Cheap cement imports imperil local industry, researchers warn

Local cement producers might be forced to mothball plants, putting thousands of jobs on the line as the industry struggles to compete against an influx of cheap cement imports, a study has warned.

Chronux Research found cement imports rose nearly 20% last year, despite many industries struggling to get goods into the country due to bottlenecks at the ports. 

The latest Cement Import Monitor by the firm, which tracked imports to January this year, reveals that imported cement volumes increased 18% in 2023 to 979kt.

Surprisingly, imports surged in the second half of year, registering a growth of 43% compared with the same time in 2022, despite port congestion.

“Cement imports continue to be able to navigate the port and supply chain issues in SA with minimal impact,” the report reads. “Government continues to provide no protection to local integrated cement producers from imported cement and clinker.”

Vietnam continued to be the primary source of imported cement, and smaller amounts were being imported from Mozambique and Namibia.

It was further found that clinker imports to Gqeberha were sourced from countries in the Middle East such as Saudi Arabia and the UAE.

Chronux Research director Rowan Goeller said it was unclear how imports were bypassing the port congestion, saying cement importers claimed to suffer like everyone else, “but still the volumes seem to slip through better than any other commodity”.

The SA cement industry has repeatedly asked for generalised tariff protection on imported cement, arguing that anti-dumping duties against exporters from specific countries are taking too long to secure and are failing to safeguard the industry from what it regards as unfair competition. However, the challenges remain unsolved.

At risk

The local cement production capacity is about 20-million tonnes, but the industry only produces 12-million tonnes.

PPC, in collaboration with the Centre for African Management and Markets (CAMM) at the Gordon Institute of Business Science (GIBS), produced in September a comprehensive report that revealed SA’s cement industry was using only two-thirds of its production capacity due to a combination of displacement by imports and low demand, putting jobs and government revenue collection at risk.

It warned that if the influx of cheap imported cement continued to stifle domestic production, the contributions that local cement companies make to the economy would be adversely affected, putting further pressure on the SA Revenue Service, which has reported it is battling with corporate tax revenue collections.

The sentiment was echoed in the Chronux report, which warned: “Strain on local cement producers must be growing and potential plant closures similar to that announced by ArcelorMittal SA (Amsa) for the Newcastle and other long products works may well be on the cards.”

Goeller said the local cement industry had been requesting help from the government for a while, with little effect. He said the Newcastle-Amsa issue shows that the government does swing into action if faced with actual large closures affecting whole towns.

“A dramatic decision to force the government’s hands may be the next step,” he said.

“The pressure is definitely on and any ongoing investment into SA cement plants needs to be weighed up against the constant threat of imports and support from government.

“Should local demand not recover — mainly due to a lack of government infrastructure spend and the consequent impact on business confidence — the business case for locally based integrated cement plants is probably touch and go,” he said, adding that it would put local companies at risk.

Carbon tax

Goeller said the looming increase in carbon tax was also “very worrying for the cement industry” as it was unaffordable, while imports would be exempt from carbon adjustment fees.

Economic adviser for the Optimum group Roelof Botha said the dilemma about some of the origin countries such as China was that they did not adhere to World Trade Organisation rules, while dumping was also hard to prove.

Botha said while local cement producers had to adhere to stringent quality standards, the same could not be said for imported or dumped products, resulting in a loss of local employment and a lack of quality.   

“The extent to which the imported product displaces the locally manufactured products will [cause it to] ultimately also replace domestic employment,” Botha told Business Day, highlighting that the government has been slow to respond.

“Under these circumstances, it is imperative for the department of trade & industry to investigate and do something, pronto.”

Stats SA data shows there is significant underutilisation of capacity in the cement industry, while the influx of cheap imports is damaging local value chains, he said.

“What’s going to happen if they build a high rise with imported cement that doesn’t conform to quality standards?” Botha said. “This can have a lot of repercussions.”

gumedemi@businesslive.co.za