Displaying items by tag: Analysis

The mountainous eastern shore of the Adriatic Sea and its hinterlands in Europe’s Balkan Peninsula have one of the world’s highest densities of countries: six, across a broad equilateral triangle of 212,000km². All six states – Albania, Bosnia & Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia – are historically characterised by political non-alignment, carrying over from the Cold War period, and all the more notable for the presence of the EU to the north (Croatia, Hungary and Romania) and east (Bulgaria and Greece).

A nine-plant, 9Mt/yr local cement sector serves the 16.8m-strong population of the unconsolidated ‘bloc.’ Albania has 2.8Mt/yr (31%), Serbia 2.7Mt/yr (30%), Bosnia & Herzegovina 1.6Mt/yr (18%), North Macedonia 1.4Mt/yr (15%) and Kosovo 500,000t/yr (6%), while Montenegro has no cement capacity – for now. Altogether, this gives this quarter of South East Europe a capacity per capita of 539kg/yr. The industry consists entirely of companies based outside of the region. Albania’s two plants are Lebanese and Greek-owned (by Seament Holding and Titan Cement Group respectively). Titan Cement Group also controls single-plant Kosovo and North Macedonia, and competes in the Serbian cement industry alongside larger and smaller plants belonging to Switzerland-based Holcim and Ireland-based CRH, respectively. Lastly, Bosnia & Herzegovina’s capacity is shared evenly between Germany-based Heidelberg Materials and Hungary-based Talentis International Construction, with one plant each.

Lafarge Srbija, Holcim's subsidiary in Serbia, announced plans for its second plant in the country, at Ratari in Belgrade, last week. No capacity has yet emerged, but the plant will cost €110m, making something in the region of the country’s existing 0.6 – 1.2Mt/yr plants seem likely. This would give Serbia over a third of total capacity in the Central Balkans and twice the number of plants of any other country there, expanding its per-capita capacity by 22 – 44%, from a regionally low 408kg/yr to 500 – 590kg/yr.

In announcing the upcoming Ratari cement plant, Lafarge Srbija laid emphasis on its sustainability. The plant will use 1Mt/yr of ash from the adjacent Nikola Tesla B thermal power plant as a raw material in its cement production. In this way, it will help to clear the Nikola Tesla B plant’s 1600 hectare ash dumps, from which only 180,000t of ash was harvested in 2023. Circularity has been front and centre of Holcim’s discussions of its growth in Serbia for some time. When Lafarge Srbija acquired aggregates producer Teko Mining Serbia in 2022, the group indicated that the business would play a part in its development of construction and demolition materials (CDM)-based cement and concrete.

Holcim’s Strategy 2025 growth plan entails bolt-on acquisitions in ‘mature markets,’ backed by strategic divestments elsewhere. Other companies have been more explicit about a realignment towards metropolitan markets, above all in North America, at a time when they are also diversifying away from cement and into other materials. Just why a leading producer should look to build cement capacity in Serbia warrants investigation.

Serbia is the only Central Balkan member of Cembureau, the European cement association. In a European market report for 2022, the association attributed to it the continent’s fastest declining cement consumption (jointly with Slovakia), down by 11% year-on-year. Like the rest of Europe, Serbia is also gradually shrinking, its population dwindling by 0.7% year-on-year to 6.62m in 2023, which limits hopes for a longer-term recovery. Serbia remains the largest country in the Central Balkans, with 39% of the total regional population.

Several factors have compounded Serbia’s difficulties as a cement-producing country. Firstly, like the Nikola Tesla B thermal power plant, its kilns run on coal. 50% of this coal originated in Russia and Ukraine in 2021, causing the entire operation to become ‘imperilled’ after the former’s brutal invasion of the latter in February 2022, according to the Serbian Cement Industry Association. In planning terms, this was a case of putting half one’s eggs in two baskets – and dropping them both.

Secondly, Serbia’s choice of export markets is mainly confined to either the EU or global markets via the River Danube, Black Sea and Mediterranean. Either way, it is in competition with a cement exporting giant: Türkiye. Serbia sold €19.7m-worth of cement in the EU in 2023, up by 63% over the three-year period since 2020 – 31% behind Türkiye’s €28.8m (more than double its 2020 figure).¹ One other Central Balkan country had a greater reliance on the EU market: Bosnia & Herzegovina. It exported €48.4m-worth of cement there, quadruple its 2020 figure and behind only China (€133m) and the UK (€54.7) in cement exports to the bloc by value.

Bosnia & Herzegovina’s cement industry underwent a different permutation at the start of 2024: an acquisition, replacing one EU-based player with another. Lukavac Cement, which operates the 800,000t/yr Lukavac cement plant in Tuzla, changed hands from Austria-based building materials producer Asamer Baustoffe to Hungary-based property developer Talentis International Construction. Talentis International Construction belongs to one of Hungary’s major family-owned conglomerates, Mészáros Csoport.

Besides Central Europe, Balkan countries have found a ready source of investments in the past decade in China. In construction alone, Chinese investments total €13.2bn in Serbia, €2.4bn in Bosnia & Herzegovina, €915m in Montenegro and €650m in North Macedonia.² This can be a booster shot to all-important domestic cement markets, but has some risks. Montenegro previously faced bankruptcy after Export-Import Bank of China began to call in an €847m loan for construction of the still upcoming A1 motorway in the country’s Northern Region. This did not put off the Montenegrin government from signing a new memorandum of understanding (MoU) with China-based Shandong Foreign Economic and Technical Cooperation and Shandong Luqiao Group for construction of a new €54m coast road in the Coastal Region in mid-2023.

In Montenegro, UK-based private equity firm Chayton Capital is currently funding a feasibility study for a partly state-owned cement plant and building materials complex at the Pljevlja energy hub in the Northern Region. Along with an upgrade to the existing Pljevlja coal-fired power plant, the project will cost €700m.

In 2026, EU member states will begin to partly tax third-country imports of cement and other products against their specific CO₂ emissions, progressing to the implementation of a 100% Carbon Border Adjustment Mechanism (CBAM) by 2034. Montenegro led the Central Balkans’ preparations for the EU’s CBAM roll-out with the introduction of its own emissions trading system in early 2021. Bosnia & Herzegovina will follow its example by 2026, but other countries in the region have struggled to conceive of the arrangement except as part of future EU accession agreements.

Based on the average specific CO₂ emissions of cement produced in the EU, the World Bank has forecast that exporters to the bloc will be disadvantaged if their own specific emissions exceed 5.52kg CO₂eq/€.³ By contrast, any figure below this ought to offer an increased competitive edge. Albanian cement has average emissions of 4.71kg CO₂eq/€, 15% below ‘biting point’ and 13% below Türkiye’s 5.39CO₂eq/€. Albania’s government consolidated its anticipated gains by quintupling the coal tax for 2024 to €0.15/kg. The figure is based on the International Monetary Fund’s recommended minimum CO₂ emissions tax of €55.80/t, 21% shy of the current EU Emissions Trading Scheme (ETS) credit price of €70.49/t.⁴

The Central Balkans is a region of apparently slow markets and industry growth regardless – to 11 cement plants, following the completion of current and upcoming projects. A recurrent theme of capital expenditure investments and the way investors talk about them may help to explain this: sustainability. Looking at the mix of technologies in the current nine plants, these include wet kilns and fuels lines built for conventional fossil fuels. This is not to presume that any given plant might not be happy with its existing equipment as is. Nonetheless, the overall picture is of a set of veteran plants with scope to benefit from the kind of investments which all four global cement producers active in the region are already carrying out elsewhere in Europe. Such plans may already be in motion. In late 2023, Titan Cement Group’s North Macedonian subsidiary Cementarnica Usje secured shareholder approval to take two new loans of up to €27m combined.

As the latest news from Serbia showed, taking care of existing plants does not preclude also building new ones. The cement industry of the Central Balkans is finding its position in the new reduced-CO₂ global cement trade – one in which old and new work together.

References

1. Trend Economy, ‘European Union – Imports and Exports – Articles of cement,’ 28 January 2024, https://trendeconomy.com/data/h2/EuropeanUnion/6810#

2. American Enterprise Institute, 'China Global Investment Tracker,' 3 February 2024 https://www.aei.org/china-global-investment-tracker/

3. World Bank Group, ‘Relative CBAM Exposure Index,’ 15 June 2023, https://www.worldbank.org/en/data/interactive/2023/06/15/relative-cbam-exposure-index

4. Ember, 'Carbon Price Tracker,' 26 August 2024, https://ember-climate.org/data/data-tools/carbon-price-viewer/

Changes are underway in South Asia’s second largest cement sector, with two legal developments that affect the industry set in motion in the past week. At a national level, the Competition Commission of Pakistan recommended that the government require cement producers to include production and expiry dates on the labels of bagged cement. Meanwhile, in Pakistan’s largest province, Punjab, a new law tightened procedures around the establishment and expansion of cement plants. At the same time, the country’s cement producers began to publish their financial results for the first nine months of the 2024 financial year (FY2024).

During the nine-month period up to 31 March 2024, the Pakistani cement industry sold 34.5Mt of cement, up by 3% year-on-year. Producers have responded to the growth with capacity expansions, including the launch of the new 1.3Mt/yr Line 3 of Attock Cement’s Hub cement plant in Balochistan on 17 April 2023. China-based contractor Hefei Cement Research & Design executed the project, including installation of a Loesche LM 56.3+3 CS vertical roller mill, giving the Hub plant a new, expanded capacity of 3Mt/yr.

Pressure has eased on the operating costs of Pakistani cement production, as inflation slowed and the country received a new government in March 2024, following political unrest in 2022 and 2023. Coal prices also settled back to 2019 levels, after prolonged agitation. Pakistan Today News reported the value of future coal supply contracts as US$93/t for June 2024, down by 2% over six months from US$95/t for January 2024.

Nonetheless, cost optimisation remained a ‘strong focus’ in the growth strategy of Fauji Cement, which switched to using local and Afghan coal at its plants during the past nine months. Its reliance on captive power rose to 60% of consumption, thanks to its commissioning of new waste heat recovery and solar power capacity. During the first nine months of FY2024, the company’s year-on-year sales growth of 14% narrowly offset cost growth of 13%, leaving it with net profit growth of 1%.

Looking more closely, the latest sales data from the All Pakistan Cement Manufacturers Association (APCMA) shows a stark divergence within cement producers’ markets. While exports recorded 68% year-on-year growth to 5.1Mt, domestic sales fell, by 4% to 29.4Mt. The association further breaks down Pakistani cement sales data into South Pakistan (Balochistan and Sindh) and North Pakistan (all other regions). Domestic sales dropped most sharply in South Pakistan, by 6% to 5.16Mt. In the North, they dropped by 3% to 24.2Mt. Part of the reason was a high base of comparison, following flooding-related reconstruction work nationally during the 2023 financial year. Meanwhile, the government finished rolling out track-and-trace on all cement despatches during the opening months of the current financial year, and commenced the implementation of axle load requirements for cement trucks. APCMA flagged both policies as potentially disruptive to its members’ domestic deliveries, amid a strong infrastructure project pipeline.

Pakistani producers suffer from overcapacity, but have established themselves as an important force in the global export market. They continue to locate new markets, including the UK in January 2024. Lucky Cement was among leading exporters overall, with a large share of its orders originating from Africa.

On 17 April 2024, the government of Punjab province set up a committee to assess new proposed cement projects, with the ultimate goal of conserving water. Falling water tables are considered a significant economic threat in agricultural Punjab. Besides completing an inspection by the new committee, proposed projects must also secure clearance from six different provincial government departments and the local government. While acknowledging the necessity of the cement industry, the government insisted that it will take legal action against any cement plant that exceeds water allowances.

Pakistan’s cement plants have grown in anticipation of a local market boom. Without this strong core of sales, underutilisation will remain troublesome, especially in North Pakistan where exposure is highest. At the same time, APCMA has given expression to the perceived lack of support affecting production and distribution. For an industry with expansionist aims, new restrictions on its growth and operations can feel like an existential menace.

Denmark: FLSmidth has signed a deal with Australia-based FCT ACTech to provide a new product for the online analysis of raw materials. Under the agreement, FLSmidth will incorporate FCT ACTech’s X-ray fluorescence (XRF) and X-Ray diffraction analysis (XRD) analysers in its new QCX Cube products. The partnership was formalised in August 2023.

Jens Asbjørn Pedersen, Global Product Manager for Sampling, Preparation and Analysis at FLSmidth, said “We are very pleased to be able to integrate FCT ACTech analyser units in our new QCX Cube analysis solutions for cement plants.” He continued, “We are starting with the launch of QCX Cube X10, which primarily targets raw meal applications, but it is our ambition to utilise FCT ACTech's innovative range of analyser units to also deliver advanced online XRD analysis solutions for clinker and cement.” He added that the company believes that such integrated solutions will provide ‘critical’ support for cement plants during the green transition, as alternative fuels and new secondary cementitious materials drive a need for further process and chemistry optimisation.

The QCX Cube X10 online elemental analyser is FLSmidth's newest analysis product for cement raw meal. Offering plug-and-play functionality, it includes sampling components, an energy dispersive X-ray fluorescence (EDXRF) analyser and a fully programmed local control system that are delivered pre-assembled in an air-conditioned container. Analysis results for calcium, silicon, aluminium and iron are provided as standard. Sodium and magnesium analysis can be provided with the addition of a helium purge, while other elements are available on request after a site-specific evaluation. The product is designed to be integrated with FLSmidth’s optimisation software QCX/BlendExpert.

FCT ACTech is the analytical instruments division of FCT International. It has developed and supplied a continuous on-stream analyser for more than two decades with products now covering raw mix, clinker quality and cement blend control.

The Hungarian government recently enacted Emergency Decree 320/2023, taxing all CO₂ emissions from the country’s 40 or so largest industrial enterprises. The government used emergency powers to set up a new taxation scheme, which undercuts existing free allowances under the EU emissions trading scheme (ETS). The scheme additionally penalises the trade in ETS credits. Cement producers announced that the new regulations will make it impossible for them to keep operating.¹

With regard to Hungary’s six active cement plants, the scheme comprises:

1 – A Euro20/t tax on CO₂ emissions, effective retroactively from 1 January 2023, payable by any large enterprise that uses EU Emissions Trading Scheme (ETS) free allowances to cover the majority of its CO₂ emissions. Plants that decrease their production, or that carry on non-CO₂-emitting activities at over 10% of their operations, will pay a higher rate of Euro40/t of CO₂.

2 – A 10% transaction fee for the sale of free allocations under the EU ETS, payable to the Hungarian Climate Protection Authority.

Less than three years ahead of full implementation of the EU carbon border adjustment mechanism (CBAM), the Hungarian government has seemingly moved unilaterally against cement production – this in a country surrounded by seven other cement-producing countries. Multiple foreign cement producers connected to the major market of Budapest by rail, river and road will be watching developments with interest. These include CRH, which, besides two smaller plants inside Hungary, operates the 800,000t/yr Cementáreň Turňa nad Bodvou plant, immediately over the border in Slovakia.

This comes at a time when the domestic cement industry is facing historically high costs and low demand, with a 30% year-on-year decline in construction activity in July 2023, following double-digit inflation throughout 2022 and the first half of 2023.

Catastrophising may be a common symptom of environmental regulation in industry associations, but one can understand on this occasion. The Hungarian cement and lime industry association, CeMBeton, backed its members’ gloomy announcement about their future with an estimate for extra annual taxes of ‘several billion forints’ (1bn forint = US$2.84m), in a statement following the decree. Assuming annual CO₂ emissions of 565kg/t across its 5.4Mt/yr cement capacity, the sector might expect to pay US$61m/yr in CO₂ rates alone.^{2, 3} According to analyst ClearBlue, the government will raise additional tax revenues worth US$278m/yr across all of the 40 aforementioned heavy emitters in Hungary.⁴

It may seem surprising that CeMBeton did not even draw up a projected tax bill during consultations over the new tax scheme – but, in fact, no such consultations took place. In its most recent statement, the association said “We do not know the government’s intentions.” Outside of official releases, Hungary’s cement producers have not always been so reserved about the government’s perceived aim.

Global Cement reported in April 2023 that the Hungarian government was allegedly interfering in the cement sector to make producers sell up – as per accusations by an anonymous industry executive.⁵ There is arguably a course of action on the government’s part which, more or less, appears consistent with this aim:

October 2020 – The Hungarian Competition Authority (GVH) starts competition supervision proceedings against CRH, Duna-Dráva Cement and Lafarge Cement Magyarország.

July 2021 – Emergency Decree 2021/404 imposes a 90% tax on producers’ ‘excess’ profits, based on threshold cement sales revenues of Euro56/t. Additionally, producers must report their exports.

September 2021 – GVH finds insufficient evidence to support the initiation of competition supervisory proceedings in the cement industry.

January 2023 – (Retroactive) entry into force of CO₂ emissions tax.

May 2023 – The government of Hungary reportedly initiates negotiations to acquire Duna Dráva Cement and Holcim Magyarország, according to the Hungarian builders’ association, National Professional Association of Construction Contractors (ÉVOSZ). Duna Dráva Cement owners Heidelberg Materials and Schwenk Zement state that they have entered into no such negotiations, while Holcim declines to comment.

July 2023 – The Act on Hungarian Architecture lets the government dictate producers' volumes and prices and require them to supply cement to National Building Materials Stores (a proposed state-owned construction materials retail monopoly).⁶ Additionally, the government gains a right of first refusal over the divestment of any asset by the cement industry’s foreign owners.

20 July 2023 – The government enacts Emergency Decree 320/2023. ETS transaction fees enter into force.

The government can now expect a legal challenge to its latest move. CeMBeton’s first ally may be the font of all emissions legislation – the EU itself. Within the EU ETS framework, tax rates are down to member states to determine. However, the introduction of a transaction fee may constitute an illegal restriction to free allowances, OPIS News has reported. The association has also indicated its readiness to mount a constitutional challenge, specifically with regard to the legislative retrofit involved in the CO₂ emissions tax. The Fundamental Law of Hungary does not generally permit legislation to apply retroactively, though how courts will balance this consideration against the rights of the government is untested.

The government amended the constitution to provide for new emergency powers, and subsequently adopted them in May 2022, in response to the ‘state of danger’ created by Russia’s war in Ukraine – though its actions on the international stage suggest careful neutrality, if not ambivalence. At home, the war has brought a consolidation of the government’s control over various areas of life, including the economy, according to Human Rights Watch.⁷

Climate protestors around the world might be glad to see governments wield emergency powers against their own heavy industries. In Hungary, however, the wider sustainability goals are not yet clear with regard to a policy that seems, at least partly, politically motivated.

References

1. CeMBeton, Sajtónyilatkozat, 21 August 2023, https://www.cembeton.hu/hirlevel/2023-08-21/202308-mozgalmas-osz-ele-nezunk/116/sajtonyilatkozat/668

2. Heidelberg Materials, ‘Energy and climate protection,’ 2022, https://www.heidelbergmaterials.com/en/energy-and-climate-protection

3. Global Cement, Global Cement Directory 2023, https://www.globalcement.com/directory

4. OPIS News, ‘Hungary's New Carbon Tax Unlikely to Set EU Precedent, Say Analysts,’ 16 August 2023

5. Global Cement, 'Update on Hungary,' April 2023, https://www.globalcement.com/news/item/15572-update-on-hungary-april-2023#:~:text=Heidelberg%20Materials'%20subsidiary%20Duna%2DDr%C3%A1va,the%20country's%20active%20national%20capacity.

6. Daily News Hungary, ‘Hungarian government’s new nationalising plan could violate EU law,’ 27 February 2023, https://dailynewshungary.com/hungarian-govts-new-nationalizing-plan-could-violate-eu-law/

7. Human Rights Watch, ‘Hungary’s New 'State of Danger',’ 8 June 2022, https://www.hrw.org/news/2022/06/08/hungarys-new-state-danger

Taiwan Cement said this week that it is aiming for cement to account for less than half of its sales by 2025. At the annual shareholders’ meeting chair Nelson Chang defended the cement sector as a core business but said that the company was expanding more into the green energy sector through its energy storage and vehicle charging lines. Chang directly linked the strategy to growing carbon taxes around the world, such as the European Union Emissions Trading Scheme, where the carbon price has been occasionally close to pushing past Euro100/t since early 2022. Taiwan Cement formed a joint venture with Türkiye-based Oyak Group in 2018 that runs Cimpor in Portugal.

Table 1: Cement business share by revenue of selected cement producers. Source: Corporate annual reports.

Taiwan Cement’s plan to decrease its reliance on cement is becoming a familiar one. Holcim notably revealed in 2021 that it was growing its light building materials division. Its cement division represented 60% of sales in 2020 with concrete and aggregates making up most of the rest to 92% and the remaining 8% on other products including light building materials. This started to change with the acquisition of roofing and building envelope producer Firestone Building Products in 2021. Other similar acquisitions have followed. Holcim’s current target is to grow the Solutions & Products division to around 30% by 2025, with cement reduced to somewhere between a third and half of sales. Earlier this year Japan-based Taiheiyo Cement said it was doing a similar thing as part of its medium-term strategy to 2035. In its case cement represented 70% of its sales in 2022 but it is now aiming to reduce this to 65% by 2025 and 50% by 2035.

A common pattern for the business composition of European cement companies is a mixture of heavy building materials made up of cement, concrete and aggregate. However, not every cement company follows the same route. Some cement companies are simply parts of larger conglomerates. UltraTech Cement, for example, is mostly just a cement company. However, it is also part of Aditya Birla Group, which runs a wide range of industries including chemicals, textiles, financial services, telecoms, mining and more. Depending on how one looks at it, UltraTech Cement’s cement business ratio is large or Aditya Birla Group’s ratio is small. Siam Cement Group (SCG) in Thailand is another example of a cement producer operated by a conglomerate with other major businesses.

A different approach that some cement producers take is to mix cement production with complimentary businesses outside of heavy building materials. A good example of this is Votorantim Cement in Brazil, which manufactures cement and steel. Companhia Siderúrgica Nacional (CSN) is another Brazil-based cement producer that is also well known for steel production. Adani Group in India, meanwhile, was well known for logistics, power generation and airports before it purchased Ambuja Cements and ACC from Holcim in 2022.

The driver for cement companies looking to reduce cement as a proportion of their businesses has varied between the three examples presented above. Holcim’s approach has been in response to growing European carbon costs but it also fits with a general desire to broaden its business as the company has sought to reshape itself following the merger between Lafarge and Holcim. Taiheiyo Cement’s plans also have a sustainability angle but the Japanese market has been in slow decline since the 1990s and this has been made worse by the spike in energy prices since 2022. Investing in new businesses makes sense for either of these reasons. Lastly, Taiwan Cement says it is taking action in response to carbon prices around the world. However, its proximity to many other large-scale producers in the Far East may also be a factor. Whether more companies follow suit and also start to reduce the ratio of their cement businesses remains to be seen. Yet, mounting carbon taxes and global production overcapacity look set to make more of the larger cement producers consider their options in certain places.

In Australia and New Zealand, four producers operate a total of six integrated cement plants, with another 13 grinding plants situated in Australia. This relatively small regional cement industry has been on a decades-long trajectory towards ever-greater sustainability – hastened by some notable developments in recent weeks.

Oceania is among the regions most exposed to the impacts of climate change. In Australia, which ranked 16th on the GermanWatch Global Climate Risk Index 2021, destructive changes are already playing out in diverse ways.¹ Boral reported 'significant disruption' to its operations in New South Wales and southeast Queensland due to wet weather earlier in 2022. This time, the operational impact was US$17.1m; in future, such events are expected to come more often and at a higher cost.

Both the Australian cement industry and the sole New Zealand cement producer, Golden Bay Cement, have strategies aimed at restricting climate change to below the 2° scenario. Golden Bay Cement, which reduced its total CO₂ emissions by 12% over the four-year period between its 2018 and 2022 financial years, aims to achieve a 30% reduction by 2030 from the same baseline. The Australian Cement Industry Federation (CIF)'s 2050 net zero cement and concrete production roadmap consists of the following pathways: alternative cements – 7%; green hydrogen and alternative fuels substitution – 6%; carbon capture – 33%; renewable energy, transport and construction innovations – 35% and alternative concretes – 13%, with the remaining 6% accounted for by the recarbonation of set concrete.

Australia produces 5.2Mt/yr of clinker, with specific CO₂ emissions of 791kg/t of clinker, 4% below the global average of 824kg/t.² Calcination generates 55% of cement’s CO₂ emissions in the country, and fuel combustion 26%. Of the remainder, electricity (comprising 21% renewables) accounted for 12%, and distribution 7%. Australian cement production has a clinker factor of 84%, which the industry aims to reduce to 70% by 2030 and 60% by 2050. In New Zealand, Golden Bay Cement's main cement, EverSure general-purpose cement, generates CO₂ at 732kg/t of product.³ It has a clinker factor of 91%, and also contains 4% gypsum and 5% added limestone.

Alternative raw materials

Currently, Australian cement grinding mills process 3.3Mt/yr of fly ash and ground granulated blast furnace slag (GGBFS). In Southern Australia, Hallett Group plans to commission its upcoming US$13.4m Port Augusta slag cement grinding plant in 2023. The plant will use local GGBFS from refineries in nearby Port Pirie and Whyalla, and fly ash from the site of the former Port Augusta power plant, as well as being 100% renewably powered. Upon commissioning, the facility will eliminate regional CO₂ emissions of 300,000t/yr, subsequently rising to 1Mt/yr following planned expansions. Elsewhere, an Australian importer holds an exclusive licencing agreement for UK-based Innovative Ash Solutions' novel air pollution control residue (APCR)-based supplementary cementitious material, an alternative to pulverised fly ash (PFA), while Australian Graphene producer First Graphene is involved in a UK project to develop reduced-CO₂ graphene-enhanced cement.

Golden Bay Cement is investigating the introduction of New Zealand's abundant volcanic ash in its cement production.

Fuels and more

Alternative fuel (AF) substitution in Australian cement production surpassed 18% in 2020, and is set to rise to 30% by 2030 and 50% by 2050, or 60% including 10% green hydrogen. In its recent report on Australian cement industry decarbonisation, the German Cement Works Association (VDZ) noted the difficulty that Australia's cement plants face in competing against landfill sites for waste streams. It described current policy as inadequate to incentivise AF use.

Cement producer Adbri is among eight members of an all-Australian consortium currently building a green hydrogen plant at AGL Energy’s Torrens Island gas-fired power plant in South Australia.

Across the Tasman Sea, Golden Bay Cement expects to attain a 60% AF substitution rate through on-going developments in its use of waste tyres and construction wood waste at its Portland cement plant in Northland. The producer will launch its new EcoSure reduced-CO₂ (699kg/t) general-purpose cement in November 2022. In developing EcoSure cement, it co-processed 80,000t of waste, including 3m waste tyres. The company says that this has helped in its efforts to manage its costs amid high coal prices.

Carbon capture

As the largest single contributor in Australia's cement decarbonisation pathway, carbon capture is now beginning to realise its potential. Boral and carbon capture specialist Calix are due to complete a feasibility study for a commercial-scale carbon capture pilot at the Berrima, New South Wales, cement plant in June 2023.

At Cement Australia's Gladstone, Queensland, cement plant, carbon capture is set to combine with green hydrocarbon production in a US$150m circular carbon methanol production facility supplied by Mitsubishi Gas Chemical Company. From its commissioning in mid-2028, the installation will use the Gladstone plant's captured CO₂ emissions and locally sourced green hydrogen to produce 100,000t/yr of methanol.

More Australian cement plant carbon capture installations may be in the offing. Heidelberg Materials, joint parent company of Cement Australia, obtained an indefinite global licence to Calix's LEILAC technology on 28 October 2022. The Germany-based group said that the method offers effective capture with minimal operational impact.

Cement Australia said “The Gladstone region is the ideal location for growing a diverse green hydrogen sector, with abundant renewable energy sources, existing infrastructure, including port facilities, and a highly skilled workforce." It added "The green hydrogen economy is a priority for the Queensland government under the Queensland Hydrogen Industry Strategy.”

Logistics

Australian and New Zealand cement facilities' remoteness makes logistics an important area of CO₂ emissions reduction. In Australia, cement production uses a 60:40 mix of Australian and imported clinker, while imported cement accounts for 5 – 10% of local cement sales of 11.7Mt/yr.

Fremantle Ports recently broke ground on construction of its US$35.1m Kwinana, Western Australia, clinker terminal. It will supply clinker to grinding plants in the state from its commissioning in 2024. Besides increasing the speed and safety of cement production, the state government said that the facility presents 'very significant environmental benefits.'

Conclusion

Antipodean cement production is undergoing a sustainability transformation, characterised by international collaboration and alliances across industries. The current structure of industrial and energy policy makes it an uphill journey, but for Australia and New Zealand's innovating cement industries, clear goals are in sight and ever nearer within reach.

References

1. Eckstein, Künzel and Schäfer, 'Global Climate Risk Index 2021,' 25 January 2021, https://www.germanwatch.org/en/19777

2. VDZ, 'Decarbonisation Pathways for the Australian Cement and Concrete Sector,' November 2021, https://cement.org.au/wp-content/uploads/2021/11/Full_Report_Decarbonisation_Pathways_web_single_page.pdf

3. Golden Bay Cement, 'Environmental Product Declaration,' 12 May 2019, https://www.goldenbay.co.nz/assets/Uploads/d310c4f72a/GoldenBayCement_EPD_2019_HighRes.pdf

Holcim Schweiz hit a milestone recently with the aerial drone programme at its Siggenthal cement plant. The project with Voliro, a Switzerland-based technology start-up, has started to use multi-rotor drones to conduct official measurement flights. They used them to take measurements to determine the steel wall thicknesses of the cement kiln and the cyclone preheater. The work has been part of Holcim’s ‘Plants of Tomorrow’ industrial automation plan with unmanned aerial vehicles (UAV). Key features of the particular drones being used are that they can be rotated around all axes by a special rotor system and can even fly upside down.

Holcim has been using drones in and around cement plants for a few years now. When it launched the Plants of Tomorrow plan in 2019, Switzerland-based drone supplier Flyability said that the cement company had chosen its Elios 2 model to perform confined space inspection. Earlier in 2017 another supplier, SenseFly, said that LafargeHolcim Tanzania had been using its fixed-wing products. Holcim is also far from alone in its use of drones. A few examples among many include Cemex USA’s work with Kespry earlier in 2021, HeidelbergCement’s work in North America and Germany in 2020 and 2021 and Votorantim’s testing at its Córdoba and Niebla plants in Spain back in late 2015. 

UAV usage by armed forces dates back to examples like unmanned incendiary balloons being deployed in the 19^th century to Azerbaijan’s reported decisive use of drones in its war against Armenia in late 2020. The current era of industrial UAVs began after 2000 when governments starting issuing civilian permits, miniaturisation occurred and improvements in cameras, sensors and computing power followed. For the mineral processing sector the trend started with drones being used for stockpile management and quarry surveying. At present this is the main area that UAVs are used for by the sector, often coupled with photogrammetry techniques. CalPortland’s Adam Chapman’s paper at the 2021 IEEE-IAS/PCA Virtual Cement Conference described one company’s use of UAVs in the cement industry since 2016, looking at licensing, cost, quality of data, drone technology, fleet management and field experiences.

More recently though, tests of drones used to survey cement plant buildings and structures have started being publicised such as Holcim’s work at Siggenthal. A presentation by consultant John Kline and Chris Place of Exelon Clearsight summarised the use of drones for structural inspection at cement plants at the Global CemProducer 3 webinar in January 2021. The key benefits they promoted of using an UAV in this way were: improved safety because workers have reduced risk from climbing, working at height or in confined spaces; less time to conduct a survey; higher resolution photographs and video; better coverage through grid method surveying; and an overall lower cost. However, on that last point, other commentators have noted that market-leading drones for surveying are relatively expensive and easy to damage. Drones have since been used to start going inside structures at cement plants with Kline demonstrating their use to inspect the condition of refractory within the cooler, kiln, pre-heater and cyclone of a production line at the Global CemProducer 2 webinar in July 2020. HeidelbergCement has also been doing similar things, with an inspection trial using a drone of the kiln at the Schelklingen plant in Germany during the 2021 maintenance shutdown period at the site.

So far the use of drones by the cement industry has mostly been in a surveying or inspection capacity. Given the short time that UAVs have been used like this there is likely to be scope for lots more development both within existing fields and new ones as the sector works out how best the technology can be used. One application we couldn’t find in the research for this short article was the use of drones for security and surveillance tasks at cement plants and quarries although this may be happening already. However, there could be a more active role for drones if or when a company finds a way for them to start making basic repairs or carrying out simple maintenance in those hard to reach areas that drones excel at accessing. Research examples exist of UAVs being used to spray concrete or repair materials onto minor defects in concrete structures. Yet considerable challenges face these kinds of applications such as the weight of a loaded multi-rotor drone or damage from rebound. Before we all get too worried about drones replacing our jobs though it is worth considering that Amazon’s plan to deliver packages by UAV was first announced in 2013 and it still hasn’t happened yet. It may yet, but for now in most situations humans remain cheaper and more practical than robots or drones.

Dalmia Bharat managing director Puneet Dalmia characterised India’s cement industry as one of ‘many regions and many players’ in an interview on 10 August 2021. It is equally an industry of many plants – which are seemingly larger and more numerous by the week.

On 9 August 2021, Orient Cement announced an investment of US$215m to increase its Devapur, Telangana, cement plant’s capacity by 53% to 11.5Mt/yr from 7.5Mt/yr. Another Southeast Indian producer, Ramco Cements, plans to invest a total of US$135m in upgrades in the 2022 financial year; it completed US$53.9m (40%) of the planned investments in the first quarter alone. NCL Industries is planning a US$13.5m expansion of its 2.7Mt/yr Mattapalli, Telangana, cement plant by 33% to 3.6Mt/yr and the establishment of a new 0.66Mt/yr grinding plant at nearby Anakapalle for US$26.9m by 2022. Thus, a single state has at least 5.56Mt/yr-worth of new capacity in the pipeline with US$337m-worth of pending investments. If the central government grants the Telangana government’s 6 August 2021 request to reopen Cement Corporation of India’s Adilabad cement plant in the state, this will be joined by a further 4.0Mt/yr of ‘old’ capacity.

Nationally, investments in on-going cement plant projects total US$1.81bn. What is remarkable here is the continued drive to expand despite existing overcapacity. Puneet Dalmia estimates that Indian capacity utilisation will be 70% in 2021. Despite this, his company plans to increase its installed capacity by 17% to 36.0Mt/yr in the (current) 2022 financial year and by 57% to 48.5Mt/yr with the realisation of all on-going projects by the 2024 financial year, from 30.8Mt in August 2021. By 2030, the group aims to more than triple its installed capacity to over 110Mt/yr. Dalmia says that, if it is to achieve this, it will be not as another South and East Indian regional company, but a ‘pan-India, pure play cement producer.’

Dalmia’s confidence is founded on the belief that overcapacity will abate. His assurance is more than just that of an investor: when, in July 2021, the Department for Promotion of Industry and Internal Trade established an advisory body, the Cement Industry Development Council (CIDC), to help tackle the oversupply issue, it appointed him as chair. Puneet Dalmia predicts that capacity utilisation will rise to 85% ‘within a few years’. Consolidation is key: over the same hazily defined time period, the top five producers’ 57% share of the cement market will rise to 65%, he believes. Rising fuel costs and restrictive limestone mining licencing will deter would-be cement plant start-ups; anticipated carbon costs should clear away a lot of old wood.

Demand is the other half of the coin in India’s attempt to pitch market forces against overcapacity. In the first quarter of the 2022 financial year, cement demand fell by an estimated 20% amid the Covid-19-led collapse of rural housing’s bagged cement uptake. This type of sales roughly accounts for a third of Indian cement consumption. Other construction segments have proved more resilient. Prime Minister Narendra Modi’s government, never infrastructure-shy, chose to resume national projects after India’s Covid-19 lockdown ended on 10 May 2020, keeping them running through subsequent waves of the pandemic. The National Highways Authority of India (NHAI) continued with 480 projects covering 25,000km of road. In Andhra Pradesh, the state government is building 122,000 new homes. Cement producers have been able to corner pent-up demand to shift their stock at a generous margin.

The Confederation of Real Estate Developers' Associations of India (CREDAI) claimed on 9 August 2021 that the price of cement is hampering the realisation of affordable housing targets, and lobbied the government to reduce the goods and services tax on cement to 18% from 28%. In parts of the country, state governments have taken the matter into their own hands. The Kerala government set out to take over 25% of the Keralan cement industry on 5 July 2021. Its plan: increasing cement production, a policy which it is already implementing via state-owned Malabar Cements and Travancore Cements.

Puneet Dalmia claimed on 10 August 2021 that India’s per-capita cement demand is 200kg/yr, corresponding to a total national demand of 276Mt/yr and 60% below the purported global average of 500kg/yr. Given India’s development trajectory, growth is nearly inevitable. Puneet Dalmia is unequivocal in his medium-term prediction: Indian cement revenues will rise at a rate of 9–10% per annum, outstripping forecast gross domestic product (GDP) growth by 2%.

Indian cement’s tale of rebound and growth is borne out in the latest financial reports. UltraTech Cement’s first-quarter sales in the 2021 financial year were US$1.59bn, up by 54% year-on-year from US$1.03bn in the first quarter of the 2020 financial year. Its cement sales rose by 47% in the period to 21.5Mt from 14.6Mt. In its 2021 first-half report, Ambuja Cements recorded year-on-year sales growth of 41%, to US$930m from US$659m, and cement sales growth of 36% to 13.5Mt from 9.95Mt. This is echoed both in the other Indian producers’ reports and internationally: France-based Vicat named India alongside its home country as an area of particular sales growth in the first half of 2021, especially in the second quarter.

The UN Intergovernmental Panel on Climate Change’s demonstration of the impacts of human activity on the climate in a report published on 9 August 2021 might lead an observer to ask “What’s the good?” in all this growth. In the face of the immense benefits cement offers to the lives of Indians, a more pertinent question would be “How best can growth happen?” Ambuja Cement’s aforementioned plan to grind clinker with fly ash is a step in the right direction. Another is Vedanta Aluminium’s proposed fly ash and bauxite residue supply deal, for which it is seeking a cement industry partner. The new Cement Industry Development Council’s remit extends to the coordination of the sector’s efforts towards maximising efficiency and eliminating waste. ACC and Ambuja Cements are participating in parent company Holcim’s Plants of Tomorrow programme, which aims to increase the efficiency of cement production through better plant optimisation, higher plant availability and a safer working environment. Dalmia Bharat has a goal of net zero CO2 cement production by 2040, and a plan for getting there.

Pan-Indian producers are on the rise. Big companies desperate to modernise and implement their models of sustainable growth are blazing a trail. The size gains will be a national marvel - if the promises of sustainability are realised. What will be lost is the Indian cement industry’s festival of local and regional producers. Though still an industry of many regions and many players, its regions are increasingly close together, its players increasingly few.

Denmark: FLSmidth has launched an online condition monitoring kiln service. It says it will give plant managers the live insights they need to optimise performance and be proactive with regards to kiln maintenance. The new ‘Online condition monitoring services for kilns’ enables producers to use existing and additional sensors to gather data from equipment on a continuous basis. This data is sent to FLSmidth’s Global Remote Service Centre where it is analysed for early signs of failure. Recommendations and reports covering maintenance issues that need addressing are sent to the customer. The service agreement is available in two packages, based on the customer’s monitoring requirements.

“Digitalisation enables us to help customers develop a data-led proactive maintenance approach, guided by our network of experts,” said Mireia Fontarnau Vilaró, Head of Service Commercial, FLSmidth. “With this service agreement, we are able to collect and analyse data that would not be normally available, giving our customers the opportunity to really get on top of maintenance, improve the life of kiln components and improve their overall reliability.” The equipment supplier says that its service monitors the kiln crank, kiln shell ovality and axial balance, helping customers avoid unplanned downtime through root cause analysis.

Back on 11 March 2020, this column drew attention to the seemingly intractable overcapacity situation in Vietnam. On that day, incidentally the day that the World Health Organisation (WHO) declared the Covid-19 outbreak to be a full-blown pandemic, Vietnam held firm on its previous estimate that it would produce 103Mt of cement in 2020. 70Mt would be consumed domestically, with 33Mt exported. At the time much of the world was heading down the coronavirus rabbit hole and we were incredulous. South East Asia was worst affected by lockdowns at that point and demand was poor. It was clear that the country would struggle to find buyers, even with its famously reasonable prices.

Fast forward five months and figures from last week show that Vietnam’s cement producers actually exported an incredible 19.5Mt in the first seven months of 2020. The volume was 11% higher than the 17.6Mt exported in the corresponding period of 2019. However, prices suffered, with the value of exports falling by 5.4% to US$732m. That works out at US$37.54/t in 2020 against US$43.98/t in 2019 - a drop of US$6.44/t. Now, just as in March, the Ministry of Construction has maintained again that Vietnam will export 32-33Mt of cement and clinker in 2020. The volumes seem impressive, but it’s ‘sales for show, profit for dough.’ How much longer can the country continue to pour such vast amounts of cement into the global market at these low prices?

Well it seems the answer is ‘not any more.’ Following an announcement in May 2020 that no new cement plant projects would go ahead in 2020 after all, there is now a new cement industry development strategy to help move the sector forward. Under the plans, all plants with a capacity under 0.9Mt/yr will be forced to improve their productivity, product quality, energy efficiency and, crucially, environmental performance, by 2025. While the government says it will help to facilitate the changes, we can be reasonably sure that it wants to reduce its domestic capacity to a fairly meaningful extent. The Global Cement Directory shows that Vietnam has at least 28 plants of less than 0.9Mt/yr capacity, jointly contributing around 16.6Mt/yr. While we should be clear that the government is not calling for the wholesale elimination of capacity, removing these plants would leave the country with around 86Mt/yr of cement production and halve exports to around 16.4Mt/yr, assuming 70Mt/yr of domestic consumption. On the surface the government says it will help plants ‘facilitate’ the changes, but it remains to be seen whether its many older, less efficient plants will actually be able to jump through the hoops the authorities put in their way. Of course, one need look no further than neighbouring China to see how effective such directives from the top of government can be.

For its part the Vietnamese government is clear: Plants that don’t pick up the pace will be closed. It says that the strategy aims to “Develop the cement industry to an advanced and modern level, to produce cement of international standard quality with economical and efficient use of energy, giving high competitiveness in the international market, while meeting the needs of the domestic market, completely eliminating out-dated, natural resource-consuming and polluting technology.” The government stops just short of mentioning profitability, but it is clear that this would be another nice effect of reduced capacity in an economy where the state is effectively selling the cement by itself. China again shows what should happen next. Following major profitability improvements in 2017, 2018 and 2019, China’s producers continue to go from strength-to-strength in 2020, even taking coronavirus closures into account. This week Anhui Conch reported a 5.3% increase in its first half net profit (to a tidy US$2.33bn), with China Resources Cement chiming in with an 11% rise to US$541m. While it is unclear from outside of China just how much capacity has been terminated, the changes are having the desired effect.

So, after looking for perhaps slightly too long at dwindling returns, Vietnam’s government appears to be serious about overcapacity. Its (larger) cement producers look set to gain from supply-side reforms in the same way that many in China have. The industry will shrink over the next few years and, while closures and job losses will be unpopular, the country, its economy and its environment will benefit from this policy in the long run.