August 2025

At today's official launch of LafargeHolcim, CEO Eric Olsen was asked to comment on the group's position in Iran. It doesn't have one, but that won't necessarily always be the case given events in Austria this week.

On Tuesday 14 July 2015, Iran and the P5+1 countries (US, UK, France, China, Russia and Germany) agreed an historic deal to limit Iranian nuclear activity in return for a significant lifting of existing trade sanctions at a meeting in Vienna. The country's cement industry will be delighted by this agreement. The talks, in progress since 2006, could mark what has been termed a 'new chapter' in relations between Iran and the rest of the world by Iranian President Hassan Rouhani. For his part, US President Barack Obama stated that the deal would ensure that 'every pathway to a nuclear weapon is cut off' for Iran, but critics from the US, Iran, Israel and elsewhere, suggest that cutting all routes will not be possible. They are alarmed and have warned that the deal could lead to an arms race between Iran and Saudi Arabia, amid increasing animosity in the Middle East.

While the geopolitical implications of the deal are huge, the lifting of trade restrictions will greatly improve Iran's ability to deal internationally. This includes allowing increased oil exports. An article by Reuters anticipates that Iranian oil production could increase drastically from around 1 million barrels per day (mbpd) at present, possibly to its former peak of 3mbpd. (What this might do to the global oil price could be the subject of an entirely separate column). The easing of banking restrictions will make Iranian products more competitive and increase trade in many sectors.

Against this backdrop sits the Iranian cement industry, the world's third or fourth largest by production in 2014, depending on your source. It has an incredible 84.4Mt/yr of cement production capacity in a country of 77.5 million people. Assuming that it could produce and consume all of that cement at home, this would represent consumption of around 1100kg/capita/yr, far above the 600-800kg/capita/yr rate that is typical of a rapidly-developing economy.

Of course, Iran has not been consuming anything like this level of cement recently. According to figures released by its Employers Guild Association this week, Iran made 66.4Mt of cement in its 1393 calendar year, which ended on 21 March 2015. Assuming the above capacity, this gives Iran a cement utilisation capacity of around 78%.

Much of the cement made in Iran was exported in 2014 and so far in 2015. The country exported an incredible 18.4Mt/yr of cement and clinker in the year to 21 March 2015, up from 18.8Mt a year earlier. A large amount of this cement was available at low cost, to the extent that Iran has been accused (along with Pakistan) of dumping cement in the Middle East and East Africa. (Pakistani producers have even pointed out that Iranian cement is making inroads into the Afghan market, more traditionally a target for exports from Pakistan).

So what might happen to the cement trade dynamic in the region? Some suggest that the easing of sanctions can only increase the potential for Iranian cement imports in the region. Trade should become easier, facilitating exports.

Indeed, this is a factor, but it is only part of the equation. Instead, it is likely that, having earned foreign exchange via increased oil sales, Iran will be able to spend more at home. Reuters anticipates that demand for steel and cement will skyrocket as the country undertakes much-needed construction and infrastructure works. This situation would be similar to Saudi Arabia and other Gulf Cooperation Council (GCC) states. How Saudi Arabia reacts to this, both politically and in terms of cement trade, will be of high interest in the region and around the world.

Instead of increasing cement exports, the effect of the lifting of sanctions may decrease them. This will surely be welcome news to local producers currently being undercut in East Africa, as well as exporters in Pakistan, India and elsewhere. Could Pakistan even find itself exporting to Iran? If a US-Iran nuclear deal is possible, anything can happen...

Kenyan cement producers kicked off this week about Chinese cement imports for the Standard Gauge Railway Project in Kenya. Local producers, including ARM Cement and Lafarge, have asked the Kenya Railways Corporation to explain why the Chinese-backed project is importing cement. Project builders the China Rail & Bridge Corporation (CRBC) has imported 7000t of cement so far in 2015 according to Kenya Ports Authority data.

Project completion is planned for 2017 with a requirement of 1Mt of cement. If CRBC carried on this rate then, roughly, the project might only use 42,000t of imported cement if the import rate holds. This is less than 5% of the estimated requirement. However, cement imports increases into Kenya have stayed steady since 2012. Imports rose by 2000t from 2013 to 2014. CRBC's imports will stick out significantly in 2015.

Kenya National Bureau of Statistics (KNBS) data places Kenyan cement production at 5.8Mt in 2014, an increase of 16.3% from 5.1Mt in 2013. Production growth has been steadily building since the late 1990s with, more recently, a dip in the rate of growth in 2011 that has been 'corrected' as the growth has returned. Consumption has risen by 21.8% year-on-year to 5.2Mt in 2014 with imports also rising and exports dropping.

Imports for the railway project are duty free as ARM Cement Chief Executive Officer Pradeep Paunrana helpfully explained to Bloomberg. Producers have also recently upgraded their plants to specifically supply 52.5 grade cement to the project. Given this, it is unsurprising that local Kenyan producers, including ARM Cement and Lafarge, are complaining about this situation, especially given the increasingly pugnacious African response to foreign imports led by Dangote and companies in South Africa. Both ARM and Lafarge hold integrated plants and grinding plants in Nairobi and Mombasa. This is the route of the new railway line.

The backdrop to this is that the Chinese cement industry is struggling at home as it adjusts to lower construction rates and reduced cement production growth. Profits made by the Chinese cement industry fell by 67.6% year-on-year to US$521m for the first quarter of 2015, according to National Development and Reform Commission (NDRC) statistics. At the same time the Shanghai Composite, China's principal stock market, has seen the value of its shares fall by 30% since June.

Although it is unclear where the cement imports in this particular row are coming from, informal or formal business links between large state controlled corporations such as a China's major cement producers will always be questioned by competitors outside of China for both genuine issues of competitiveness and simple attempts to claw more profit. If the Chinese cement producers are sufficiently spooked or they really start to lose money then what is to stop it asking a sister company building a large infrastructure project abroad to offer it some help? Or it might consider asking the Chinese bank providing 90% of the financing towards the US$3.8bn infrastructure project to force the Kenyan government to offer more concessions to foreign firms. Meanwhile one counter argument goes that Kenya has a growing construction market with a giant infrastructure project that may unlock the region's long-simmering low cement consumption per capita boom. The Kenyan government may face some difficult decisions ahead.

The Greek debt crisis directly hit the local cement industry on Tuesday 30 June 2015 when Titan Cement reported that it was unable to pay a dividend to its shareholders. The leading local cement producer blamed the capital controls introduced by the government.

It is worth looking at the effects on the domestic cement industry as the Eurozone bureaucracy and the Greek government play 'chicken' with each other while Greece starts the default process, having failed to pay the latest International Monetary Fund (IMF) payment on 30 June 2015. Greece will now join a group, possibly even more select than the European Union, of countries that have failed to pay back the IMF, including current defaulters like Sudan and Zimbabwe.

A better comparison might be made with Argentina which defaulted upon its foreign debts in 2001. Its construction industry fell by 12% year-on-year in 2001 and by a further 30% in 2002. Cement consumption and cement production utilisation rates hit 23% in 2002. One key difference with Greece is that the country has had major financial difficulties for far longer than Argentina. Argentina ran into financial depression in 1998 and defaulted in 2001. Greece ran into financial trouble following the 2008 financial crisis and then received its first bailout in 2010.

As the capital controls show, even initial responses to the financial situations are impacting upon the standard transactions a limited company conducts. The Financial Times ran an article in May 2015 examining the potential effects on businesses of a debt default and Greek exit from the Eurozone (Grexit). In short, business and commerce will continue where possible reacting to whatever comes their way. For example, an olive oil producer reported switching to exports to make profits. Crucially though, another company interviewed, a construction contractor, worried about potential cuts to government or EU-led infrastructure projects.

As Titan reported in its first quarter results for 2015, its Greek market has been dependent on road building. In February 2014 Titan Cement reported its first improved operating results in seven years followed by profit in 2014 as a whole. The other major cement producers, Lafarge subsidiary Heracles General Cement and Italcementi subsidiary Halyps Cement, reported an improved construction market in 2014 with rising cement volumes. However, it was noted by Lafarge that it was developing exports to 'optimise kiln utilisation.' Titan also noted the benefits of exports in its first quarter report for 2015, focusing on a strengthening US Dollar versus the Euro. Given on-going events, one suspects there is going to be a lot more 'development' of this kind.

To set some sense of scale of the crisis Jim O'Neill, former head of economics at Goldman Sachs, famously calculated that, at the height of its growth, China created an economy the size of Greece's every three months. What happens next is down to the crystal balls of economists, although the path of least resistance now seems to be pointing at further default, departure from the Eurozone and Euro and further significant financial pain for Greece.

It looks likely that the local construction market will stay subdued and exports will offer a lifeline. How much the EU is prepared to let Greece default on its bills and then try and undercut its own over-capacity cement industries remains to be seen. However, since the main cement producers in Greece are all multinational outfits, it will afford them some flexibility in their strategy in coping with the fallout. Meanwhile a cement production capacity of around 14Mt/yr for a population of 11m suggests over capacity by European standards. If exports can't help then the situation looks grim.

UPDATE: Here is Global Cement's previous take on Greece from June 2012

India: Lafarge India has appointed Ujjwal Batria as CEO of the company effective from 22 June 2015. Batria will take over the responsibility from Martin Kriegner, who has been named as area manager for Central Europe of LafargeHolcim.

The development comes shortly before the expected completion of the LafargeHolcim merger. The Indian Competition Commission of India (CCI) has already approved the Indian leg of the proposed merger, with certain provisions, including divestment of two cement plants; Lafarge's plants at Jojobera, Jharkhand and Sonadih, Chhattisgarh. The two plants have a combined capacity of 5.15Mt/yr. Holcim's business in India is run through ACC and Ambuja Cements. It is not clear what Batria's role will be in the merged LafargeHolcim entity. Since ACC and Ambuja Cements are public listed firms, Lafarge's Indian unit may continue to operate separately, at least to begin with.

Prior to his appointment as CEO of Lafarge India, Batria was managing director of the company and was managing its cement business. He has been with Lafarge for 16 years. He had joined the company in 1999 and has served on different position across functions since then.

Kenya: According to Business Daily, East African Portland Cement Company (EAPCC) has renewed its efforts to recruit a new COO after the candidates who applied to fill the new position in August 2014 'fell short' of the required qualifications. EAPCC has now re-advertised the position, which is expected to strengthen its governance structure.

The Athi River-based manufacturer first sought to recruit a COO and CFO in 2014 through consultancy PricewaterhouseCoopers. Kephar Tande, the company's managing director, said that the board deemed the applicants to be unqualified. "The first attempt in 2014 did not yield a suitable candidate from the shortlisted four, hence this new advertisement," said Tande. "This position is primarily required to improve the efficiency of our supply chain to make the company more competitive. We expect the position to be filled by August 2015."

EAPCC's current management executive structure is made up of heads of sections and divisions like financial management, research and development, internal audit and risk management, as well as strategy performance improvement. The new COO will be responsible for cement production operations, production engineering, product research and development, as well as sales and marketing.

EAPPC has not said whether it will re-advertise the CFO job, also a new position. The CFO is expected to streamline financial management at the company, which has recently faced accusations of having reported inaccurate accounts. "The position of CFO will be filled as soon as internal procedures are completed," said Tande.

The small cement industry of Mozambique, in south west Africa must be an interesting place to make cement. On one side the country's producers, like their more vocal South African counterparts, have been fighting off cheap imports from Iran, Pakistan, China et al. On the other side of the coin though, Mozambique has growing domestic demand and is within striking distance of growing markets further into Africa, like Malawi and the Democratic Republic of Congo (DRC).

With the announcement this week that there will be not one but two new integrated cement plants in the country, bringing over 2Mt/yr of new capacity, everything should be set fair for the coming years then, shouldn't it? Domestic production will rise, the price of local cement will fall as a result, competition from imports will drop off and money will be made from new exports.

Except that might not happen. Before the announcement of these two plants, (one of which does not state a capacity), there was around 5.5Mt/yr of grinding and integrated capacity either currently active in Mozambique or due to come onstream in 2015. With the new projects this rises to over 7.5Mt/yr.

The desirable chain of events described above starts to break down due to the fact that domestic demand in Mozambique, while rising, is not currently anywhere near as high as domestic supply. The United States Geological Survey estimated that the country produced just 1.2Mt/yr in 2012. Data for 2013 and 2014, though unavailable, is highly unlikely to show a three-fold increase. Indeed Insitec, a minority shareholder in Cimentos de Moçambique, predicted in 2014 that demand for that year would rise to just 1.5Mt, before hitting the dizzying heights of 1.8Mt in 2018 – And that's still three years away!

So what are the options? Option 1: Some or all of the planned and mooted cement plants will fail to come to fruition. Option 2: Some or all of the plants will be built but will operate at reduced capacity and/or on a campaign basis. Option 3: The Mozambican cement industry becomes a regional powerhouse and starts to export to its neighbours.

Option 1 is certainly possible. Limak Group, one of the parties linked to the new projects, is a Turkish cement producer that is inexperienced outside of Turkey. There has also been a lack of information on the progress of projects by Austral Cimentos ('coming on stream in 2015'), Star Cement and Consolidated Building Materials, although a lack of progress reports does not necessarily imply 'no progress.'

Option 2 is more likely, as some producers already operate on a campaign basis. InterCement's plant at Nacala, formerly an integrated plant, currently operates only as a grinding station. Option 3 is also possible, with Malawi particularly lacking in cement production facilities.
In reality a combination of all three 'Options' is the most likely outcome. However, this will lead to Mozambique becoming yet another player in an increasingly busy African cement market. The desire for self-sufficiency in cement production, a common goal for the region's governments, can easily lead to over-estimates of local demand growth, with resultant over-capacity. Of course the expectation that all African countries can get rid of this extra cement capacity via exports will ultimately backfire.

In southern Africa we already have South Africa exporting. Angola declared 'cement self-sufficiency' in October 2014 and banned imports at the start of 2015. Zambia, Botswana, Zimbabwe and DRC all have large-scale Dangote and/or PCC projects near completion or in production that will greatly reduce their need for imports. Meanwhile, further north, Nigeria is already a gigantic producer and significant cement exporter. Cameroon has recently banned imports and Ghana is thinking of doing the same. Over in the east of Africa, Ethiopia's (and the rest of that region's) rapidly-developing situation was covered in this column just two weeks ago.

Finally, in the north of Africa, Algeria has declared its intention to be self-sufficient in cement by 2016. This news must have 'gone down like a lead balloon' in Italy, Spain and Greece, which have been reliant on north African markets after the bottoms fell out of their own economies. In the north east, Egypt has different problems at present, also described previously. It needs fuel not cement!

So where does this all lead for regional cement dynamics in Africa? Well perhaps the situation in India points the way. There, as in Africa, local and regional producers with the desire to expand grew from their local bases and eventually overlapped. Against a backdrop of lower-than-expected demand, the country now has overcapacity. This has resulted in smaller producers being acquired and leaving the market.

Could this eventually happen in Africa? Only time will tell. However one thing is certain: It's just not possible for every country to export to every other country!

Belgium: Daniel Gauthier, CEO of Western Europe-Africa and member of the managing board of HeidelbergCement, has been elected as president of CEMBUREAU for a two-year term after having completed his mandate of vice president over the last two years. He takes over from Peter Hoddinott, executive vice president of performance and member of the executive committee at Lafarge. In addition, Gonçalo Salazar Leite, CEO of Secil, has been elected as vice president of CEMBUREAU for a two-year term.

"The industry must now build upon the accomplishments of 'The Concrete Initiative," said Gauthier. The initiative was launched one year ago. "Concrete is essential to Europe's future, providing the buildings and infrastructure that society needs, as well as growth and jobs. The circular economy, competitiveness and climate change will also remain at the forefront of CEMBUREAU's activities."

"With the election of Gauthier, CEMBUREAU and the priorities of the european cement sector are in excellent hands," said Hoddinott. "He will advance and reinforce the agendas of putting the cement industry forward as a solution provider, where concrete can fulfill both the aspirations of the end users of construction and act as a partner in fulfilling the needs of policymakers."

"I take this opportunity to thank Peter Hoddinott for his commitment to the Association over the last two years," said Koen Coppenholle, CEMBUREAU chief executive. "We are now at a turning point. After a protracted period of negative growth, Europe is getting back on its feet. Indeed, our 2014 activity report shows some glimmers of hope for our sector."

Compared to 2013, 2014 cement production in the CEMBUREAU member countries saw a very moderate recovery, rising by 0.3% year-on-year to 235.5Mt after the drops recorded in 2013 and 2012 (1.4% and 8.2% respectively) and having fallen by 27% since 2007. Developments in cement demand were in line with the upturn in the general economic and construction environment, particularly over the second half of the year, reflecting somewhat improved sentiment and activity, despite tight budgetary conditions in many member states. Global cement production has been estimated at 4.3Bnt in 2014, translating into a 6.7% increase compared to the 4Bt recorded in 2013. The CEMBUREAU member countries accounted for 5.5% of global production, with China representing 56.5%, compared to 58.3% in 2013. Without taking into account China, global cement production increased year-on-year by 11.3%.

This week brought the news that, following testing by the Food Safety and Standards Authority of India (FSSAI), some 27,402t or US$49.8m of Nestlé's Maggi noodles had to be recalled from the market due to allegedly high levels of lead. But what do you do with 27,402t of noodles deemed unsafe for human consumption?

The solution was incineration. Five cement plants will take 40 days, which started on 9 June 2015, to consume all of the noodles as an alternative fuel. "This was the most environment-friendly solution to destroy the recalled noodles," said Luca Fichera, executive vice president of Nestlé's supply chain in India.

India's fuel supply is notoriously unreliable. Coal is the dominant fuel used for cement and power production in India, however, supplies have been inconstant in terms of both quality and quantity for some time now. To shore up the coal supply, the government cancelled, reallocated and auctioned 214 of the 218 coal blocks in India, starting in September 2014. According to local media, Coal India, which still operates most of the blocks, is now expected to increase its coal production capacity by as much as 60Mt in 2015, following 7% production growth in the 2014 - 2015 financial year. However, there is still a major coal shortage in the country and recent reports by India's coal ministry suggest that the new coal linkages will increase coal costs. The new coal linkage process will see sales go via an auction system instead of a static price. Coal costs for cement producers are expected to rise by as much as 25% as a result.

Given India's long-standing fuel supply problems, its cement producers may wish to learn from the use of Nestlé's Maggi noodles as alternative fuels in cement plants. Instead of viewing the coal shortage as a challenge, it might instead be considered an opportunity to increase alternative fuel use, reducing costs and moving to more environmentally-friendly cement production. In addition to the standard industrial, municipal and household waste, among others, India might look to use some of the large quantities of waste biomass that must surely be produced from its agricultural sector. Like the game, 'Hungry, hungry hippos,' India's cement plants could consume a wide variety of nearby wastes in place of coal.

US: FCT, the rotary kiln pyro-processing company, is pleased to announce that Adriano Greco has joined the team at FCT as Global Sales Director, based in the United States.

Mr Greco is known to many in the cement industry through his previous activities as Managing Director of Greco and as Sales Director for Gebr. Pfeiffer. FCT said that his experience and professionalism would be 'invaluable as FCT extends its reach to the markets across the globe.'

FCT already has operations in Australia, United States, Europe, Middle East and Canada and continues to expand with projects in every continent.

India: India Cements has appointed P L Subramanian as a non-executive director with immediate effect. Subramanian joined the company in 1986 and has served in various positions. He was serving as its executive director of operations and retired from service in May 2015.