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How much is an American cement plant worth?
Written by Global Cement staff
03 October 2012
Eagle Materials has picked up two cement plants in the US from Lafarge with a combined capacity of 1.6Mt/yr for US$446m. The deal also included six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.
Following our column in August 2012 following an acquisition in India we decided to ask a similar question: how much are American cement plants worth?
Eagle's acquisition now increases its presence in the Midwest and South Central regions of the US, giving it a rough line of plants across the country nearly connecting Lake Michigan to the Gulf of Mexico. As shown in our industry report on the US between 2005 and 2011 cement consumption fell in both the states the plants are located in. Missouri's consumption fell by 45% from 2.82Mt to 1.56Mt, just above the US national average. By contrast Oklahoma's consumption only fell by 11%, from 1.6Mt to 1.43Mt, the fourth smallest decline in the country.
However, Eagle has demonstrated financial health in contrast to the US sector as a whole, reporting a 21% rise in total revenue in the quarter to 30 June 2012 and a 60% rise in operating earnings year-on-year in the quarter to 31 March 2012. The combined operations at the two plants generated about US$178m in revenue during the year ending in June 2012. By contrast Eagle Materials' revenue totalled US$529m during the same period. The plants' additional capacity will increase Eagle's total by about 60%.
Lafarge are still thinking big though, with the proviso that Eagle will supply certain Lafarge operations with cement for four to five years, as well as an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. According to its 2011 annual report North America comprised 11% of Lafarge's cement sales. Lafarge's sales in the US remained flat in 2011. In that year the company's capacity was 12.8Mt with a 12% market share. This picture has started to change in 2012 with a reduced loss in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter followed by volume and sales increases of above 10% in the second quarter.
Back in June 2011 Cementos Argos picked up two plants from Lafarge in Roberta, Alabama and Harlyville, South Carolina for US$760m with a combined capacity of 2.7Mt/yr. As with the Eagle deal the sale included a number of peripheral assets including a clinker mill, cement mixer lorries and a marine port.
Cementos Argos recently put the world average at US$250m/t when publicising the expansion of its Rioclaro plant. The European Cement Association reports the figure at being above US$200m/t on its website. In August 2012, at the time of the potential CRH acquisition in India, the cost of Indian cement production capacity was placed at US$110/t-US$120/t.
Perhaps the question we should ask is how much is a US cement plant worth when it used to belong to Lafarge. Both the Cementos Argos sale and the Eagle deal worked out at US$280/t including all the ancillaries. The actual question we should ask is why has Lafarge chosen these specific plants to sell to a competitor in the US market?
China GETS ready for carbon trading
Written by Global Cement staff
26 September 2012
Today's report that cement producers from Taiwan are preparing for new Chinese NOx regulations is yet another reaction to several 'seismic' shifts of government-led change rocking the industry in China. These have included the closure of old, inefficient capacity and significant implementation of waste-heat recovery (WHR) systems. Last week's launch of the Guangdong Emissions Trading Scheme (GETS) is one more.
As reported by Reuters Point Carbon, GETS involves four cement plants from the start and it is the largest of seven such provincial schemes. It is as big and bold as the manufacturing hub that it covers. It includes over 800 manufacturing sites and will regulate the emissions from 42% of all power consumed in Guangdong and 63% of all its industrial emissions. It will be the fifth biggest ETS in the world after those in the EU, Australia, California and South Korea.
While GETS is large, the rate that it will be implemented will be more restrained. There will be three years of testing (2012-2015), an 'improvement period' (2016- 2020) and a proper market from 2020. The scheme's progress will be watched closely - its success or failure could determine the shape of emissions trading schemes (ETS) across China and the rest of Asia.
While the aims of ETS are laudable, they have met with 'mixed' reviews in other parts of the world. In Australia in 2011, there were dire warnings of the potential for job-losses and carbon-leakage, with China itself identified as a probable destination for both.
In Europe there is now a strong claim that the EU-ETS has been ineffective, with carbon prices slumping to under Euro10/credit (~US$13/credit), less than a quarter of projected levels for 2012. In the midst of the downturn Ireland's CRH 'earned' millions of Euros in unused credits. Security has also been a problem for the EU-ETS.
Even GETS, less than a month old, has drawn criticism. Unnamed commentators have suggested that the higher-than-expected prices, US$9.50/credit, (only slightly lower than in Europe), already look like the result of collusion in the market.
With all of these concerns, the immediate demand from the cement producers, China Resources Cement, Sinoma, Taipai and Yangchun Hailuo, looks a little strange. However, local media reports that there are advantages to be gained by buying early. All of the four producers have to buy credits for cement plant projects they are currently working on. They are gambling on the fact that carbon prices can only rise - something that is not expected by analysts.
In addition the producers can gain valuable experience of the scheme before it has to be used 'in anger,' which may give them an operational advantage over others. They also know that, unlike in other parts of the world, the government will not backtrack on its decision. Recent NOx regulations, closure of older capacity and implementation of WHR have all been imposed (or are being imposed) from above. They know that it is better to jump into the deep end than to be pushed.
Global Cement Directory 2013 - Coming soon
Written by Global Cement staff
19 September 2012
After another year of research and data collection from a variety of cement industry experts, associations and other sources, the Global Cement Directory 2013 will soon be with us. The new edition will feature more cement plants than ever before and shows a number of trends in the global cement industry.
The 2013 edition of the directory has an extra 70+ plants across Asia. This is in part due to the continued rampant demand in these cement-hungry nations, but is also due to the fact that the directory is impossible to keep 100% up-to-date. As one would expect, India sees significant extra entries compared with the 2012 edition, despite valid concerns of overcapacity.
Looking north, there are also new plants and projects in Russia, a major global cement player, with 60 plants listed in 2012 and 69 in 2013. Over the Bering Strait, North America has seen a minor contraction year-on-year, with the section of the directory dedicated to the US showing two fewer plants, 97 rather than 99. There are also an extra seven mothballed facilities in the US, although the vastness of the country means that regions have not been affected equally. Consolidation of older capacity ahead of an uncertain regulatory future is partly to blame for the mothballings and closures, although the fundamentals of the economy in 2012 have been surprisingly resilient.
In South and Central America, an area of strong growth, there are new projects and expansions in Brazil, Ecuador and Peru among others, with gradual expansion a common theme among producers eager to expand as markets develop. Mexico has provided a challenging environment for some, with little change year-on-year in the directory. In the Middle East and north Africa we have carried out significant updates. Despite continuing political challenges, countries here continue to demand cement, something that we highlighted for Egypt last week.
In contrast Europe continues to be a drain on the multinational cement players' balance sheets. The continent has lost 15 plants year-on-year with several others mothballed. Many countries, notably Spain, Greece and Italy, have cement industries much larger than their current needs demand. Considerable further closures are likely to be reflected in the 2014 version of the directory if the Eurozone financial malaise is not resolved, although many plants remain 'open' at the moment.
Also, new for 2013, the directory will expand by over 100 pages with the inclusion of cement industry reviews from various countries around the world, collated from recent issues of Global Cement Magazine.
The inclusion of the reviews will add not just literal weight to the directory, but will also contribute a new angle to the publication's information, adding context to the raw data. Countries with expanded entries include Russia, Brazil, USA as well as leading European and Asian cement producers along with extensive coverage of the Middle East.
At the beginning of October 2012 a digital 'beta' version of the Global Cement Directory 2013 will be released and seen by nearly 20,000 cement, lime and ancillary sector readers allowing a period for corrections from those 'on-the-ground', before the full print version is released for sale in November. Secure your company's space today, right-hand page advertising positions are available for the directory within the plant listings as well as in some of the newly included country reports. Contact Sören Rothfahl on direct line +44 (0) 1372 840 957 mobile +44 (0) 785 0669169 or at This email address is being protected from spambots. You need JavaScript enabled to view it..
Invest like an Egyptian
Written by Global Cement staff
12 September 2012
Lawlessness, strike action and increases in energy inputs are the three factors hindering Turkish investment in Egypt.
These concerns arose in a meeting held last week between the Minister of Industry and Foreign Trade Hatem Saleh and a Turkish trade delegation. It was also reported that Turkish investors have applied to build a cement plant in the Sinai region of Egypt.
Investing in Egypt by a cement company seems risky given that both Italcementi and Lafarge have shown problems in the country in their recent financial reports. Italcementi reported a loss in sales in its first half results for 2012 partly due to the Egyptian market. Lafarge saw volumes fall by 11% in its second quarter in Egypt due to limited gas supply.
Nationally cement demand fell by 8% in 2011 to 45.2Mt due to the political unrest of the 'Arab Spring'. In January 2012 the government cut energy subsidies to heavy industry, including cement, to narrow its budget deficit.
Lawlessness is certainly a concern. In August 2012 Suez Cement suspended construction of a plant expansion project amid civil unrest. It had also suffered from strikes at its plants earlier in the year. Earlier in the month Egypt launched air strikes in the Sinai region close to the border with Gaza killing 20 people. Previous to this a group of Chinese cement workers working in the Sinai were kidnapped in January 2012.
Yet Titan, despite its losses so far in 2012, reported in its first half results at the end of August 2012 that the construction sector maintained its positive momentum in the country. In addition, it said that demand for building materials grew absorbing production from new cement plants entering the market.
Recent developments supporting this optimistic trend have included Arabian Cement increasing its capacity to 5Mt/yr with the opening of its second production line. FLSmidth recently won a contract to operate and maintain two production lines for Egyptian National Cement. ASEC Cement expects full production of 1.9Mt/yr at Minya to begin by the first quarter of 2013.
With a mixed picture emerging, the cement industry in Egypt shows potential for those producers willing to take the risks, or those able to minimise them. Even at the proposal stage the new Turkish project in Sinai has been linked with the al-Maghara coal supplies of the northern Sinai.
Ash Wednesday: cement in the Philippines
Written by Global Cement staff
05 September 2012
Coal ash seems to be in short supply in the Philippines. Lafarge Republic has signed a deal with a local energy producer to buy coal ash from a new 600MW coal plant.
Although the cost of the deal was not announced, the agreement will run from when the plant starts operation until 2019. This move follows a similar arrangement by Cemex Philippines in June 2012. In that instance Cemex agreed to purchase coal ash from the 200MW Kepco SPC Power Corp plant in Naga, Cebu for US$0.95/t.
Distinctively both arrangements were set up in conjunction with local government. For the Lafarge deal part of the agreement involved donating at least 10,000 bags of cement per month for use in various infrastructure projects of the province. Bataan governor Enrique Garcia put the value of the deal at US$1.19m/yr. For the Cemex deal the Cebu Provincial Government signed the agreement. In November 2009 Cebu Province and Kepco entered into an Ash Disposal Agreement, where Cebu Province was granted exclusive rights to the ash produced by the power plant.
Adding to the suspicion that the Philippines lacks sufficient coal ash, back in the autumn of 2011, the Cement Manufacturers' Association of the Philippines (CeMAP) asked the Department of Trade and Industry (DTI) to impose mandatory quality standards on raw materials, such as coal ash. This followed accusations by CeMAP that poor quality coal ash might be behind complaints from contractors working on infrastructure projects. In 2009 a DTI profile on the cement industry placed the demand for Portland cement at 73% and the demand for pozzolan cement at 27% of the total.
Cement sales in the Philippines have been steadily growing over the last decade. Lafarge Republic announced in August 2012 that it was increasing its capacity to just below 9Mt/yr in 2013. Around the same time CeMAP released data showing that sales were up 20% year-on-year for the first half of 2012. The local industry reported combined sales of 15.6Mt in 2011. Previous to this, Holcim Philippines announced the US$9.46m upgrade to a previously closed mill in Batangas.