Displaying items by tag: Elementia

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!

Mexico: Cementos Fortaleza has started to build a new 0.25Mt/yr grinding plant at Merida in Yucatan. The project has an investment of US$30m, according to the El Economista newspaper. The plant is scheduled to open in July 2019. It will create 50 direct jobs.

Mexico: Elementia has said that it will install a new cement grinding plant in Yucatán. It will invest US$30m and will start at a capacity of 0.25Mt/yr. Commercial operation is expected within the first half of 2019.

Costa Rica: Gebr. Pfeiffer is in the process of supplying a Ready2Grind modular grinding plant to Cementos Fortaleza’s new 300,000t/yr plant at Salinas Esparza in Puntarenas. The project is a joint venture between Mexico’s Cementos Fortaleza and fibre cement producer Plycem. Production is scheduled to begin in the first quarter 2018.

The project scope includes: a clinker mill feed system with four hoppers; a MVR 2500 C-4 roller clinker mill with classifier and ancillaries; process filters, hot gas generator and fan; electrical controls and drives; cement transport and three storage silos; packing plant and bulk loading systems; and monitoring and coordination of erection as well as commissioning of the grinding plant.

Costa Rica: Mexico’s Cementos Fortaleza and fibre cement producer Plycem will inaugurate a new plant at Barranca de Puntaneras by the end of September 2017. The two companies are part of Elementia, according to the La Nación newspaper. No value for plant has been disclosed.

Mexico: Elementia’s cement division’s sales revenue in Mexico rose by 30% year-on-year to US$155m in 2016 from US$119m in 2015. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 39% to US$65.9m from US$47.3m. It attributed the result to increased prices and a higher capacity utilisation rate.

The cement producer noted that its 1.5Mt/yr upgrade to its Tula cement plant is scheduled for completion in the third quarter of 2017. The company also competed its acquisition of a 55% stake in US company Giant in the fourth quarter of 2016.

With president-elect Trump due to take office this week we wonder what this means for the cement industry in Mexico. In 2016 this column looked a couple of times at the implications of Trump upon the US cement industry. First, we looked at who might benefit if he builds his wall along the Mexican border and then we wondered what his policies might mean for the US industry. To answer the latter first, the main issues for the US industry are infrastructure, changes to the Environment Protection Agency (EPA) and the repercussions if Trumps serious about a trade war with China. So long as a trade war doesn’t happen then Trump is probably good news for the US cement industry. As for Mexico, the joke has been that Trump will be good for the construction business ever since market analysts Bernstein’s passed a note around in the summer of 2016 about that wall.

Graph 1: Breakdown of Mexican cement industry by production capacity. Source: Global Cement Directory 2017.

The makeup of the domestic Mexican cement industry hasn’t changed too much in the last decade, even with the merger between Lafarge and Holcim, preserving the same market share in production capacity between the companies. Most of the producers have reported growth in 2016. Cemex reported that its cement sales volumes rose by 3% for the first nine months of 2016 and by 10% in the third quarter of that year. Overall though, its net sales fell slightly to US$2.16bn in the first nine months, alongside a fall in ready-mix concrete sales volumes. Cemex, crucially, also seems to have taken charge of its debts in 2016, saying that it was on track to meet its targets and that it had announced nearly US$2bn worth of divestments in that year. Currently the company is trying to buy out Trinidad Cement in the Caribbean, which may be a sign that it has turned a corner.

Grupo Cementos de Chihuahua’s (GCC) cement sales volumes rose in the first three quarters of 2016, in its case by 4%. Its overall net sales in Mexico rose by 4.2% in Mexican Pesos for the same period but fell when calculated in US Dollars due to currency variations. GCC attributed its sales growth to better pricing environment and increased cement volumes, mainly for projects in the commercial and industrial sectors that compensated for a decline in the public sector, following the culmination of two major urban paving and highway construction projects in 2015. At the smaller end of the market, Elementia reported that its cement sales skyrocketed by 30% to US$104m in the first nine months of the year aided by higher prices and volumes.

The major Mexican cement producers all have a presence in the US with the exception of Cruz Azul. Cemex has held assets north of the border for years, Cemento Portland Moctezuma has links to Buzzi Unicem, GCC bought US assets from Cemex in 2016 and Elementia completed its purchase of Giant Cement also in 2016. These companies have clinker in their kilns in plants on US soil manned by US citizens. This represents investment in local industry and it is exactly the kind of thing that appeals to the rhetoric of Trump’s approach so far. If the new president builds his wall then Mexican producers will probably be producing much of the cement that builds it. Even the Mexican Peso’s slow decline since 2014 could help the local cement industry, as it will cut the cost of moving exports and materials north of the border. Indeed, Enrique Escalante, the chief executive officer of GCC said in late 2016 that his company was ‘ready to build’ Trump’s wall.

However, the sheer uncertainty factor of an incoming president with as little experience of public office as Donald Trump must be giving chief executives pause for thought. After all, Trump's tweets before he has assumed office have forced car manufacturers to change policy. If he manages to disrupt the North American Free-Trade Agreement (NAFTA) in order to protect US jobs then the repercussions for the Mexican economy will be profound. It sends nearly three quarters of its exports to the US. Local cement producers would surely suffer in the resulting economic disruption.

So, currency devaluations aside, Mexican producers are making money from their cement operations at home and they are increasingly hedging their bets by operating or buying units in the US. Some, like GCC, are even being ebullient about the benefits that might come their way. It may be a bumpy ride but the Mexican industry is ready. However, it may wish to avoid appearing in any of Donald Trump’s tweets anytime soon.

US: Mexico’s Elementia has completed its acquisition of Giant Cement for US$220m from Cementos Portland Valderrivas (CPV). The board of directors has given its final approval for the purchase of the remaining 55% stake of the US cement producer giving it full control of the company. The transaction gives Elementia three cement plants, three limestone quarries, two aggregate quarries and six cement terminals, adding more than 2.8Mt/yr of cement production capacity.

“Today marks a major milestone for Elementia as we successfully enter the US cement market and take another solid step within our inorganic growth strategy. The work of our transition team is already underway to extract the tremendous value we see in Giant,” said Fernando Ruiz Jacques, chief executive officer of Elementia.

US: The board of Cementos Portland Valderrivas (CPV) has approved the sale of a 55% stake in its US subsidiary Giant Cement Holding to Elementia. The deal includes a US$220m capital increase in Giant Cement with subscription rights granted to Elementia, according to SeeNews. Elementia will also extend a loan of around US$305m to Giant Cement. In addition CPV will transfer up to US$66m in loans to Giant Cement to keep its remaining stake in the American cement producer at 45%.

US: Elementia has signed a letter of intent with Cementos Portland Valderrivas to buy 55% of Giant Cement Holding for an undisclosed value. Giant Cement Holding is a US cement producer with operations on the east coast that includes three cement plants, three limestone quarries, two aggregate quarries, six terminals and four waste handling facilities.

In a statement Elementia said that the acquisition would grant it access to the third-largest cement market in the world. The acquisition is subject to obtaining all applicable regulatory approvals and the completion of the internal processes by both companies.