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Update on Bangladesh, November 2022
Written by David Perilli, Global Cement
16 November 2022
The Infrastructure Development Company in Bangladesh announced this week that it had agreed to loan Crown Cement US$25m to help it add a new mill to its cement grinding plant at Munshiganj, south of Dhaka. If completed it will be the plant’s sixth mill. Originally known as MI Cement the plant has a production capacity of 3.3Mt/yr and the most recent mill was added in 2017. The plan to add a sixth mill dates back to 2019 but was revised in 2021 with a total investment of US$90m. Securing a loan marks a significant step forward for the project.
The timing to expand a cement plant in Bangladesh is interesting given the problems facing the local cement sector. In August 2022 Mohammed Alamgir Kabir, the president of the Bangladesh Cement Manufacturers Association (BCMA), told the Daily Star newspaper that cement producers were facing both falling investment in infrastructure development and private projects. The local cement industry imports 90% of the raw materials it uses and most of the country’s cement plants grind cement use imported clinker. However, the aftermath of the coronavirus pandemic created supply chain problems leading to higher costs of raw materials, dearer transportation charges and started to push up global energy prices. This was then exacerbated by the Russian invasion of Ukraine in February 2022 and negative currency exchange effects as the Bangladeshi Taka fell in value against the US Dollar. In words echoing cement associations in other parts of the world, Kabir suggested that cement producers now faced the option of either continuing to raise prices or simply shutting down production.
The local cement production capacity utilisation rate appears to be around 56% based on data from a recent feature in the Financial Express newspaper. It placed total production capacity at 83Mt/yr from 37 active plants but demand at only 47Mt/yr. This is similar to the reported utilisation rate of 54% back in 2017 from a total production capacity of 50Mt/yr. Data from the Bangladesh Bureau of Statistics (BBS) suggests that cement production picked up in 2021 but then declined on a monthly year-to-date basis between December 2021 and February 2022. However, the BBS only reports production from a sample of plants. Masud Khan, the chief advisor to Crown Cement and its former chief executive officer, placed the cost of all that unused capacity at US$40/t or something like an investment of US$1.46bn for idle manufacturing potential. In his view, the larger local producers forecast an increase in demand around five to 10 years ago and invested accordingly to avoid losing market share. However, some smaller companies may also have done the same.
The local sector has likely been able to cope with a relatively low capacity utilisation rate previously because it was ‘grinding heavy.‘ How the current problems have shown themselves on cement company balance sheets has been mixed though. LafargeHolcim Bangladesh’s sales revenue and profit grew by 8% year-on-year to US$166m and 7% to US$32.2m in the nine months to September 2022. It was probably able to do this, in part, due to the fact that it operates one the few integrated plants in the country and it has direct access to limestone reserves across the border in India. By contrast, HeidelbergCement Bangladesh’s sales fell by 3% year-on-year to US$90.7m in the first six months of 2021 and it made a loss of around US$2m. Aramit Cement’s revenue fell by 60% year-on-year to US$6.09m in the nine months to March 2022 and it reported a loss. Premier Cement Mills increased its revenue by 5% to US$99m in the same period, although its net profit dropped by 91% to US$387,000. Crown Cement’s revenue rose by 16% to US$13m but its net profit fell by 81% to US$1.32m.
Geopolitics, high energy prices and local problems are all combining to make life difficult for cement producers in Bangladesh. As the market adjusts to the current situation the determining factor here is likely to be the cost of grinding cement to end users versus just importing cement directly. Current conditions do not seem to be stopping Crown Cement though nor LafargeHolcim Bangladesh. The latter, for example, launched a new blended cement product, Supercrete Plus, earlier in November 2022. One way out for the others might be explore exports and the BCMA suggested just that to the government over the summer, although this doesn’t seem like the most obvious solution for a country that imports so much of its raw materials.
Update on COP27
Written by David Perilli, Global Cement
09 November 2022
Readers may have noticed the 2022 United Nations Climate Change Conference (COP27) is currently taking place at Sharm El Sheikh in Egypt. Many of the cement companies, suppliers and related associations are present at the annual jamboree and getting stuck in. For example, Holcim’s chief sustainability officer Magali Anderson was scheduled on 8 November 2022 to discuss solutions to decarbonise the built environment at the event’s Building Pavilion, Cemex’s chief executive officer Fernando A González took part in the First Movers Coalition (FMC) panel, FLSmidth is down for a number of talks and both the Global Cement and Concrete Association (GCCA) and World Cement Association are busy too.
Stone cold progress, if any, from the conference is yet to emerge although there is still time given that the event runs until 18 November 2022. No doubt some sort of ‘big message’ style international commitment or plan will emerge from the haggling. However, on the cement sector side, the biggest story so far has been the FMC plan for some of its members to procure at least 10% near-zero cement and concrete for its projects by 2030. Both Holcim and Cemex were founding members of the collation of companies that intend to use their purchasing power to support sustainable technologies in hard to abate sectors. Commitments for the aviation, shipping, steel and trucking sectors were set at COP26 in Glasgow, aluminium and CO2 removal followed in May 2022 and chemicals and concrete were scheduled for November 2022. The latter has started to happen with the formation of the FMC’s cement and concrete group. Companies involved include ETEX, General Motors, Ørsted, RMZ Corporation and Vattenfall. Of these, Sweden-based energy producer Vattenfall has publicly said it is going for the 10% near-zero cement and concrete target by 2030.
Company | 2021 | 2030 Target | Notes |
Cemex | 591 | 480 | ESTIMATE, 40% less CO2/t of cementitious material compared to 1990 |
China Resources Cement | 847 | UNKNOWN | Emission intensity is for clinker |
CRH | 586 | UNKNOWN | 25% reduction in Scope 1 and Scope 2 CO2 emissions by 2030 (on a 2020 baseline) |
Heidelberg Materials | 565 | 500 | |
Holcim | 553 | 475 | |
UltraTech Cement | 582 | 483 | ESTIMATE, Reduction in CO2 emission intensity by 27% from FY2017 level by FY2032 |
Votorantim | 597 | 520 |
Table 1: Net CO2 emission intensity (kgCO2/t) for cement production at selected large cement producers.
While we wait for more announcements to escape from Sharm El Sheikh it might be worth reflecting upon one of the targets some of the cement companies have set themselves for 2030. Table 1 above compares the net CO2 emission intensity for cement production at some of the large cement producers. It doesn’t tell us much, other than that the CO2 emission intensity for these companies was in the region of 550 - 600kgCO2/t of cementitious material in 2021. This compares to 580kgCO2/t in 2020 for the GCCA’s Getting the Numbers Right (GNR) data for the companies it covers. The companies featured in Table 1 are all aiming – or appear to be aiming – for 475 - 525kgCO2/t by 2030. This may not sound like much but it has and will require hard work, innovation, investment and risk on the part of the cement producers. This is also before carbon capture, utilisation and/or storage (CCUS) units will have been built at most cement plants. Yes, until the CO2 emission intensity goes to down to zero, if cement production volumes keep rising sufficiently then total gross CO2 emissions from the cement industry will also increase. Yet, gross CO2 emissions from cement production are likely to peak sometime between now and 2030 if they haven’t already.
One sobering fact to end with is that 1990 is now further in the past than 2050 is in the future. If you can remember George Bush Sr as US president or you saw the film Goodfellas at the cinema then that’s the amount of time we have left to reach net zero. The global economic shocks of the post-coronavirus period and the war in Ukraine are stressing the world’s climate targets more than ever before. Let’s see how COP27 reacts to this. So far though, serious commitments to using low-carbon cement and concrete from big companies are a useful step to entrenching these products in the market.
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- CO2
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- Global Cement and Concrete Association
- GCCA
- World Cement Association
- FLSmidth
- Vattenfall
- Etex
- Getting the Numbers Right
Slashing cement's CO2 emissions Down Under
Written by Global Cement staff
02 November 2022
In Australia and New Zealand, four producers operate a total of six integrated cement plants, with another 13 grinding plants situated in Australia. This relatively small regional cement industry has been on a decades-long trajectory towards ever-greater sustainability – hastened by some notable developments in recent weeks.
Oceania is among the regions most exposed to the impacts of climate change. In Australia, which ranked 16th on the GermanWatch Global Climate Risk Index 2021, destructive changes are already playing out in diverse ways.1 Boral reported 'significant disruption' to its operations in New South Wales and southeast Queensland due to wet weather earlier in 2022. This time, the operational impact was US$17.1m; in future, such events are expected to come more often and at a higher cost.
Both the Australian cement industry and the sole New Zealand cement producer, Golden Bay Cement, have strategies aimed at restricting climate change to below the 2° scenario. Golden Bay Cement, which reduced its total CO2 emissions by 12% over the four-year period between its 2018 and 2022 financial years, aims to achieve a 30% reduction by 2030 from the same baseline. The Australian Cement Industry Federation (CIF)'s 2050 net zero cement and concrete production roadmap consists of the following pathways: alternative cements – 7%; green hydrogen and alternative fuels substitution – 6%; carbon capture – 33%; renewable energy, transport and construction innovations – 35% and alternative concretes – 13%, with the remaining 6% accounted for by the recarbonation of set concrete.
Australia produces 5.2Mt/yr of clinker, with specific CO2 emissions of 791kg/t of clinker, 4% below the global average of 824kg/t.2 Calcination generates 55% of cement’s CO2 emissions in the country, and fuel combustion 26%. Of the remainder, electricity (comprising 21% renewables) accounted for 12%, and distribution 7%. Australian cement production has a clinker factor of 84%, which the industry aims to reduce to 70% by 2030 and 60% by 2050. In New Zealand, Golden Bay Cement's main cement, EverSure general-purpose cement, generates CO2 at 732kg/t of product.3 It has a clinker factor of 91%, and also contains 4% gypsum and 5% added limestone.
Alternative raw materials
Currently, Australian cement grinding mills process 3.3Mt/yr of fly ash and ground granulated blast furnace slag (GGBFS). In Southern Australia, Hallett Group plans to commission its upcoming US$13.4m Port Augusta slag cement grinding plant in 2023. The plant will use local GGBFS from refineries in nearby Port Pirie and Whyalla, and fly ash from the site of the former Port Augusta power plant, as well as being 100% renewably powered. Upon commissioning, the facility will eliminate regional CO2 emissions of 300,000t/yr, subsequently rising to 1Mt/yr following planned expansions. Elsewhere, an Australian importer holds an exclusive licencing agreement for UK-based Innovative Ash Solutions' novel air pollution control residue (APCR)-based supplementary cementitious material, an alternative to pulverised fly ash (PFA), while Australian Graphene producer First Graphene is involved in a UK project to develop reduced-CO2 graphene-enhanced cement.
Golden Bay Cement is investigating the introduction of New Zealand's abundant volcanic ash in its cement production.
Fuels and more
Alternative fuel (AF) substitution in Australian cement production surpassed 18% in 2020, and is set to rise to 30% by 2030 and 50% by 2050, or 60% including 10% green hydrogen. In its recent report on Australian cement industry decarbonisation, the German Cement Works Association (VDZ) noted the difficulty that Australia's cement plants face in competing against landfill sites for waste streams. It described current policy as inadequate to incentivise AF use.
Cement producer Adbri is among eight members of an all-Australian consortium currently building a green hydrogen plant at AGL Energy’s Torrens Island gas-fired power plant in South Australia.
Across the Tasman Sea, Golden Bay Cement expects to attain a 60% AF substitution rate through on-going developments in its use of waste tyres and construction wood waste at its Portland cement plant in Northland. The producer will launch its new EcoSure reduced-CO2 (699kg/t) general-purpose cement in November 2022. In developing EcoSure cement, it co-processed 80,000t of waste, including 3m waste tyres. The company says that this has helped in its efforts to manage its costs amid high coal prices.
Carbon capture
As the largest single contributor in Australia's cement decarbonisation pathway, carbon capture is now beginning to realise its potential. Boral and carbon capture specialist Calix are due to complete a feasibility study for a commercial-scale carbon capture pilot at the Berrima, New South Wales, cement plant in June 2023.
At Cement Australia's Gladstone, Queensland, cement plant, carbon capture is set to combine with green hydrocarbon production in a US$150m circular carbon methanol production facility supplied by Mitsubishi Gas Chemical Company. From its commissioning in mid-2028, the installation will use the Gladstone plant's captured CO2 emissions and locally sourced green hydrogen to produce 100,000t/yr of methanol.
More Australian cement plant carbon capture installations may be in the offing. Heidelberg Materials, joint parent company of Cement Australia, obtained an indefinite global licence to Calix's LEILAC technology on 28 October 2022. The Germany-based group said that the method offers effective capture with minimal operational impact.
Cement Australia said “The Gladstone region is the ideal location for growing a diverse green hydrogen sector, with abundant renewable energy sources, existing infrastructure, including port facilities, and a highly skilled workforce." It added "The green hydrogen economy is a priority for the Queensland government under the Queensland Hydrogen Industry Strategy.”
Logistics
Australian and New Zealand cement facilities' remoteness makes logistics an important area of CO2 emissions reduction. In Australia, cement production uses a 60:40 mix of Australian and imported clinker, while imported cement accounts for 5 – 10% of local cement sales of 11.7Mt/yr.
Fremantle Ports recently broke ground on construction of its US$35.1m Kwinana, Western Australia, clinker terminal. It will supply clinker to grinding plants in the state from its commissioning in 2024. Besides increasing the speed and safety of cement production, the state government said that the facility presents 'very significant environmental benefits.'
Conclusion
Antipodean cement production is undergoing a sustainability transformation, characterised by international collaboration and alliances across industries. The current structure of industrial and energy policy makes it an uphill journey, but for Australia and New Zealand's innovating cement industries, clear goals are in sight and ever nearer within reach.
References
1. Eckstein, Künzel and Schäfer, 'Global Climate Risk Index 2021,' 25 January 2021, https://www.germanwatch.org/en/19777
2. VDZ, 'Decarbonisation Pathways for the Australian Cement and Concrete Sector,' November 2021, https://cement.org.au/wp-content/uploads/2021/11/Full_Report_Decarbonisation_Pathways_web_single_page.pdf
3. Golden Bay Cement, 'Environmental Product Declaration,' 12 May 2019, https://www.goldenbay.co.nz/assets/Uploads/d310c4f72a/GoldenBayCement_EPD_2019_HighRes.pdf
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Obstacles for Obajana
Written by David Perilli, Global Cement
26 October 2022
Dangote Cement’s Obajana plant has been the focus of an argument between the cement producer and the Kogi State Government (KSG) in recent weeks. The integrated plant was forced to close in early October 2022 and then reopened in mid-October 2022 following an order by the Federal Government. The dispute then entered a legal phase, with the state government taking Dangote Cement to court. The case is ongoing.
The current stage of the disagreement dates back to late August 2022 when the Kogi State House of Assembly reportedly set up a committee to investigate the shares that the state owned in Dangote Cement and other organisations as part of an initiative to examine tax revenue from mining companies. By the end of September 2022 this had turned into a discussion about how exactly Dangote Cement had originally acquired its shares in the Obajana cement plant in Kogi state as well as how much tax it was paying. In early October 2022 the local government ordered the closure of the plant. Events then turned nasty as local vigilantes attacked the plant and hurt some of its staff. In the general unrest that followed the Kogi State House of Assembly was destroyed in a fire. The plant partially reopened fairly quickly and then fully once the Federal Government intervened. Legal action was then started at the Kogi High Court.
Unusually for this kind of disagreement both sides have published detailed information on their respective arguments. Dangote Cement’s parent company Dangote Industries outlined how it originally came to build and own the Obajana cement plant. In short, it signed deals in 2002 and 2003 to buy a 100% stake in Obajana Cement from the KSG, before the plant was built, with the proviso that the state could later buy a 5% share within five years. Dangote Industries then independently financed and built the plant and Obajana Cement later became Dangote Cement. Crucially, according to Dangote Industries, KSG never bought its 5% share. On the opposing side, the KSG has published what it says is the original contract and annexes that it signed with Dangote Industries. This agrees with some of what Dangote Industries has said, especially the part about the option to buy a 5% stake within five years. However, according to reports in the local press, KSG is attempting to persuade the judiciary to cancel the original contract on the grounds that it lacked clear consideration of what should pass from the state to Dangote Industries in return for giving the latter full ownership of Obajana Cement. In other words, the KSG is querying whether the contract is valid given that it received apparently nothing for giving a company away.
The Obajana cement plant was later built and it became operational in 2007. Today it is the largest cement plant in Nigeria and one of the largest in Africa. It produces around a third of the country’s cement and this is why its closure earlier in October 2022 became a national issue. Since the early 2000s Dangote Cement has become the biggest cement producer in Sub-Saharan Africa. It is both a success story for the region and the world.
There may be issues with the perceived or actual contribution Dangote Cement is making locally in Kogi State. These are the kinds of issues that both companies and governments contend with continually. Companies consider where it is cost effective to place investments and governments try to entice them. It is possible that the KSG gave Obajana Cement to Dangote Industries in what it retrospectively considers is a poor deal. It is also possible that Dangote Cement has not paid sufficient tax, although it strongly denies this, and the KSG seems to have moved on from this line of attack. What may be the bigger issue here is if Dangote Cement is perceived to have not paid its dues in Kogi State. However, it seems odd that the KSG would suddenly decide to go after Dangote Industries nearly 20 years after agreeing to the deal. It also seems strange that no lawyer for either party flagged the consideration issue at the time. Thankfully calmness has now prevailed in the state and the cement plant remains open. It is for the courts to decide the validity of the original contract between Dangote Industries and the KSG.
Holcim pays the price
Written by David Perilli, Global Cement
19 October 2022
Doing deals with terrorists has a price: US$778m. The US Department of Justice (DOJ) revealed this week that it had fined Lafarge for its conduct in Syria between 2013 and 2014. In addition Lafarge and its subsidiary Lafarge Cement Syria (LCS) have pleaded guilty to one count of conspiring to provide material support to designated foreign terrorist organisations in Syria. It is uncertain how exactly the fine will be paid but it is worth noting that successor company Holcim reported net sales of nearly US$27bn in 2021. The fine represents nearly 2% of this.
A reasonable amount of new detail can be found on the DOJ website. LCS was essentially dealing with the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front (ANF) as they would a local government in relation to the running of the Jalabiyeh cement plant. As a reminder, both of these groups were defined as terrorist organisations by the US government at the time. The relationship apparently started as monthly payments to local armed groups, including ISIS and ANF, to allow movement through checkpoints. This later progressed to a de-facto tax based on cement sales. However, it became worse when LCS started asking ISIS to block or tax imports of cement from Turkey-based competitors into northern Syria as part of a revenue-sharing agreement. Effectively LCS was fixing the price of cement in a war zone by collaborating with terrorists. In the end LCS, the intermediaries and the terrorist groups made around US$80m whilst they were working together.
Holcim’s interpretation of the ruling was keen to point out that the conduct in Syria was recognised by the DOJ as not involving Holcim in any way. The DOJ did agree that Lafarge’s executives didn't disclose their activities in Syria to its successor company Holcim either before or after the merger in 2015. However, it pointed out that Holcim had not carried out due diligence of LCS’s operations in Syria. It added that, “Lafarge, LCS and the successor company also did not self-report the conduct or fully cooperate in the investigation.”
Despite this, other information that Holcim also highlighted was that the US authorities were now happy that effective compliance and risk management controls were in place to prevent anything similar happening again. Crucially, it said that the DOJ didn’t think that an independent compliance monitor was required. It pointed out that none of the conduct involved Lafarge’s operations or employees in the US and that none of the Lafarge executives were working for Holcim or any associated company. Finally, the group wanted to report that the DOJ found that none of the former Lafarge executives involved shared any of the “methods, goals or ideologies” of the terrorist groups operating in area at the time.
The immediate reaction from all of this is what happens to the ongoing legal case in France, also about Lafarge’s conduct in Syria? In mid-May 2022 the Court of Appeals confirmed a charge of complicity in crimes against humanity against Lafarge. The company then reportedly started the appeal process at the Supreme Court. Other charges, including financing terrorism, endangering life and violating an embargo, were lodged earlier in the legal process. The US is generally seen as being the leading prosecutor of international corporate crime but if the French legal system also issued a fine to Lafarge on the same scale things could become difficult for Holcim. The other complication for the French legal case is that the national intelligence services allegedly used Lafarge’s links with the Syrian terror groups to acquire information but they did not warn the company that it was committing a crime.
Holcim is a different company from what it was when LafargeHolcim formed in 2015. It is being run by a new chief executive officer who came in from another company well after the merger and is diversifying away from the trio of cement, concrete and aggregates with the addition of a fourth business area of light building materials. Alongside this the group has been selling off businesses in the developing world and focusing on Europe and North America. Yet it is still being defined by the criminal actions of a company it absorbed seven years ago and the behaviour of staff long gone. Those actions have been investigated and punishment delivered. More may be coming.