Valentines Day 2015 (14 February 2015) saw the kick-off of India's first round of coal mine auctions - who said that the commercialisation of Valentines Day is a bad thing? For those not following the story, here's a brief summary of the key events that have led to the auctions:

Coal, the main fuel used for cement and power production in India, has been in short supply in recent years due to the shortcomings of state-owned Coal India Ltd (CIL), which produces around 80% of India's coal and owns 90% of its coal mines. In 2013-2014, CIL produced 462Mt of coal, missing a target of 482Mt. Demand is expected to reach 950Mt/yr by 2016 - 2017. Numerous cement plants have had to temporarily cease production due to inadequate coal supplies. This is in spite of India's estimated 302Bnt of coal reserves, more than enough to supply both the power and cement industries. Coalgate indeed!

On 24 September 2014, India's Supreme Court cancelled 214 of the 218 coal blocks that had been allocated since 1993. The blocks were for captive use by the cement, steel and power industries, but the allocation process had been accused of lacking transparency. Of the cancelled blocks, 12 belonged to cement companies. The re-allocation of the cancelled blocks commenced in December 2014, when 36 of the 98 viable coal blocks were allocated. A transparent auction process for 21 of the cancelled blocks for end-usage in power, cement and iron production started on 14 February 2015. In March 2015, a further 23 blocks will be auctioned. CIL was requested to steer clear of the bidding by the Indian government.

Reliance Cement and Jaiprakash Associates, as well as Aditya Birla Group's Hindalco Industries, have all won coal mines during the first three days of bidding. Prices ranged from US$22.5/t to US$45.9/t. UltraTech Cement and JSW Cement both placed bids, but have so far been beaten by rivals. There are still many opportunities for cement producers to win coal mines, although whether the locations are suitable is another matter.

With captive coal mines in hand for India's luckiest cement producers, fuel shortages should become a problem of the past. As India's coal-fired power companies are also bidding fiercely in the auctions, power supplies throughout the country should become more reliable. However, one only needs to look at Afghanistan's Ghori I cement plant to see that having a captive coal mine is not always the answer to fuel shortages; due to internal disputes and poor mining equipment, its coal mine production is poor and the plant operates only intermittently. Hopefully, any cement companies new to coal mining will invest in equipment wisely and ensure an efficient supply chain. As with any large purchase, or indeed Valentines Day, India's coal mine auctions are very much a case of caveat emptor...

CRH has made good on its intentions. This week it stumped up Euro6.5bn to buy assets from Lafarge and Holcim in four continents. The move follows preparation since at least May 2014 when the Irish building materials group announced a divestment programme. In October 2014 it announced that it would sell its brickwork division.

CRH is finding the cash through a mix of existing cash, debt and equity placing. Interestingly, back in 2012 an Irish stockbroking analyst who was interviewed reckoned that the company could spend up to Euro3.5bn on acquisitions whilst remaining within its banking agreements. Throw in the recent sales and planned divestments and the planned acquisition from LafargeHolcim doesn't seem like too much of a stretch for CRH.

If completed, the purchase will see CRH take on 24 cement plants with a production capacity of 36Mt/yr. As a back of the envelope calculation suggests the sale price of Euro6.5bn isn't far off the occasionally used price of US$200/t for western cement production. The deal also includes aggregates, ready mixed concrete and asphalt assets.

The purchase marks a change in CRH's buying strategy both in terms of scale and distribution. Much of CRH's previous acquisitions have been minority shareholdings that make it difficult to accurately report the company's position in the cement industry. For example, in our Top 100 Report CRH was reported to have a production capacity of 6.49Mt/yr for majority shareholdings with another 19.9Mt/yr for minority shareholdings. The new cement capacity being purchased blows this away because it more than doubles CRH's total capacity and it appears to be all majority owned. CRH thinks that this will propel it to become the world's third biggest building materials manufacturer after LafargeHolcim and Saint-Gobain, leapfrogging Cemex and HeidelbergCement in the process. Strangely there is no mention of the huge Chinese players in the top five manufacturers in CRH's acquisition presentation.

CRH has avoided buying plants in southern Europe but it is relying on the slowly improving growing UK market, where CRH will pick up four plants, to balance the risk. Elsewhere in Europe, the three Holcim plants in France have been suffering from continued low construction rates in that country and the two Lafarge cement plants in Romania are unlikely to have recovered from a production fall in 2013. Outside of Europe growth has been poor in Quebec in 2013 and 2014, where CRH is buying two plants from Holcim. Both Lafarge and Holcim have also seen a slowdown in Brazil. However, the Philippines does seem like a better bet for CRH, with solid cement volumes growth seen by Lafarge in 2013 and the first three quarters of 2014.

With CRH now looking like a company that wants to produce cement rather than one that owns parts of companies that produce cement, all eyes are on the construction markets. 14 of the 24 cement plants CRH are buying are in Europe. Buying at the bottom of a sustained production slump makes sense because the asking price will be low. However, has the bottom been reached yet?

Russian refractory manufacturer Magnezit Group has struck a deal this week with Vamtec to sell product in Brazil. What such a cooperation agreement will actually entail, as ever, remains vague but it is an interesting time for a cement equipment supplier to enter the market. The majority of refractories sales are to the iron and steel industries but cement and lime holds the biggest minority market. Industrial research analysts Roskill placed the cement and lime share at 13% in a recent market report.

Competitor refractory producer RHI placed Magnezit in the same Euro0.5 – 1bn revenue bracket with producers such as a Magnesita, Inerys, Krosaki and Shinagawa. Magnesita is the most relevant company out of that list because it is headquartered in Belo Horizonte in Brazil. It is a global company but some of its major mines and production sites are based in Brazil. In 2013 its revenue grew by 8% to US$937m despite static refractory sales volumes led by falling steel production. In 2013 its refractory revenues came mainly from South America. So far in 2014 it appears to have increased its refractory sales volumes, despite a declining marking in Brazil and South America as a whole, by moving into new markets.

A similar situation has been reported by RHI in the region so far in 2014 with falling steel production hitting refractory revenue. RHI originally planned to build a refractory plant in Rio de Janeiro in 2011 but this was amended in late 2012. In this environment it seems that Magnezit may be testing the market rather than planning a full-scale incursion into Brazil.

For the first half of 2014 the Sindicato Nacional Da Indústria Do Cimento (SNIC) has reported that cement sales were 34.5Mt in Brazil, a rise of 2.8% compared to the same period in 2013. Despite this modest growth, Brazilian cement producers will see this as disappointing following years of higher growth prior to 2013.

However, events may not be that gloomy in Brazil after all. The prospect of CRH's impending purchase of three cement plants and two grinding plants from Lafarge and Holcim in Brazil with a cement production capacity of 3.6Mt/yr may stir up the market. For starters CRH may audit the suppliers the new plants are using and decide whether they want to continue using them. The acquisition will add a new player to compete with the existing producers in the high producing states of Minas Gerais and Rio De Janeiro. Competition authority Conselho Administrativo de Defesa Econômica (CADE) set up the terms for what Lafarge and Holcim would have to sell in December 2014, so now that a buyer has been found the move may go smoothly. Needless to say this presents an opening for any, say, Russian-based refractory producers looking for new clients!

The Portland Cement Association (PCA) put out a positive forecast for residential housing in the US last week. PCA Chief Economist and Group Vice-President Edward J Sullivan announced that housing starts will increase by 20% to 1.2 million units in 2015 from around 950,000 units in 2014. Strong gains are also expected for 2016.

This is relevant because in previous forecasts growth has been pinned on residential construction demand where there was a lag in demand following the recession in 2008. The PCA has not said whether this improves on its last forecast from late 2014. At that time the US cement market in 2014 was expected to grow by 8% despite a late start to the building season and weaker than expected housing start figures. The latest release suggests that the PCA has become more optimistic about the number of houses being built.

Interestingly, Sullivan pointed out that the focus is on family homes, with high student debt levels excluding the millennial generation born in 1980 - 2000 and with the baby boomers now leaving the market. As an aside, it is worth mentioning that specifying millennials in relation to housing starts is pertinent outside the US also. In the UK, for example, age of first time house buyers has been steadily rising in recent years. This has implications for the construction market and the cement industry alike.

Back in the US, demographic trends are on the side of the cement producers, led by a rising population. Cement demand growth of around 8% is expected in 2015 and 2016. Forbes placed Houston, the location of last week's 2nd Global Well Cem Conference, as America's fastest-growing city. Census data show that it saw a population growth of 392,742 inhabitants in the metropolitan Houston area between 1 July 2010 and 1 July 2013. Put another way this amounted to an extra 10,909 people moving into town each month (!) during this period. That calls for a lot of cement as these people demand houses and infrastructure.

Unfortunately the fly in the ointment here is that the global price of oil has been falling since mid-2014 and Houston's growth is dependent on the oil industry and its associated industries. By extension the cement industry in Texas, the US's biggest producing state, is also vulnerable. Houston may be an extreme example but the PCA is already wondering what the implications of low oil prices will have on the US construction industry as a whole. To this end, Sullivan is set to forecast that short-term gains could be made in the housing market if the oil price stays low but it could have a negative effect if the low prices continue.

One question is whether the US housing market is already experiencing this boost yet. If it is, housing starts and cement production in 2014 may have been artificially stimulated by cheap oil. In this case cement production growth in the US over the next few years may be slower than expected. We'll have to wait and see what Sullivan predicts but in the meantime it might be worth delaying buying that nice new house in Houston.