Displaying items by tag: Canada

A couple of long-running news stories popped up this week, led by the Portland Cement Association’s (PCA) latest forecast for the US market. Chief economist Ed Sullivan and the Market Intelligence Group predict slowing cement consumption growth to 2020 as the recovery period ends following the financial crash in 2008. The background to this is an expected rise in interest rates dragging on the construction market, a limited boost from the Trump administration’s tax cuts and rising debt levels hitting federal infrastructure spending.

This marks an abrupt turnaround from the PCA’s April 2018 forecast in which potential federal infrastructure spending was anticipated to kick in towards the end of 2019 creating 4% growth in 2020. To give the PCA credit, it did say at the time that this was contingent on a couple of key steps, including passage of an infrastructure bill, federal and state paperwork, bid letting and review and finally, contract awards leading to construction. Following the US mid-term elections in early November 2018 the prospect of an infrastructure bills seems remoter than before given the political differences between the US House of Representatives and the Senate. This may have been the final straw for the PCA and it adapted its forecast accordingly.

Graph 1: Cement shipments in the US, January – August 2013 - January – August 2018. Source: Portland Cement Association (PCA).

It is also worth reflecting on the third quarter financial results of the multinational cement producers over the last few weeks. CRH may have been crowing this week about how its US performance was driving its business in the wake of its acquisition of Ash Grove Cement and other assets, but many of the other multinational cement producers weren’t. HeidelbergCement, Buzzi Unicem and Titan all blamed the weather in the US for dragging on their results. LafargeHolcim said it suffered less with a ‘soft’ first quarter in 2018 followed by recovery.

The other story this week with relevance to the US was the continued speculation in the Canadian press about the future of the McInnis Cement plant in Quebec. The latest update is that the plant’s shareholders have asked the provincial government if they can swap the debt the province holds in the venture for equity. This has been seen as a potential bid to keep the company operational while it continues to hunt for a buyer. Rumours of a sale have swirled around since the start of 2018, with the Global and Mail newspaper naming HeidelbergCement as being potentially interested. Three bids have been reportedly made by unnamed parties but they were rejected for being too low. A slowing US cement market is particularly bad news for McInnis Cement. The plant is situated on the Atlantic Coast of Canada and exports to the US have been seen as a major part of its business. To this end it officially opened its marine terminal in the Bronx, New York in October 2018.

The main US market needs to find an alternative to the ‘fabled’ infrastructure bill if it wants better growth. Yet, reduced US cement consumption growth won’t help McInnis’ shareholders recoup the money they have sunk in the project. Somebody seems certain to lose in this situation and, with a protectionist incumbent in the White House, it seems likely to be somebody north of the border.

Ireland: CRH’s sales rose by 3% year-on-year to Euro19.9bn in the first nine months of 2018. Its earnings before interest, taxation, deprecation and amortisation (EBITDA) increased by 2% on a like-for-like basis to Euro2.5bn. The building materials producer said that its earnings had been supported by growth in the Americas despite poor weather. It added that ‘momentum’ remained positive in Europe and demand had improved in Asia. However, its EBITDA dropped by 44% in Asia.

By region the group reported falling cement sales volumes in the UK and Ukraine. Sales volumes rose in most other European territories, with particular growth in Hungary, Germany, Poland, Serbia and Switzerland. In the US it said that its newly acquired Ash Grove Cement assets and ones in Florida had performed in line with expectations. However, sales in Canada fell due to poor weather. Sales in the Philippines rose by 3% due to rising cement sales volumes and prices following growing demand. However, here earnings were hit by higher fuel and power costs.

Canada: Quebec's Ministry of Economy and Innovation has confirmed that it has received a request from the shareholders of McInnis Cement to swap the debt the province holds in the venture for equity. A request has been made to the ministry and to Investissement Québec, the provincial government's investment arm, to convert almost US$200m of debt into shares in the cement producer, according to the Globe and Mail newspaper. The newspaper speculates that an arrangement of this kind could be part of a potential deal with creditors to reduce the company’s liabilities and enable it to continue to operate.

McInnis Cement’s plant at Port-Daniel–Gascons was inaugurated in mid-2017. Construction at the site started in mid-2014. However, cost overruns saw the government-backed project delayed and then taken over by an investor, the Caisse de dépôt et placement du Québec (CDPQ), a pension and insurance fund manager. The CDPQ was reportedly considering options including selling the plant or securing more investment in early 2018. Three bids were made for the cement producer but were rejected as being too low, according to reporting by the Globe and Mail. Interested parties in the company included Germany’s HeidelbergCement.

Canada: CEMSI, a subsidiary of Kontrol Energy, has received an order worth US$0.8m for an emissions analyser for an unnamed ‘global’ cement company. The product offers on-going regulatory compliance and process data to meet government requirements and reduce fuel and energy costs associated with production. The company said that it has withheld the name of the customer due to ‘industry competitive purposes.’

CEMSI, Is an integrator of turnkey continuous emissions and process monitoring equipment solutions, serving the Canadian and US market. Currently, up to 40% of CEMSI’s revenues are recurring under multi-year service agreements. It was acquired by Kontrol Energy in September 2018.

“This is a significant new order for the CEMSI operating team and adds to a growing vertical line of business in emissions compliance,” said Paul Ghezzi, chief executive officer (CEO) of Kontrol Energy.

Canada: Environmental groups including Nature Canada, Ontario Nature, Nature Quebec and the VanKleek Hill and District Nature Society have called on Environment and Climate Change Minister Catherine McKenna to start a review of the proposed Colacem Canada L’Orignal cement plant in Ontario. The groups have received a response from the Canadian Environmental Assessment Agency (CEAA) saying that their concerns had been acknowledged and that it was providing advice to the minister, according to the National Observer. Colacem hopes to build a 3000t/day plant next to a limestone quarry it already operates.

US: Canada’s McInnis Cement has officially opened its terminal in the Bronx, New York. The terminal can store up to 44,000t of cement and most of this will be delivered by ship. City Council Member and Land Use Committee Chair Rafael Salamanca, Bronx Community Board 2 Chair, Bobby Crespo and members of several Bronx organisations and the local business community joined McInnis Cement executives to celebrate the opening of the unit, the first new industrial maritime project built on the South Bronx waterfront in more than half a century.

Cementos Fortaleza started building its new grinding plant in Merida this week. The 0.25Mt/yr unit is expected to open in July 2019. It marks the first new plant in the country in a while and it will be only the second in the south-eastern state of Yucatan, joining Cemex’s integrated plant. It follows a number of upgrades at existing plants over the last two years, such as various mill orders by Cruz Azul from European suppliers (as part of an upgrade at two of its plants) and Elementia’s upgrade to its Tula plant.

Note that Cementos Fortaleza is a subsidiary of Elementia, the building materials company partly-owned by ‘Mexico’s richest man’ Carlos Slim. The group has steadily been expanding with its purchase of the remaining share in Cementos Fortaleza in 2015, acquiring a controlling stake in Giant Cement in the US in 2016 and a project to build a grinding plant in Costa Rica in early 2018.

The other big news story this week with implications for the cement sector was the arrangement of the US-Mexico-Canada Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA). Although the exact details of the deal are still emerging, the consensus is that the cement industry in Mexico is unlikely to be affected much. The two points that might have implications for the cement industry are changes to rules of origin regulations and tariffs on imports made by low-wage workers. Both clauses are targeted at the automotive sector to protect US industry so it is unlikely that cement will be affected. In addition it is worth remembering that Mexico was the fifth largest exporter of cement and clinker to the US in 2017 after Canada, Greece, China and Turkey. And, all the major Mexican cement producers operate plants in the US, further protecting them from any potential negative consequences of the USMCA.

Graph 1: Mexican cement production, 2009 – 2017. Source: Camara Nacional del Cemento (CANCEM).

Back in Mexico, the graph above shows that production has been growing in fits and starts over the last decade. The last growth trend started in 2013 but it stalled in 2017. However, the Camara Nacional del Cemento (CANCEM) was forecasting growth of 2.5% year-on-year for 2018 in April 2018. The last time this column covered Mexico, back in early 2017, we produced a breakdown of the industry by company and production capacity. This is worth looking at for an overview of the production base.

Cemex, the largest local producer, reported Ordinary Portland Cement sales volume growth of 3% year-on-year in the second quarter of 2018 but flat growth for the first half of the year. This growth was supported by good activity in the formal residential sector with support from the industrial and commercial sector. LafargeHolcim released less detailed figures for the first half of 2018 but it attributed its strong performance in Latin America to Mexico. Overall cement sales for the region grew by 12.1% to 12.6Mt, in part due to large infrastructure projects in Mexico, such as the new Mexico City International airport. The third biggest producer, Grupo Cementos de Chihuahua, said that its cement sales volumes rose by 2.5% in the first half of the year, supported by rising prices.

As reported in early 2017, the Mexican cement industry is moving ahead with confidence. A modest amount of production capacity is being built, the steady market growth since 2013 looks set to continue after a minor blip in 2017 and the main producers are all reporting good performance so far in 2018. Finally, the USMCA looks unlikely to trouble Mexican producers much and their diversified holdings will certainly help them if it does. For the moment - bravo!

Canada: Kate Strachan has become the new plant manager of the Lafarge Exshaw plant in Alberta, the largest in Canada. She took up the position in June 2018.

Born and raised in Warrington, UK, Strachan moved to Canada with her family when she was 10 years old, following her father’s job in marine engineering. She graduated from the University of Victoria with a mechanical engineering degree in 2000 before joining Lafarge Canada’s Richmond plant in the mechanical engineering department. Over the next 12 years she moved up through the mechanical department, eventually becoming the maintenance coordinator and then production coordinator at the plant.

After holding that position for several years she was promoted to production manager for Lafarge’s Sugar Creek plant in Missouri, US, but returned to Canada in less than a year to assist with the Exshaw plant’s US$600m expansion. “The commissioning of a new plant line is a once in a lifetime opportunity, so it was something I couldn’t really pass up,” said Strachan.

After spending nearly two years as the plant’s production manager, Strachan assumed her new role as plant manager in June 2018, taking over from Jim Bachmann, who was the plant manager since 2015.

UK: Refractory producer RHI Magnesita says that its cement and lime segment was ‘flat’ in the first half of 2018. It blamed this on on-going low capacity utilisation in China and Brazil and ‘some’ market share losses due to its prices. The adjusted sales revenue of its Industrial Division, including cement and lime, rose by 14.3% year-on-year to Euro413m in the first half of 2018 from Euro362m in the same period of 2017. Overall, the company reported a 24.6% increase in revenue to Euro1.51bn from Euro1.21bn.

In a separate release RHI Magnesita subsidiary Magnesita said that the company’s revenue rose by 81.6% to US$133m. This was attributed to sales to the cement business in North America and higher deliveries in Europe in 2018. However, Magnesita’s services business suffered from a poor cement market in Brazil.

Canada: Hervé Mallet, the president and chief executive officer (CEO) of McInnis Cement, is leaving the company. He has been in post since November 2016. He will be replaced, with immediate effect, by Jean Moreau, chief financial officer, who will assume the role of president and CEO on an interim basis

Moreau joined McInnis Cement in the spring of 2017. He holds experience in company, finance and operations management, and has held leadership positions within private and public entities in the finance and operations management sectors. McInnis Cement said that, “Moreau is familiar with McInnis and will ensure business continuity.”