Displaying items by tag: Competition

US: Bloomberg has named Germany-based HeidelbergCement, Switzerland-based Holcim and Turkey-based Sabancı Holding as possible bidders for some of Sika’s US admixtures assets. Sika is seeking to divest the assets in order to obtain competition authorities’ approval for its US$6bn acquisition of Germany-based construction chemicals company MBCC from Lone Star Funds.

Argentina: Holcim Argentina has launched a hackathon for project proposals aimed at boosting gender inclusivity in the Argentinian construction sector. Projects may fall along one or more target axes: awareness, education and training, enterprise or public policy. Two winning projects will claim US$300,000 each in prize money, and the contest is open to anyone over 18. The company says that the hackathon is an invite to open a conversation about the presence and appreciation of women in cement and construction.

Mexico: 200 police officers in 80 police cars arrived outside the gates of Cooperativa La Cruz Azul’s Cruz Azul cement plant in Tula, Hidalgo, on 15 December 2021, but failed to enter the plant. The El Financiero newspaper has reported that the police were following a court order to remove the company from the plant. Supervisory board president Alberto Lopez reasserted the company’s right to occupy the property in line with federal government ordinances. Lopez suggested an alleged collusion between cooperativists and Omar Fayad’s Institutional Revolutionary Party (PRI) Hidalgo state government to decieve the courts.

Authorities have frozen Cooperativa La Cruz Azul’s accounts with outstanding bills of US$800,000 in electricity, gas, equipment and services bills, as well as the payroll of its 1100 workers.

Coopertiva La Cruz Azul chair Federico Sarabia said that the developments threaten the existence of the Cruz Azul plant. He said "In terms of quality, Cruz Azul’s cement exceeds the standard. At the time that Cruz Azul disappears as a cement producer, prices will increase.”

Turkey: Steel company Erdmir has received the Turkish Competition Board (TCB)'s approval for its acquisition of a 100% stake in refractory and magnesia producer Kümaş Manyezit Sanayi. Erdemir's parent company is OYAK Group, an industrial conglomerate with interests in cement alongside other industries. Thus, the TCB considered the deal's competition impacts on the cement industry. The board ruled that the vertical merger would not have a negative effect on competition because it does not give rise to horizontally affected markets, hence neither creating nor strengthening any dominant market position.

There have been a couple of news stories worth noting in the Turkish market this week. First, it was revealed that Medcem had chosen Sintek Group to build a new production line at its integrated plant in Mersin. Second, Çimko Çimento agreed to buy two integrated plants and a grinding plant from Çimsa.

The Medcem upgrade project will see the subsidiary of Eren Holding add a second production line, with a clinker capacity of 9000t/day. Sintek Group reportedly has agreed to do this for US$128m. This follows an announcement from Medcem in late May 2021 that it was intending to invest over US$200m towards increasing its plant’s overall production capacity to 6.5Mt/yr from 3.5Mt/yr. The plan at this point was to start construction work in August 2021 with eventual commissioning of the second line in the first quarter of 2023. In addition the cement producer said at the time that it was going to open a new terminal in the US shortly. This was intended to join the company’s existing grinding plants in Cameroon and Tunisia and terminals in Russia and Northern Cyprus. On a side note, Medcem likes to point out that the 11,500t/day clinker production capacity on its existing line at its plant is the biggest in Turkey and Europe.

The Çimko Çimento deal with Çimsa was for US$127m. It includes the Nigde Kayseri integrated plants, the Ankara grinding plant and seven ready-mix concrete plants. As would be expected, the transaction is subject to the approval of the local competition authority.

Graph 1: Domestic and export cement sales in Turkey, January – June 2017 – 2021. Source: Türk Çimento.

Graph 1 above gives an idea why some cement producers might have decided that it’s time to expand either through upgrades or acquisitions. The general Turkish economy suffered a jolt in mid-2018 when the value of the Turkish Lira dropped and interest rates rose. The coronavirus pandemic hit in 2020 but after a slowdown at the start of that year the economy managed to grow. The growth has continued so far in 2021 but inflation rates have also soared. In the cement sector, annual domestic sales fell consecutively from 2017 to 2019. They started to recover in 2020 and so far in 2021 it looks like they are continuing to grow. As domestic sales fell the sector focused on exports and they have grown steadily on an annual and half-year basis since 2018. Annual exports hit a high of 16Mt in 2020 or 23% of total sales.

Despite this, in June 2021 the Turkish Cement Manufacturers' Association, Türk Çimento, was warning that input costs were mounting, particularly in the last year. It reported that the price of petcoke had nearly tripled in this period. It also warned of mounting production overcapacity, estimated at over 20Mt/yr in 2019 although down to 7Mt/yr in 2020. Coupled with a fall in annual domestic sales from 2017 to 2019, in its words, “The contraction in domestic consumption during that period steered our companies toward exports.” Some of the larger cement producers, including Oyak, Akçansa and Çimsa all reported healthy rises year-on-year in revenue and operating profit in the first half of 2021. They also reported mounting costs which have risen by 35 – 80%.

The other recent stories from Turkey to note are a two week strike organised by the Building Contractors Confederation (IMKON) in September 2021 due to high costs, particularly cement. The confederation claimed that the price of cement had tripled over the last year. Earlier, in late April 2021, the Turkish competition authority Rekabat Kurumu launched a probe into alleged collusion by nine cement producers including Oyak, Çimsa and Limak. We are not saying these two stories are connected. The current state of the Turkish economy is more than enough to cause input costs for cement producers to spike. Yet headlines like this cannot be reassuring to builders wondering why the cost of cement is going up.

In summary, it’s an uncertain time for the Turkish cement industry. Sales are recovering but this has been achieved by pushing exports more than a rally at home. Alongside this, currency instability and high inflation rates are raising costs for cement producers and end-users. This hasn’t been enough though to stop growth activity from a couple of producers in the last week.

For more on the Turkish cement sector read ‘Cement in Turkey’ in the October 2021 issue of Global Cement Magazine

Companhia Siderúrgica Nacional (CSN) Cimentos was confirmed this week as the agreed buyer for Holcim’s Brazilian cement business for US$1.03bn. The deal includes five integrated cement plants, four grinding plants and 19 ready-mix concrete facilities. CSN is now poised to become Brazil’s third-largest cement producer by production capacity after Votorantim and InterCement. Or second place if you believe CSN’s cheeky claims about a competitor’s idle capacity!

Figure 1: Map of cement plants included in CSN Cimentos’ deal to buy LafargeHolcim Brazil assets. Source: CSN Investor Relations website.

CSN originally started out in steel production and this remains the major part of its operations to the present day. In 2020 it reported revenue of US$5.74bn. Around 55% of this came from its steel business, 42% from mining, 5% in logistics and only 3% came from its cement segment. CSN’s path in the cement sector started in 2009 when it started grinding blast furnace slag and clinker at its Presidente Vargas Plant at Volta Redonda in Rio de Janeiro state. It then started clinker production in 2011 at its integrated Arcos plant in Minas Gerais. Not a lot happened for the next decade, publicly at least, as the country faced an economic downturn and national cement sales sunk to a low in 2017. From around 2019, CSN Cimentos then started talking about a number of new proposed plant projects elsewhere in Brazil, dependent on market growth and an anticipated initial public offering (IPO). These included plants at Ceará, Sergipe, Pará and Paraná and expansion to the existing units in the south-east. Then CSN Cimentos agreed to buy Cimento Elizabeth for US$220m in July 2021.

It is worth noting that the Holcim acquisition is subject to approval by the local competition authority. For example, the Cimento Elizabeth plant and Holcim’s Caaporã plant are both in Paraíba state and within about 30km of each other. If approved, this would give CSN Cimentos two of the four integrated plants in the state, with the other two operated by Votorantim and InterCement respectively. CSN also stands to pick up four integrated plants in Minas Gerais from Holcim to add to the one it holds at present. Although this would seem to be of less concern due to the high number of plants in the state.

Holcim has made a point of saying that its divestment in Brazil is part of its strategy to refocus on sustainable building solutions with the proceeds going towards its Solutions & Products business following the Firestone acquisition that completed in early 2021. It has also stated previously that it wants to concentrate on core markets with long term prospects. In this context a major steelmaker like CSN diversifying into cement is a contrast. Both industries are high CO₂ emitters so CSN is hardly moving away from carbon-intensive sectors. Yet the two have operational, economic and sustainability synergies through the use of slag in cement production. This puts CSN Cimentos in company with Votorantim in Brazil and JSW Cement in India, two other steel manufacturers that also produce cement. Whatever else happens at the 26th United Nations Climate Change conference (COP26) in November 2021, it seems unlikely that global demand for steel or cement is likely to be significantly reduced. CSN Cimentos is now going to resume its IPO of shares to raise funds for the Holcim acquisition.

Acquisitions are all about timing. The CSN Cimentos-Holcim deal follows the purchase of CRH Brazil by Buzzi Unicem’s Companhia Nacional de Cimento (CNC) joint-venture earlier in 2021. As mentioned above, the cement market in Brazil has been doing well since it started recovering in 2018. The coronavirus pandemic barely slowed this down due to weak lockdown measures compared to other countries. The current run of sales growth may be tapering off based on the latest National Cement Industry Association (SNIC) figures for August 2021. Rolling annual totals on a monthly basis had been growing since mid-2019 but this started to slow in May 2021. Annual sales will be up in 2021 based on the figures so far this year but after that, who knows? A CSN investors’ day document in December 2020 predicted, as one would expect, steady cement consumption growth in Brazil until at least 2025, based on correlated forecast growth in the general economy. Yet fears of inflation, rising prices and political uncertainty ahead of the next general election in late 2022 may undermine this. InterCement, for example, cancelled a proposed IPO in July 2021 due to low valuations amid investor uncertainty. CSN Cimentos may encounter similar issues with its own planned IPO or face over-leveraging itself when it picks up the tab for LafargeHolcim Brazil. Either way, CSN decided to take the risk on its path to becoming Brazil’s third largest cement producer.

Pakistan: The Association of Builders and Developers (ABAD) has asked the government to appoint a commission to investigate rises in cement prices. The Pakistan Observer newspaper has reported that ABAD chair Fayyaz Ilyas alleged that producers had colluded as a cartel. He said that price rises have prevented the construction sector from being able to realise the aims of the Naya Pakistan housing scheme.

Mozambique: Adil Cement, África Cement Factory, Maputo Cement, National Cement, Limak Cement Factory, Royal Cement and Suneira Cement Fonte have written a letter to the Ministry of Industry and Commerce complaining about ‘unfair’ pricing by Dugongo Cement. They allege that the pricing of their Chinese-backed rival breaks local competition law and has caused harm to their businesses, according to Moçambique Media Online. The price of cement has reportedly dropped by as much as 70% since Dugongo Cement’s new plant opened in May 2021.

India: Dubai-based Synergy Metals has made an offer and sought the permission of the Competition Commission of India to acquire a minority stake in JSW Group subsidiary JSW Cement. The New Indian Express has reported that JSW Group is seeking to reduce its stake ahead of an initial public offer (IPO) for the producer. The company is valued at over US$2.0bn and is seeking to sell US$200m-worth of stakes.

Egypt: The Egyptian Competition Authority has approved a request by 23 cement producers for permission for a temporary reduction in their cement output by 11%, with additional cuts of 3% per kiln line. Reuters has reported that the reduced quotas will be in force between 15 July 2021 and 15 July 2022. Previously, two cement executives quoted by the source said that the proposed cuts seemed unfair on multinational companies, like them, that operate older plants.