Latin Finance - March/April 2011 - 84

Andean peru cement

Peru is Cemex’s second largest operation in South America – third if a plant nationalized by the Venezuelan government that is currently in arbitration in the World Bank is counted. Production in Peru when the plant is finished in 2013 will be roughly one-third of what Cemex produces in neighboring Colombia, says Cárdenas.

Locals Build Up

the past two years was similar to that planned for 2011-12. “There is so much to do regarding infrastructure and housing, and there are so many mining investment projects on the horizon, that we are conservatively forecasting growth in the industry between 10% and 12% annually for the coming five years. It will be higher if construction were to begin on projects that have been announced,” says Jordán.

Cemex’s investment is rivaled by Cementos Lima, Peru’s largest Formalizing Construction cement operation, which plans to invest $230 million expanding Besides universally bullish views, industry players say that its operations in 2011-12. Cementos Lima has the capacity more formality in the market – and Peru’s economy in general – to produce 4.5 million MT, equivalent to 39% of the market, would help stimulate expansion at an even faster clip. according to Asocem. Capeco and the Lima Engineering Society report that more The new investment will increase capacity to 5.5 million than 50% of the buildings constructed annually in the country MT. The bulk of the investment will be financed through Peru’s are done so informally, either by property owners themselves local banking system, but the company plans to issue up to $35 or unregistered builders. Walter Piazza de la Jara, Capeco million in corporate bonds president, says informal in 2011. construction “poses The company’s original serious security risks, Peru Per Capita Cement Use (kg) expansion plan from 2008 due to Peru’s high level Rising steadily forecast that new capacity of seismic activity, and 260 would meet demand limits the state’s action for the next 15 years. for imposing regulations 240 The estimate has been and collecting taxes. It lowered to five years as is an issue that must be 220 the economy, principally addressed.” construction, has far Informality makes 200 outstripped projections. Peru one of the few 180 Peru’s second largest countries in the region cement company, where use of bagged 160 Pacasmayo, has started cement far outstrips rolling out a two-year ready-mix concrete. 140 $125 million investment Pacasmayo’s Jordán to consolidate its grip on says the company sold 120 northern Peru, where it 265,000 cubic meters of 100 is the dominant player. ready-mix concrete in 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 Two plants, in Pacasmayo 2010, which was a 30% on the northern coast increase over the previous Source: ASOCEM and Rioja in the northyear, but still less than 5% central jungle, produced of total sales. 1.8 million MT in 2010. The company has 20% of the Peruvian “This has to change, but it will take work. More than half of market, according Scotiabank. construction is done the traditional way, using bags of cement Pacasmayo will begin construction in the first half of this and a mixer,” he says. year on a new plant in Piura, on the northern coast, expand Pacasmayo launched January 24 an incentive program in operations in Rioja, in the San Martin department, and build its area of northern Peru to help push the use of ready-mix a quicklime plant in Cajamarca, also in the north, according to concrete. Rodolfo Jordán, the company’s commercial manager. Cemex’s Cárdenas says he expects the industry to move Jordán says cement production would reach 2.8 million toward ready-mix as Peru becomes more developed. “The MT once Piura comes on line and upgrades are made to the market structure will change as the economy continues to Rioja plant starting this year. The main plant in Pacasmayo was expand and mature. Peru is not the country is was just 10 recently upgraded with an investment above $100 million. The years ago and there will continue to be changes in habits as the Piura plant will produce approximately 500,000 MT annually of country moves forward,” he concludes. LF cement and require investment of $40 million. Jordán says the company would finance expansion with a > UPDATE basket of loans from local banks as well as internal capital. He For daily news on Peruvian markets, see www.latinfinance.com adds that this model was used in the upgrade of the main plant in Pacasmayo and worked well for the company. Investment in

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March/April 2011

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Latin Finance - March/April 2011

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