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The Ministry of Trade in Türkiye said this week that it was monitoring developments in the construction industry. Specifically, the ministry is reacting to complaints it has received about the high price of cement and supply issues. It has been looking at exports of clinker and cement. The statement noted that prices had risen particularly in the last one to two months and that the government was prepared to take unspecified action to alleviate the situation.

The comments hark back to the autumn of 2021 when members of the Construction Contractors Confederation (IMKON) stopped working for two weeks in response to high prices including cement. At the time the ministry tightened its rules on exporting cement and clinker. This followed the start of an investigation into alleged anti-competitive behaviour by the regulator Rekabat Kurumu into nine cement producers in the first half of that year. Around the same time Türk Çimento, the Turkish Cement Manufacturers' Association, had also been warning about growing raw material and energy costs. It noted that declining domestic sales between 2017 and 2019 had encouraged its members to focus on export markets more. All of this was overshadowed in February 2022 when Russia invaded Ukraine and global energy prices spiked. Türk Çimento then warned of the trouble that high coal prices were causing the sector.

Graph 1: Domestic and export cement sales in Türkiye, January – September, 2017 – 2022. Source: Türk Çimento.

Graph 1 above shows that the trend towards exports that Türk Çimento pointed out in mid-2021 has continued. Domestic sales fell to a low of 33.2Mt in 2019, recovered to 2021 and dropped somewhat so far in 2022. As an aside, that decline in domestic sales from 2017 to 2019 was the first the local cement industry had experienced a fall in sales since at least 2002. Exports fell year-on-year in 2018 but have increased steadily since then to 14.6Mt in the first nine months of 2022. Exports represented 10% of total sales in 2017. So far in 2022 they have accounted for 27% of total sales. Türk Çimento’s take on the picture so far in 2022 is that it expects the domestic market to decline by 10% in 2022 in all regions of the country principally due to high commodity prices. Cement exports are expected to increase but clinker exports to decrease.

Commercially, Türkiye-based cement producers have reacted to high energy prices by upping their own product prices in turn. OYAK Çimento, for example, reported significant rises year-on-year in sales revenue and earnings in the first nine months of 2022. Net sales grew by 160% year-on-year to Euro403m and earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 202% to Euro106m. Akçansa and Çimsa reported a similar situation.

Despite the high energy costs, both investment and merger and acquisition activity has continued in the cement sector in 2022. In August 2022 Fernas Group completed its purchase of two integrated cement plants, a grinding plant and associated ready-mix concrete assets from Çimsa Çimento for US$110m. Later in the year, in November 2022, Safi Çimento acquired Sancim Bilecik Çimento’s integrated plant from Aşkale Çimento. Various upgrade projects to cement plants were also reported including projects at KÇS Kipaş Çimento’s Kahramanmaraş plant, Nuh Çimento’s Hereke cement plant, MEDCEM’s Silifke plant and OYAK Çimento’s Ünye plant.

Recent reporting by the Economist newspaper suggests that the government is targeting the domestic housing sector in response to higher than inflation price rises even compared to Türkiye’s high consumer price inflation rate. The next general election in June 2023 may also be encouraging legislators to look at the accommodation needs of their constituents. Whether this is connected to the Ministry of Trade’s recent decision is unknown. Cement producers have followed the money to lucrative export markets in recent years. How far the government is willing to intervene in this strategy could mark a change in direction for the sector.

Germany: The German Cement Works Association (VDZ) has appointed Kristina Fleiger as the head of its new Climate-neutral Process Technology department. Stefan Schäfer has become the head of Environment and Industrial Engineering department. Both posts report to Volker Hoenig, who retains his position as the managing director of the VDZ.

Fleiger has worked for the VDZ in project management and engineering roles since 2011.

Schäfer was previously the VDZ’s Deputy Head of Environment and Plant Technology. He has worked for the VDZ since 1999.

Germany: Beumer Group has appointed Kay Wieczorek as the Head of its Center of Competence (COC) Product Business. The division is responsible for the Cement, Building Materials, Chemicals and FMCG divisions. He succeeds Norbert Stemich, who has been appointed as the chief strategy officer of Beumer Machinery (Shanghai) in China.

Kay Wieczorek has worked for Beumer Group since 2014. Most recently he was responsible for cement division sales. He holds a degree in Sales Engineering and Product Management from the Ruhr University in Bochum.

US: Inform has appointed Justin Newell as the chief executive officer (CEO) of its subsidiary Inform North America. He succeeds Adrian Weiler, who will continue in his role as ongoing advisor to the CEOs across all of Inform Group’s subsidiaries. Newell will retain his role as chief operating officer, which he has held since 2019. Newell started working for Inform after holding management roles at Reliable Carriers, Porsche Cars North America and Genuine Parts Company.

US: Ed Sullivan, the Chief Economist and Senior Vice President of Market Intelligence at the Portland Cement Association (PCA), expects that cement consumption will decline in the second half of 2023 due to a worsening general economic outlook. However, he noted that order books for the construction industry were ‘strong’ for at least the next six months and that this would cushion the sector. Sullivan made his comments at a presentation at the World of Concrete conference in Las Vegas.

Sullivan said, "When looking at the big picture of real construction spending and cement consumption this year, we should expect both volumes to soften throughout the year, with significant declines in the second half of 2023." He added, "The downturn is expected to be short-lived as interest rates ease slightly and stronger infrastructure volumes materialise in 2024 and beyond."

Sullivan predicts that the US economy is gradually weakening under the weight of high inflation, rising interest rates and geopolitical turmoil. However, he viewed the occurrence of a recession as unlikely. In the construction sector he forecasts that the private sector will continue decline in 2023 following a drop in 2022. Spending benefits from the Bipartisan Infrastructure Law are likely to be muted in 2023 before registering a stronger effect in 2024.

Denmark: Equipment manufacturer FLSmidth has launched new corporate strategies for its cement and mining sectors. The so-called ‘pure play’ plans are intended to further focus on technology, products and services and sustainability. The group says it is also simplifying its operating model to reduce risks, improve efficiencies, ensure stronger execution and improve profitability and quality of earnings. The announcement was made at the same time as the group’s latest investor event.

Mikko Keto, the chief executive officer at FLSmidth, said “We must prioritise our efforts on our core business, reduce risk and execute with excellence. We have already started to fundamentally transform our business to ensure stronger strategy execution and to achieve our long-term ambitions to the benefit of our stakeholders.”

In the cement sector the group’s ‘Green 26’ plan aims to make the company the preferred service supplier for the industry. It added that it has a “clear commitment to drive the green transition in the cement industry.” It has set a target of reaching an 8% earnings before interest, taxation, depreciation and amortisation (EBITDA) margin by 2026. For the mining sector the target is a 13 - 15% margin.

In provisional financial results for 2022, FLSmidth revealed that it had an EBITDA margin of 3.3% for cement and 7.6% for mining. Group revenue rose by 24% year-on-year to Euro2.93bn in 2022 from Euro2.37bn in the 2021. Revenue from the cement and mining sectors grew by 7% to Euro847m and 29% to Euro2.03bn respectively. The group said that the short-term outlook for the cement industry remained impacted by overcapacity and that a potential recession is expected to impact market demand negatively over the coming period. Its mining sector revenue was inflated by the acquisition of ThyssenKrupp Mining in 2022.

India: Sagar Cements has won the auction to acquire Andhra Cements from Jaiprakash Associates (Jaypee Group), a company currently undergoing an insolvency process. The committee of creditors of Andhra Cements voted to approve the sale, although the amount of the bid has not been disclosed, according to the Press Trust of India. Dalmia Cement (Bharat) was also reportedly made a bid for the cement producer.

Andhra Cements operates an integrated plant at Durga and a grinding plant at Visakhapatnam in Andhra Pradesh. It was previously acquired by Jaypee Group in 2012 from Duncan Goenka Group.

Oman: Raysut Cement’s loss after tax rose to US$243m in 2022 from US$33.6m in 2021. Its expenses more than doubled to US$361m from US$168m. Its sales revenue dropped by 12% year-on-year to US$118m from US$134m.

The release of financial data for 2022 follows the intervention by the Capital Market Authority (CMA) in late 2022. In November 2022 the regulator publicly called on the cement producer to urgently address 'material misrepresentations' in its financial results for the second quarter of 2022. It then replaced the company’s board of directors and appointed a temporary one in December 2022 following an audit. This is the second time the CMA’s history that it has taken such action, according to local press.

Paraguay: Ernesto Julián Benítez Petters, the president of Industria Nacional del Cemento (INC), has reassured the market that the company can continually to operate normally despite low water levels in the Paraguay River. He reported that, in the fourth quarter of 2022, boats were loading with 1.5m of draft, according to the Última Hora newspaper. This has meant that barges can only accommodate around half of their normal capacity. Benítez Petters added that it is uncertain when the river will recover its previously normal water levels.

The state-owned cement producer says it has enough raw materials to keep its plant operating at Villeta as it has used more barges to cope. It also conducted maintenance works at the docks of both its Viletta and Vallemí plants in 2021. Widening work at the Paso Queso on the river is a long term goal of the government.

Brazil: Data from the Brazilian National Cement Industry Association (SNIC) shows that sales of cement fell by 3% year-on-year to 63.1Mt in 2022 from 64.4Mt in 2021. Sales fell in the Nordeste, Sudeste and Sui regions but grew elsewhere. Exports declined by 14% to 0.40Mt from 0.47Mt. SNIC has blamed the falling sales on a declining real estate sector, high inflation rates and a poor response from a new house-building campaign. It also attributed the Football World Cup in late 2022 as having a detrimental effect on national cement sales! SNIC forecasts sales growth of 1% in 2023 despite considerable market uncertainty.