Analysis

The close of the first half of 2023 brought the latest crop of seasonal cement data from the Vietnam National Cement Association (VNCA). Vietnam sold 61.4Mt of cement and clinker during the first half of 2023, up by 2.7% year-on-year.¹ Graph 1 (below) tracks the progress of full-year Vietnamese cement and clinker sales over the six years up to 2022, as well as the most recent half-year.

Graph  1 - Vietnamese annual cement production, January 2017 – June 2023

The first half of 2023 marks the first half-year in which lockdown restrictions have been absent in both Vietnam and its main export market, China, since the start of the Covid-19 outbreak.² Vietnam was especially hard-hit: it implemented the first lockdown outside of China in March 2020, and has recorded the 13th most Covid-19 cases of any country up to July 2023. Then, the Russian invasion of Ukraine in 2022 caused uncertainties for cement producers and importers all around the world. Yet the price of imported coal across Southeast Asia had returned to pre-war levels by the end of June 2023.³ This indicates that the first half of 2023 may represent a ‘typical’ first half for the Vietnamese cement industry, for the first time this decade. During the 2010s, this meant growth margins of over 10% year-on-year.

During the first half of 2023, Vietnam’s sales volumes grew by 30% from pre-Covid-19 levels of 47.1Mt in the first half of 2019, confirming the industry trend of rapid capacity expansion. Just in the course of the half year, Vietnam’s integrated cement capacity rose by 7.9% to 123Mt/yr.⁴ It previously rose by 6.9% year-on-year to 114Mt/yr in 2022. That year, first-half cement sales also grew by 6.9% year-on-year, to 59.8Mt from 55.9Mt. In the first half of 2023, capacity growth has outstripped the country’s sales growth, of 2.7% year-on-year.

Meanwhile, Vietnam exported 15.7Mt of cement and clinker in the first half of 2023, 26% of its total despatches.⁵ This corresponds to a decline of 31% year-on-year from 22.7Mt (38% of despatches) in the first half of 2022 and a rise of 0.5% from pre-Covid-19 levels of 15.6Mt (33%) in the first half of 2019.

Chinese construction is the lynchpin in the Vietnamese cement industry’s current growth model. Over successive Five-Year Plans, it has consumed increasing volumes of clinker from Vietnam, as well as cement, at diminishing prices. This strategy overreached itself in the first quarter of 2023, more than a year into an on-going Chinese property market slump, when the value of Vietnam’s cement and clinker exports to the country fell by 95% year-on-year, to US$11.4m.⁶

By lowering prices, Vietnam’s cement sector charts a careful course within the contested waters of global trade rules, but it has run aground before. Most recently, from the start of 2023, the Philippines attached tariffs of up to 28% (and up to 55% for blended cement) to Vietnamese cement from 11 different producers.⁷ The Philippines Tariff Commission had found that ‘dumped’ cement from Vietnam – constituting over 50% of cement imports over the 18 months up to the end of 2020 – threatened the domestic industry. The failure to diversify its markets is a further sign that Vietnam’s current positioning in the cement and clinker trade is, at best, medium-term.

From October 2023, cement entering the European Union (EU) will become subject to extra taxes under the carbon border adjustment mechanism (CBAM).⁸ The EU is a relatively small trade partner for Vietnam, but the longer-term effect of this policy will be to replicate itself in the statute books of other nations and trade blocs, beginning in the Global North. With forecast lignite imports of 70 – 75Mt to Vietnam in 2023 – 2026, opportunities for cement exports from Vietnam, and countries like it, are diminishing.

The best situation for Vietnam would be accelerated growth in its domestic consumption base. The government is attempting to trigger a construction boom with its 2023 budget, which includes US$5bn in residential construction funding. Meanwhile, full-year infrastructure spending will rise by 25% year-on-year.⁹ To this end, it also needs to keep the cement price low. From 1 January 2023, Vietnamese exporters paid a tax of 10% of value on shipments of cement and clinker, instead of the previous 5% rate. If successful, this will nourish booming consumption with booming, and cheap, supply. Vietnam is grafting its Chinese model back onto the domestic market.

Producers will keep exporting. In May 2023, Nghi Son Cement Corporation despatched a first shipment of 31,500t of cement to the US. Nghi Son Cement Corporation’s cement, produced with fly ash, is clearly considered by the company and its owners to have some long-term marketability in the US. Said owners include Japan-based Taiheiyo Cement, which produces cement in the US via its CalPortland subsidiary.

In Vietnam, the cement industry has undergone a period of unparalleled growth, fuelled by exports. It can now reinvest the proceeds in establishing a self-sufficient construction sector around an ever more sustainable cement industry, ready to become the first choice across new markets as they arise in Southeast Asia and beyond.

1. Global Cement, 'Vietnam's first-half cement production declines in 2023,' 29 June 2023, https://www.globalcement.com/news/item/15941-vietnam-s-first-half-cement-production-declines-in-2023

2. The Observer, ‘‘It was all for nothing’: Chinese count cost of Xi’s snap decision to let Covid rip,’ 29 January 2023, https://www.theguardian.com/world/2023/jan/29/chinese-cost-covid-xi-lockdowns-china

3. Reuters, ‘Column: Asia thermal coal prices get the blues from Europe and LNG,’ 20 June 2023, https://www.reuters.com/markets/commodities/asia-thermal-coal-prices-get-blues-europe-lng-russell-2023-06-20/

4. Việt Nam News, ‘Record input costs thwart cement groups,’ 12 July 2023, https://global.factiva.com/ha/default.aspx?mod=SavedSearch_SelectSearch&page_driver=SavedSearch_SelectSearch#./!?&_suid=168119771197707004455190223307

5. Việt Nam News, ‘Industry: Vietnam’s Cement, Clinker Exports +82.2% y/y to $116M in Jun: GSO,’ 4 July 2023, https://global.factiva.com/ha/default.aspx?page_driver=searchBuilder_Search#./!?&_suid=168908188871006418595282713178

6. Vietnam Investment Review, ‘A strenuous year ahead in cement,’ 9 May 2023, https://vir.com.vn/a-strenuous-year-ahead-in-cement-101707.html

7. Global Cement, 'Philippines Department of Trade and Industry to impose anti-dumping duties on cement from Vietnam,' 22 December 2022, https://www.globalcement.com/news/item/15084-philippines-department-of-trade-and-industry-to-impose-anti-dumping-duties-on-cement-from-vietnam

8. Global Cement, 'Too taxing? How the CBAM affects cement exporters to the EU,’ 29 June 2022, https://www.globalcement.com/news/item/14316-too-taxing-how-the-cbam-affects-cement-exporters-to-the-eu

9. Customs News, ‘Cement enterprises expect a "brighter" second half of 2023
https://english.haiquanonline.com.vn/cement-enterprises-expect-a-brighter-second-half-of-2023-25368.html

It’s been a good week for graphene usage in the cement and concrete industries, with a trial set to take place at Breedon Group’s Hope cement plant and the inclusion of four graphene projects in the Global Cement & Concrete Association’s (GCCA) shortlist for its second second Innovandi Open Challenge.

The trial at the Hope cement plant was scheduled to take place on 28 June 2023, alongside First Graphene, Morgan Sindall Construction and the University of Manchester. The plan was to use 1.2t of First Graphene’s PureGraph product by testing different dispersion methods and dosage rates. The graphene was going to be prepared as a grinding aid and then added to cement grinding mill feed. Dispersion into the cement production line was planned to occur over a 24-hour period using traditional grinding aid dosage lines, with minimal operational or mechanical change required to the existing plant.

The cement produced was then going to be validated by Breedon’s quality control team to assess its performance enhancement. Overall the trial was going to produce around 2000t of graphene-enhanced cement during the trial. This cement will then be passed to Morgan Sindall Construction for real-world construction demonstrations. First Graphene reckoned that the trial was going to produce the largest volume of graphene-enhanced cement manufactured to date.

First Graphene and the other partners haven’t released any information yet on how the trial went. However, the results will be used to build on data obtained from smaller scale trials previously conducted at a concrete processing laboratory in the UK.

Elsewhere, the 15 projects shortlisted by the GCCA, as part of the Innovandi Open Challenge, were set to pitch their ideas for access to the scheme. The benefits of inclusion on the scheme include access to industry plants, laboratories, networks and the expertise and infrastructure of the manufacturer members of the association. 70 applications were made for the second Innovandi round. The first round in 2021 was focused on carbon capture and utilisation and two projects eventually made it to the pilot stage. This time the emphasis is on low-carbon concrete.

The graphene-related contenders for Innovandi in the current round include Nano Crete, Nanospan India, SeaMix and Versarien Graphene. All four companies are promoting concrete admixtures that use graphene. Given the brief for this Innovandi round, these projects are focused on concrete production as opposed to the trial at the Hope cement plant, mentioned above, which is testing graphene addition during cement grinding.

Nanospan India, for example, is promoting its Spanocrete product. It says that its admixture acts as a superplasticizer and accelerator, allowing for reduced cement and water consumption, a shorter curing cycle and an increase in compressive strength. US-based SeaMix (part of MEP Group), meanwhile, has developed its own concrete admixture that uses chopped basalt fibres and graphene. It too offers greater compressive strength and reduced cement consumption for the resulting concrete. However, it also allows for the use of any non-potable water source, a compelling selling point for construction companies trying to minimise the use of drinking water.

It is early days yet for the application of graphene in the cement and concrete sectors. Graphene was first produced at the University of Manchester in 2004. Just under 20 years later and various products are emerging with test projects slowly gathering pace and even commercial applications, such as SeaMix and others, building up their portfolios. Various challenges such as reduced workability, the high cost of graphene or even concerns about simply handling graphene get raised in discussions about the wider adoption of graphene-based admixtures but so far these do not seem insurmountable. We await the outcomes of the trial at Hope and the selections of the second round of Innovandi.

For more on Seamix read the interview with Rey Rubio, the Vice President of MEP Consulting Engineers, in the July - August 2023 issue of Global Cement Magazine

Cemex highlighted its Clyngas project at its Alicante cement plant in Spain this week. The project will produce synthesis gas (syngas) from different types of waste for direct injection into the burner at the plant during the combustion process. It is being run in conjunction with Waste to Energy Advanced Solutions (WTEnergy), a company that Cemex invested in at the end of 2022. It is also receiving Euro4.4m in funding from the European Commission (EC) as part of its innovation fund for small scale projects. The initiative estimates that it will save over 400,000t of equivalent CO₂ during the first 10 years of the project's life by replacing petroleum coke with syngas.

Clyngas is another example of Cemex’s innovation with alternative fuels for cement and lime. It follows on from the group’s work with hydrogen injection into cement kilns. As presented at the 15th Global CemFuels Conference 2022 it has been using hydrogen in low volumes as a combustion enhancer in more than 20 plants worldwide. However, it was also looking into using hydrogen more directly as a fuel and as a feedstock for other alternative fuels. WTEnergy’s gasification process could potentially link up to this as it converts waste streams such as wood chips, agricultural waste, refuse derived fuel (RDF), solid recovered fuel (SRF), dry sewage sludge, meat and bone meal, poultry litter and plastics into syngas. WTEnergy then proposes that its gasification process and/or the syngas can be used for power generation and thermal applications. In the case of the Clyngas project it will be the latter, as the gasification process will be used to boost the burnability characteristics of RDF with a high biomass content. One part of this to note is that the syngas can potentially be used to manufacture hydrogen. This would be a useful capability for a cement company, for example, that was already using alternative fuels and was now considering further decarbonisation by switching to using hydrogen.

A few other cement companies have been looking at synthetic fuels too, but this has generally been as a by-product of carbon capture and utilisation. This week Lafarge France, for example, said it had signed a memorandum of understanding with Axens, EDF and IFP Energies Nouvelles for a synthetic fuel production trial. Its plan is to build a unit that will produce synthetic kerosene using captured CO₂ from a carbon capture installation at Lafarge France's Saint-Pierre-La-Cour cement plant. The kerosene will then be sold to airlines. Other examples of cement companies looking at using captured CO₂ to manufacture synthetic fuels include Finnsementti’s pre-engineering study with Aker Carbon Capture to consider producing methanol as a fuel for transport, Holcim’s and TotalEnergies’ various plans of what to do with the CO₂ captured from the-to-be upgraded Obourg cement plant and Cemex Deutschland’s ambitions for its Rüdersdorf plant.

As can be seen above there are different types of synthetic fuels and cement companies are at the research and pilot stages. Although there isn’t a commonly accepted definition of what a synthetic fuel is, the general meaning is that of a fuel made from feedstock using a chemical reaction as opposed to, say, a refining process. The wide variety of potential synthetic fuels puts the confusion over the different types of hydrogen into perspective. However, this may be a problem for a later date if usage by cement companies becomes more serious.

What is a problem, though, has been the EC’s planned legislation to phase out the use of industrial CO₂ in synthetic fuels by 2041. Cembureau, the European cement industry association, warned in late 2022 of the issues this would pose for industries trying to find a way to utilise their CO₂ emissions where storage was too difficult or expensive. Its view was that while synthetic fuels using industrial CO₂ are not fully net-zero, as the captured CO₂ is later released into the atmosphere, it is a necessary short to medium term step for sectors trying to make the transition. Companies trying to build industrial-scale chemical plants for synthetic fuels need running periods of 20 to 30 years to achieve payback. As of March 2023 Cembureau was still concerned about the implication of proposed regulations, specifically with regards to the proposed criteria for which synthetic fuels could be used, based on their greenhouse gas emissions savings (at least 70% compared to the regular fuels being replaced). It directly linked this to synthetic fuels projects being launched by the cement sector that might be adversely affected by the new rules. The EC published the legislation in late June 2023 and it is set to become legal in mid-July 2023.

Using synthetic fuels either as a fuel or a by-product from cement production is an area of interest currently with the projects detailed above and others in progress. One vision for their use in Europe, at least, is that they might offer a route for carbon capture for cement plants without access to the logistic networks necessary for sequestration. Whether they find a place in cement manufacture either on a transitional basis or over a longer term should become clearer over the coming decade. Yet the EC’s new rules are likely to slow this process down as at least some of the planned pilots may become unviable in Europe. Other jurisdictions around the world take note.

Mining and materials company Afrimat said it was buying Lafarge South Africa this week. The assets it is acquiring include aggregate quarries, ready mix concrete (RMX) batching plants, one integrated cement plant, two cement grinding plants, cement terminals and fly-ash sources. The means of purchase is somewhat unusual, as Afrimat is paying around US$6m but it also appears to be taking responsibility for around US$50m of outstanding debt that Lafarge South Africa owes its parent company, Holcim. In a statement Afrimat’s chief executive officer (CEO) Andries van Heerden talked up the benefits for his company in terms of the boost to its aggregates and concrete businesses.

This is quite the change from 2012 when India-based Aditya Birla Group was reportedly looking into buying Lafarge South Africa. At this time the value for the business for a similar mix of assets, including 55 RMX plants and 20 quarries, was said to be to US$900m. Prior to this, Lafarge South Africa spent around US$170m in the late 2000s on increasing the production capacity at its integrated Lichtenburg plant and building its Randfontein grinding plant. Then in 2014, when the merger between Lafarge and Holcim was announced, Lafarge consolidated its Nigeria-based and South Africa-based operations as Lafarge Africa. It later decided to move the South African business to another Holcim subsidiary, Caricement, in 2019 to keep the business in Nigeria more profitable by reducing its debts. This transaction was valued at US$317m. At the time chair Mobolaji Balogun said that Lafarge South Africa’s operations had faced a challenging market in South Africa, with shrinking demand in an aggressively competitive sector. Afrimat is now buying Lafarge South Africa and its subsidiaries from Caricement.

Holcim isn’t alone in making an effort to sell up in South Africa. In April 2023 the Valor Econômico newspaper reported that Brazil-based InterCement was receiving offers for its remaining African-based assets in Mozambique and South Africa with a potential deal valued at around US$300m. InterCement runs Natal Portland Cement in South Africa, which operates one integrated plant and two grinding units. This follows the sale of its Egypt-based assets in January 2023 to an unnamed buyer.

PPC, the country’s largest cement producer, is staying put. However, it issued a mixed trading update this week ahead of the formal release of its annual results to 31 March 2023. Trading conditions in the interior of South Africa and Botswana were described as being ‘difficult,’ with cement sales volumes down by nearly 6% year-on-year and earnings before interest, taxation, depreciation and amortisation (EBITDA) down by 26%. Yet the group says it was able to grow its revenue. PPC’s CEO Roland van Wijnen added, “We therefore remain hopeful that the South African government will roll out its infrastructure development plans and protect the local cement market through the introduction of import tariffs to create a level playing field for domestic producers.” Dangote Cement subsidiary Sephaku Cement was more circumspect in its recent trading update but it too warned that, “deteriorating economic conditions and persistent challenges in the cement industry impacted Sephaku Cement’s financial performance to break-even levels.”

Much of the above makes for gloomy reading. As the local trade association Cement and Concrete South Africa (CCSA) has laid out to local media, the market faces the problem of having 20Mt/yr of production capacity, 12Mt/yr of demand and over 1Mt/yr of imports compounding the problem. Lobbying by local producers against imports has been a feature of the market since the early 2010s and this work continues through the efforts of the CCSA and others. However, the plea by PPC for government infrastructure spending suggests that the market faces more systemic problems. As a consequence some cement producers are trying to leave the market, while others are attempting to tough it out.

Cement producers in Bangladesh received a surprise at the start of June 2023 when the government budget proposed increasing the duty on imported clinker. The Bangladesh Cement Manufacturers Association (BCMA) reacted this week by calling for the duty on clinker to be reduced, while also calling for the same for a non-adjustable advance income tax (AIT) applied to associated imports and sales.

During a press conference, reported upon by the Financial Express newspaper and other media, BCMA president Alamgir Kabir said that the customs duty on key raw materials for the sector had previously been around 5% of the import value. However, he argued that the new suggested increased tariff was “disproportionate” because it placed the burden at 12 - 13%. He urged the government to treat the cement sector as a "priority sector" given that it was facing higher prices generally due to the aftermath of the Covid-19 pandemic, the energy shocks from the Russian invasion of Ukraine and negative currency exchange effects.

The BCMA’s latest lobbying call may sound familiar because it follows a similar battle against import charges from late 2022. A supplementary duty was introduced in November 2022 when the National Board of Revenue (NBR) changed the way limestone was coded in response to a significant increase in imports from 2020. At the time, the price of limestone imports reportedly nearly doubled. The BCMA may have won this battle because in March 2023 the NBR withdrew its supplementary duty. It did require that importers submit to further scrutiny including an updated Import Registration Certificate and various tax related requirements.

The timing of the NBR’s decision to relax the limestone duty is telling given that the previous month or so six of the country’s seven publicly listed cement producers reported either falling profits or losses for the second half of 2022 or the year as a whole. Only LafargeHolcim Bangladesh bucked the trend with an increase year-on-year in its annual profit after tax in 2022, although it attributed this to 95% volume growth in its aggregates business.

As discussed previously a characteristic of the cement sector in Bangladesh is that the country has no domestic limestone reserves. It all has to be imported. Arusha Ahmed Khan, Shun Shing Group presented a summary of the national industry at the Global Slag Conference that took place in early June 2023 in Düsseldorf. The country has two integrated cement plants and 36 grinding mills operated by 31 companies with a total capacity of 84Mt/yr. At present around 14Mt/yr of new cement grinding production capacity is planned by UK Bangla Cement, MI Cement, Confidence Cement and Dubai Bangla with commissioning dates expected from mid-2023 to mid-2025. Khan revealed that the government switched from British to European standards in the early 2000s leading to a high level (95%) of blended cements on the market. Use of slag cements has grown as more producers commission vertical roller mills and more uptake of slag and other blended cements using secondary cementitious materials (SCM) is expected in the future.

A key vulnerability for a grinding-heavy cement sector, like the one in Bangladesh, is any burden on imports such as logistic costs, currency exchange effects and government tariffs. Sure enough each of these examples has been reported locally. The government says that its proposed higher import tariff on clinker is the first such change in a decade. Cement producers have reacted, predictably, in a negative manner. Whether the authorities go ahead with the planned increase and how well the cement sector could absorb it remains to be seen. There may never be a good time for a tax rise but the BCMA has been able to present the current period as being especially bad.

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