Leading cement maker to expand production

The Phnom Penh Post – September 19, 2008

Written by Nguon Sovan

$200m investment hoped to decrease Cambodia’s reliance on expensive imported construction materials, as building boom continues to create demand

A delivery man prepares to unload sacks of cement near the Canadia Bank headquarters constuction site in Phnom Penh. (Photo: VANDY RATTANA)

KAMPOT Cement plans to invest US$200 million into production in order to triple its output by the end of next year as a local construction boom continues to push demand for cement, according to one of the firm’s top officials.

Khaou Phallaboth, president of the firm’s Cambodian minority stakeholder, told the Post that Kampot Cement would increase its current production from one million tonnes to three million tonnes by the end of 2009 on predictions that total domestic demand will rise over the next five years from three million to seven million tonnes, as heavy foreign investment fuels a surge in construction.

He also said the company has its sights set on the export market down the road if international prices remain high.
Kampot Cement launched in January of this year as a $127 million joint venture with Thailand’s largest industrial conglomerate, Siam Cement Group (SCG), controlling a 90 percent share, and Cambodia’s Khaou Chuly Group holding the remainder. Khaou Phallaboth said the Cambodian partner’s share would double to 20 percent by next year.

While the plant’s current production of one million tonnes a year represents nearly half of all domestic production, the company has to import from Thailand another half million tonnes at increasingly unfavorable prices in order to fill local orders, Khaou Phallaboth said.

He said that despite the growth in local demand for cement, Cambodia’s exorbitantly high energy costs, which are three times higher than those in neighboring Vietnam and Thailand, continue to pose a major obstacle to the industry’s expansion.

“So once we increase our production, we will switch from using heavy fuel to a coal-fired power plant,” he said. “It will cost us $70 to $80 million at first, but it will save us several million dollars in energy costs every year after that.”

Opposition party lawmaker Yim Sovann said that he supports industrial self-sufficiency, but expressed concerns over the effects on the surrounding communities of a coal-fired plant, which he said would “seriously damage the environment and health of local people if it is not built according to international standards”.

Others, however, played down the potential effects of the plant, while saying Cambodia was too reliant on imported construction materials.

“It will be very good to reduce our reliance on imports from foreign countries, and we should support the use of local products,” said Ith Priang, secretary of state at the Ministry of Industry, Mines and Energy.

“Oil has been really expensive, so a clean-coal power plant is a good, cheaper alternative…. There should not be any concern over the environmental effects because we will thoroughly inspect the plant to make sure it is in compliance.”