Financial Times

Powerful cement cartel controls global industry, 51 % of Lankan market
By Quintus Perera
Other than in China and India, the cement industry is controlled by five major companies called the ‘big Five’ which have formed into a cartel to dominate the global cement market, a top Sri Lankan industrialist said.

This group now holds a 51 percent market share in Sri Lanka compared to six percent in 1995 with home grown local companies unable to compete equally due to their financial and political power while another key reason is lack of clear government policy and non-consultation with local industrialists in the respective countries.

This was revealed by S R Gnanam, Joint Managing Director, Tokyo Cement Group at the celebrations in Colombo last week of Tokyo Cement crossing one million tonnes of cement sales a year - a record for a Sri Lankan company.
He said that these companies have been found guilty and fined heavily specially in Europe for forming cartels and price fixing. The same year there was no share in Philippines but now they have 82 percent while in Indonesia the share has gone up to 75 percent from just 4.3 percent in 1995.

Gnanam said that his company was rebuilt through the ashes of destruction after being shut down in May 1986 having closed for two years due to extensive damages caused to the factory by unknown persons. The company was started in 1983 with Japanese investment and got the best use of the natural resources of Trincomalee harbour. It was a journey worth celebrating as the 2005 Calendar year was finished with a 1,079,000 M/Tons which made them the market leader for cement in Sri Lanka.

This was jointly achieved by their operations both in Trincomalee contributing 68 percent and Colombo contributing 32 percent. The sales are made up of 63 percent bulk sales and 24 percent bag sales in 2005.

As there was civil unrest in the country in 1984 the company was operating far below capacity and due to an unsuccessful IPO and since earlier efforts with several banks to underwrite their issue were unsuccessful, the family had to underwrite the issue.

He said that from 30 M/tons per hour in 1984 they have now risen to a capacity of 840,000 M/Tons per annum and this is expected to increase to a total of 1.8 million per annum in 2007 from Trincomalee alone. The Colombo terminal commenced in 2001 and the capacity today is 650,000 M/Tons.
Gnanam paid a glowing tribute to the management, senior managers and the staff, calling them heroes, whose dedication as a team plus the using of modern technology in cement industry brought the company to this great heights.

Commenting on the cement business in Sri Lanka he said that Sri Lanka had a growth rate of 16.5 percent in 2005 when compared to 4 percent in 2004 and a volume increase from 3.2 million Mt in 2004 to 3.7 million MTs in 2005. The growth was due to the revival of several irrigation projects, development of apartment buildings, rebuilding and construction work in the North and East and tsunami relief work.

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