Cementos Argos sees Honduras potential
This week it was announced that Cementos Argos was looking to expand its overseas cement capacity by upgrading its 0.3Mta Cementos del Sur (Cesur) facility in San Lorenzo Valley, southern Honduras. Cementos Argos bought Lafarge’s 53.3 per cent shares in the Cesur grinding station as well as the 1Mta Piedras Azules integrated plant from Lafarge in 2013 for EUR232m.
The Honduran population is expected to grow by 1.4 per cent annually from 8.4m in 2013 to 8.65m in 2020. In four years' time, some 74 per cent of this population will be under the age of 35. These demographic characteristics are expected to play a significant part in the forecast rise of per capita cement consumption from 174kg in 2013 to around 252kg in 2020, according to Cementos Argos estimates.
Cement consumption going forward is also expected to receive a boost on the back of positive GDP projections by the IMF. The organisation forecasts GDP growth of 3.6 per cent in 2016 and 3.7 per cent in 2017.
Government initiatives
Positive stimulus packages include the Honduras 20/20 Programme, the national development plan. This joint public-private initiative aims to generate 600,000 jobs between 2016-20. Government spending is also forecast to rise on civil works for infrastructure. The Ministry of Infrastructure has increased its budget for 2016 to US$1.65m, up US$60.2m on 2015. Major works include construction of 69km of the Tegucigalpa-Catacamas route and continuation of the San Francisco de la Paz-Puerto Castilla road as well as the 392km-long highway to link the Atlantic and Pacific coasts. Some 80km of rural roads are also to be improved and refurbishment of 332km of other roads are to be completed.
Natural disasters
Stumbling blocks to growth may still come in the form of natural disasters. Honduras continually finds itself exposed to light to moderate earthquakes, the most recent being in September when it suffered a 5.1 magnitude disturbance near Cusuna and a 4.9 magnitude earthquake north Savannah Bight. The 2009 earthquake with its epicentre in the Caribbean Sea was much bigger, registering 7.3.
Domestic cement market
The market is fairly evenly split at present between Cementos Argos and Cementos del Norte (Cenosa) with a market share of 53 and 47 per cent, respectively. Cenosa operates a 1.5Mta cement works at at Rio Bijao. Cementos Argos only reopened its San Lorenzo grinding plant in 3Q15, but by the 2Q16 it reported one per cent growth in domestic sales boosted by a new distribution centre in San Pedro.
However, the fight for market share is anticipated to intensify. Only last August it was also made known that Italian mining company Goldlake would be investing US$230m, via its local Five Star Mining subsidiary, in a new 1.2Mta cement plant in the Agalteca Valley for sulphur-resistant cement to be used in marine infrastructure projects.
The pressure on the supply of cement is showing itself in the higher recorded prices for the commodity. While the Honduran Chamber of the Construction and Industry has been advocating that prices should be lowered over the past year or more, 42.5kg bags of cement rose to HNL183 (US$8.09) in December 2015.
