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2015 has seen a decrease in public spending, especially in infrastructure, which at the same time has been translated into a decrease in the construction sector. The sector had experienced […]

2015 has seen a decrease in public spending, especially in infrastructure, which at the same time has been translated into a decrease in the construction sector. The sector had experienced what could be called a “golden age“ in previous years due to the high public spending in infrastructure, though due to the drop in the oil price this trend has declined. The commercialization chain in the construction sector presented a decrease in some of its most important products. From January to May cement sales dropped a 7.1%, and iron sales dropped by 8%, according to the Construction Chamber of Ecuador.

Even though these statistics might sound discouraging, foreign investors still see a lot of potential in the Ecuadorian cement industry. The cement industry in Ecuador has always had the characteristics of an oligopoly, with few companies controlling the market. However, this would have turned into a bigger monopoly with the fusion of the two biggest cement companies in the world, Holcim and Lafarge. As a result of this, Lafarge had to sell its company in Ecuador to a new bidder in what became the biggest movement in the acquisition and fusion market in Ecuador. The Andean country is a very small player compared to the rest of the region, but in November 2014, the acquisition of Lafarge by the Peruvian UNACEM involved $517 million for 98.57% of stocks. UNACEM Ecuador is currently the second biggest cement company in Ecuador, with $186 million in sales in 2014 and a 22% market share, just after Holcim. In 2014 the total production of UNACEM Ecuador was 1,458,851 tons. José Antonio Correa, General Manager of UNACEM Ecuador said, “the cement industry in Ecuador has inspired confidence.“

The third big company sharing the market with Holcim and UNACEM Ecuador is the state-owned UCEM (National Cement Union), which was created after the fusion of 86% stock from Cementos Chimborazo, a public company, and 100% from Industrias Guapán, a company whose property has gone through the hands of the IESS, the BIESS, and the Ministry of Industry and Productivity. However, another Peruvian player is eyeing the cement industry for this year. Grupo Gloria is preparing an investment of $230 million in the country through one of their companies, Cementos Yura. This investment will be spent in the construction of a new clinker plant, which will allow the substitution of this imported material. Cementos Yura will become the strategic ally of UCEM, in which it will become the majority stakeholder with 63.5% of stocks, leaving 36.5% for the public company. The investment will also allow the improvement of the plants in Chimborazo and Guapán, although it will be mainly focused in the new clinker plant that will be located in Riobamba, in the Chimborazo province, with a production of 1,400 tons a day. UCEM currently imports 1,000,000 tons of clinker every year, at a price of $75 per tonne, which means that the government would save $75 million annually.

Following this same strategic line, Holcim Ecuador has already introduced a new production line of clinker in the second phase of modernization of their plant in Guayaquil, with approximately $400 million hacing been invested in the modernization work in the last 5 years. The cement industry still has a lot to offer, and as part of the imports substitution strategy, the shift in the production matrix and the promotion of the national industry, the government is looking to bring and support investments in key sector in order to generate employment and develop different production chains.

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