IMPORTED CEMENT CONTINUES TO FLOW INTO SOUTH AFRICA

By Roy Cokayne, Moneyweb

• Imports surged in November despite prohibition on the use of foreign cement on government projects
• However, it is too soon for the impact of the prohibition to be felt
• It will take a while for the impact of the designation of cement to come through in government projects

Imports surged in November despite prohibition on the use of foreign cement on government projects. The greatest volume has been coming in from Vietnam and Pakistan.

Cement imports surged to 161 555 tons in November last year to the highest level in 2021 despite the designation of cement, which prohibits the use of imported cement on government contracts.

By comparison 34 964 tons of cement was imported in October, the lowest monthly total to date in 2021. However, this was a significant decline from the 151 452 tons of cement imported into South Africa in September 2021, which was the previous highest monthly volume of cement imported into the country.

Elsie Snyman, CEO of construction market intelligence firm Industry Insight, says a total of 1 097 642 tons of cement was imported into South Africa in the first 11 months of 2021, which represented an 18.7% year-on-year increase compared to the same period in 2020.

She says the bulk of cement imports were from Vietnam and mainly entered the country via Durban. Pakistan was the second largest exporter of cement to South Africa. Industry Insight previously reported that cement imports peaked in early 2015 when more than 1.4 million tons were imported over the 12-month period up to February 2015.

TOO SOON FOR EFFECT OF CHANGE TO BE FELT

Bryan Perrie, CEO of Cement & Concrete SA (CCSA), believes imported cement volumes were so high in November because this cement was “probably already on the water before the designation came in”. National Treasury issued a circular on October 4 2021 advising the industry and other stakeholders about the designation of cement effective from November 4 2021.

Perrie adds that the designation only prohibits the use of imported cement on government contracts and does not stop its use for private sector projects. “A lot of that stuff [imported cement] will be going through the hardware stores and things like that, not necessarily into new government contracts,” he says.

Perrie says it will also take a while for the impact of the designation of cement to come through in government projects. He does not know what percentage of imported cement, compared to locally produced cement, was used on government projects prior to the implementation of the designation

Perrie says the problem is that with a lot of government contracts, the cement is not bought directly from the cement companies but generally bought through traders and retail outlets and “so we have no idea where it goes”.

“Our hands are tied in trying to keep details of cement statistics and sales because of competition issues so it’s very difficult to track that stuff.”

IMPORTERS STILL TO SUFFER ‘MAJOR IMPACT’

However, Snyman said in October last year that an Industry Insight survey indicated that more than 80% of the imported cement was used on public sector contracts, “suggesting this ban on imported materials will have a major impact on suppliers of imported materials”.

Cement importers are facing further threats because the International Trade Administration Commission (Itac) in December 2020 accepted an application from the cement industry for a sunset review of the import tariffs imposed on cement from Pakistan five years ago.

The cement industry is also still waiting for Itac to finalise an application first submitted to the commission in August 2019 for “safeguard action” against cheap cement imports, particularly from countries such as China and Vietnam.

Perrie says there has not been any movement on the safeguard action application to Itac. “We are still talking to them [Itac]. They are still looking for more information and so we are still waiting for that.”

ITAC INVESTIGATION

However, he stresses that Itac’s acceptance of the application for a sunset review of the import tariffs imposed on cement from Pakistan effectively means the anti-dumping tariffs previously imposed on Pakistani cement stay in place until Itac completes its investigation.

“We are hoping that it will be in the next month or two and then it obviously depends on what happens with that,” he says.

Statistics South Africa reports that cement prices increased by an average of 11.5% in 2019, slowing to an average of less than 2% in 2020 because the sector was hit hard by the Covid-19 pandemic. Stats SA says cement prices increased by an average of 7% between January and November 2021.

‘DUMPING’

PPC Group CEO Roland van Wijnen said in November last year (when the group announced its interim financial results) that cement imports continue to surge on the back of some Asian countries dumping their materials below full cost price in the South African market.

“For every bag of cement that is not produced locally, a local producer is unable to contribute to the communities in which they operate … unable to pay taxes that help to drive society. For every bag that is imported, a company in, for example Vietnam, is able to pay taxes and help their communities …

“As a global citizen, I shouldn’t mind where the development takes place and whether we lift poverty in Vietnam or in South Africa,” said Van Wijnen. “But as a temporary resident of South Africa it pains me to see that we are not doing the maximum to bring South Africa up to the next level that it so much needs.”