This week CemNet reported on the inauguration of JSC Almalyk Mining and Metallurgical Combine's new 1.5Mta plant at Sherabad, Uzbekistan. The project was orchestrated by Dal Teknik Makina of Turkey and is one of a number of new capacity projects that have been attracted to the high cement demand forecasts in this former Soviet Union country.
The Sherabad factory is JSC Almalyk Mining and Metallurgical Combine's largest plant in Uzbekistan and joins the facility that the group operates in Dzhizak, where it has white (0.35Mta) and grey (0.76Mta) cement production. With a total group capacity of 2.26Mta of grey cement, JSC Almalyk Mining and Metallurgical Combine is some way behind the leading player in the country, which is Eurocement.
Eurocement dominates
Eurocement is also boosting its production capacity. The Ankhangaran Cement subsidiary is planning to commission the Akhagaran 2 plant in mid-2020. This will be a new 3Mta integrated line next to the existing 2Mta plant in Tashkent region that is being constructed by Beijing Triumph International Engineering Co (part of the CNBM group). Before this, Eurocement will complete a 2.4Mta plant in Angren with JSC Uz Qurilish Materiallari which is scheduled for start-up in 2018. The Angren plant will be a modern dry-process plant that will save approximately 35-35 per cent on natural gas.
Foreign investment flooding into the market
Foreign investment into the Uzbekistan cement sector is continuing with the arrival of Anhui Conch, which has planned a 2Mta integrated plant in Samarkand. Announced in March 2017, the Samarkand plant forms part of China's 'Belt and Road Initiative'. Titan Cement is another multinational that will be introducing new capacity, taking its Karakalpak Sement plant in Qoraozak district from 0.2Mta to 0.9Mta this year.
The Buloqboshi district in Andijan region is also to receive a 1.2Mta cement plant. This is an Uzbek-Chinese joint venture called Shangfeng-Bridge of Friendship that will be completed by 2019. Behind the project is Zhejiand Shangfeng Building Materials Co and Tunli with Uzbek company LLC Juydam Ta’mir Qurilish. Direct foreign investment will reach US$136.3m for the project with the joint venture investing an additional US$52.7m and Uzpromstomstroybank providing US$14.9m in the way of a loan.
Other projects include those of Surkhoncementinvest and Popcement (0.5Mta increasing to 1.5Mta capacity) in Sherabad, as well as Evergreen Holdings' Karakalpakstan grinding plant. Tajikistan-based investment was also said to be behind the Surxondaryo cement plant project that was announced in August 2018.
Production slips back
At the start of this year the Uzbekistan Government estimated the country would produce 9.198Mt of cement, but 1H18 production is less than half that figure. Cement producers have seen natural gas and higher power prices limit their ability to raise production. From April 2018, electricity prices increased by 12 per cent and natural gas prices rose by 10 per cent.
The need for higher cement production can be seen in the recent import trend for the country. In 1H18 the State Statistics Committee reported that domestic production has fallen to 3.954Mt from 4.199Mt in 1H17, while imports had risen six-fold. Tajikistan in particular had increased its overall exports by 84 per cent in 1H18 with Uzbekistan one of its main markets, while Kazakhstan exported 0.265Mta of cement to Uzbekistan in 1Q18.
Cement prices on the rise
Meanwhile, cement prices have been driven upwards above US$89.96/t in most regions and to US$97/t in Khorezm. In May, President Shavkat Mirziyoyev signed a resolution called "On Additional Measures for stable Provision of the Internal Market with Cement" to try and slowdown the escalation in cement prices and give cement producers a higher threshold of production before their revenue could be considered as a super profit and eligible for higher tax.
The cement industry in Uzbekistan is evolving at a rapid pace, and while cement demand growth is slightly lacklustre at present – some way below the double-digit growth enjoyed by the market in 2014-15 – it has potential to expand strongly in the medium- to long-term, driven by increasing regional investment flows. Competition from imports remains a short-term risk, but will recede as domestic capacity ramps up to provide competition.