May 2006 Financial News

TCL is ready to meet demand

May 25, 2006

Arun Goyal, General Manager, Trinidad Cement Limited (TCL) wants to bet anyone from any sector in the economy that the Claxton Bay-based company will have a problem meeting potential demand.

He is dead sure that TCL will not crumble in face of inreasing demand.

“Production capacity has now exceeded the anticipated local demand, leaving no potential for shortages,” he said. Goyal said barring major unforeseen circumstances, TCL is not going to go soft on anyone.

In an interview last week, he gave the booming construction sector the asurance that cement “is available and will be available to meet all current and future demands.”

This, as the company is in its final stages of commissioning its expanded production facilities at Claxton Bay in Central Trinidad.

Goyal said expansion was now a priority and was spending millions to ensure that it does not fall short. In Trinidad, TCL’s kiln modernisation costs US$80 million. In Jamaica, modernisation was being done to the US$130 milliion. In Barbados, its optimisation programme at Arawak Cement and which was in progress costs about US $12 million.

In Guyana, the terminals costing US$10 million, is expected to completed in June.

Suriname’s terminals is going to cost about US $6.6 million whie St Lucia and Grenada will see about US$13 million being invested.

Total projected investment cost, Goyal said, is about US $265 million.

Goyal also quoted figures to support his claim that the company is meeting and will meet the demand, even as concerns are being raised about their inability to do so. In 2003, for instance production was 746,600 metric tonnes while domestic demand stood at 514,000 metric tonnes.

In 2004, production was 758,471 metric tonnes and domestic demand was 524,976 metric tonnes.

He went on to state his case. In 2005, production, he noted, was 702,044 metric tonnes with local demand topping 565,467 metric tonnes.

And as far as future rejections go, he was just was forth-coming with the information.

For 2006, production target is 961,076 metric tonnes and domestic demand, according to TCL, is estimated at 610,078 metric tonnes

Goyal also gave an insight into next year, with production set at about one million metric tonnes with demand reaching only 647,185 metric tonnes.

For 2008, production has been calculated to be about 1.1 million metric tonnes; domestic demand - 686,461 metric tonnes.

In 2009, TCL sees production levels reaching 1,150,034 metric tonnes and local demand tapering out at about 727,034 metric tonnes.

In 2010, production, according to the company, will top about 1.2 metric tonnes and demand — 640,970 metric tonnes.

He is confident of his calculations, saying, “On the basis of these figures, cement shortage will definitely not take place.” He also pointed out that the company recorded an average 4.96 percent annual growth in local sales between 2000 and 2005.

He noted that there were continued requests for increases in supplies to overseas customers, noting that despite such foreign orders “we still have enough supplies for the local market.”

Goyal went on to justify the current price level of cement in the local market by comparing it with the total cost of construction of a building and explained that cement constituted roughly 2.5 percent of the total cost of construction of a building valued around $200,000.

By their calcuation, steel in 2003 cost US$412.70 per metric tonne, aggregate $17.06, cement US$99.15 per metric tonne and concrete — $205.33.

In 2004, steel, he said went up to $655 per metric ton, while the figure for aggregate and cement, concrete remained unchanged.

In 2005, steel cost US $605.per metic tonne while the prices for aggregate and cement showed no change.

But one year later, steel stood at $658.73 per metric tonne and aggregate was $22.58 per metric tonne and cement rose to $108.57 per metric tonne. Concrete rose to $298.81 per metric tonne.

The percentage changes are represented in these figures, he said, noting steel showed a 118.95 percent; aggregate 32.32 percent; concrete 48.77 percent.

Cement, he said, showed an increase of only 14.92 percent.

He said that now that the construction industry had taken an upswing, people held the view that cement was the most expensive factor.

“We have shown that this is not so,” he said with the figures in front of him.

He was unyielding in his view that price controls was needed for the cement industry.

If the government implements price controls in the construction industry, he said that this would seriously give a false idea of the cost of production for cement.

He also reasoned that it will not keep step with inflation rates and also not factor in the natural gas price agreement.

The local cement industry, he said could suffer, resulting in unemployment.

As the company seeks to recoup its expenses, he said price controls will stifle competitiveness and undermine the objectives of trade liberalization.

“It would also mean that foreign companies would be more reluctant to enter the local market with imposed price controls and this would be viewed as having less profit potential, he said.

He said that price controls restrict imports and do nothing for supply shortages. He argued that it was against the spirit of the WTO.

Herman Roop Dass
Newsday Business Day
Thursday, May 25, 2006.
http://www.newsday.co.tt/businessday/0,38001.html