23 - 24 May 2013
London, UK
Conference review - by Robert McCaffrey, conference convenor
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The 2nd Global CemTrader Conference and Exhibition has successfully taken place in London, UK, with delegates from 22 countries gathering to hear 17 presentations on global cement markets, production trends, shipping, coal and petcoke and on trends in SCMs. Delegates highly praised the event for its excellent networking opportunities.
After an informal get-together the night before the conference, delegates gathered at the historic Glazier's Hall on the banks of the River Thames to discuss all aspects of global cement trade and trends. Conference convenor Robert McCaffrey, editor of Global Cement Magazine, likened the perils of doing business in the global cement industry with navigating a boat, dodging rocks, through the fog and in the dark. A certain amount of luck can be useful in such a situation.
Global overviews
The first presenter at the conference, Imran Akram of IA Cement Ltd, suggested that global cement supply will grow by around 5% per year, despite a slowdown in the BRIC countries. The best growth will be cement in Africa and the Middle East. US demand is growing strongly with both volumes and prices rising, with an increase in housing starts of around 20% expected in 2013. Brazilian demand is being underpinned by infrastructure and stimulus spending. Colombian demand is being driven by housing demand, but Argentina is still struggling.
Imran suggested that Europe is looking at its own 'lost decade,' with fresh bailouts for banks and countries never far away and with austerity in full swing. Even 'safe havens' are becoming less insulated from the general economic malaise in Europe. France, Germany, Greece, Spain, Italy and the UK are all expected to see negative cement growth in 2013, even after falls in the preceding years. Greek cement demand has dropped from 13Mt/yr to only around 2.5Mt/yr, meaning that the Greeks have turned to the export markets to sell their excess production. Eastern European nations are also suffering, partly due to a liquidity crunch because Western banks have repatriated cash that had previously been lent to speculative projects in the region. Imran called the Polish construction market 'a disaster.' Russia is a rare ray of light in the depressed European scene, with strong growth prospects.
Chinese growth rates have moderated from 15% per year and above, to a 'new normal' of perhaps 6% per year. Chinese cement prices fell by 15% through 2012 and the market is still oversupplied, suggesting that prices can still fall further: China's property bubble continues to inflate, despite the efforts of the Chinese government to engineer a soft landing. Indian pricing has been strong, but it remains to be seen if this can continue with incipient regional oversupply.
Demand growth for cement in the Middle East and Africa will average around 4%/year, but this masks great variations in the regions, with Saudi Arabia, Algeria and Ghana suffering from shortages, but Iran, the UAE and Egypt 'enjoying' oversupply. New capacity is affecting imports into several African countries, including Nigeria, Tanzania and Ethiopia. However, Imran Akram stated at there will be solid momentum in most countries in these regions. There has been strong government spending in Thailand, the Philippines and in Malaysia, leading to double-digit growth in cement demand. Indonesia is the strongest major market, but infrastructure issues are still holding back demand. South Korea and Vietnam are both currently oversupplied. Chinese cement producers now dominate the world's largest multinationals, with many European companies still burdened with debt. However, Chinese companies have become less profitable and are increasingly constrained in their capacity to grow through international acquisitions, due to a dwindling cash pile.
Elaine Chen of Ocean Shipping Consultants then spoke about global cement trends to 2025. Elaine suggested that global cement demand will increase to around 7Bnt in 2025, with China representing around 58% of global demand. Around 5-8% of global cement production is traded: around 166Mt in 2012, with 75% moved by sea. Total trade and sea trade volumes dipped during the 'Great Recession,' but are starting to climb back up again. Asia is now the world's largest exporting region, with China, Japan, Taiwan and South Korea all involved in exports, with Japan's exports being driven by a reduction in domestic cement demand. Turkey is the largest exporter in the European area, shipping more than the EU15 combined in 2012. From being the largest importer in Europe, Spain's imports have dropped to practically zero by 2013. Cement demand in Africa and the Middle East has provided some relief for oversupplied European countries seeking export markets. Hong Kong, Singapore, Sri Lanka, Malaysia and Afghanistan are all major importers. Bangladesh has been importing over 10Mt/yr since around 2010 and is likely to be a major importer for the foreseeable future.
European scene
Koen Coppenholle, CEO of Cembureau, the European cement association, and a regular columnist for Global Cement Magazine, then rose to speak about the prospects of the European cement industry. The growing population, global warming, energy security, the economic crisis, affordable housing and resource efficiency are all issues facing the world and are all areas where the cement industry has its part to play. Koen underlined the fact that the cement industry is very much a local industry, with raw materials won close to each plant and the product typically not travelling far from the cement plant. The European cement industry has taken the lead in reducing energy demands and the use of alternative fuels and is also a major employer with over 60,000 direct workers throughout Europe and with production valued at Euro18bn.
Koen pointed out that with Cembureau representing around 6.3% of global cement production and China representing perhaps nearly 60%, any approach to reducing greenhouse gas emissions should be a global solution and should not make European industry globally uncompetitive. The concept of CO2 imports, where products imported into the EU also import their emissions at the same time, is one which will become much more important during future discussions about emissions and competitiveness. Koen stated that 100% of cement companies in Europe have returned less that the cost of capital since 2009, partly because they have been unable to pass on all of their rising costs to the final customers. He pointed out that one Euro spent on construction gives rise to three Euros of economic activity through the multiplier effect, a point that should be kept in mind by Eurocrats considering stimulus spending. Koen suggested that concrete can support a sustainable building programme: the use of concrete reduces CO2 emissions by 2-8% over the lifetime of a building compared to steel- or wood-based buildings, partly through its thermal stability and thermal mass. Concrete buildings also have superior fire-resistance compared to all other buildings.
Seaborne trade trends
Ad Ligthart of Cement Distribution Consultants gave a fascinating presentation on global seaborne cement and clinker trade flows, starting with a warning when looking at trade statistics. Ad Ligthart said that if you added up all the cement and clinker export and import figures reported by cement associations, that exports are generally 20% larger than imports. The problem is that imports are often not reported. There is often no separation between cement and clinker imports, while national associations often do not report figures for imports by independents, while SCMs are often not included in the statistics at all. Production and export figures are therefore much more reliable than import figures. Some countries have more reliable statistics than others - these should be used as the foundation stones when building the bigger picture of trade.
Ad also pointed out that a cement plant will be economically more efficient when operating at higher capacity, even if the excess production is then exported, providing a driver for the export market and for global cement trade. The 'Great Recession' reduced global seaborne cement trade by around 30Mt/yr, even while imports into Africa have grown strongly in the meantime. Egypt has suffered a great deal of trouble with its gas supplies, meaning that its cement production has fallen dramatically, leading to substantial imports. Ad showed a fascinating map which showed the seaborne routes for cement and clinker into all of the coastal countries of Africa, supplied from Europe, Asia and the Middle East, largely due to the chronic lack of integrated cement plants on the continent. Ad pointed out that the USA is in a very strong position to be able to import and export, with coastal and river-based terminals, even though many facilities are currently mothballed. He suggested that Australia will import increasing tonnages of cement and clinker, on account of the increasing costs of domestic production. Ad Ligthart went on to give a very thorough account of the status of all of the world's cement and clinker distribution terminals.
Looking at the legal side of shipping, Simon Cox of Howe Robinson Shipbrokers pointed out that clinker is much easier to transport than cement powder, and much cheaper. Fly ash is a difficult cargo, since it is very dusty, and tends to be moved either in specialised cement carriers or in bags. However, slag is easiest carried in granulated form, before grinding. He suggested that around 18-25Mt of cement, flyash and GBFS is moved internationally by sea, with another 50Mt moved domestically by sea, for example between the islands of Indonesia or Japan. South Korea, Taiwan, India and Vietnam are the biggest movers of cement. Only Japanese-flagged carriers are allowed to operate in Japan, and all of them are now fully employed, post-tsunami, on domestic cement transport. Indonesia is buying as many cement carriers as it possibly can in order to try to keep up with a 'hot' domestic market. Korean cement carriers are busy on domestic routes and on transport to cement-hungry Japan. Libya is currently a major importer, with much coming from Greece. According to Lloyds List, there are 313 cement carriers around the world of which 17 are out of service, but only seven are currently available for charter in the next two months. This very low level of availability will inevitably push up prices. Demolition of ships essentially halted in May 2012, and no ship demolition is expected in 2013 since they are still making good money. All the while, the fleet is steadily aging. However, India, Japan, Indonesia and China all have orders pending for new carriers. Conversions from normal bulkers to dedicated cement carriers are becoming more common.
Coal and petcoke for cement
Janina Lam of Howe Robinson Shipbrokers spoke about the outlook for global seaborne coal trade. Indonesia is the largest driver of global coal supplies, producing one third of all coal traded internationally. The two countries driving the market from the demand side are China and India, and the two countries now account for 76% of all proposed new coal-fired power stations worldwide. China is now the world's largest importer, bringing in coal from Indonesia and Australia, and totalling 235Mt of coal imports in 2012. Chinese domestic coal prices have recently been higher than the international price, so that with low freight rates, imports make strong economic sense, especially when taking quality factors into account. The shale gas revolution in the US has meant that a tidal wave of excess coal supply has washed from North America towards Europe. Russia, Columbia, Canada and Mozambique will all significantly increase their export production in the next few years. Freight rates have collapsed, with 2013 expected to be one of the lowest rates seen on the Baltic Dry Index, but with the market now seen to have bottomed out, partly because of a deficit in new builds and inevitable scrappage rates. According to Janina, the fleet is reducing in size and prices will be forced up once more.
Kerry Satterthwaite of Roskill spoke about the economics of petcoke for use in the cement industry. Petcoke is a byproduct of the oil industry and is 'priced to move.' It is priced relative to its main competitor, which is coal. Kerry noted that the global energy demand of the cement industry is equal to around 300Mt of coal. The global coal market is around 7Bnt, meaning that supplying coal to the cement industry is of little or no importance to the main coal suppliers, which concentrate on supplying coal to major power producers. On average, petcoke seems to make up around 20% of the fuel mix of cement production, with coal supplying around 60% and alternative fuels making up only around 5% of the fuel supply (but increasing). Petcoke is not a straight swap for coal, since it is harder to burn, has higher sulphur content, significant minor elements and does not add to the mix, due to its very low ash content. However, it is cheap relative to coal. After 2009, much of the petcoke that had been shipped to Europe has been re-routed to Asia, particularly to China. Petcoke is generally around 80% of the delivered cost of coal. Petcoke production capacity will increase to around 170Mt by 2020, but production will lag capacity, amounting to around 143Mt in 2016. Around 30Mt of this supply will end up in cement kilns around the world.
Legal issues in shipping
Robert Wilson of Holman Fenwick Willan LLP gave the final presentation of the first day, on contract and legal issues in the global cement and coal shipping business. Regulations, pollution, hijacking and defaults are just some of the risks that charterers and owners must expect when writing and signing contracts. He pointed out that the precise wording of the contract, and the precise meaning of the words, possibly as later determined in a court of law, are critical to the contract. Contracts often stipulate that delivery to ASWP, any safe world port - Robert pointed out that if a contract include the word 'safe' then you have a contractual risk. Defaults are rising, especially when prices are falling, as buyers try to decrease their costs. Insurance and credit control can both be used to decrease default risk. Correctly-drafted contracts can also help to prevent defaults. 'Follow strict requirements for sending notices for breach of contract - if you do not, then you may yourself be in breach of the contract,' concluded Robert Wilson.
At the end of the first day of the conference, delegates retired to the Swan Pub, next to Shakespeare's Globe Theatre, for discussion, networking and glasses of lovely warm British beer.
Conference second day
At the start of the second day, Moisés Nuñez of Cemengal spoke about his company's new modular grinding plant technology, 'Plug&Grind.' As well as the capability to build some of the largest grinding stations in the world, Cemengal also builds the smallest and most mobile plants as well. The Plug&Grind grinding station can fit into around 15 shipping containers and when assembled fits into an area the size of a basketball court. Moisés stated that with this concept, it is possible to 'follow the market.' Pre-assembly of the plant takes place in Spain, where it is manufactured, reducing on-site engineering. The plant can be operated with as few as four employees. The ball mill is small, at 500kW, 8m long and 2.2m in diameter - dictated by the size of the container - but it is capable of producing cement up to 6000 Blaine: all equipment is produced in Western Europe, so that there are 'no surprises' during operation.
Trends in Africa and the Middle East
Andy Gboka of broking company Exotix started the session on Africa by saying that everything about the cement industry in Africa is based on transparency or the lack of it. It can be difficult to gain reliable information about many aspects of the industry in sub-Saharan Africa (SSA). Andy suggested that SSA will provide an average of around 6% economic growth for the next decade. Lafarge and HeidelbergCement are well-established multinationals that operate in Africa, but Dangote and PPC (formerly Pretoria Portland Cement) are both strong local players. More than 70% of SSA countries are importers, suggesting that they are under-supplied with domestic capacity, while local prices are often above US$180/t, compared with US$80-100/t globally.
Africa also suffers from a chronic lack of infrastructure, affecting transportation, energy and housing. Per capita consumption in Africa is very low, perhaps only 30kg per person in the DRC for example, due to lack of public investment and low per capita GDP and expensive selling prices. Political and regulatory risks also prevent a higher consumption, including inconsistent policies, armed conflicts and the costs of doing business. However, Andy suggested that the EBITDA margins for companies operating in SSA are generally higher than the world average, at possibly double the level of European plants. Andy pointed out Nigeria and Ethiopia as countries in SSA with the highest growth potential. Growth of 40% over the next five years can be expected for a number of economies in SSA. Cement is critical for governments and local businesses to operate and to grow in SSA, and he suggested that over US$17bn will be invested in the cement industry in Africa over the next five years.
Local players will lead the surge in domestic capacity and the multinationals will inevitably suffer from increased competition. There will be a stronger availability of cement throughout SSA, which will inevitably bring down prices and which will lead to increased plant efficiency. There will be an expansion of distribution networks and an inter-penetration of SSA cement markets. Countries are heading towards increased self-sufficiency in cement, partly through an increase in import tariffs and increased protectionism.
Giorgio Bodo, CEO of ASEC Cement, next spoke about the situation in the Middle East pre- and post-Arab Spring. Essentially all of the countries of North Africa and some of the countries of the Middle East have undergone some degree of political change since 2010. Oil- and gas-led economies are still generally doing well, while those without hydrocarbon resources have fallen behind due to the economic turmoil. Iraqi demand is very high and it is importing a great deal of cement.
Iran is now exporting significant quantities and is set to become the third largest producer of cement in the world in the next few years. Jordan's demand has increased, partly due to the effect of refugees from other counties in the region. Egypt has the oldest cement industry in the region, and now has a total installed capacity of 67Mt/t. Egypt was a major importer of cement in the 1990s and was a major exporter through the first decade of the new century. However, the industry has now fragmented, with many new entrants coming into the market since 2005. Starting on 25 January 2011, Egyptians forced out the regime of Hosni Mubarak, but this has led to a prolonged period of unrest and lower cement demand, due to cancellation of new investments, confusion in government entities and massive fuel shortages. However, demand has increased as has production, since domestic consumers have decided to press ahead with building works, despite (and perhaps because of) the lack of government control on building permits. The newly elected civil president and a new government should lead to increased infrastructure spending, alongside export opportunities, which should now lead to further increases in demand. A new licensing round for up to 14 new cement plants has been mooted, but Giorgio suggested that it is unlikely that any of the projects will happen, at least for the next six or seven years.
In contrast, Algeria has paid off all of its debts and now has over US$200bn in reserves from gas exports. The country has now built a total of 19Mt/yr of cement production capacity, with Lafarge the only non-government-owned producer. However, the country still imports around 2-3Mt of cement each year. The state-operated plants will expand capacity by 8Mt/yr by 2015, while there will also be three new plants with a further capacity of 8.5Mt/yr by 2017. Demand is expected to amount to 31Mt/yr by 2018. Finally, the Kingdom of Saudi Arabia, KSA, is expected to see a CAGR of 10% for the next few years, with demand reaching 80Mt/yr by 2017: energy costs are very low. The low input costs will give Saudi producers a competitive edge when the current export ban is finally lifted. Giorgio Bodo suggested that the political turmoil in the region is not yet over, and will continue to be an issue for a number of years to come.
Carl Franklin, head of investor relations at Dangote Cement, next spoke about opportunities in Africa. Dangote has 20Mt/yr of capacity in Nigeria, with another 9Mt/yr being built, as well as plans to operate in 13 other African countries. Flooding, gas supply problems and commissioning issues on new capacity affected margins in 2012, but the company still managed US$1.2bn of EBITDA, with a 58% margin. Dangote accounts for around a quarter of the capitalisation of the Nigerian stock exchange. Dangote is looking for a listing on the London Stock Exchange, most likely in early 2015, to allow the company access to global capital funds. The company's roadmap for expansion points towards a total capacity of 50Mt/yr by 2015, exporting across African borders, and becoming known as an emerging global cement giant. Dangote is bullish on Africa due to increasing political and economic stability, strong GDP and population growth, an emerging middle class, rapid urbanisation, infrastructure improvements, strengthening financial services, rapid technological adoption, the unlocking of natural resources and increased manufacturing for export due to the low labour costs. Carl fancifully suggested that the future 'iPad 37' could be built in Lagos.
Nigeria currently has a strong and sustained GDP growth of 7%, with a population of 168m rising at 2.5% per year. The country suffers from appalling roads and an under-supply of electricity, and if these impediments are fixed, then growth could rise yet further. New companies are tax free for five years and there are incentives for exports. Carl suggested that there is room for sustainable growth in Nigeria for at least the next 40 years.
Despite the large amounts of new capacity that is due to come on stream, shortages would occur past 2017 if further new capacity is not built in the country. Dangote expects to be able to export to up to 17 countries from its manufacturing bases in Nigeria and Senegal. The Economic Community of the West African States, ECOWAS, offers a current population of 300m (800m by 2050), with low duties for fellow ECOWAS members and taxes on imports from non-member states. Dangote has a policy of building all its plants with Sinoma on a turnkey basis.
Supplementary Cementitious Materials
Charles Zeynel of ZAG International next gave a keynote-style presentation on trends in SCMs. His first point was that China will have huge amounts of surplus capacity at some point in the future, since its current per person consumption is unsustainable. Although not all of it will be available for international export, there is the possibility of very large amounts of cement coming onto the international market. Iran will perhaps eventually be in the same situation. Charles suggested that Chinese cement excesses may be well-timed for increased demand in the US and that trans-Pacific cement shipments may amount to more than 40Mt/yr per year within a few years. There is also a huge opportunity for SCMs to penetrate into the US market. SCMs have better economics than clinker, they improve concrete performance, have lower CO2 emissions, have lower embodied energy and allow beneficial recycling of wastes and by-products. Charles suggested that China may also have very large excesses of blast furnace slag available for export, although the quality of the material may not be very high. In effect, there is not enough granulated blast furnace slag, GBFS, worldwide to match cement industry growth predictions. Iron and steel producers worldwide are typically contracted for long-term supply: very little is now available on the spot markets. Japan has cut its slag exports, due to increased domestic demand. In addition, Charles pointed out that US power producers are very rapidly shutting down coal-fired power stations due to environmental regulations, and are switching to gas-fired stations. Ash availability in the US is reducing and prospects for ash imports into the US are improving, despite logistic difficulties.
Christos Dedeloudis of S&B Industrial Minerals - a major global producer of bentonite, perlite, casting fluxes and bauxite - spoke about a 'new' pozzolanic product. Christos pointed out that many natural pozzolans have disadvantages, such as variability in behaviour. He spoke about a highly active volcanic glass from Milos in Greece, known as µ-Silica. It is an amorphous aluminosilicate of volcanic origin, which is very finely ground and which has strong pozzolanic properties. It has a very consistent chemistry and mineralogy, since the material is derived from a single volcanic flow. µ-Silica has a higher pozzolanicity than OPC, and has much lower water demand than other SCMs, for example silica fume. Concrete strengths in the long term are increased compared to OPC. Christos pointed out that use of the µ-Silica reduces the ingress of chlorides and also reduces the heat of hydration while also making concrete more pumpable. The new material also improves the sprayability of concrete, reducing rebound and increasing long-term strength. He concluded by saying that the price and volumes available of the µ-Silica are not influenced by external factors, since it is not a byproduct, unlike for slag-based products and flyash.
Continuing the session on SCMs, Martyn Popham of Cenin Ltd spoke about the production of ultra-low carbon cement. He pointed out that the best way of reducing the environmental impact of cement is to ensure that the cement is used efficiently, with lower levels of waste. However, the use of alternative fuels and biomass, higher electrical efficiency, waste heat recovery and other means can be used to reduce the environmental impact of cement. Cenin uses a number of different alternative raw materials, transforms them in a patented process, checks the properties of the produced materials using analytical techniques and produces quality durable cement with as little as 43kg/t cement of associated CO2 emissions.
Rachel Bain of Aylesford Ne
wsprint spoke about paper-making ash as a partial cement replacement material. Aylesford Newsprint is an independent newsprint producer, using 100% recycled materials. During the process, a 'paper crumble' is produced in the pulp fibre preparation step. This paper crumble is burnt in the plant's combustor to produce power and steam for the plant and a paper ash is produced as a byproduct. The paper crumble is composed of short fibres, inks, fillers, calcium carbonate and clays. Around 50,000t of paper-making ash is produced each year. The ash is around 58% CaO, 17% SiO2, 9% Al2O3 and 3% MgO and is very finely divided. The main phases are calcite, calcium silicate, lime, mayenite, gehlenite and quartz. Ali Sadeghi of the University of East London presented research showing that a 5% addition of the paper-making ash produces a 5% increase in strength at all timespans, whereas higher substitution rates decrease strength compared to OPC-based concrete. Overall, the rate of strength development in concrete containing paper-making ash was slower than in control OPC-based concrete at an early age, prior to 28 days, at higher levels of substitution. Rachel concluded that the paper-making ash can effectively be used as a partial cement replacement, and can also be used for soil stabilisation and for sewage sludge stabilisation. The material has now been reclassified as a waste-derived product for use in block manufacture, with cement manufacture soon to be included in the classification, meaning that trialling of the material is much easier. The product is registered under REACH.
The speaker programme concluded with a review by Robert McCaffrey of Global Cement Magazine, of the mega-trends likely to influence the global cement industry in the years to 2050 and beyond, including population growth and aging, urbanisation, climate change and environmental degradation and increases in energy costs.
Farewell and awards
Before delegates dispersed once again to the four corners of the world, a number of presentations were made at the conference farewell party. Moisés Nuñez of Cemengal was awarded third place in the best presentation awards, as voted for by the delegates, while Imran Akran took the second prize. However, Charles Zeynel of ZAG International won the prize for the best presentation for his overview of global trends in SCMs.
Delegates highly rated the conference in a number of areas, most particularly for its networking opportunities, while the conference overall was rated more highly that the original event a year before.
The 3rd Global CemTrader Conference and Exhibition on global cement trade and trends will take place in May 2014, once again in London, the world's most connected city. See you there!