Financially Speaking | For the love of concrete!
It took seven to eight years, but Caribbean Cement Company is once again in near full control of the cement market, and its primary rivals are now its dealers.
A decade ago when the commodity producer made the fatal error of allowing its quality processes to derail, it led to the faulty cement scandal, and later a monumental fight against market incursions that began playing itself out from around 2007.
Caribbean Cement paid out $305 million in claims for its bad cement and tried to move on.
But with the cooperation of the state, which lifted tariffs on cement imports and carved out a quota for them, enterprising traders jumped into the market over time - operators like Mainland International, Arc Systems, Tank-Weld Metals and Buying House - setting off internal trade wars that were fought in the arena of the anti-dumping agency.
From the sidelines, hardware merchants and real estate developers cheered on the emerging import rivals with expectations that the added competition would eventually drive down the cost of input cement.
But they also had another motivation. They wanted that thing that underpins all free markets - options. At the height of the faulty cement probe, some 100,000 construction projects were reportedly locked down because the market was entirely dependent at the time on Caribbean Cement's output. It was either bad cement or no cement.
Now the market is headed back to yesteryear after the commodity producer changed strategy. Instead of clobbering importers with legal complaints, Caribbean Cement has made them its partners. Now, instead of buying rival products from overseas, Tank-Weld and Arc are distributing Jamaican-made cement.
Technically, that ought to be good news. Buying Jamaican to build Jamaica is a source of national pride, even if the owners of the Rockfort-domiciled producer reside in Trinidad and Mexico. But it is most definitely not in the national interest to have an entire sector - and the sturdiness of your dream home - beholden to one company.
Yet, we are on the verge of the former status quo, apparently having learned nothing concrete from the fault lines of 2004-2006. It appears that, with one exception of a small supplier - Buying House - Caribbean Cement has tamed its competition. It has largely succeeded in repairing the veil.
Tank-Weld has exited imports after five or so years of trading American-made Vulcan cement. Its decision turned on the quota system - all imports are capped at 15 per cent of market - which Tank-Weld said was hobbling the business.
That quota has been fought unsuccessfully by Caribbean Cement, to whom the carve-out was akin to a betrayal. Its owners had made a major bet on exponential growth in market demand for cement in the form of a US$177m expansion project that would increase capacity at the Rockfort plant from one million tonnes to 1.8 million tonnes. A secure market was critical to recouping that investment.
In the early part of the 2000s, the Jamaican market was consuming around 600,000 tonnes of cement. That shot up to 800,000 tonnes around mid-decade in a giddy sign for Caribbean Cement, which was then getting ready to retool and expand. Exports were a blip on the radar then, but would eventually expand.
If the market continued growing, so did the chance of recovering the investment and paying back the loans that were to be taken out by parent Trinidad Cement to back the project.
But two things intervened - Caribbean Cement took its eye off the quality ball, and with that business opportunists poked a hole in the protectionist veil over the market; and the world economy got clobbered.
In its best year ever, 2005, Caribbean Cement supplied 862,400 tonnes of cement to the Jamaican market. Fast-forward a decade and supplies are now just shy of 600,000 tonnes. Essentially, local demand for Carib Cement has regressed by about a dozen years. Which is why the cement producer is cosying up to former rivals to buy access to their customers.
Caribbean Cement has also staked out export markets in the past four year, which have turned out to be its saving grace.
Overall volume sales of cement in the past two years - domestic and export supplies - were back above 800,000 tonnes but well shy of the peak 865,000 tonnes sold in 2005. It's as if that US$177m and added capacity had made no difference at all.