Displaying items by tag: Saudi Arabia
At today's official launch of LafargeHolcim, CEO Eric Olsen was asked to comment on the group's position in Iran. It doesn't have one, but that won't necessarily always be the case given events in Austria this week.
On Tuesday 14 July 2015, Iran and the P5+1 countries (US, UK, France, China, Russia and Germany) agreed an historic deal to limit Iranian nuclear activity in return for a significant lifting of existing trade sanctions at a meeting in Vienna. The country's cement industry will be delighted by this agreement. The talks, in progress since 2006, could mark what has been termed a 'new chapter' in relations between Iran and the rest of the world by Iranian President Hassan Rouhani. For his part, US President Barack Obama stated that the deal would ensure that 'every pathway to a nuclear weapon is cut off' for Iran, but critics from the US, Iran, Israel and elsewhere, suggest that cutting all routes will not be possible. They are alarmed and have warned that the deal could lead to an arms race between Iran and Saudi Arabia, amid increasing animosity in the Middle East.
While the geopolitical implications of the deal are huge, the lifting of trade restrictions will greatly improve Iran's ability to deal internationally. This includes allowing increased oil exports. An article by Reuters anticipates that Iranian oil production could increase drastically from around 1 million barrels per day (mbpd) at present, possibly to its former peak of 3mbpd. (What this might do to the global oil price could be the subject of an entirely separate column). The easing of banking restrictions will make Iranian products more competitive and increase trade in many sectors.
Against this backdrop sits the Iranian cement industry, the world's third or fourth largest by production in 2014, depending on your source. It has an incredible 84.4Mt/yr of cement production capacity in a country of 77.5 million people. Assuming that it could produce and consume all of that cement at home, this would represent consumption of around 1100kg/capita/yr, far above the 600-800kg/capita/yr rate that is typical of a rapidly-developing economy.
Of course, Iran has not been consuming anything like this level of cement recently. According to figures released by its Employers Guild Association this week, Iran made 66.4Mt of cement in its 1393 calendar year, which ended on 21 March 2015. Assuming the above capacity, this gives Iran a cement utilisation capacity of around 78%.
Much of the cement made in Iran was exported in 2014 and so far in 2015. The country exported an incredible 18.4Mt/yr of cement and clinker in the year to 21 March 2015, up from 18.8Mt a year earlier. A large amount of this cement was available at low cost, to the extent that Iran has been accused (along with Pakistan) of dumping cement in the Middle East and East Africa. (Pakistani producers have even pointed out that Iranian cement is making inroads into the Afghan market, more traditionally a target for exports from Pakistan).
So what might happen to the cement trade dynamic in the region? Some suggest that the easing of sanctions can only increase the potential for Iranian cement imports in the region. Trade should become easier, facilitating exports.
Indeed, this is a factor, but it is only part of the equation. Instead, it is likely that, having earned foreign exchange via increased oil sales, Iran will be able to spend more at home. Reuters anticipates that demand for steel and cement will skyrocket as the country undertakes much-needed construction and infrastructure works. This situation would be similar to Saudi Arabia and other Gulf Cooperation Council (GCC) states. How Saudi Arabia reacts to this, both politically and in terms of cement trade, will be of high interest in the region and around the world.
Instead of increasing cement exports, the effect of the lifting of sanctions may decrease them. This will surely be welcome news to local producers currently being undercut in East Africa, as well as exporters in Pakistan, India and elsewhere. Could Pakistan even find itself exporting to Iran? If a US-Iran nuclear deal is possible, anything can happen...
Saudi Arabia: The Chinese General Contractor Chengdu Design & Research Institute of Bldg Materials Industry Co Ltd in Chengdu has placed an order with Gebr. Pfeiffer SE for the supply of an MPS 3070 BC cement mill for Readymix in Saudi Arabia. The 1100kW drive power mill will grind 30t/hr of granulated blast-furnace slag and 46t/hr of Ordinary Portland Cement to a fineness of 4000cm²/g and 3600cm²/g, respectively. Delivery of the equipment is scheduled for 2015.
Saudi Arabia: Arabian Cement Company (ACC) has signed a US$96.5m contract with China's state-run CNBM, under which the Chinese firm will supply and install two cement mills at ACC's plant in Rabigh. The contract includes all engineering, construction and electrical and mechanical works. It will take 13 months to complete.
Saudi Arabia: Southern Province Cement (SPC) has launched trial operations of a third production line at its plant in Tuhama. The new line has 5000t/day of production capacity. The trial period will last about four months.
Saudi Arabia: Saudi Arabia's cement producers have again asked the government to lift a three-year-old ban on their exports so they can supply Egypt with 6Mt of cement, according to the chairman of Saudi Arabia's Cement Association.
"We are ready to export 6Mt of our cement surplus to Egypt following the signing of large contracts between that country and global companies this week," said Jihad Al-Rasheed, chairman of the national cement committee in the council of Saudi chambers of commerce and industry. Al-Rasheed said that it was time for Saudi authorities to lift the export ban after the emergence of 'golden' opportunities for the country's cement manufacturers to export their products to nearby Qatar, which needs large quantities of building materials for the planned stadia and other facilities for the FIFA 2022 World Cup. He added that other key markets that need Saudi cement include Kuwait, Bahrain, Sudan, Yemen and Ethiopia.
"Some Saudi cement plants were constructed in border areas with the aim of exporting their products to neighbouring countries, but the export ban has inflicted heavy losses on them and could force them to lay off workers," said Al-Rasheed. He added that cement companies in Saudi Arabia are trying to reduce a surplus of >20Mt by supplying domestic projects. "Most of the local government and private sector projects now have sufficient cement supplies. We want the Saudi government to lift the ban on cement exports in line with international trade rules," said Al-Rasheed.
Saudi Arabia partially lifted the cement export ban in 2009 before enforcing it again in 2012 to ensure enough supplies for domestic projects. According to Al-Rasheed, cement demand in Saudi Arabia stood at around 57.2Mt in 2014 and is projected to grow to nearly 59.5Mt in 2015.
Saudi Arabia: Yanbu Cement Company (YCC) has signed a contract to set up a 34MW waste heat recovery (WHR) system at its 8.5Mt/yr capacity cement plant near Yanbu with China's Sinoma Energy Conservation Ltd for US$61.8m.
The WHR system will be on stream by the end of 2016 and will be one of the largest of its kind at a cement plant in the world. It will be the largest in Saudi Arabia. Once operational, this WHR system will result in substantial savings in terms of fuel dependence for power generation from the diesel power station. Carbon emissions at the plant will be reduced by more than 100,000t/yr. About 25% of YCC's energy requirement will be met from the WHR system.
Saudi Arabia: Arabian Cement Company has signed an agreement with Saudi British Bank for US$107m of Islamic financing. The loan is to be repaid over a period of five years, including a one-year grace period. Arabian Cement said that it will use the loan to finance part of the first phase of an expansion project to install two new cement mills.
Saudi Arabia: Saudi Arabia's cement sales rose by 3% year-on-year to 57.2Mt in 2014 from 55.3Mt in 2013, according to statistics published by the Argaam news website.
In the fourth quarter of 2014, Saudi Arabia's cement sales reached 14.6Mt, compared to 12.7Mt in the same period of 2013 and 11.6Mt in the third quarter of 2014. In December 2014, cement sales rose by 17% year-on-year to 5.59Mt from 4.79Mt in December 2013. In December 2014, Saudi Cement Company sold 785,000t, followed by Southern Province Cement with 769,000t and Yanbu Cement with 623,000t.
Saudi Arabia: The combined net profit of the Saudi cement firms rose by 6% in 2014 to reach US$1.56bn compared with US$1.48bn recorded in 2013. The profit during the October - December quarter grew by 31% to US$383m compared with US$293m during the same period in the previous year.
The net profits of seven firms, out of 14 listed companies, grew. The profits of six companies dropped in 2014 and one company, Um Al-Qura, registered a net loss.
Arabian Cement Company (ACC) registered the biggest profit, with its profits reaching US$172m compared to US$51.0m in 2013, an increase of 236%. The company attributed the surge in profits to a growth in sales, which reached US$457m in 2014, compared with US$361.6m in 2013.
ACC was followed by Hail Cement Company (HCC), which was the second biggest booster for the sector. Its profits reached US$39.1m in 2014 compared to US$13.3m in 2013, increasing by 191%.
The profits of six companies dropped in 2014 and this negatively affected the sector's profit growth for the year. The profits of Yamama Cement Company (YCC) fell by 23%, followed by Saudi Cement Company (SCC), the profit of which fell by 8% year-on-year.
Saudi Arabia: Yamama Cement has reported that its net profit in 2014 has fallen by 23% year-on-year to US$179m from US$232m in 2013. The decrease was attributed to lower sales due to poor cement demand in 2014. Its operating profit fell by 21% to US$175m from US$221m.