The plant, which is expected to take 36 months to complete, is estimated to cost approximately RM750 million, Cahya Mata Sarawak said in a filing with Bursa Malaysia.
KUCHING (June 28): Analysts are upbeat over Cahya Mata Sarawak Bhd’s (Cahya Mata Sarawak) wholly-owned subsidiary Cahya Mata Cement Sdn Bhd set to proceed with the proposed construction of a new clinker line with a daily production of 6,000 metric tonnes (MT) per day or 1.9 million MT per year, in Mambong here.
The plant, which is expected to take 36 months to complete, is estimated to cost approximately RM750 million, Cahya Mata Sarawak said in a filing with Bursa Malaysia.
“The project will meet Sarawak’s growing domestic cement demand and increase production efficiency which leads to a reduction in carbon footprint and ensure continuous sustainability,” it said.
Assuming that construction works for the new plant kicks off in July, MIDF Amanah Investment Bank Bhd (MIDF Research) said it is expected to be completed in 36 months, by June 2025.
“The new line has a daily production capacity of 6,000 metric tonnes or 1.9 million metric tonnes annually,” commented analyst Royce Tan in his analysis.
“We estimate that this will enable Cahya Mata Sarawak to triple its yearly clinker production capacity from 900,000 metric tonnes currently to a total of 2.8 million metric tonnes.”
To note, clinker is the main raw material for the manufacturing of cement. Depending on the type of cement produced, clinker comprises about 60 to 90 per cent of the raw materials used.
Meanwhile, the main raw materials that go into clinker production are limestone (78 per cent), sandstone (11 per cent), shale (10 per cent) and iron ore (one per cent).
“Our view is that two scenarios are at play here,” the analyst explained.
“One, Cahya Mata Sarawak is ramping up its cement production to meet the expected rise in demand for cement in view of the development plans in store for Sarawak and as it taps on new markets, especially Nusantara.
“The other scenario is that the group is trying to do away with imported clinker as much as possible.
“During our trip to Sarawak recently where we visited the integrated plant in Mambong, management guided that the ratio of its clinker usage was roughly 40 per cent self-produced and 60 per cent imported, usually from Vietnam.”
Cahya Mata Sarawak’s cement plants have the capacity to produce 2.75 million metric tonnes of cement annually and the plant utilisation is only about 54.5 per cent, sufficient to meet Sarawak’s demand of 1.5 million to 1.6 million metric tonnes annually.
The Bandung Institute of Technology projected a demand of 21 million tonnes per annum over the next 20 years for the construction of Nusantara as the new capital.
While Indonesia has an excess capacity of more than 50 million metric tonnes per annum, we note that most of the production facilities are concentrated in Java.
Within Kalimantan, the annual cement production is about 9m metric tonnes with some spare capacity. We view the geographical and logistical advantage favours Cahya Mata Sarawak, being the sole cement manufacturer of Sarawak.
“We remain positive on Cahya Mata Sarawak’s earnings outlook in FY23 and we are optimistic on its medium to long term prospects, especially with the development projects that have been planned for the state and also Indonesia’s upcoming new capital in Nusantara.
“Recall that Budget 2023 saw RM5.6 billion allocated for Sarawak’s development expenditure, on top of RM2.5 billion for public amenities in Sabah and Sarawak. The federal government is also expediting the Pan Borneo Highway and the Sarawak-Sabah Link Road.
“All these, on top of a RM100 billion capital injection into the state by 2030 would see strong contract flows over the coming years, where Cahya Mata Sarawak stands to benefit as the sole cement manufacturer in the state.”