Dangote Cement’s South African subsidiary, Sephaku Cement, is among the local producers seeking protection from cheaper imports after South Africa’s trade regulator found prima facie evidence that cement from Mozambique and Vietnam is being dumped into the Southern African Customs Union (SACU) market.
The International Trade Administration Commission of South Africa (ITAC) said on Friday that Sephaku Cement and Afrimat had provided sufficient evidence to justify an investigation into the alleged dumping, including claims that the imports were hurting local producers.
ITAC found dumping margins of about 90% for cement imported from Mozambique and 37 percent for Vietnamese cement. The finding opens the way for possible anti dumping duties if the commission’s investigation confirms that the imports are being sold below their normal value and are causing material injury to domestic producers.
‘The applicant submitted sufficient evidence and established a prima facie case to enable the commission to arrive at a reasonable conclusion that an investigation should be initiated based on dumping, material injury, threat of material injury and a causal link between the alleged dumped imports and the material injury,’ ITAC said in a government notice.
Sephaku Cement is part of Dangote Cement, Nigeria’s largest cement producer, which acquired the South African company for about R3bn in 2008. The case puts Dangote’s South African operation at the centre of a wider dispute over rising cement imports and the future of local production.
ITAC said the applicants provided evidence of declines in market share, sales volumes, profitability and employment, which they linked to the alleged dumped imports. They also warned that further growth in imports could put additional pressure on domestic cement prices.
The investigation comes as Mozambique expands its cement production capacity. The Mozambican government and Chinese partners agreed last year to invest $333m in two new cement plants and supporting infrastructure, raising concerns among South African producers about the potential for more cement to enter the market.
The issue has also gained importance because of a proposed change in ownership of another major South African cement producer. AfriSam is subject to a R2.5bn takeover bid by West China Cement (WCC), a transaction that has received approval from the Competition Commission.
PPC has warned that the deal could encourage AfriSam to rely more heavily on cement produced in Mozambique, where WCC has spare capacity, rather than manufacture locally.
‘AfriSam’s new Chinese owners currently supply South Africa from its Mozambique operation. The proposed acquisition raises serious concerns for South African local production, with AfriSam becoming a distribution platform for Mozambique-produced cement,’ Matias Cardarelli, PPC Africa CEO, told Business Times.
‘In fact, this transaction creates strong incentives to abandon local manufacturing in favour of cheaper imported cement,’ he said.
South African cement producers are also facing high energy costs, which have made local manufacturing more expensive. PPC is investing R3bn in a new Western Cape plant with capacity to produce 1.5 million tonnes of cement a year.
The industry has also raised concerns about substandard cement products in the market, with the National Regulator for Compulsory Specifications finding that some products sold in hardware stores failed to meet required strength standards.
ITAC’s finding is not a final determination that dumping has occurred. The commission’s investigation will establish whether dumping took place, whether local producers suffered material injury and whether the alleged dumped imports caused that injury.