May 2011 Financial News

Dom Rep plays hard ball with Caribbean Cement

May 11, 2011

A fight over cement markets that appears headed to court in Dominican Republic has drawn the Jamaican Ministry of Industry, Investment and Commerce into likely defending home-based exporter Caribbean Cement Company Limited, whose quality standards have been impugned in the rival market.

Reginald Budhan, the ministry's permanent secretary, said Jamaica was surprised at the claim by ADOCEM, a group of cement manufacturers in Dom Rep, and was conducting a full-scale investigation.

Budhan's surprise arises from the quality claims given that Jamaica's Bureau of Standards and its equivalent in Dom Rep both collaborated in testing and passing the cement for the Dom Rep market.

The new volley follows Carib Cement's seemingly successful pushback last year against critics of its export pricing policy, which the company acknowledged saw its cement being sold cheaper abroad than in its home market, but insisted did not breach the rules on dumping which requires the practice to be proved harmful to an industry.

The policy extends to Dom Rep where Caribbean Cements product is said to be the cheapest on the market.

ADOCEM, in defence of the country's manufacturing base, is said to have threatened to take the Dom Rep standards bureau Digenor to court.

'low-grade' product

The group, in which CEMEX is a member, and one of the parties reportedly most vocal against Caribbean Cement's entry, has alleged that the Jamaican company's product is low grade - a charge that has resonance in history from the company's 2005-06 distribution of faulty cement in its home market of Jamaica.

CEMEX owns about 5 per cent of Caribbean Cement and 20 per cent of CCCL's parent, Trinidad Cement Limited, but well-placed industry sources say the Mexican operation is, understandably, more loyal to its manufacturing bases and is central to the ongoing clash over market share.

ADOCEM's complaints led to the seizure of the commodity by consumer rights agency Pro-Consumidor over the weekend.

"We are still trying to understand it; we have been having discussion with the Dom Rep on trade issues, and the harmonisation of quality standards, so it is a little surprising that this is happening," said Budhan.

"We are now trying to assess how to deal with it."

According to the PS, the request for the Jamaican cement to gain entry to Dom Rep was made during a visit to Kingston a few months ago by a delegation that included representatives from the Dominican Republic standards agency and political directorate.

Caribbean Cement in April shipped its first batch of 2,500 tons of cement to the Dominican Republic - which has the capacity to absorb three million tonnes of the commodity annually - and declared its intention last month to capture at least 10 per cent of that market over time.

Anthony Haynes, general manager at CCCL, in an interview with Wednesday Business last month, described that country as a game changer for his company, given the size of the market in a growing economy forecast to expand by 7.5 per cent this year.

company's statement

The company put out a statement welcoming the industry ministry's support in, it said, helping to eliminate barriers to entry to the Dom Rep market, and reiterating that that it had met all required standards for export.

Caribbean Cement declined to speak beyond the issues in the statement.

"The DR market is four times larger than the Jamaican market and exceeds three million tonnes per annum. The company has targeted 100,000 tonnes annually for this market, which will account for merely 3 per cent of the DR market," the statement reads.

"Caribbean Cement has affirmed that it will continue to pursue exports into the DR market and will not be derailed or deterred by the cement producers in the DR."

ADOCEM has accused Digenor of "assuming attributes it doesn't have and ignoring mandatory quality tests", even suggesting that it could take legal action, according to Dominican Today reports.

Caribbean Cement's products were ordered off the market after constant complaints from ADECOM.

Haynes has rubbished the claims that his product does not meet the standards of the Spanish-speaking country, describing the move as a push from established players in the Dominican Republic against competition.

According to its annual report for 2010, ADOCEM exports around 25 per cent of its yearly production.

Jamaican cement importers Buying House Cement Limited and Arc System Limited trade cement manufactured by Dom Rep producers DOMICEM and CEMEX. Indeed, Caribbean Cement went in search of export markets to diversify its income stream and geographic markets, having unsuccessfully fought importers like Buying House, Tank-Weld and others, whose combined domestic market share add up to around 15 per cent.

Efforts to contact Julissa Bez, executive director at ADOCEM, were unsuccessful.

Budhan also downplayed quality concerns, and having opened the door for cement from that country to Jamaica, says he expects that CCCL would be paid the same courtesy.

"It could not have had anything to do with the cement crisis in 2006, because those problems were solved and we have been monitoring things even more vigorously since then, so that is not expected to be a problem," the permanent secretary said.

"We have been importing Dom Rep cement for some time now - since our problem - so we would expect that we can export to them also. It cannot be a one-way train."

When asked if this went against the spirit of the CARIFORUM-EU Economic Partnership Agreement (EPA), of which both Jamaica and the Dominican Republic are signatories, Budhan was hesitant.

"Within the EPA and Cariforum we are expected to open our markets and facilitate trade, but I cannot make any further comment, because I still don't understand the facts," he said.


Source:
Mark Titus, Business Reporter
mark.titus@gleamerjm.com
Jamaica Gleaner
Wednesday May 11, 2011

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