High prices in El Salvador attract new entrants
This week CemNet reported on the new 120,000tpa grinding plant under construction in Acajutla, El Salvador, by Cemento Regional, the Guatemala-based Monterrey group, which is due to be completed by December 2019. This is the first significant challenge to Holcim El Salvador, which currently serves the 0.9Mta domestic cement market. Earlier this year, Cemengal (Spain) supplied the new Cemento Regional Co facility with a 12tph Plug & Grind modular plant.
Roberto Díaz Durán, president of Cemento Regional, stated that "... the cement company found in the current government of El Salvador the facilities to carry out the construction management of the processing plant in the canton of San Julián, in Acajutla."
The plant's proximity of the industrial port in Acajutla will enable raw materials, including clinker, to be imported from Asia and generating new competition in the domestic market. The US$12m factory will produce quality cement with 20 per cent more higher strength than cement currently available in the market.
Improving construction market
The new initiative comes on the back of an improving construction market in recent years. El Salvador saw a substantial increase in cement sales in 2018, when consumption rose by 28 per cent between January and November on the back of an 8.1 per cent rise in construction activity in the country.
In addition, cement producers enjoyed a rise in ex-works cement prices from US$7.28 to US$7.57 in March 2018. Meanwhile, retail prices have held firm to reach US$8.45/bag in June 2019 but have dropped lately to US$8.32/bag in August.
While El Salvador has been slow to implement infrastructure programmes, anti-corruption candidate Nayib Bukele won the presidential elections in February 2019, indicating changes can be expected. He has vowed to complete the 521km-long Pacific Railway, or 'coastal train', as a signature project to boost employment. Work also begun on the Monseñor Oscar Arnulfo Romero International Airport in 2018, which will see a US$66m expansion of the facility and a new terminal. A new container terminal is also being built in the port of La Unión.
Market leader continues to invest
Holcim El Salvador (LafargeHolcim group) is the country's main cement producer with two integrated plants: the 1.7Mta El Ronco works and the 0.47Mta Maya facility.
This year represents a historic anniversary for Holcim El Salvador, which has been operating in the country for 70 years. To boost sales in this anniversary year, a special cement bag was produced to commemorate the achievement and launched in June 2019.
"In this bag 70 years of technology and quality are put at the disposal of Salvadorans," said Francisco Shwortshik, commercial director of Holcim El Salvador. The company began operations in Acajutla in 1949 but moved to the city of Metapán and founded the El Ronco cement plant in 1965.
In recent years, LafargeHolcim has continued to invest in its Salvadoran subsidiary. The El Ronco works was expanded in 2017 to its current capacity with an investment of US$6m to upgrade its production equipment. A further US$3m was spent on upgrading transport areas and security at the facility. Much of the demand for the new capacity came from the construction of the El Chaparral hydroelectric dam, which was budgeted at US$290m.
This year, Holcim will invest US$1.4m in the expansion and modernisation of the cement dispatch area at the El Ronco plant. The investment will enable the purchase and installation of new machinery that will reduce dispatch times, result in more efficient logistics processes and improve the customer experience, all in response to the growing demand. The company has also carried out maintenance on its cement Silo No 2 at the Maya plant, which had been troubled by lower extractions until cleaning was carried out in June 2019.
More new entrants to follow?
While Holcim El Salvador's recent investments will support the company in retaining its market leadership, new players can be expected to enter the market as demand for cement surges on the back of increasing construction activity going forward. Cemento Regional intends to lead the charge, although at the moment it remains unclear how many will follow.
