Displaying items by tag: European Commission

Belgium: Cembureau, the European cement association, has published a position paper outlining its stance European Commission’s plastics strategy. The association wants policymakers to ensure any plastic waste that has a calorific value that can be recovered as a fuel source is not landfilled. At present there are differences in waste management policies across the member states of the European Union.

Other points that Cemburea wants to highlight include: a ban on landfill of recoverable and recyclable waste; recognition that cement plants can treat different waste streams such as plastics and simultaneously recycle them as material in the manufacturing process of cement and recover them as energy; the specific relevance that co-processing offers the unique opportunity of a simultaneous energy and material recovery; and the potential to minimise investment costs in dedicated facilities.

In January 2018, the European Commission published a dedicated Plastics Strategy as part of the Circular Economy package. The strategy indicates that there is currently a low rate of recycling or reuse of plastics with most of it going to landfill or used in incinerators.

Putting two speakers from the European Commission front and centre at the start of this year’s European Slag Association Conference (EuroSlag) in Metz, France was always going to cause a ruck. Once Coal and Steel Research Unit head Hervé Martin and steel sector policy officer Gabriele Morgante said their pieces and the panel opened up then the verbal punches started flying. Okay, this may be slightly exaggerated, but after a bunch of policy-heavy presentations, suddenly the situation became crystal clear. Was the agricultural use of ferrous slag going to be allowed to continue? What would be the classification of the slag? And so on. One Russian delegate commented afterwards, “I thought we had environmental problems in Russia.”

Jérémie Domas, Centre Technique et de Promotion des Laitiers Sidérurgiques (CTPL) explained in a later presentation that the heart of the current debate goes back to the European Waste Framework Directive (2008/98/EC). This legislation created an ambiguity over the status of slag between classifying it, as a waste or as a by-product, that the European industry has been battling over ever since. A multi-coloured map in Aurelio Braconi of the European Steel Association’s (Eurofer) presentation depicted the disarray this has caused with the varied legal statuses of slag across Europe. To add to this, Braconi’s home country of Italy, for example, is split into designating slag as both a product and a waste. His response was to say that the ‘human factor’ was important back home for utilising slag. The European Union (EU) is now working on its Circular Economy Package, which includes revised legislative proposals on waste, and it has been consulting on various issues throughout the year. It is this process is that been making slag producers twitchy.

Other delegates on the first session’s panel provided a bit more context, with Thomas Reiche of the German Technical Association for Ferrous Slag (FEHS) saying that the waste legislation didn’t need to be changed but that public procurement laws did. Eric Seitz of the French Association of the Users of industrial By-products (AFOCO) added that slag products had been sold for decades without any problems. However, he definitely wanted ‘strong’ support from the EU on the issue.

Moving on, Craig Heidrich of the Australasian (Iron & Steel) Slag Association (ASA) provided some interesting figures in his presentation on worldwide slag production that differ from the data often reported by trading companies. Heidrich reckoned that 567Mt of slag was produced in 2015 with a breakdown of 347Mt blast furnace (BF) slag and 220Mt steel slag.

Andreas Ehrenberg of the FEHS presented research on converting electric arc furnace (EAF) slag into a hydraulic material that could be used in cement or concrete production. Given that, using Heidrich’s figures for example, about a third of ferrous slag production is steel slag often created in an EAF, the potential implications of this line of inquiry are important. Unfortunately, the main disadvantages of the original EAF slag analysed in Ehrenberg’s work compared to BF slag are the lower CaO and SiO₂ contents and the higher MgO and Fe oxide contents. Laboratory-scale tests confirmed in principle the feasibility of forming clinker or ground blast furnace slag-like materials based on EAF slag. But the reduction and treatment steps in the process require a lot of effort and the economical value of the recovered metal is low. Taking the research further will require much more work on the semi-technical scale.

The other paper with particular relevance to the cement industry was Chris Poling of SCB International unveiling his company’s ground blast furnace slag (GBFS) micro-grinding mill, the Nutek Mill 2. The new mill is intended to allow slag grinding to take place in a much wider range of locations, along similar lines to the modular clinker grinding mills made by Cemengal or Gebr. Pfeiffer’s Ready2Grind line. The pilot project is being installed now in New York State, US. The mill has a GBFS capacity of 10 - 12t/hr with a target of 40 – 45kWh/t when fully optimised. Further units at the same location are planned for early 2018 with approval sought from the New York State Department of Transportation.

The 10th European Slag Conference is expected to take place in 2019. With more clarity expected from the EU on its Circular Economy Package there will be much to discuss.

Unsurprisingly the European Commission blocked Duna-Dráva Cement’s (DDC) attempted purchase of Cemex Croatia this week. Merging the country’s biggest cement producer with its largest importer was going to be a challenge for the commission. Whereas in previous transactions the various parties offered business disposals to ease the commission’s concerns, here all they were got was access to a cement terminal in Metković in southern Croatia. And this facility on the Neretva river is currently being leased by Cemex! Clearly this didn’t give the impression of being a long term solution.

Compare this with the merger between Lafarge and Holcim in 2015 where multiple sales were proposed to make sure the deal went through. Or look at the acquisition of Italcementi by HeidelbergCement in 2016 where the parties sold Italcementi’s Belgian subsidiary Compagnie des Ciments Belges to Cementir to make the deal happen. In comparison to these deals the attempt by HeidelbergCement and Schwenk, through their subsidiary DDC, comes across as a calculated gamble designed to test the resolve of the commission. If the commission had somehow passed the proposed acquisition then the companies would have cornered the market. If it turned it down, as it has, then nothing would be lost other than putting together the bid. HeidelbergCement had its mind on bigger things as it bought and then integrated Italcementi.

Commissioner Margrethe Vestager summed up the mood of the commission: “For mergers between direct competitors, we generally have a preference for a clean, structural solution, such as selling a production plant. HeidelbergCement and Schwenk decided not to offer that. Instead they proposed to give a competitor access to a cement terminal in southern Croatia. Essentially, this amounted to giving a competitor access to a storage facility – without existing customers or established access to cement, without brands and without sales or managerial staff.”

Elsewhere, the other big story in the industry news this week was Votorantim’s decision to focus on the lime business in Brazil by adding lime units to some of its existing cement plants. Given the dire state of the local cement and construction industry, initiatives to break the deadlock have been expected. The alternative is plant closures and divestures, such as the ongoing talks by Camargo Corrêa to sell the other big local producer, InterCement. Votorantim plans to build lime units attached to the cement plants at Nobres in Mato Grosso, Xambioa in Tocantins, Primavera in Pará and Idealiza in Goiás. Unfortunately the agricultural areas of the country and ones with cement plants don’t overlay neatly. Cement production is mainly focused in the south-eastern states and Votorantim are targeting the Cerrado, in the centre of the country, for the lime business.

The scale of the project, at US$50m, the scale of the lime business generally and the addition of lime units at cement plants suggest that the pivot to lime can only be a sideline to cement and construction. Given the similarity of the cement and lime production processes the announcement would be much more significant were Votorantim set to convert clinker kilns into lime ones. A notable example of this was at Cement Australia’s Gladstone plant in Queensland, Australia. Here a mothballed FCB-Ciment clinker kiln was converted into a lime kiln in the early 2000s. At the time the cost of the conversion project was valued at just under US$20m. If Votorantim was seriously thinking of doing this at a few of their underperforming cement plants then one would expect the bill to be higher than US$50m. However, it’s early days yet.

It looks like Cembureau, the European Cement Association, got its own way on the proposal to amend the European Union's (EU) Emissions Trading Scheme (ETS) that the European Parliament voted on last week. The system has been tightened but not enough to make the cement industry suffer, for now. Naturally, the environmentalists are outraged.

The key reform was that the carbon credits reduction rate (the linear reduction rate) will increase and the market stability reserve (MSR) will double its capacity to absorb excess allowances on the market. However, the big battle was fought over whether to include an importer inclusion scheme (or Border Adjustment Measure) or not. Lots of political 'horse-trading' took place right up to the vote on 15 February 2017 to adopt the draft proposal, with particular battles over the importer inclusion scheme. Negotiations will now continue with the Council of the European Union before the proposal returns to the European Parliament for a final vote.

Cembureau seemed pleased with the outcome. It supported the proposal principally for maintaining competitiveness and for not ‘deliberately discriminate between sectors.' It also liked the inclusion of dynamic allocation, a benchmark based on what it said was real data, a flexible reserve in relation to the allowances available for free and those designated for auctioning and an impetus towards funding carbon capture and storage. It also singled out its pleasure that an amendment for an importer inclusion scheme had not been accepted.

This last point caused a spat between Cembureau and Bruno Vanderborght, a former executive at Holcim, at the end of January 2017 in the lobbying frenzy before the vote. In robust language Vanderborght accused the European cement industry of using the ETS for negative leakage. His argument was that the free allocation of carbon credits given to the cement industry had been used to 'maximise gross margin.' Instead of spending the money on upgrading inefficient units, the industry had used its same inefficient units to increase exports of clinker to outside the EU, to places like Africa. Cembureau countered that it had been taken out of context by Vanderborght and that arguments he levelled, such as data from the Cement Sustainability Initiative (CSI) suggesting that the EU has the highest share of clinker production in old, energy-intensive installations worldwide, were misleading since CSI reporting may not be as thorough outside of Europe.

Predictably, the proposal didn't please the environmental lobby, which denounced the deal as toothless. Environmental campaign group Sandbag has been on the case of the cement industry for several years, pointing out that its own research shows that cement producers have 'abused' the free allocation scheme for profit and that emissions have actually increased under the ETS so far. Its headline figure in the wake of the vote was that the cement sector was set to rake in a surplus of allowances worth Euro2.8bn by 2030.

Following the vote Sandbag took no time to point out that the ETS carbon price had sunk below Euro5/t. In its assessment, a carbon price of least Euro50/t is required to stimulate low carbon investment. However, the carbon price soon rose back up. Little impartial analysis is available on whether the amended proposal will actually deliver its aims, although a Thomson Reuters analyst did describe the outcome as one that 'significantly tightens the market balance.'

In a final twist, the lead rapporteur for the reforms to the EU ETS is a UK member of the European Parliament (MEP). Depending on how the Brexit negotiations go, the guy marshalling the amendments to the EU ETS won't be subject to its eventual implementation.

The EU ETS is slowly starting to improve through reforms such as those voted on last week but it remains very much in doubt whether it will be able to deliver solid meaningful reductions in carbon emissions. Cembureau is rightly protecting the industry it represents but at present the price of coal appears to be a better driver of measures such as increased use of alternative fuels than the ETS. The ETS has had the misfortune in operating for the last few years throughout a market depression in Europe where it has been propping up some cement producers and now it’s helping them get back on their feet as they export their products out of the continent. In a world awash with excess clinker the policy makers are eventually going to have to decide how much they want to damage industry in order to meet their environmental aims. We need cement and we need to cut carbon emissions. Someone is always going to be unhappy in this situation.

The European Commission’s decision to investigate Duna-Dráva Cement’s (DDC) purchase of Cemex Croatia sticks out in a busy news week. There have been a few noteworthy news stories this week from the Indonesian government making preparations to fight overcapacity, LafargeHolcim retreating from Chile, Cemex restructuring its management in Colombia after investigations into a land deal and the announcement of merger plans between two of the larger refractory manufacturers. Yet the commission’s probe is a response to what may be in effect a ‘land grab’ by DDC. How on earth did HeidelbergCement and Schwenk, the joint-owners of DDC, think they were going to pass this one past the relevant competition bodies?!

As the commissions describes it, the “proposed transaction would combine Cemex Croatia, the largest producer in the area, and DDC, the largest importer.” So far, so bad. Then add the observation that Cemex Croatia and LafargeHolcim control all the cement terminals in ports along the Croatian coast. Cemex has three cement plants in the south of the country with no nearby competition. Giving the owners of DDC those assets ties up the market southern Croatia nicely. Understandably, the European Commission has concerns.

Croatia has five cement plants. LafargeHolcim runs a 0.45Mt/yr plant at Koromačno and Nasicecement run a 0.6Mt/yr plant at Nasice. Cemex’s three plants are all in the south near Split within about 10km of each other. When Global Cement visited in late 2014 Cemex Croatia told us that the plants were so close together that the company considered them as one plant. The sites also share one quarry for their raw materials. Only one of three plants, Sv Juraj the largest, has a bagging unit and Sv 10 Kolovoz was mothballed due to poor market demand. Together the plants have a cement production capacity of 1.92Mt/yr. This gives Cemex 65% of the market by production capacity.

Describing the three plants as one certainly makes sense for a company that might have been considering selling them. However, it is a fair comment given the close proximity of the plants to each other and the joint-capacity below that of some of the larger single site multi-kiln plants around the world. In this sense, the real questions for the European Commission will be how much of a dent to competition will it make to hand over the area’s main importer to the area’s main producer?

Graph 1: Cement consumption in Croatia, 2011 - 2015 (Mt). Source: Croatian Bureau of Statistics.

Looking at the national cement market since 2011 in Graph 1 using data from the Croatian Bureau of Statistics, sales volumes fell to a low in 2013 and have picked up since then, although not to the same levels. Prior to this cement sales halved from 2008 to 2013. Under these kinds of conditions Nexe Grupa, the owner of Nasicecement, filed with pre-bankruptcy settlements in 2013. HeidelbergCement expressed interest in the cement assets around this time, although nothing eventually happened. Imports of cement grew by 11% year-on-year to 312,000t in 2015 from 280,000t in 2014. This compares to a 1% increase to 2.36Mt in domestic cement sales in 2015.

As the commission suggests, combining the region’s biggest producer and its biggest importer seems like a recipe for reduced competition and inflated prices. This could be mitigated, in theory, if DDC decided to flood the region with imports from HeidelbergCement’s new assets from Italcementi once it completes its purchase of that company. Although a dominant player in a region undercutting its own prices seems far fetched. Theoreticals aside, it seems very unlikely that the European Commission will let the purchase go ahead without taking some sort of action.

HeidelbergCement released more detail on its plans to buy Italcementi last week. The main points were that Italcementi’s operations in Belgium will be sold, the Italcementi brand will be retained, its research and development (R&D) centre will assume responsibilities for the entire group and up to 260 job losses are expected in Bergamo. The integration plan is expected to be complete by 2020.

Following an update in HeidelbergCement’s preliminary financial results for 2015 in February 2016, this was more focused on the practicalities of taking over a company. Sales of assets in Belgium were expected from the moment the deal was announced in July 2015. Between them the two companies operate three of the country’s four cement plants, holding 73% of the market by cement production capacity. Selling up Italcementi’s Belgian subsidiary Compagnie des Ciments Belges will maintain the existing market balance. Once this is done, from a cement sector perspective, interaction from the European Commission on the deal should merely be a formality.

Interestingly, no plans to sell assets in the US were announced. This is more ambitious on HeidelbergCement’s part because the acquisition has far bigger implications in that country. Merging Italcementi’s Essroc subsidiary and HeidelbergCement’s Lehigh Hanson subsidiary will see HeidelbergCement become the new second largest cement producer in the US with around 16.4Mt/yr. LafargeHolcim had a relatively easy ride from the Federal Trade Commission (FTC) having to sell two integrated cement plants, two slag grinding plants and a series of terminals. As HeidelbergCement will become the second largest cement producer it seems unlikely that the FTC will be too demanding. However, post-acquisition the cement producer will own cement plants within 75 miles of each other in Pennsylvania and in Maryland and West Virginia. The FTC may take exception to this but perhaps HeidelbergCement is trying their luck to see if it can get away with it.

The decision to retain Italcementi’s i.Lab R&D centre in Bergamo, Italy raises questions about what will happen to the Heidelberg Technology Centre (HTC) in Leimen, Germany. The focus here is on making Bergamo the ‘product’ R&D division for the entire group. i.Lab was opened in early 2012 to fanfare, based in a building designed by architect Richard Meier and it cost Euro40m to build. How this fits with HeidelbergCement’s existing Global R&D team at the HTC remains to be seen.

Job losses of up to 260 personnel at Bergamo are regrettable but hardly unexpected. It may not be much comfort for any staff members facing redundancy but this figure is well below the figures bandied about in the media in late 2015 of first around 1000 and then nearer 500. Another 170 personnel will also be offered relocation packages taking the impact of the reorganisation up to about 400 of Italcementi’s 2500 workforce in Italy.

Looking at the wider situation with the acquisition this week, HeidelbergCement announced a record contract for Norcem, its Norwegian subsidiary, to supply 280,000t of cement over three years for an infrastructure project. Then, Carlo Pesenti, the chief executive officer of Italcementi, was reported making comments about the business’ expansion plans in Thailand and the Association of Southeast Asian Nations (ASEAN). Projects in Myanmar and Cambodia look likely once the acquisition is complete. Finally, the ratings agency Moody’s was drumming up attention for a market report by pointing out the implications for the multinational cement producers in India if a proposed rise in infrastructure spending gets approved. In summary HeidelbergCement and Italcementi are unlikely to benefit due to their southern Indian spread of assets and local production overcapacity.

HeidelbergCement may not be getting it all its own way but the acquisition of Italcementi remains on track so far. All eyes will be on how the US FTC responds to the deal.