A change in direction for Taiwanese cement producers
Taiwan's cement sector saw tremendous growth in 2020, after the country acted rapidly and very successfully to contain the COVID-19 pandemic. Cement consumption rose from 9.48Mt in 2019 to 10.07Mt in 2020, a rise of 6.2 per cent, according to data released by the Taiwan Cement Manufacturers' Association.
Cement consumption previously exceeded 10Mt in 2015, when it peaked at 10.6Mt. It fell to 8.88Mt in 2017 before recovering to its current level, and in 2021 it is forecast to reach 10.36Mt, a further rise of 2.9 per cent.
Much of the stimulus for the improved domestic cement demand emanates from the government's Forward-looking Infrastructure Development Program (FIDP). The National Development Council reports that US$17.29bn has been budgeted for the second stage of the eight-year initiative, which will be spent on rail construction, digital infrastructure and 5G network installation, green energy and urban renewal projects.
Production keeping pace
The pressure on Taiwanese cement producers at home from falling cement demand had seen cement plants retired as well as ambitious growth overseas in China.
The domestic industry has also been supported by anti-dumping tariffs on cement imports from China. Clinker imports serving domestic grinding plants, however, have risen steadily to 2Mta in 2020.
Taiwan Cement (9.57Mta), Asia Cement (5Mta) and Lucky Cement (3.5Mta) still dominate the domestic cement sector, owning 18Mta of capacity out of Taiwan's 25.3Mta cement manufacturing base.
A shift of investment
It also appears that the years of substantial Taiwanese investment in China are on the slide with trade tensions between the two nations leading to a sharp drop in investments in China. The change in attitude has been accelerated by the US trade war with China. Many Taiwanese firms are now relocating back home or to other areas along their trade supply routes in southeast Asia.
For the cement sector, Taiwan Cement and Asia Cement have remained top-ranked producers amongst the companies that are consolidating the Chinese cement sector. Taiwan Cement has some 64Mta of cement capacity in China and Asia Cement operates around 33Mta. Asia Cement has been more cautious in not expanding further than the Chinese mainland, but Taiwan Cement has sought to broaden its overseas portfolio. The decision of Taiwan Cement Co to create a new joint venture with Turkey’s Oyak group in 2018, via a new subsidiary under the name Dutch TCC Holdings, has shown that overseas expansion away from China is firmly now on the agenda for this producer. Taiwan Cement's reach now includes the Turkish cement sector and Portugal, through its partnership with Oyak.
Outlook
The IMF has forecast GDP to rise by 3.2 per cent in Taiwan in 2021 and by 2.1 per cent in 2022. On the back of the FIDP, cement demand in Taiwan is likely to remain in expansion at a similar rate of around three per cent in 2021.
