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Competition Commission improves competition in the UK. Again.
Written by Global Cement staff
22 January 2014
Following a two-year investigation, the UK Competition Commission (CC) has concluded that the UK needs a new cement producer to further encourage competition. Lafarge Tarmac will be required to sell one of its five cement plants. Additionally the CC wants the HeidelbergCement subsidiary Hanson to sell one of its slag grinding plants to increase competition in the supply chain for ground granulated blast furnace slag (GGBS).
The CC's competition investigation estimated that UK customers were cost at least Euro55m/yr between 2007 and 2012 due to high cement and GGBS prices, brought about by a lack of competition. According to Mineral Products Association (MPA) cement sales data, over the same period cement sales in the UK fell from 12Mt in 2007 to 8Mt in 2012.
Although it seems strange that the CC has acted again to support competition in the UK (just one year afterthe Lafarge Tarmac merger) the CC defended its actions in a letter to the December 2013 issue of Global Cement Magazine. According to Rory Taylor, the Lafarge Tarmac merger inquiry could only maintain pre-existing levels of competition, while the investigation's remit was to increase competition if it found a problem.
Explaining their administrative procedures provided little comfort for Lafarge Tarmac, which complained about the ruling. "Its analysis of industry profitability, which is central to its conclusion of Adverse Effect on Competition, is flawed, grossly overestimating the returns made. It has also failed to take into account the new business environment that has been established by our divestments - only 12 months ago - to create a new competitor (Hope Construction Materials), and the entry of new importers into the market."
One such importer, Quinn Cement, popped up this week with news that it is to invest Euro16m in its cement plant at Cavan, Ireland. It has hopes to capture 1% of the mainland British market, making it up to Euro9.6m in the process. Although the CC doesn't think that imports significantly effect cement prices in the UK, those Irish hopes have likely been boosted following the UK CC's decision. Whether it is in the interest of UK consumers remains to be seen. One measure of the CC's activity this time might be the time that passes before its next intervention in the cement industry.
Returning briefly to last week's column (MINT cement focus: Indonesia, GCW133), Holcim Indonesia has reported that its sales fell by 2% in 2013. Growth in the cement industry in Indonesia is by no means assured. Holcim will publish its full annual results for 2013 on 26 February 2014.
MINT cement focus: Indonesia
Written by Global Cement staff
15 January 2014
Thank you to everyone who commented on the column in last week's Global Cement Weekly (GCW132, MINTed cement industries). Amongst the more interesting thoughts was that in a large cement producing country like the US, there are regional areas of focus. So, returning to neologisms, FACT might refer to, say, Florida, Alabama, California and Texas, four southern states with the highest cement production capacities in the union. Similar regional breakdowns could be applied to countries such as China, India or Brazil.
Following last week's look at the MINT (Mexico, Indonesia, Nigeria and Turkey) economies in the context of cement we now take a quick recap on what has been happening in the 'I' of the MINT, Indonesia.
Indonesia has a population of 238m, a cement production capacity of 47Mt and a Gross Domestic Product (GDP) of US$1.29tr. Both its cement consumption per capita and GDP per capita are low by international standards suggesting that it has considerable growth potential for its cement industry as its wider economy grows.
Indonesia's biggest cement producer, the state owned Semen Indonesia (formerly Semen Gresik) has reported to local media that its unaudited net profit rose by 14% year-on-year in 2013 to US$410m. Its revenue rose by 12% to US$1.8bn. Its new 1.5Mt/yr cement plant in Tuban, East Java has been reported as being operational, bringing Semen Indonesia's cement production capacity up to 31.8Mt/yr in 2014.
The country's second biggest cement producer, Indocement, has not reported any figures for 2013 as a whole yet. However parent company HeidelbergCement did note that the Indonesian economy had slowed down as a result of falling commodity prices. Cement and clinker sales including exports rose by 0.6% in the first nine months of 2013. Around mid-2013 local media reported that Indocement was losing market share in Indonesia.
Holcim Indonesia has also not revealed its financial situation in 2013. However, like Indocement, Holcim Indonesia reported with its third quarter results that economic growth had 'temporarily' flattened in the country. Operating results had not improved on levels in 2012.
Overall domestic cement sales rose by 5.8% year-on-year to 47Mt for the first 10 months of 2013 according to data from the Indonesian Cement Association. Previous annual rises in cement production and cement consumption had started to slow in 2012.
Growth in the Indonesian cement industry is also having an effect on the larger geographical region. Australian cement producer Boral suspended clinker production at its Waurn Ponds plant in late 2012 due to cheaper imports from countries such as Indonesia. New Zealand followed suit in mid-2013 when Holcim announced plans to build cement import terminals instead of building a new cement plant at Weston.
In summary it seems likely that the cement market in Indonesia slowed down in the first half of 2013 but it still appears to be generating growth none-the-less, true to the MINT pattern. Market analysts from Kim Eng agree, pinning issues with domestic cement consumption in 2013 on capacity bottlenecks and over-crowded ports. Growth in the cement markets for the MINT countries may seem likely but in the case of Indonesia it cannot be assumed.
MINTed cement industries
Written by Global Cement staff
08 January 2014
There was a great quote on BBC News from Nigerian cement mogul Aliko Dangote to start 2014 with: "Can you imagine, can you believe, that [Nigeria] has been growing at 7%/yr with no power, with zero power? It's a joke."
In the article Dangote is describing economic growth in Nigeria and the BBC points out that 170 million people in Nigeria use the same amount of power as 1.5 million people do in the UK. The author then goes on to predict that Nigeria could grow at a rate of 10 – 12%, by just solving power infrastructure in the country.
For the start of 2014 the British state broadcaster has been running a radio series on the so-called MINT economies. The term refers to the growing economies of Mexico, Indonesia, Nigeria and Turkey and is being used as a new buzzword in the same fashion as BRIC (Brazil, Russia, India and China) to describe broadly similar growing economies outside the traditional western bloc dominated by the G7.
Comparing the cement industries in the MINT countries raises some discrepancies between the desires of Western economists and the local cement industries. Mexico has a population of 118m, a Gross Domestic Product (GDP) of US$1.85tr and a cement production capacity of 50Mt/yr. Indonesia has a population of 238m, a GDP of US$1.29tr and a cement production capacity of 47Mt/yr. Nigeria has a population of 175m, a GDP of US$479bn and a cement production capacity of 28Mt/yr. Turkey has a population of 74m, a GDP of US$1.17tr and a cement production capacity of 82Mt/yr.
Mexico and Turkey have the lower populations in the MINT group, the highest (and most similar) Gross Domestic Product (GDP) per capita at US$15,000 and are the more developed cement industries in the group with the higher cement production capacities per capita. All of the MINT countries have infrastructural issues that will require large amounts of cement in the coming years.
Highlighting Dangote's concerns we cover a cement industry news story this week from Nepal, where Dangote is considering potential locations for a cement plant. Part of the publicly reported meeting between Dangote and the Nepalese government concerned power requirements for the project. Dangote intends to generate 30MW itself and has asked Nepal to provide 30MW. From the CEO downwards the cement producer clearly understands the problems of underdeveloped infrastructure. This is not surprising given his comments above!
That MINT economies are growing powers will not surprise the cement industry. In this week's Global Cement Weekly, in addition to the Dangote story, we feature two news stories focusing on direct industry capital investment in Indonesia. Looking more widely nearly half the stories are from BRIC or MINT countries.
With this in mind Global Cement has developed its own buzzword for the cement industry in 2014: the VISA group. This group includes Vietnam, Italy, Spain and Australia, countries that have all had problems with their cement industries in 2013 such as a production overcapacity or financial losses. If readers have any nicknames of their own for groups of cement producing nations let us know at This email address is being protected from spambots. You need JavaScript enabled to view it..
2013 in cement
Written by Global Cement staff
18 December 2013
As this is the last issue of Global Cement Weekly before the Christmas 2013 break, once again we will look at some of the major news stories of the year. This is a subjective summary of the year so if readers feel we have missed anything major let us know via LinkedIn, Twitter or This email address is being protected from spambots. You need JavaScript enabled to view it..
China tackles pollution and overcapacity
2013 has been the year that China's central planners took action against cement production overcapacity and pollution. Consolidation plans for the industry followed falling profits for cement producers in 2012. However, record air pollution levels in Beijing in early 2013 shut the city down, raised public awareness and gave the government a strong lever to encourage further industry consolidation through environmental controls. By the middle of year profits of major producers were up but production was also up. Finally in December 2013, China started to launch its emissions trading schemes (ETS), led by Guangdong province, to create what will be the second largest carbon market in the world after the EU ETS.
India faces a sticky wicket
Meanwhile, the world's second largest cement producing country has faced poor profits and growth for cement producers blamed on paltry demand, piddling prices and proliferating production costs. Compounding that, the Indian Rupee fell to a historic low relative to the US Dollar in mid-2013, further putting pressure on input costs. Holcim reacted to all of this by releasing plans to simplify its presence in the country between Holcim India, Ambuja and ACC.
Sub-Saharan Africa draws up the battle lines
Competition in sub-Saharan Africa is set to intensify when Nigeria's Dangote Cement opens its first cement plant in South Africa in early 2014. It is the first time Africa's two largest cement producers, Dangote and South Africa's PPC, will produce cement in the same country. Future clashes will follow across the region as each producer increasingly advances toward the other.
The Kingdom needs cement... and workers
Saudi Arabian infrastructure demands have created all sorts of reverberations across the Middle Eastern cement industry and beyond as the nation pushes on to build its six 'economic' cities amongst other projects. Back in April 2013 King Abdullah bin Abdulaziz Al Saud of Saudi Arabia issued an edict ordering the import of 10Mt of cement. Then some producers started to report production line shutdowns in the autumn of 2013 as they buckled under the pressure, although they consoled themselves with solid profit rises. Now, cement sales have fallen following a government crackdown on migrant workers that has hit the construction sector.
Competition concerns in Europe
Europe may be slowly emerging from the economic gloom but anti-trust regulators have remained vigilant. An asset swap between Cemex and Holcim over units in the Czech Republic, Germany and Spain has received attention from the European Commission. In the UK the Competition Commission has decreed that further action is required for the cement sector following the creation of new player Hope Construction Materials in 2012. Lafarge Tarmac may now have to sell another one of its UK cement plants to increase more competition into the market. Elsewhere in Europe, Belgium regulators took action in September 2013 and this week we report on Polish action against cartel-like activity.
Don't forget South-East Asia, Brazil or Russia!
Growth continues to dominate these regions and major sporting tournaments are on the way in Brazil and Russia, further adding to local cement demand. Votorantim may have cancelled its US$4.8bn initial public offering in August 2013 but it is still has the highest cement production capacity in Brazil. Finally, Indonesia may not have had any 'marquee' style story to sum up 2013 but it continues to regularly announce cement plant builds. In July 2013 the Indonesian Cement Association announced that cement sales growth had fallen to 'just' 7.5% for the first half of 2013.
Global Cement Weekly will return on 8 January 2013
Fracking up the cement industry
Written by Global Cement staff
11 December 2013
Water conservation is on the agenda this week with two water-related news stories from the multinational cement producers.
First came a story that Lafarge Canada is preparing to run a trial using waste water from hydraulic fracking at its Brookfield cement plant in Nova Scotia. Currently the plant uses 35ML/yr of fresh water from a nearby lake to control temperatures of its rotary cement kiln. Potentially some of this water could be replaced with water produced during the fracking process. This water would then evaporate and be emitted from the stack.
The background to this pilot project is that the Nova Scotia regional government introduced a two-year moratorium on fracking in 2012 while it reviews the situation. Given the high level of public debate on fracking, any process using waste products from it is going to receive a high level of attention. One of the major arguments against fracking concerns the toxicity of the fluids used. Hence Lafarge stressed in their statement how safe the waste water would be before it would even be used in the plant. Safe enough to drink apparently.
Focusing on the industrial aspects of the pilot for cement production, it will be fascinating to see what effects the fracking waste water might have even just as a coolant on plant equipment. Among other contaminants, fracking waste water often contains high levels of salt. Managing a transition from a fresh water coolant source to a saltier more corrosive one may pose the first of many challenges.
Later in the week Cemex announced the latest stage in its work on water conservation with the implementation of a corporate water policy. The policy aims to focus on resource availability, resource quality, and ecosystem integrity. It continues Cemex's Water Project, developed in partnership with the International Union for Conservation of Nature.
Notably Cemex's water policy aims to maximise efficiency by managing water consumption with increased captured recycled or captured water usage given as an example. How Cemex might use recycled water from a contentious industrial process such as hydraulic fracking is not specified. However, the policy does aim to actively reduce pollution and limit the effects of discharge upon water ecosystems from its operations.
Water policies such as a Cemex's are great for an industry that often has an image problem in the eyes of environmentalists. Linking cement production to fracking runoff will not improve this image. Yet placing science before lobbying is the way to go. Bring on the results of the pilot.