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Aug 31, 2005

Cement boom leads to R1,36bn PPC expansion

© Reuse this Cement producer PPC yesterday announced that it is to go ahead with a R1,36-billion capacity-expansion project, which, it hopes, will better position it to take advantage of the current construction boom in South Africa, and the accompanying surge in cement demand.

The expansion project, named 'Batsweledi', has two components: the recommissioning and upgrading of the existing cement-milling plant at the Jupiter facility in Johannesburg, (R130-million), followed by the installation of a new kiln line and associated infrastructure at PPC's Dwaalboom factory, in Limpopo, (R1,23-billion).

The 550 000 t/y Jupiter cement factory is also currently being recommissioned, and is scheduled for completion in March or April next year.

This is being done to provide additional supply during the construction of the Batswaledi project and PPC CEO John Gomersall said yesterday that the Jupiter operations would be mothballed once the new Dwaalboom capacity came onstream, although this decision could be revised if market demand continued to escalate beyond the capacity of local cement producers.

All other PPC mothballed kilns have also been recommissioned.

The new capacity is expected to come online in the second calendar quarter of 2008, with construction set to begin at Dwaalboom early next year.

PPC COO Orrie Fenn said that the capital expansion project is expected to add about a million tons a year to South Africa's inland cement-production capacity.

He explained that the decision to build a new kiln line, rather than opting to upgrade the existing facilities, was taken for two reasons.

Firstly, an upgrade, although less costly, would be quite complex and involve between two and three months of downtime at Dwaalboom.

Also, the construction of a new line provides the opportunity to install state-of-the art equipment, particularly in light of the fact that this is the first new kiln to be built in the country in 15 years.

An environmental-impact assessment has been completed for the new facilities at Dwaalboom and the necessary approvals to proceed with the project have been obtained from the authorities, Fenn said.

The new kiln line will include lower-energy vertical roller raw and coal mills and will have the ability to burn low-grade coal and secondary fuels, as well as the high-grade coal currently being processed.

It will also meet best-practice environmental standards with low dust emissions and water consumption.

The cement-milling facility at Jupiter, once the upgrade and recommissioning is complete, will have a capacity of 800 000 t/y.

Cement produced through the expansion at Dwaalboom will be transported to Jupiter for milling, as well as to the Hercules plant, which also has spare capacity.

Fenn said that this would prove more cost-efficient than the construction of a new milling facility at Dwaalboom.

Strong demand outlook forecast

Gomersall said that the company expected a strong period of economic growth in South Africa to persist for the next five years, fuelled by low interest rates and an attractive inflation environment.

“The country fundamentals are positive,” he said, citing high business-confidence levels, increased spending on fixed-investment and infrastructural projects, anticipated benefits from the 2010 soccer World Cup and the residential market upsurge as some key indicators.

Further, presenting an overview yesterday of the local cement industry, Fenn said that PPC expected yearly demand - excluding exports - to continue to rise for at least the next five years, and to exceed 16-million tons a year by 2010.

The only other extra capacity announced as yet is NPC's Simuma kiln, which will add 600 000 t/y.

In response to a question from an investment analyst, Gomersall said that, should no other producer announce plans to raise capacity before 2010, PPC would probably look at further expansion projects.

Edited by: Liezel Hill
© Reuse this Comment Guidelines (150 word limit)
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