Top cement producers eye ASEAN stakes

Top cement producers eye ASEAN stakes

HANOI (Reuters): Swiss cement maker Holderbank Financiere Glaruse Ltd said on Thursday big foreign cement makers are battling for position in key Southeast Asian markets and will play a significant role in the industry.

But Urs Bieri, member of the executive committee of Holderbank, said the firm would steer clear of Indonesia for the moment because of political uncertainties there.

Analysts have said Asia's combination of cheap labor and high infrastructure demand has persuaded international cement companies to chase bargains in the region even though many countries are under severe economic stress.

"Global cement producers are locked in competition on the main ASEAN markets," Bieri said in written remarks handed out at a news conference in Hanoi to mark a trip by Holderbank executives to Vietnam.

The Association of Southeast Asian Nations (ASEAN) comprises Brunei, Indonesia, Laos, Malaysia, Myanmar, the Philippines, Singapore, Thailand and Vietnam.

Apart from Holderbank, the world's largest cement maker, Bieri was referring to recent deals or negotiations in ASEAN involving Britain's Blue Circle, France's Lafarge S.A. and Mexico's Cemex S.A. de CV.

"The outcome of this wave of investments spearheaded by Holderbank, Blue Circle, Cemex and Lafarge is not yet fully visible, but it is likely that in the future the big foreign cement producers will play a significant role in these markets...," he said.

Bieri said Blue Circle had achieved the dominant position in Malaysia, Holderbank was beginning to play a major role in Thailand and the Philippines while Cemex appeared to be gaining the upper hand in Indonesia.

Holderbank's capital expenditure in Southeast Asia recently, excluding Vietnam, had been $500-600 million, Bieri said.

Holderbank also has a 65 percent stake in a $350 million Vietnam joint venture called Morning Star Cement Ltd.

Bieri said Holderbank was cautious on Indonesia, which has heaved under political tumult this year with the downfall of President Soeharto in May and a major economic crisis.

"We will look at Indonesia as an important market but whether we move depends on the political situation. Our next move (in ASEAN) would be there but there are still many questions," he told the news conference.

Bieri said demand for cement in ASEAN had dropped dramatically and would take years to recover. Asia, and ASEAN in particular, had seen demand fall 15 to 50 percent, he said.

In Thailand, Holderbank estimated production capacity at 50 million tonnes this year but demand at 20-25 million tonnes.

Asked if he expected a nationalistic backlash in ASEAN against foreign firms buying up such a strategic industry, Bieri said top producers would get involved mainly in joint ventures.

"Most Western companies will try to move into these countries in a careful and low-key way," he said.

Indonesia cut an offer to sell a 35 percent stake in giant cement maker PT Semen Gresik to 14 percent earlier this year in the face of protests from workers who did not want the company falling into foreign hands. Mexico's Cemex won the second round of bidding on September 29 for the stake.