Displaying items by tag: Fuel

Togo: Cimtogo has blamed price rises for its cement on mounting fuel and transport costs. Eric Goulignac, the chief executive officer of the subsidiary of HeidelbergCement, said that the company had seen a 250% increase in fuels for the integrated Scantogo plant in Tablogbo and a rise in sea freight costs of over US$35/t to import coal and gypsum, according to local press.

Japan: Taiheiyo Cement says that the cost of producing its cement has increased throughout 2021. The company said the coal prices have risen due to increased coal demand in China and a reduction in exports from coal-producing countries. It anticipates further rises in the price of coal. Additionally, it foresees a rise in maintenance costs as the equipment at its plants nears the end of its service life. The producer says that it is endeavouring to improve productivity and reduce costs.

Pakistan: The All Pakistan Cement Manufacturers Association (APCMA) recorded a 5.7% year-on-year decline in overall cement sales in the first quarter of the 2022 financial year to 12.8Mt from 13.6Mt in the corresponding period of the 2021 financial year. Intensified local construction activity increased domestic cement sales by 4% to 11.3Mt/yr from 10.9Mt/yr.

Costs increased – notably the price of coal, which more than tripled year-on-year to US$210/t from US$68/t. Its transport costs from South Africa more than doubled to US$30/t from US$11/t. Currency effects exacerbated the rise in costs. The Dawn newspaper has reported that exports fell by 44% in the period to 1.55Mt from 2.74Mt. Afghanistan had previously received 606,000t of Pakistani cement exports, 22% of the total. This figure fell by 36% year-on-year to 389,000t, 25% of the first-quarter 2021 total, due to political unrest and increased transport costs.

UK: The Mineral Products Association (MPA) has announced the successful completion of a trial of cement production using a net-zero fuel mix consisting of hydrogen and refuse-derived fuel (RDF) at Hanson’s Ribblesdale, Lancashire, cement plant. The RDF in the mix consists of meat and bone meal (MBM) from the food industry and glycerol from biodiesel production.

Increased alternative fuel (AF) substitution is one of seven key levers in the MPA’s Roadmap Beyond Net Zero emissions reduction strategy. The association says that the fuel will eliminate 180,000t/yr of CO₂ emissions from the Ribblesdale plant’s operations when fully implemented. The project received Euro3.71m in government funding.

Hanson’s environmental sustainability manager Iain Walpole said “We are delighted to be involved with this world-leading project, which is a further example of our commitment to cutting CO₂ emissions.” He added “It will also contribute to our ambition of supplying net zero carbon concrete by 2050.”

US: Lhoist will raise the price of its lime products by US$0.2/t for every US$0.05 rise in its natural gas costs above US$2.6/MMBtu from 1 November 2021. The producer says that the price rise reflects supply challenges and increased costs, of which energy costs have risen most significantly.

The producer said “We regret having to implement this energy surcharge, but believe it necessary in the face of these energy-related cost increases. Additionally, please note that this surcharge is independent of and in addition to 2022 price increases that will be necessary for Lhoist to keep pace with general inflationary factors impacting its cost structure.” It added “We appreciate your business and cooperation during this difficult time. If you have any questions regarding the above, feel free to contact your Lhoist sales representative.”

Iraq: The Cement Producers Association in Iraq (CPAI) has complained about a government decision to reduce subsidises on fuel for the industry. It has warned that the cut could risk plants closing and cement prices rising, according to the Agence France Presse. The Ministry of Oil raised the price of fuel sold to cement manufactures to US$0.17/l in September 2021 from US$0.10/l litre previously. This followed a rise earlier in 2021. CPAI has warned of ‘enormous losses’ in the sector and has lobbied the government to reverse the decision. It added that producers would have to decide whether to stop production and lay off workers or raises cement prices by at least US$10/t. The subsidised fuel price for cement manufacturers was originally approved in exchange for an agreement to cap the price of cement.

India: Cement companies produced 82Mt of cement in the three-month period ending on 30 June 2021, the first quarter of the 2022 financial year, corresponding to growth of 54% year-on-year. Production in the quarter declined by 12% quarter-on-quarter, due to the proliferation of new state Covid-19 lockdowns from April 2021 onwards. The Hitavada newspaper has reported that ratings agency ICRA forecast that full-year production will rise by 12% in the 2022 financial year, on account of pent-up demand, growing rural housing demand and a pick-up in infrastructure activity. It nonetheless estimated that production will remain 2% below pre-Covid-19 outbreak 2020 financial year levels, with continuing high costs due to rising fuel prices. In the first quarter of the 2022 financial year, coal prices more than doubled and petcoke prices rose by 98% year-on-year.

Pakistan: The Pakistan International Bulk Terminal plans to invest US$70m in increasing its coal capacity by 40% to 17Mt/yr from 12Mt/yr with the installation of a second conveyor belt. The expanded terminal will open in late 2023 or early 2024. The Dawn newspaper has reported that cement producers previously called for an expansion of the country’s coal import infrastructure. The All Pakistan Cement Manufacturers Association (APCMA) lobbied the government in July 2021 to permit coal discharge at the 10,000t/day Karachi Port Trust port. By contrast, the Pakistan International Bulk Terminal currently has a capacity of around 30,000t/day. It charges importers US$5.49/t of coal, plus a US$1/t handling fee for use of its berth.

Jordan: The country’s industrial chambers have made a statement saying that most cement plants are charging ‘average’ prices for cement despite recent rises in energy costs due to imported coal and diesel. In a joint statement the group’s said, that although some plants have increased the price of cement, it does not reflect the increase in real cost to producers, according to the Jordan News Agency. The price of cement has reportedly risen by 12% recently.

The industrial chambers noted that the sector is, “keen to stabilise commodity prices locally and maintain their sustainability." It added that it accomplished this in the interests of citizens during the Covid-19 crisis despite the high price of raw materials. The statement also noted that the country has a cement production capacity of 10Mt/yr but the local market only uses 3Mt/yr.

Another week and it’s another commodity story related to the effects of coronavirus. This time the Indian press and financial analysts have started to notice a shift in the fuel mix of some of the major producers from petcoke to coal. UltraTech Cement moved to 30% petcoke and 60% imported coal in the fourth quarter of its 2021 financial year that ended on 31 March 2021. This compares to a reported mix of 77% and 10% in the previous year according to Mint. Dalmia Bharat reduced its share of petcoke to 52% in the fourth quarter from 70% in the third quarter, while its coal mix was 35 - 40% in the fourth quarter.

Price is the driver here. UltraTech Cement’s chief financial officer Atul Daga summed the situation up in an earnings call in late January 2021. Essentially, he said that fuel represented about 13% of total costs for cement producers in India and that both the cost of coal and petcoke nearly doubled from June 2020 to January 2021. However, coal is seen as the cheaper option, hence the move towards it in the fuels mix ratio. The petcoke market meanwhile has suffered due to reduced oil refinery output due to, you guessed it, the effect of coronavirus on global markets in 2020. Scarcity in the US market has particularly affected the decisions on buyers for Indian cement companies since this is the key source of their imports. Demand for petcoke from Latin America and the Mediterranean hasn’t helped either. Both petcoke and coal markets are expected to stabilise in the second half of 2021. Diesel prices have also risen recently causing UltraTech Cement’s power and fuel costs to increase by 28% year-on-year to US$356m and logistics costs, including freight expenses, to rise by 25% to US$449m in the fourth quarter of its 2021 financial year.

With this in mind it’s interesting then, that for some analysts at least, fuel prices have been seen as more worrying for cement producer profits than the latest round of coronavirus-related lockdowns from India’s second wave of infection. Fitch Ratings for example, warned that the impact of mounting fuel costs would continue to be seen in the quarter to June 2021 but that it would subside due to the switch in fuel mix and price rises passed to end consumers. On the lockdowns, it forecast that localised restrictions, with cement plants being allowed to continue operating in most states, would cause a far less pronounced drop in cement demand than during the first national lockdown.

Graph 1: Monthly cement production in India, January 2019 – April 2021. Source: Office of the Economic Adviser.

Graph 1 above shows that the crisis the Indian cement sector faced during the first lockdown, when production crumbled by 85% year-on-year to 4.3Mt in April 2020. The following recovery saw production reach its second highest ever figure at 32.9Mt in March 2021. It’s too soon to tell what’s happening from the national figure but that dip in April 2021 is not looking good so far.

One benefit from unstable fuel prices is that it builds the economic case for cement producers to raise their alternative fuels substitution rates. UltraTech Cement, for example, reported that its ‘green’ energy rate grew to 13% in its 2021 financial year from 11% in 2020. With a target of 34% by its 2024 financial year, this is an ideal opportunity for a change for both UltraTech Cement and other producers.