Displaying items by tag: CNBM

Nigeria: China based Sinoma International Engineering has signed a US$585m contract to build an integrated cement plant at Itori in Ogun state. The plant will have two 6000t/day clinker production lines covering limestone crushing to cement packaging and shipping. The contract becomes effective once Sinoma International Engineering receives a geological survey, payment and performance guarantees and a 12% advance payment. Clinker production is scheduled for two years after the contract starts with final commissioning expected a few months later.

Dangote Cement’s Itori Cement subsidiary was established in 2016 at the same time work started on building the 6Mt/yr Okpella plant in Edo state. The Okpella plant started producing cement in 2021.

China: China National Building Material (CNBM) subsidiary Sinoma International Engineering has concluded an agreement to acquire cement plant equipment supplier CNBM Smart Industry Technology. MarketScreener News has reported the value of the deal as US$52m.

CNBM Smart Industry Technology supplies maintenance services and equipment to companies around the globe.

China: China Resources Cement subsidiary Shangsi Cement has successfully commissioned its new 5Mt/yr Shangsi aggregates site in Guangxi Province. The cement company developed the site in collaboration with CNBM Design and Research Institute, beginning in February 2022.

CNBM Design and Research Institute general manager Xie Xiaoning that both parties could take this project as an opportunity to further cooperate in-depth in fields such as new building materials, waste co-processing and automation, so as to help China Resources Cement to achieve diversified development and extension along value chains.

China Resources Cement expects to exceed 30Mt/yr in 2022. Earlier in the year, it won an auction for 1.5BnT of limestone reserves in Guangxi Province.

China: China National Building Material (CNBM) expects its profit to decline by 50% year-on-year in the first nine months of 2022. The group said that this will be due in part to reduced cement sales, increased costs resulting from high coal prices and a 'substantial' decline in the value of its financial assets.

Saudi Arabia: Arabian Cement says it is considering how it can complete work on the construction of new cement mills at its integrated Rabigh plant. The announcement follows a statement from the cement producer reporting that contractor China National Building Materials Company (CNBM) said that it was unable to complete the project due to the necessity of “involving a third party.” The project has suffered repeated delays, such as Covid-19-related travel bans, and dates back to at least 2015.

The larger cement producers in China have published their half-year financial results and the numbers are looking grim. Starting with data from the National Bureau of Statistics of China, cement output in the country fell by 14.5% year-on-year to 979Mt in the first half of 2022 from 1.14Bnt in the same period in 2021. This is the lowest first half output figure since 2012. The decline on a monthly basis started in May 2021 and has carried on consistently since then. Rolling cumulative annual output hit a low of 2.18Bnt in July 2022, the lowest figure since at least the start of 2019 and well before the coronavirus pandemic started.

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China.

The financial figures from the cement producers have mostly followed this trend. Of the companies covered here, Anhui Conch’s drop in sales revenue was the most distinct at 30% year-on-year to US$8.14bn. However, Jidong Cement actually managed to increase its revenue and Huaxin Cement’s decrease was fairly small, possibly due to its growing stable of overseas projects. None of these companies could avoid falling cement and clinkers sales volumes though. Again, Anhui Conch is the outlier here with a larger fall in sales volumes proportionally at nearly 40% compared to around 20% for the rest. Chen Bolin, the deputy secretary-general of China Cement Association (CCA), told the 21st Century Business Herald newspaper that of the 20 or so listed cement companies that have published their half-year reports by the end of August 2022, more than half had reported falling sales revenue and net profit and only one company had managed to increase its net profit.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports. Note: Cement revenue shown only for CNBM & Taiwan Cement.

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.

The financial reports from the Chinese cement companies detailed here have been fairly light on the reasons for the current state of the sector. Repeated coronavirus outbreaks, instability in the real estate market, a lack of funding for infrastructure projects, growing energy and raw materials costs, pressure on prices and a generally weak economy have all been blamed for the situation. Media channels outside of China have continued to scan the country’s real estate sector for signs of collapse following Evergrande’s problems in 2021. However Chen Bolin diplomatically held back by describing the real estate market as not yet stabilised and a drag on cement demand. Instead he hoped that large-scale infrastructure projects would offer some form of relief.

One last point to note, that both the CCA has made and could be seen in some of the company reports, is that some of the Chinese cement companies are already starting to diversify their businesses. This is in parallel to what some of the larger western-based multinational cement producers have also been doing in recent years with forays into concrete, light building materials and construction chemicals. CNBM already has large concrete, light building materials and engineering subsidiaries. However, Huaxin Cement and Anhui Conch have also started to branch out recently into aggregates, concrete and new energy generation, in the case of the latter company. Things may get worse before they get better, especially depending when or if the Chinese government decides to act on the real estate market. However, whatever kind of adjustment the cement sector may face, there are some signs present already of what some of the companies may do next.

China: CNBM has blamed declining sales of cement on repeated coronavirus outbreaks, a decline in the real estate market, lack of funding for infrastructure projects and a generally weak economy. Its cement sales revenue fell by 10% year-on-year to US$7.80bn in the first half of 2022 from US$8.65bn in the same period in 2021. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 39% to US$1.72bn from US$2.82bn. Cement and clinker sales volumes decreased by 17.8% to 128Mt and 14.6% to 18Mt respectively. Sales volumes of concrete decreased by 24% to 39.5Mm³.

Overall, the group’s revenue fell by 11% to US$15.8bn in the first half of 2022 from US$17.6bn in the same period in 2021. Its adjusted EBITDA dropped by 23% to US$2.87bn from US$3.71bn.

China: Xinjiang Tianshan Cement has announced plans to invest US$300m into its new materials subsidiary Chizhou CNBM New Materials. The company says that it has increased its planned investments in its Hengshan limestone mine project by 15% to US$1.58bn from US$1.37bn.

France: Germany-based IKN says it successfully commissioned a new Pendulum Cooler at Lafarge France’s Martres cement plant earlier in the year. The 2500t/day cooler was supplied for the new production line at the unit. It is also equipped with a single grate Dynamic Linear Drive and a roll crusher with three rolls at the cooler end as well as a bypass. It is designed to be used with an alternative fuels thermal substitution rate of up to 85%. IKN thanked Lafarge France and China-based CBMI for their cooperation on the project. The new production line was commissioned in January 2022.

China Daily ran a story this week entitled “Steel and cement don't reflect China's growth story any more.” The piece reassured English-language readers that the country’s economy is moving on and that recent falling production of cement simply reflected the “profound changes China's economic structure is undergoing.” Profound is the right word here given that China is home to the world’s largest cement sector.

Graph 1: Cement output by quarter in China, 2019 - 2022. Source: National Bureau of Statistics of China.

Data from the Ministry of Industry and Information Technology shows that cement output fell by 12% year-on-year to 387Mt in the first quarter of 2022. This compares to 7% and 15% falls in the third and fourth quarters of 2021 respectively. On an annual cumulative rolling basis, output previously hit a low of 2.22Bnt in March 2020 as the initial coronavirus outbreak was brought under control. Output then surged to a high of 2.53Bnt/yr in April 2021 before it started to fall in the autumn of 2021. On a monthly basis, output volumes fell by 5.6% year-on-year to 187Mt in March 2022.

As covered in last week’s column (GCW 555), the financial results from the larger Chinese cement producers have also suffered in the first quarter of 2022. CNBM’s total operating revenue fell by 1% year-on-year to US$7.29bn in the first quarter of 2022. Anhui Conch’s revenue fell by 26% to US$3.85bn and China Resources Cement’s (CRC) turnover fell by 18% to US$889m. Of these three only CRC has released cement sales volumes. Its sales volumes of cement and clinker decreased by 34% and 12% respectively.

In its own analysis, the China Cement Association (CCA) has summarised the current situation as one of rising costs, falling demand and declining benefits. The latest large-scale coronavirus lockdowns and a poor real estate market have hit demand. Rising energy and freight prices have increased the cost of cement. Together, higher costs and falling demand have hit the profits of the cement producers. CNBM’s net profit, for example, fell by 9% to US$420m. Regionally, the CCA observed that the losses of the northern-based producers had increased and that the profits of the southern producers had started to fall sharply also. Another interesting point it made was that the year-on-year decline in March 2022 was slower than compared to the first quarter as a whole and that high levels of inventory may have made March 2022 look worse than it actually was. The association is now pinning its hopes upon demand and prices picking up again later in the second quarter after the current quarantine controls are eased and the government curbs high coal prices.

The CCA’s take doesn’t seem unreasonable, although the first quarter of 2022 was previously deemed to be a continuation of the trouble the Chinese cement sector experienced in the autumn of 2021. Possibly the first quarter has turned out worse than expected but the monthly output in March 2022 has started to look like it might be a tail-off from the worst. The period to watch remains the second quarter of 2022. Looking more widely, energy shocks from the war in Ukraine couldn’t be easily predicted but coal prices were already becoming a concern in the autumn of 2021. China’s renewed zero-Covid policy meanwhile is starting to look unpalatable both economically and socially. Throw in a continued slowdown of the real estate sector and China Daily’s profound pronouncement about the future of cement may prove accurate.