Belarus cement plant modernisation costly exercise

Belarus is ruing its decision to modernise its three cement plants with Chinese technology. The country’s cooperation with China over the new dry-process lines at local cement plants attracted a soft loan from China's Eximbank of US$530m, just under half of the US$1134m total project cost.

The plan envisaged the installation of three new 1.8Mta kiln lines, which would increase domestic cement production from 4.6Mt (2011) to 10Mta by 2014. The launch dates for the production lines were repeatedly postponed. Although two of the three lines are already running, during January-April 2013, cement production decreased by 1.6 per cent when compared with the same period in 2012.

Local reports suggest that the current situation is crippling. While new capacity has been created, it is not fully operational. It has been stated that the JSC Krichevcementnoshifer plant has recently released a test cement batch using its new kiln line. However, the new production line's launch did not result in increased cement production. It will take at least one year to implement the line’s full capacity. Moreover, low-quality equipment from the project's Chinese partners has resulted in greater financial debt without improving the enterprises’ financial performance, pointed out local sources. It is suggested that the poor quality of the supplied equipment resulted in repeated production stoppages due to equipment failure as well as in bringing additional costs for businesses.

At present, the only potential customers that are able to increase the volume of Belarus' cement consumption are located in the domestic market. However, domestic market consumption has shrunk, while export supplies are limited by a catchment area of 500km and a Russian shortage of cement is not envisaged.

In addition to these issues, there is the 3.5 times increase in transportation tariffs as of 1 January 2013 due to a harmonisation of tariffs following Customs Union agreements. Together with the significant rise in accounts receivable resulting in the need to attract banks’ credit resources at a high rate, the business environment for Belarus cement producers has worsened.