Sri Lanka stocks steady, cement firm draws interest

Jan 21, 2008 (LBO) — Trading in Lanka Cement picked up Monday on reports that an Indian firm may start a cement plant in Jaffna and the broader market was steady in a day when global markets plunged. Shipping cement to Tamil Nadu from Jaffna would be cheaper than trucking it from plants in India itself as distances would be shorter.

The All Share Price Index was up 5.60 points to 2,387.93 and the more liquid Milanka up 9.04 points to 3,070.26 but turnover slumped to a mere 67 million rupees.

Lanka Cement was the day’s highest gainer – up by 1.25 rupees or 19.23 percent to close at 7.75 after rising to eight rupees – with 723,900 shares changing hands on speculation that India’s Birla group may be interested in its plant.

Lanka Cement said in a statement to the Colombo bourse that it was unaware of any development to handover the cement factory at Kankesanturai in the Jaffna peninsula to the Birla group.

Industry officials said there were two cement plants in Jaffna, one which was operated by the wholly state-owned Cement Corporation and the other by the listed Lanka Cement which is also outdated but with a 500,000 tonne kiln that could be refurbished.

Both plants were closed or damaged due to the internal conflict.

Lanka Cement, also state controlled, was awaiting clarification on the exact intentions of Birla from the government.

Sri Lanka’s construction minister Rajitha Senaratne said last week, that India’s Birla group will be allowed to operate a cement plant in the Jaffna peninsula on a lease and the group was expected to set up a plant on a build operate transfer basis.

The Jaffna peninsula has high purity limestone deposits but cement production ceased with the flare up in hostilities.

The rich limestone deposit in Jaffna has been eyed by the island’s top cement players Holcim and the listed Tokyo Cement.

But the risks and high insurance costs generated by the ethnic war, which has cut off the Jaffna peninsula from the rest of the country, have deterred investment.

Holcim has toyed with the idea of setting up a one million tonnes per year plant in Kankesanthurai to ship cement to south India.