New cement manufacturer going after 25-27% market share
Published:Wednesday | February 23, 2011 | 12:00 AM
Rivalry welcomed for Carib Cement
Mark Titus, Business Reporter
The plant won't be ready for another two years, but already the planned entry of Canadian conglomerate Cemcorp, which will break Caribbean Cement Company's singular hold on cement manufacturing in Jamaica, is being welcomed by different interests.
Cemcorp is planning a 1.5-million capacity plant to be operated under the name Cement Jamaica Limited - Carib Cement's Rockfort operation has installed capacity of 1.8m tonnes - but says in documents filed in Kingston that it plans to sell just 25 per cent of the output on the domestic market, while the rest is for export.
Cement Jamaica, a US$340-million investment, says it will draw on red mud extracted from waste ponds at bauxite company Windalco, gypsum acquired from the Caribbean Cement's Rockfort facility, and expand its existing quarrying operations at Rose Hall district in Clarendon as raw material sources.
Citing the prospect for new jobs and tax revenues, Omar Azan, president of the Jamaica Manufacturers' Association, said another cement maker "would be a plus for Jamaica, for sure".
"And if they are going to be using indigenous raw materials that are already here in the Jamaican market that would be a win-win situation from all angles," he said.
At its initial production target of 900,000 tonnes per year, Cement Jamaica would be distributing 225,000 tonnes of its output in Jamaica, which is equivalent to about 30 per cent of Caribbean Cement's annual sales volume, or around 25-27 per cent of the total distributive trade, which combines activity of the Rockfort plant and importers.
Cemcorp is planning for a 2013 start of operation.
Jamaica's building sector, when construction is booming, is said to demand up to one million tonnes of cement per year. About 15-20 per cent is serviced by importers Tank-Weld Metals, Buying House and Arc Systems.
Cement Jamaica's entry will likely impact the market share of both groups, but Caribbean Cement, whose financial health has been battered by lost market share, falling revenues and an onerous plant-modernisation bill, declined to weigh in on the likely impact of a new rival.
"I am sure that it will be very easy for you to evaluate the possible impact on the industry with the information already at your disposal," said public relations head Lystra Sharpe, "giving consideration to the current size of the local market, the possible size of the market then and the capacity of both local plants."
Tank-Weld Chief Executive Officer Chris Bicknell says he considers it a plus.
"Any form of manufacturing investment at this time will be good for Jamaica, and will ensure that we remain competitive," he said. "This should be a big benefit to the consumer."
The JMA head, however, sees it as a motivating factor, saying competition tends to lead to new efficiencies and would force Caribbean Cement to step up its game.
"If they are going to be exporting 75 per cent, that would only mean 25 per cent for the local market," he said. "This means that Carib Cement would need to step up its marketing strategies."
Hugh Burton, the newly appointed president of the Incorporated Masterbuilders Association of Jamaica and head of HDB Construction Limited, is encouraging his members to cheer for the new entrant.
"Certainly, such a competition is good for the country," he said. "I am sure Cemcorp would have done their study and seen where this is a wise decision. I am hoping that our members will benefit from such a project."
Calls to Cemcorp's North American offices went unanswered, but the environmental impact assessment report for the plant shows its planned location as White Marl, St Catherine.
The report said that Cement Jamaica has already concluded significant take-or-pay contracts with users and distributors of cement in the region.