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Dominican Republic: Growing Towards a Sustainable Future in the Cement IndustryFriday, August 08, 2014 > 08:37:39
by Julissa Baez
Potential development in the Dominican Republic, mainly driven by a growing housing and infrastructure deficit, has motivated new and significant investments within the cement industry.
For the country’s cement sector, the concept of continuous growth is inseparable from the industry’s contribution to the creation of a sustainable society. Even though there are many challenges in this regard, none have so far undermined the belief that sustainability is fundamental to the viability of the sector, both now and in the future.
The Domincan Republic’s cement industry began a little more than six decades ago, and the level of development that it has experienced since then has been surprising. At present, seven cement manufacturers operate in several areas of the country. This includes Cemex, Domicem and Cementos Cibao, which produce clinker, and Argos Dominicana, Cementos Andino, Cementos Santo Domingo and, more recently, Cementos Panam, all four of which operate grinding plants.
This unusual situation, given the size of the island, has resulted in the country having the largest cement production capacity per capita in the entire American continent, above large producers such as Mexico, Brazil and Colombia. The Dominican Cement Producers Association (ADOCEM) believes that, at this time, the level of overcapacity in the Dominican Republic (around 50%) cannot be found elsewhere in Latin America.
In order to understand this peculiarity better, it should be noted that over the last 30 years cement production capacity in the country has grown at an average annual rate of 6%, and has accelerated in the last decade. Installed capacity has increased from 866 000 tpa in 1978 to approximately 7 million tpa today. In other words, the Dominican Republic is capable of producing almost nine times the volume of cement that it could 30 years ago, and it now has the capacity to meet local market growth over the coming decades.
The investment of companies within the sector totals around US$1.2 billion, excluding additional amounts invested on a yearly basis to maintain production and efficiency levels.
This growth is further sustained by the cement industry’s investment in people. It generates employment for around 10 000 people, both directly and indirectly, and it continues to focus on the welfare and continuous progress of its staff.
Products and marketing
Portland cement distributed in bagged form (bags of 42.5 kg) represents 23% of sales in the country, and bulk cement accounts for the remaining 77%.
Bagged cement is mostly sold through the hardware channel, while bulk cement is mainly sold through the industrial channel, which consists of pre-mixed concrete trading companies and products derived from cement.
Quality certifications for the products are granted by the Dominican Quality Institute, which validates the results of quality control in manufacturing and certifies compliance with the applicable regulations, thereby guaranteeing quality to the end-user.
Cement manufacturers in the country are also involved in the sale of concrete, aggregates and mortar cement products.
Construction and demand
As is well-known, the performance of cement markets around the world is intertwined with that of the construction sector, which, in turn, depends closely on a country’s economic and urban construction policies. During the first half of 2013, the construction market in the Dominican Republic contracted by 4.3%. However, it recuperated in the following months, reaching growth of 8.6% by the close of the year.
This was reflected in the region’s cement sector, which achieved sales of around 3 million t in 2013, representing a significant increase of around 16% when compared with 2012, thus breaking with the negative trend experienced since 2007. This improvement is due to the government’s decision to inject liquidity into development, and particularly to the initiatives focused on infrastructure projects and schools in different provinces of the country.
At the time of writing (June 2014) local demand for cement is 25% above the corresponding period in 2013, which, as mentioned above, was at its lowest point in the first half of the year.
One of the factors that has helped to invigorate local cement demand is a drop in product prices. This results from a common trend in small markets such as the Dominican Republic, where competition is high.
In the past two years, sales prices for customers across various distribution channels have fallen by 18%.
The rise in demand experienced last year, and thus far this year, allows for an optimistic outlook for the remainder of 2014. Market growth of between 10% and 15% is expected by the end of the year. In the short-term, growth will be determined by projects already underway in the public sector, and in the medium and long-term, it will depend on the implementation of several initiatives designed to boost the mortgages market and construction of low cost housing in the country, which could serve as an agent of change for the greater development of the sector.
Housing and roads
At present, the Dominican Republic is in an excellent position to take advantage of the formidable potential of its cement industry. This means increasing its participation in the development of housing, roads and other major infrastructure investments, areas in which the high demand for cement has not yet been fully realised.
The housing deficit in the country is estimated at a million units, with a demand of 30 000 homes pa. This represents an opportunity for the private construction sector, which would benefit from a transparent legal framework encouraging sustainable investment in the housing sector.
The same applies to road infrastructure. The cement industry makes a persistent effort to encourage the use of cement and concrete in the Dominican Republic’s highways and roads. The multiple technical arguments for this have already been proven, i.e. high durability, low maintenance costs, as well as improved lifespan, thereby avoiding the need for periodic investment in repairs, refurbishments and replacements.
The Dominican Republic has transitioned from a net importer of cement to a self-sufficient manufacturer that exports approximately 30% of the cement it produces.
Haiti is the main export market for Dominican cement, both before and after the earthquake that devastated the country in January 2010. Cement is also exported to other countries, mainly in the Caribbean.
The cement industry in the Dominican Republic has developed into a reference point for the dynamism and growth experienced by the country. The sector will continue to focus on future development while sharing its knowledge and experience of current trends and issues in support of the country and its construction industry.