Wednesday, 04 July 2007 02:00

Bags of opportunity?

Women's empowerment group Wiphold and a Cape Town-based construction company, Coessa, say they will start to import cement from China at "competitive prices" in coming months.

Construction IndustryWiphold finance director Tryphosa Ramano says it is not possible to calculate a stable price for the cement because it is exposed to the rand-dollar exchange rate. It is currently possible to land cement in Durban for US$40/t. "But this doubles with handling and bringing the cement up to Gauteng," Ramano says.

Wiphold has formed a joint venture with Tangshan Jidong Cement (Jidong) to import a cement called Dunshi.

Coessa director Adam Essa says since news broke of his company's supply deal with Singapore-based Evermont International, he has taken at least a dozen orders totalling tens of thousands of tons.

He will not divulge the landed cost of the product but says he expects to sell it for about $93/t. At the present rate of R7,13, a 50 kg bag of this cement will sell for R33,50. Local building suppliers are charging R50-R60. A year ago the price was R36.

Evermont MD Lim Hong Siang has "conservatively calculated" SA's annual cement shortage to be over 5 Mt. "The four big companies in SA are currently producing 13 Mt-14 Mt annually. According to statistics, total usage is set to be around 20 Mt this year."

Independent industry analyst Mark Kingham disputes these numbers. "I don't know where they get them," he says. "The SA cement market is broadly in balance. The supply situation is tight, I agree, but we are nowhere near a 5 Mt shortage."

Kingham says new capacity which will start to come on stream in the next nine months will gradually reduce the need for imports. Already it appears that Pretoria Portland Cement (PPC) will need to import only half the cement it previously predicted. Kingham adds: "If you're importing cement, you're transporting a dead weight. These container ships also leak like colanders, so even if the bags don't break there is a good chance there is going to be spoilage."

Lafarge SA CEO Albert Corcos says a previous attempt by his company to import Chinese cement "translated into a loss". Lafarge's experience shows that if it had managed to get all its logistics right, even cement supplied to coastal regions would have been cost-neutral. "As soon as you start hauling it, you start losing money. Transport is not cost-effective."

JP Morgan analyst Marc ter Mors says it is possible to make money on Chinese cement imports but doubts it can be achieved consistently. A rise in shipping rates from China or a dip in the rand's strength would wipe out profits. "It's a low-margin business and it is likely that they will make margin only in the coastal areas," Ter Mors says.

He agrees with Corcos that once cement is moved to Gauteng, where demand is strongest, transport and handling costs are too high.

"It is possible that at a certain point in time you will be able to make money on the imports but it is questionable whether that can be done sustainably."

He adds that companies have gone bust in Namibia after underestimating the complexity and cost of importing cement. "I think it would be quite difficult to build a sustainable business out of this." However, he adds that if local companies continue to push up prices - some have risen by as much as 20% this year - importers will have a better chance of profit.

Wiphold appears to be aware of some of the challenges. "SA is not geared for the importing of cement," admits Ramano, but she says that because Wiphold has no overhead costs associated with importing the product, there is less pressure on margins.

She admits Wiphold has not yet found any customers. "You don't get commitments until you can guarantee continuity of supply," she says.

Wiphold expects to take delivery of a first shipment in October. It hopes customers will make their own collection and transport arrangements. If not, it hopes to get Grindrod or Spoornet to offer bulk services.

Lack of customers is not the only problem facing Wiphold. Ramano says the Durban port's warehouse facilities are limited and can handle only 25 000 t/ month of cement.

Importing cement from China is Wiphold's first step to cash in on the rapid acceleration in infrastructure investment. Ramano says it is investigating the possibility of building a cement-making plant with Jidong.

Until then, the partners will have their work cut out bringing in the cement. Kingham says: "If it was easy to make money by importing cement, the big guys would have done it ages ago. "

 

Wednesday, 02 August 2006 02:00

Protea eyes prospects in some African markets

Hotels and hospitality group Protea Hotels is "actively" looking to establish a presence in a number of other African countries, said managing director Arthur Gillis yesterday.

Thursday, 08 September 2005 02:00

Africa offers rich pickings for the brave

Some commentators believe there are major opportunities for local property companies on the continent.

The Clay Brick Association has announced the appointment of Pierre Sanson as its new Executive Director.

Thursday, 12 May 2005 02:00

How Do We Make the BEE Cake Bigger?

Lately, Black Economic Empowerment or BEE in short has become a hotly debated issue in Africa and Namibia is no exception. Continuous deliberations from local experts have been on how best to redress the past inequalities and assist previously disadvantaged Namibians to also benefit from the BEE cake, which is largely seen to only benefit the elite few in the country.

Tuesday, 03 May 2005 02:00

Demand triggers record cement sales

Domestic cement producers have benefited handsomely from the strong rise

Thursday, 24 March 2005 02:00

The engineer has no clothes

Order books of construction contractors could become useless as a measure of business health in this sector with the apparent rise in the number of contracts gone wrong.

Small was big during the construction sector reporting season that ended last week

Cement sales in the Southern African Customs Union (Sacu) increased 5.7 percent last month as economic growth spurred demand from the construction industry.

Wednesday, 22 December 2004 02:00

Basil Read disposes of Namibian company

Basil Read Holdings' board has agreed to sell Basil Read Civils Namibia to the company's controlling shareholder Bouygues Travaux Publics for a nominal amount

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