Displaying items by tag: China

Germany: Robert Habeck, the Federal Minister for Economic Affairs and Climate Action, has visited specialist Flender at the Hannover Messe trade fair. He spoke with the company’s head Andreas Evertz about the energy transition goals for Germany and Europe, Flender's role as a supplier for the wind sector, and the importance of an energy-efficient industry on the way to reach global climate goals. The mechanical drive manufacturer was part of the government minister’s official tour of the exhibition.

Habeck said, "Discussing about the expansion of renewable energies, we usually talk about the electrical output, the production. But here at Hannover Messe, we see also the other side of the coin. A lot of the industrial production is here in Germany, or at least with German companies. And when you say the market is now swinging in and growing, that's good news." He added that “It is challenging to bring electricity production out of renewables to 80% of the demand by 2030, but it is possible."

Evertz said "Flender is a major driver of the energy transition. And this starts with any kind of materials. In drive technology, Flender not only manufactures wind gearboxes, but industrial gearboxes that are involved in the production of raw materials for wind turbines. Flender is part of nearly every supply chain."

Other recent interest shown by the German government include a tour by Foreign Minister Annalena Baerbock of Flender’s plant in Tianjin as part of a tour of China.

Kenya: Savannah Clinker, an associate company of Savannah Cement, has raised around US$480m to build a new integrated cement plant in Kitui county. It said it generated the funding through a privately placed debt arrangement with the bond set to be listed at regulated international exchange, according to the Business Daily newspaper.

Benson Ndeta, chairman of Savannah Cement Group, said “I am extremely proud to have the support of a major international investor who shares our vision and beliefs in what is required to deliver the growth and development of our key infrastructure and affordable housing.”

It was announced in December 2022 that China-based Sinoma International Engineering had been contracted to build the 2.92Mt/yr plant with a completion date planned for late 2024.

Ethiopia: China-based Sinoma International Engineering has signed an agreement with National West International Holding (WIH) Building Materials to build an industrial park development project at Dire Dawa. The project has an investment of US$600m and will include a 6000t/day cement plant and a 1000t/day lime unit, according to the Xinhua News Agency. The proposed industrial park is relatively close to the Port of Djibouti, in neighbouring Djibouti, to allow for access to raw materials and potential export markets.

WIH, a joint-venture between companies based in Ethiopia and China, already operates a cement plant at Lemi in Amhara Region.

Huaxin Cement completed its acquisition of a majority stake in Oman Cement this week. The China-based company estimated that the purchase price was around US$193m. Following the transaction with a subsidiary of the Oman Investment Authority, the country’s sovereign wealth fund, the cement producer now controls just under a 60% share in Oman Cement.

A key part of the deal includes Oman Cement’s integrated plant at Ruwi in the north of the country. The three-line unit has clinker and cement production capacities of 2.6Mt/yr and 3.6Mt/yr respectively. With the partial ownership share of 60% taken into account, this places the capacity purchase price at around US$124/t, a lower figure for capacity compared to other international acquisitions.

Oman Cement has a couple of new projects in the pipeline that have been mentioned on and off previously over the last year or so. These include the construction of a new 10,000t/day fourth production line, an upgrade to line 3 to 4000t/day from 3000t/day at present and plans for a new plant at the Special Economic Zone (SEZ) at Duqm. The company said it was looking for a contractor to carry out the upgrades at the Ruwi plant. However, Rashid bin Sultan al Hashmi, the chair of Oman Cement, said in the company’s annual results for 2022 that the Duqm project, operating under the name Al Sahawa Cement, had run into problems with the supply of gas for the proposed unit. Another recent development was the signing of a deal between Omani Environment Services Holding Company (Be’ah) and Oman Cement for the supply of refuse-derived fuel (RDF). As an aside, that last one may also have received a boost this week with the news that the local Environment Authority has suspended licenses for the export of used tyres from the country.

How these existing projects will fare under the new ownership remains to be seen, but Huaxin Cement has a track record for developing new cement production capacity outside of China. The cement producer describes itself as de-facto controlled by Switzerland-based Holcim although Holcim said in its annual report for 2022 that Huaxin Cement is a joint-venture. It currently operates plants in Cambodia, Kyrgyzstan, Malawi, Nepal, Tajikistan, Tanzania, Uzbekistan and Zambia and says that it has 10 additional projects in Africa, the Middle East and elsewhere in preparation for future business expansion. In 2022 it started operating a 3000t/day production line at Nepal Narayani and commenced the second stage of a project to build a 4000t/day clinker line at Maweni in Tanzania. Plus, as mentioned in our recent roundup of China-based producers, 13% of the group’s operating revenue derived from business outside of China in 2022 compared to 8% in 2021.

Other producers from outside of Oman have also been active locally in 2023. In late January 2023 India-based UltraTech Cement agreed a deal to buy a 70% stake in Duqm Cement Project International from Seven Seas for US$2.25m. The agreement covered a limestone mining lease that UltraTech Cement said was important for “raw material security.”

The other big development in the Oman cement market since we last covered the country in September 2021 was an intervention by the Capital Market Authority (CMA) on Raysut Cement. The chief financial officer resigned in November 2022 before the CMA questioned the company’s financial results for the second quarter of 2022. The CMA then replaced the board of Raysut Cement in December 2022 saying it had detected ‘material misrepresentation’ in the company’s third quarter results.

The last four months or so have marked a turning point for the local cement sector with a change in leadership for the two largest producers. Oman Cement reported strong growth in 2022 although it warned of “low priced cement being supplied by competitors.” Raysut Cement, unsurprisingly, recorded a loss in 2022. The construction market in the country is expected to grow as the economy leaves the coronavirus period behind, mounting energy prices boost national revenue and potentially some of this heads into infrastructure development. This puts the new management at both producers in a good position going forward.

Oman: Oman Cement has appointed Xu Gang, Chen Qian, Ian Riley and Li Yeqing as temporary board members following its acquisition by China-based Huaxin Cement. The new personnel will remain in place until the company’s next ordinary general meeting. Former chair Rashid Sultan Al Hashmi and board members Mohammed Sulaiman Al Salmi, Mohammed Abdullah Al Harthi and Sami Abdullah Al Sinani have also resigned.

Li Yeqing is the chief executive officer (CEO), secretary of the party committee and senior engineer at Huaxin Group. He holds a bachelor degree in engineering, a master’s degree in engineering and a Ph.D in business administration. He joined Huaxin Cement in 1987. He also works as the vice chair of the China Building Materials Federation and China Cement Association, and chair of the Hubei Building Materials Federation. He previously held the post of executive vice chair of the Sixth Council of China Building Materials Federation.

Xu Gang is the vice president of the Huaxin Cement. He has worked in various management roles for cement companies such as safety engineer and technical manager. He has also worked as a director for Lafarge and Huaxin Cement. Xu Gang holds a master’s degree in business administration (MBA) from Tsinghua University, a bachelor’s degree in safety engineering from the China University of Geosciences and a bachelor's degree in financial management from the Huazhong University of Science and Technology.

Ian Riley is the head of the World Cement Association. Prior to this, he held various positions such as an executive director of Tianqiao International (Shanghai) Consulting Company, the president of Asilinko Information Technology (Shanghai), the general manager of SIP (Shanghai), Information Director and the assistant and the vice president to the Xeroc. He also served as the head of Holcim Group's China region. Riley holds a bachelor’s and a master’s degree in engineering from the University of Cambridge.

Chen Qian is the vice president and chief financial officer (CFO) of Huaxin Group. Previously he held positions in various financial positions including senior auditor, senior consultant and CFO for several companies. Chan Qian is a Chinese Certified Public Accountant and a fellow member of the Chartered Global Management Accountant. He holds a bachelor's degree in world economics from Fudan University and a master's degree in business administration from the Anderson School of Business in the US.

China: China Resources Cement has forecast a loss of US$4.46 – 5.73m during the first quarter of 2023, which ended on 31 March 2023. Dow Jones Institutional News has reported that the group attributed the anticipated scale of the loss to a year-on-year decline in its cement prices.

China: Xinjiang Tianshan Cement has secured board approval for an issue of commercial paper. Reuters has reported the total value of the paper as US$2.19bn.

The Chinese cement sector had a tough time in 2022. This was confirmed this week as the large domestic cement producers released their financial results. Revenue was down, profits fell and cement sales volumes tumbled. The key causes included the continuation of the country’s zero-coronavirus policy, the declining real estate market and rising input costs for raw materials such as coal. Demand for cement withered and so did the fortunes of the cement companies.

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

Data from the National Bureau of Statistics of China shows that cement output fell by 9.8% year-on-year to 2.13Bnt in 2022 from 2.36Bnt in 2021. The greater decrease was in the first half of the year rather than the second. The China Cement Association (CCA) said that this was nearly the lowest output in the last decade and the largest decline since 1969 ! The National Bureau of Statistics of China also pointed out in a release that, despite investment in fixed assets increasing by around 5% in 2022 and national infrastructure spending growing by 9%, real estate development investment dropped by 10% to US$1.46Tn.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports.

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

The cement producers warned in their forecasts that the results for 2022 were going to be rough and so it came to pass. China National Building Material (CNBM)’s revenue fell by 16% year-on-year to US$33.4bn in 2022 and Anhui Conch’s sales fell by 21% to US$19.2bn in 2022. Although, Tangshang Jidong Cement and Huaxin Cement reported declines of income or revenue in single digits. Profits halved for all of the companies covered here. Various combinations of the reasons covered above were cited for the situation.

What is more interesting are the responses some of the producers are making and what has gone well. CNBM, for example, is pinning its hopes on better staggered peak production and infrastructure projects. Anhui Conch, meanwhile, appears to have been diversifying its business by increasing both its concrete and solar power production capacity significantly in 2022. It was also announced that it plans to spend US$2.81bn on capital expenditure projects in 2023. China Resources Cement (CRC) said it had optimised its presence in South China through selected acquisition and divestments. Huaxin Cement has continued its focus on overseas markets with its share of operating revenue originating from outside China rising to 13% of the group’s total in 2022 compared to 8% in 2021. It also mentioned a number of unnamed projects around the world steadily drawing nearer to action. Sure enough, the group announced earlier in March 2023 that it was buying a majority stake in Oman Cement.

As for 2023, the CCA forecast in January 2023 that cement demand would be flat or slightly down. However, at the same time, provincial changes to the real estate market are expected to improve market conditions and infrastructure development will further drive demand for cement. The CCA identified that the cement sector’s production overcapacity could become an issue with lower demand. In 2022 the national clinker production utilisation rate was 65%, a fall of 10% from that in 2021. It also pointed out that peak-staggered production had actually helped cement producers generally to cope with smaller declines in profits compared to less well regulated industries.

Problems such as the zero-coronavirus policy, the real estate market and rising raw material costs have made the country’s production overcapacity issue worse. Changes are being made such as the national abandonment of the coronavirus lockdowns in late 2022, and, as mentioned above, the real estate market is being modified. In addition to this, various environmental changes are on the way, as the government works towards its sustainability goals. The country remains the largest cement producer in the world. Yet the message here is that we should expect more of the same for the cement sector in China in 2023.

China: China National Building Material's (CNBM) revenue fell by 16% year-on-year to US$33.4bn in 2022 from US$40.0bn in 2021. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 31% to US$5.18bn from US$7.50bn. Sales from its cement and concrete business segments fell by 18% to US$16.0bn and 29% to US$5.25bn respectively. Adjusted EBITDA fell by 42% to US$2.89bn and 7% to US$470m. Its sales volumes of cement and clinker decreased by 15% to 316Mt from 373Mt. Sales volumes of concrete decreased by 24% to 84.7Mm³ from 112Mm³.

The group said that, “In 2022, the triple pressure from shrinking demand, supply shock and weakening expectations persisted, and the complexity, severity and uncertainty of the development environment increased.” With regards to the building materials segment it blamed a declining real estate market, a poor economy and general poor demand in both the peak and off seasons. It added, “The downturn in demand has further aggravated the contradiction of overcapacity in the industry, with prices running low, coupled with a sharp rise in the cost of coal and other elements leading to escalating production costs, the production and operation situation was extremely critical.” In response the company is continuing to push for supply-side reform, promote precise staggered peak production, working on stablising the market and seeking out opportunities to supply large-scale infrastructure projects.

China: Anhui Conch’s sales fell by 21% year-on-year to US$19.2bn in 2022 from US$24.4bn in 2021. Its net profit dropped by 52% to US$2.31bn from US$4.84bn. Sales volumes of cement and clinker decreased by 24% to 310Mt. It blamed the situation on weakening market demand and high energy costs.

New projects that started operation in 2022 included a capacity replacement scheme at its Anhui Chizhou Conch Cement subsidiary and two new clinker production lines at the Qarshi project in Uzbekistan. The group also completed its acquisition of Chongqing Duoji Renewable Resources, Naimanqi Hongji Cement and Chifeng Hahe Cement. By the end of 2022 its cement and concrete production capacities rose by 1% to 269Mt and 73% to 25.5Mm³. Its solar power capacity also more than doubled to 475MW.