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News GCW189

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Did LafargeHolcim overprice its sale to CRH?

25 February 2015

One of the compelling issues to emerge from the Global CemFuels conference last week in Dubai was how alternative fuel (AF) use by cement producers might change while oil prices are low. Dirk Lechtenberg, of MVW Lechtenberg hinged his overview talk on both low energy prices and the on-going Lafarge-Holcim merger. The unspoken implication was that Holcim and Lafarge are offloading cement plants that use increasingly unprofitable AF. Cement plants are increasingly being out-bid for AF by energy-from-waste plants and 'gate fees' are dwindling accordingly.

Here's how it works. CRH is buying nine plants from Lafarge and Holcim in western Europe and five in eastern Europe. These are plants with high AF substitution rates. For example, Holcim's plants in France and Belgium have a substitution rate of 50% using around 250,000t/yr of waste fuels. Similarly, the Lafarge Zement Wössingen cement plant has permits for a 60% AF rate.

Globally, Lafarge and Holcim had substitution rates of 17.2% and 12.8% in 2013. CRH had a substitution rate of 21.2% in the same year. Post merger LafargeHolcim is estimated to have a substitution rate of below 10% in 2015. Meanwhile CRH is estimated to have a rate over 30%. After establishing this, Lechtenberg demonstrated how a thermal substitution model might be affected by fluctuating coal prices whilst using a refuse-derived fuels (RDF) rate of 35%. Put the price of coal below US$55/t and the savings of using RDF vanish.

Other delegates at the conference pointed out various limitations in Lechtenberg's methodology and figures. External legislation such as a carbon tax can disrupt this model for example. However, once coal becomes cheap and abundant enough it will displace most AF on economic grounds due to its high calorific value. Very few waste fuels can beat it.

At the time of writing the Brent crude oil price is just below US$60/barrel following a steep decline since mid-2014. The Australian coal price, the world's biggest export hub, has seen a steady fall since 2011 hitting just over US$60/t in January 2015. However, how interconnected are the oil and coal price?

This is difficult to link because bulk energy consumers switch supply according to price and other variables such as which fuels they can actually use. That last point is important in this discussion because preparing a cement plant to use AF requires an investment cost. Meanwhile, energy producers vary production depending on how much profit they want to make. Throw in new energy sources such as waste fuels and fracking and the overall picture becomes messy as all of these factors and others (OPEC policy, legislation etc) interact. Low oil prices do not necessarily mean low coal prices. For example, one analyst looking at BP's Statistical Review of World Energy in 2014 concluded that oil and coal consumption hold an inverse relationship to each other. When the proportion used of one rises, the proportion used of the other falls, and vice versa.

With all of this in mind there is ambiguity over whether CRH has been handed a time bomb in terms of its new cement plants' energy policies. Given that widely assumed production costs for the major oil producing nations are mostly above the current cost of crude oil, if the producers are controlling the price, then it seems likely that the price can't stay this low on a sustained basis. However, the cost of coal is on a five year low also. Is this the new normal or a market blip?

Cement plants using AF have a capital expenditure cushion against changing their fuels mix in the short to medium term but it can only last so long. The longer fossil fuel energy prices remain low the longer CRH will make less money from the fuel strategy it will inherit at its new plants.

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Read the review of the 9th Global CemFuels Conference 2015

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Aumund Fördertechnik announces Robert Gruss as new Managing Director

25 February 2015

Germany: Aumund Fördertechnik has announced that Robert Gruss has been appointed as its new Managing Director. He is responsible for sales, service and technology as well as for research and development. He has been in post since 1 November 2014. Gruss will also join Volker Brandenburg on the managing board.

Gruss, aged 49 years, joined Aumund from SMS Siemag AG. He started his professional career with SMS in 1995. For several years he worked in Italy, China and Belgium in managing positions.

During 2015 Aumund's president, Franz-W Aumund, will gradually retire from operational business. He will continue as managing director of Aumund Holding and as member of the advisory boards of the product and daughter companies. Primarily he will dedicate himself to steering and controlling the Aumund Group. Gruss will take over additional responsibilities from the managing Franz-W Aumund.

Published in People
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Mykolaiv Cement appoints Andrii Zvyrynskyi as a board member

25 February 2015

Ukraine: Mykolaiv Cement has appointed its commercial director Andrii Zvyrynskyi as a board member. He replaces Ruslan Koliada who occupied the post since September 2013 and has now been dismissed. Zvyrynskyi will hold the position until the recall of his candidacy by the supervisory board or a general stockholders' meeting. Previously he had been the commercial director of Mondy Packaging Behs Ukraine.

Published in People
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Persio Morassutti appointed as director of Shree Digvijay Cement

25 February 2015

India: Shree Digvijay Cement Company has reported that Persio Morassutti has been appointed as a director. He will replaces Osvaldo Ayres Filho following his resignation.

Published in People
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Mangalam Cement director Shri K K Mudgil dies

25 February 2015

India: Mangalam Cement has reported that Shri K K Mudgil, a non-executive independent director of the Company died on 20 February 2015 in New Delhi.

Published in People
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South Africa Competition Commission refers Natal Portland Cement to competition tribunal

25 February 2015

South Africa: The Competition Commission of South Africa has referred Natal Portland Cement (NPC) to the Competition Tribunal. The referral follows the Commission's investigation, between 2008 and 2012, of collusive conduct in the cement cartel against the four main cement producers, NPC, Pretoria Portland Cement Company Limited (PPC), Lafarge Industries South Africa (Lafarge) and AfriSam Consortium (Pty) Ltd (AfriSam).

PPC was granted conditional leniency in terms of the corporate leniency policy of the Commission. AfriSam settled with the Commission and agreed to pay an administrative penalty of US$11.2m representing 3% of its annual turnover in 2010. Lafarge also settled with the Commission and agreed to pay an administrative penalty of US$13m representing 6% of its annual turnover in 2010.

The investigation found that the four cement producers agreed to collude and to divide the cement market by allocating market shares and indirectly fixing the price of cement during a legal cartel in South Africa that ended in 1996. The Competition Commission allege that they subsequently reinforced these collusive arrangements through a series of other agreements, which NPC's representatives were party to, including an agreement to progressively exchange competitively sensitive sales data through the Concrete and Cement Institute of South Africa.

The Commission is pursuing a maximum penalty of 10% of NPC's annual turnover and a Tribunal order that NPC contravened the Competition Act.

Published in Global Cement News
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Uzbekistan to launch two new cement plants in 2016

25 February 2015

Uzbekistan: Uzbekistan is planning to commission two new cement plants in 2016, according to Islom Arslonov, department head at Uzstroymateriali (Uzbek Construction Materials). A 0.4Mt/yr plant is being built by Karakalpak Cement in Karakalpakstan for launch in 2016. A 2.2Mt/yr plant being built by Surkhoncementinvest in Jarkurgan district of Surkhandarya.

Arslonov noted other cement projects that have been built in Uzbekistan recently including a 0.75Mt/yr plant commissioned in Jizzakh in 2014, the Ferghana Cement 0.15Mt/yr plant in Ferghana, the SingLida 0.12Mt/yr plant in Andijan and the Keer 20,000t/yr plants also in Andijan.

Accoridng to Arslonov, eight cement plants are operating in Uzbekistan with a total production capacity of 8.8Mt/yr.

Published in Global Cement News
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KORFEZ ENG reports two new European orders

24 February 2015

France/Germany: KORFEZ ENG has signed a contract with Italcementi for the supply of a new second compartment mill shell lining for one of its cement plants in France. The system is intended for a 3.8m diameter two-compartment raw mill. A total grinding compartment of 7250mm will be equipped with a combination of lifter and sorting liners. The design work will be carried out in the technical sales office in Neubeckum, North Rhine-Westphalia. Operation is expected to start in the summer of 2015.

KORFEZ ENG has also received an order from a building materials group in Germany for a dip tube cast lining system for its pre-heater, cyclone stage 2. The dip tubes will be executed as a locked hanging segment system tailor-fit to the existing dip tube. KORFEZ ENG determined the optimum material alloy for the application, which is being used for the first time. Manufacturing will be completed in about two months and delivery is planned for April 2015.

Published in Global Cement News
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Clean water for Malawi and Bangladesh

24 February 2015

Bangladesh/Malawi: Germany's Loesche has been supporting the non-profit organisation Charity: Water. The first result of the engagement was a water well in Lutarupara-Molliktola, Bangladesh.

After more than a year's preparation, at the end of 2014 an additional well was completed in Chiphwafu village, Malawi. The drilled well allows the village community year-round access to clean drinking water that is free of pathogens and pollutants. Alongside the construction of the well, the people in the village were taught about safe and sustainable ways to use water. Of Malawi's 15.9 million inhabitants, around 3 million have no access to clean water and 92% have no access to sanitation facilities.

Published in Global Cement News
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Lucky Cement reports 8.5% increase in its net profit in the first half of 2015

24 February 2015

Pakistan: Lucky Cement Limited has reported a considerable rise in its net profit for the first six months of its 2015 financial year, which ended on 31 December 2014.

It net profit rose to US$54.9m, some 8.54% higher than in the same period of its 2014 financial year. Lucky Cement's gross profits increased by 9.03% during the period and its net sales revenue improved by 9.37% to US$210m, up from US$192m in its 2014 financial year.

Lucky Cement's local sales volume grew by 9.20% year-on-year to 2.02Mt, compared to 1.85Mt in the same period of its 2014 financial year. Its export sales volume grew by 2.24% to 1.23Mt compared to 1.21Mt in the same six months of its 2014 financial year. Lucky Cement maintained its market share at 19%. During the period, its combined sales revenue increased by 9.37%, which was mainly contributed to by increased sales volumes.

Published in Global Cement News
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