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Buzzi Unicem strengthened its position in Italy this week with a deal to buy Cementizillo. The agreement included Zillo Group’s two integrated cement plants at Fanna and Este in the northeast with a combined production capacity of 1.4Mt/yr. The sale price appeared to be low at a maximum of Euro104m plus 450,000 shares in Buzzi. However, the interesting part of this transaction is a variable portion of zero to Euro21m based on the average price of cement achieved by Buzzi in Italy between 2017 and 2020.

Buzzi hammered home the point in its acquisition statement that the local cement sector suffers from, “…significant surplus of production capacity coupled with permanently reduced sales volumes.” No doubt this was a prominent part of the deal negotiations given that, with a rough calculation of Euro10m for the shares, Buzzi has picked up the new cement production capacity at about Euro80/t or US$91/t. In July 2016 this column commented that Cementir’s purchase of Compagnie des Ciments Belges’ assets for Euro125/t seemed fairly low globally. Yet even this seemed high when Cementir picked up Sacci’s cement business, including five cement plants, for Euro125m or Euro38/t. Although it should be noted that Sacci was bankrupt at the time and being run by its liquidators.

As ever all these transactions were complicated by assets other than clinker production lines but the problems facing the Italian cement industry are clear. Following on from last week’s column about changing patterns of cement consumption in southern Europe, the cement intensity of the construction sectors in Italy and Spain has dropped significantly since 2000 suggesting that the mode of construction has moved from new projects to patching up old ones. Throw in the financial crash in 2007 and, strikingly, cement production in Italy fell from 49Mt in 2006 to 21Mt in 2015. Anecdotally, looking through the Global Cement Directory 2017, 13 of the country’s 56 integrated cement plants were listed as idled, mothballed or closed at the start of the year. Cembureau, the European Cement Association, reckons that consumption fell year-on-year by 4.7% in 2016 with a further drop of 3% forecast for 2017. Surprisingly though estimates from the Associazione Italiana Tecnico Economica Cemento (AITEC) suggest that cement exports have not increased dramatically since 2007. Since hitting a low of 1.6Mt in 2011 they rose to 2.5Mt, a similar figure to that of before the crash.

This kind of environment suggests consolidation and that’s exactly what has happened with Buzzi buying Cementizillo this week, Germany’s HeidelbergCement’s purchase of Italcementi in 2016 and Cementir’s purchase of Sacci in the same year. Earlier in 2014 Austria's Wietersdorfer & Peggauer picked up a plant in Cadola from Buzzi.

Financially, the story is in line with what the declining production and consumption figures suggest. Buzzi reported that its net sales in Italy fell by 16% to Euro375m in 2016 and Cementir said that its sales would have fallen by 14% had it not benefitted from the new revenue from Sacci.

HeidelbergCement presented Italy as a territory ripe for ‘substantial’ recovery potential at a shareholders event in the autumn of 2016. It highlighted opportunities in further rationalisation of the industry, recovery in cement consumption from a low base and optimisation of the country’s distribution and depot network. It probably will not be publicly released but if Buzzi Unicem pays out the full amount of its variable payment to Cementizillo then the industry may be picking up again. Until then expect more acquisitions.

Nigeria: Lafarge Africa has reduced the size of its board of directors to 11 members from 17. The African subsidiary of LafargeHolcim increased the size of its board followings its formation but following its annual general meeting it has now agreed to decrease it once more. Joe Hudson, Jean-Christophe Barbant, Oludewa Edodo-Thorpe and Thierry Metro have all resigned voluntarily with effect from 8 June 2017.

Saudi Arabia: Hail Cement has appointed Abdul Aziz Bin Saad Al Saud as its chairman. The move follows the resignation of Saud Bin Abdul Mohsen Al Saud in the role, according to Reuters.

Canada: McInnis Cement produced the first cement at its plant in Port-Daniel–Gascons, Quebec on 16 June 2017. Construction at the 2.2Mt/yr plant started in mid-2014. However, Caisse de dépôt et placement du Québec (CDPQ), a pension and insurance fund manager, took charge of the government-backed project in mid-2016 after cost overruns.

“This important milestone marks the work of hundreds of employees, workers and partners who have helped make our plant a performance model for the cement industry, both in terms of productivity and environment”, said Hervé Mallet, President and chief executive officer (CEO) of McInnis Cement.

Nigeria: Dangote Cement has signed an agreement with China Sinoma International Engineering for it to build a 6000t/day cement plant for US$249m. The scope of supply for the integrated production line includes the quarry, cement grinding, equipment procurement and supply, civil construction, mechanical and electrical equipment installation, commissioning and personnel training, according to Reuters. Once the final contract is signed and started the project is forecast to take 27 months to produce cement and 30 months to complete performance testing.

UK: Ecocem Ireland has officially opened its import terminal at Sheerness. The company’s second terminal in the UK is set to supply the construction market in the southeast and London. The unit cost is Euro2.9m to build and it will be able to supply the market with 250,000t/yr of the company’s slag cement products.

It follows the opening of Ecocem’s terminal at Runcorn in early 2016 and it joins facilities in the Ireland, the Netherlands and France.

“Our second investment into the UK in a state of the art import facility demonstrates to the market the need for the low carbon cement alternative and the growing demand from the UK construction industry. We have already engaged in long term agreements with major concrete manufacturers in the UK and will continue to build momentum in the coming months,” said Micheál McKittrick, the managing director of Ecocem Ireland.

Lithuania: Akmenės Cementas is fighting a legal battle over the repayment of a Euro40m loan it took out in 2007. The cement producer started negotiating in September 2016 with its creditors to have the repayment deferred by three years, according to the Baltic Business Daily. However the deal was blocked by the Baltijos Kredito Sprendimai, which inherited the portfolio of the bankrupt bank Snoras. On 15 June 2017 the Vilnius Regional Court temporarily banned Akmenės Cementas’ six creditors from taking loan repayments from its accounts with the exception of interest payments.

Akmenes Cementas built a new Euro110m production line in late 2014. The company used its own funds and the loan to finance the project.

Angola: Cimenfort has inaugurated the start of its clinker kiln project. Industry minister Bernarda Martins presided at the event that marks the second phase of its ongoing upgrade scheme at its cement grinding plant in Benguela, according to the Angola News Agency. The first phase of its upgrades saw its production capacity rise to 0.7Mt/yr through an upgraded grinding system. Equipment for the project is being supplied by Germany’s KHD Humboldt Wedag.

Taiwan: Vice Minister of Economic Affairs Yang Wei-fuu says the government plans to lower the cap on cement exports from over 20% of total output to 15% on environmental grounds. The ministry is also preparing an environmental impact assessment (EIA) policy for the development of the cement industry, according to the Central News Agency. The policy is scheduled to be completed by June 2018 and be submitted to the Environmental Protection Administration. The decision follows public outcry over the alleged expansion of the quarry at Asia Cement’s Hualien plant, which is partly located in a national park.

According to ministry data, Taiwan's cement exports reached 51% of total output in 2009 and 36%, 24%, 24% and 27% from 2013 to 2016 respectively. The ratio was at 25% in the first four months of 2017. Once an amendment to the Mining Act and environmental assessment regulations come into effect, many cement mining projects are expected to be affected. The ministry also intends to find alterative sources for the cement industry’s demand for raw materials.

Philippines: The Board of Investments (BOI) is seeking investment in the cement sector as it expects demand to double to 40Mt/yr by 2020 due to a peak in government infrastructure spending. At the same time Department of Trade and Industry (TI) Undersecretary for industry promotions group Ceferino S Rodolfo confirmed that two companies are preparing to build new integrated plants, according to the Manila Bulletin newspaper. Both companies are obtaining permits for their projects but Rodolfo would not confirm their identifies. DMCI Holdings was reported in the local press as being interested in building a plant Antique's Semirara Island in early June 2017.