country in which to dump their cement. “Maybe they see the fact that cement prices may be higher in South Africa than the market would expect [as making] it an easy target.”

Metelerkamp says the industry is not calling for a total ban on imports but rather seeking tariffs to safeguard the local industry.

TCI chief executive Bryan Perrie says imported cement is “undercutting” the local industry by up to 45%.

Metelerkamp points out that locally produced cement is subject to additional regulatory requirements, including the newly introduced carbon tax, with escalating energy costs and labour union pressures also adding to production costs.

He says local capacity is also negatively affected by weak consumer demand in line with poor economic growth and a contraction in public sector infrastructure expenditure.

Government intervention on the cards

Njombo Lekula, MD of PPC’s Southern African businesses, says government and Dti are engaging the industry about cement imports but have not yet reached a solution and a further meeting is scheduled.

But Lekula says business and government in South Africa have a big problem in that they are suspicious of one another, to the detriment of the country.

“That needs to change,” he stresses. “We need to be co-creators of this country with the government.”

Lekula says the domestic cement industry is not only dealing with imports but also internal competition from extended products. This overcapacity in the market has the same effect on the industry as imports.

He says that while the domestic industry has an annual production capacity of 18 million tons, demand is languishing at 13 million tons, with the two million tons of imported cement that comes into the country each year adding to the demand deficit.

Mergers likely

Lekula admits that at some point consolidation in the industry in the form of mergers is “a logical thing and will probably have to take place”.

“But all conditions will have to be correct for that to happen,” he adds.

Commenting on extended cement products, Lekula says there are probably 64 different bags of cement available in Gauteng today, more than half of which are extended with ash, which affects quality and pricing.

But Lekula says cement prices are already “rock bottom” and the extended cement products have started to impact the sustainability of the industry.

Lekula says there are four major producers in Gauteng and all of them are “sort of fighting for survival”.

He says that when the costs are broken down and compared to current pricing, the industry “at this point is unfortunately not really sustainable”.

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“But Lekula says business and government in South Africa have a big problem in that they are suspicious of one another, to the detriment of the country.” A socialist government cannot deal with a capitalist economy!!!

Government doesn’t trust anybody!
That’s why it has wrapped the entire economy with BS bureaucracy that continues to be justified by emotional merits. This economic situation, shows us why, business decisions cannot be made when emotional/personal issues are at play.

An eye for an eye…leaves everyone blind!

If it is cheaper to manufacture cement in Vietnam or Pakistan and ship it to SA than manufacturing locally then something is wrong with the local producers.

I had project a few years ago for solar array steel support structures. The Chinese quotes for manufactured delivered to Cape incl freight and insurance was less than local fabricators’ steel cost. The world is riddled with trade distorting subsidies.

Interesting, if the customs value of the 690k tonnes is R440m then powder works out a bit shy of R700/tonne so call it 70c/kg. In bagged form, 50kg retails for bit more than double that. So another 80c/kg for bagging, distribution, wholesale margin and retail margin.

Not always. Our local textile and steel industry broke for similar reasons. Offshore companies either have lower cost of labour, subsidies from gov, or huge surplusses that theyre willing to dump at 0 cost. Examples included computer casings for desktops used to be cheaper imported than the cost of steel to make them. The result lots of local job losses… And the rise of trumponomics and brexits.

What is the strength of this imported cement?

Probably not worse than the local “extended products”. According to the article: more than half of which are extended with ash, which affects quality and pricing.

This has to be the biggest poppycock ever, how is is possible with lower electrical costs, local labour, local supplies, that somebody can manufacture it and transport it all to this country and still sell at lower cost than local manufacturers!!
This smells of something else going on along with corruption!!

From other research into Vietnamese “exports” much of what comes out of their ports is simply transhipped from the original source – China.

South Africa is de-industrialising at a rapid rate.
Clothing , shoes you name it . all has to do with piss-poor work ethic of indigenous labour.
I had a factory and could have produced 24/7 , but only because my industry was protected by a 35% ad valorem tax. as the tax was reduced so my orders declined because we could not compete with the like of India, Thailand and even Italy- yes, Italy.
Eventually i sold the business which went bankrupt in under 3 years .
If we want to create employment labour has got to be more honest about it’s worth and stop striking whenever faced with layoffs.

Between the Construction Mafia and the importing of ( probably) sub standard cement, the rape and robbery from the South African economy continues unabated. And, it seems with approval from the governing party.
Both of these anomalies can be rectified if theANC stood up for what is right.

I hope it’s not the same rubbish that they imported in the mid nineties which had no binding power whatsoever and impoverished a lot of discharged individuals who tried to make a living in producing (totally worthless) cement bricks.

293 % increase, Imagine if we could import ruling party intelligence to the same quantum …… we will still have 0

End of comments.

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