Displaying items by tag: Grupo Cementos de Chihuahua

Talk of US tariffs on imports from Mexico was not troubling the National Chamber of Cement (CANACEM) this week. Director general Yanina Navarro pointed out to local media that Mexico only exports 1.42Mt or 3.4% of its total production of 44Mt/yr to its northern neighbour. This is a little higher than the 1.04Mt reported by the United States Geological Survey (USGS) in 2018, although that figure is believed to have underestimated imports to El Paso district in Texas. Mexico was the fifth largest exporter of hydraulic cement and clinker to the US behind Canada, Turkey, China and Greece.

Commentators pointed out that Grupo Cementos de Chihuahua (GCC) might be affected more that other Mexican producers as two of its plants are close to the border at Samalayuca and Juárez in Chihuahua. However, GCC operates five plants in the US. Cemex also has a plant near the US border at Ensenada in Baja California. Yet it’s the fourth largest producer in the US by integrated production capacity. If either company had its export markets seriously disrupted by any border duties they could likely focus on production in the US to compensate.

Once again this is similar to the situation with the proposed border wall where, although President Donald Trump wanted Mexico to pay, it would have been Mexican companies benefiting the most from any construction boom. This was also the case with the US-Mexico-Canada Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA). The international structure of many of the larger Mexican cement producers insulates them from these kinds of political and trade disputes.

Mexican producers shouldn’t be too complacent though. Tariffs are likely to play havoc with integrated supply chains as in the car industry. Building materials will probably be affected less so but that 1.42Mt export figure is more than the production capacity of many individual Mexican cement plants. Taking away this export market will drag on the industry’s utilisation rate and alternate destinations may be hard to find. Note the trouble Mexico has had distributing its products in Peru. The Supreme Court there upheld a fine this week on UNACEM for trying to block the distribution of Cemex’s brand of cement in 2014. Also, although Trump’s tariffs on Chinese products may not have much of an impact on building materials, USGS data shows that Chinese imports of cement to the US fell by 27% year-on-year to 0.76Mt in the six months to the end of February 2019. Similar reductions could await Mexico’s exporters.

The general consensus from the free market press is that tariffs will ultimately hurt both economies. In agreement the Portland Cement Association (PCA) published a market report in April 2018 on the effects of tariffs on US cement consumption in the wake of tariffs on steel and aluminium imports from the European Union (EU), Canada and Mexico. The summary was that all forms of tariff – from minor to a global trade war – would likely result in reduced US cement consumption to varying degrees due to slower economic growth. A full-scale set of tariffs on Mexican imports is likely to induce similar consequences.

Mexico/US: Yanina Navarro, the general director of the National Chamber of Cement (CANACEM), says that Mexican cement producers are not worried by US tariffs on imports. Mexico exports 1.42Mt or 3.4% of its total production of 44Mt/yr to its neighbour, according to the EL Financiero newspaper. Data from the United States Geological Survey (USGS) placed Mexico at the fifth largest exporter of cement to the US after Canada, Turkey, China and Greece.

Grupo Cementos de Chihuahua (GCC) could be affected more than other Mexican producers by any tariffs as 17% of its production is exported to the US. Mainly this covers production from plants at Samalayuca and Juárez in Chihuahua. Hoevever, GCC operates five plants in the US, which would enable it to reduce the potential negative affects of tariffs.

Mexico: Grupo Cementos de Chihuahua’s (GCC) sales fell in the first quarter of 2019 due to lower cement and concrete volumes in the US. Sales volumes rose in Mexico and the group described a ‘favourable pricing environment’ in both markets. Its net sales dropped by 1.9% year-on-year to US$163m from US$167m. Cement sales volumes fell by 7.3% in the US but they rose by 3.8% in Mexico. Earnings before interest, taxation, deprecation and amortisation (EBITDA) fell by 16% to US$38.3m from US$45.6m.

“The US operations slowed, with severe inclement weather continuing into the first quarter. However, there is a strong backlog and we are picking up the pace as the weather conditions improve,” said Enrique Escalante, GCC’s chief executive officer (CEO). He added that Chihuahua in Mexico continued to perform well driven by mining shipments, industrial maquiladora plants and warehouse construction and middle-income housing starts.

Bolivia/Mexico/US: The US District Court of Colorado has confirmed compensation of US$36.1m awarded to Bolivian investment company Compania de Inversiones Mercantiles (CIMSA) from Mexico’s Grupo Cementos de Chihuahua (GCC). The arbitration follows a dispute that started in 2011 between CIMSA and GCC about the sales of shares in the Sociedad Boliviana de Cemento (SOBOCE) to Consorcio Cemento del Sur de Perú.

GCC said that it will continue to dispute the ruling and that it would continue to fight the legal case in Bolivia. In 2015 local courts in Bolivia overturned damages imposed by the Inter-American Commercial Arbitration Commission (CIAC) upon GCC.

US: Argos USA’s Harleyville cement plant in South Carolina and Grupo Cementos de Chihuahua’s (GCC) Pueblo plant in Colorado have been awarded Energy Star certification by the Environmental Protection Agency (EPA) for the first time. Altogether 100 manufacturing plants across different industries earned the certification in 2018.

24 cement plants received the certification in 13 states. These cement companies included Alamo Cement, Argos USA, Buzzi Unicem, CalPortland, Cemex, Continental Cement, GCC, Holcim US, Lehigh Cement, Salt River Materials and Titan America.

“America’s cement manufacturers’ commitment to sustainable manufacturing have led to improved equipment reliability, energy efficiency, and the increased the use of alternative fuels,” said Portland Cement Association president and chief executive officer (CEO) Mike Ireland.

US: Grupo Cementos de Chihuahua (GCC) says that the upgrade to its Rapid City cement plant in South Dakota has started operation. The expansion has added 0.44Mt/yr of production capacity to the unit taking its total capacity to 1.18Mt/yr. The project cost US$105m and it started in 2016. Tie-in of the upgrade was finished in late November 2018. Production was suspended during the tie-in-process and has now resumed. The new facilities are now being stabilised.

“The Rapid City expansion comes at an opportune time, as our US cement plants are running nearly at full capacity, and we expect to see continued, steady growth in demand across our market area. We will be able to serve our customers better and operate our cement logistics network more efficiently with the additional capacity,” said Enrique Escalante, GCC’s chief executive officer (CEO).

GCC has 5.8Mt/yr of cement production capacity. Of this, 3.5Mt/yr is in the US, with plants in Pueblo in Colorado, Odessa in Texas, Tijeras in New Mexico, Trident in Montana and Rapid City in South Dakota. GCC expects to ramp up the new production capacity at Rapid City gradually over the next 18 to 24 months, in accordance with market conditions.

GCC’s cement production capacity in Mexico is 2.3Mt/yr from plants in Chihuahua, Juarez and Samalayuca in Chihuahua state. In the third quarter of 2018, GCC reactivated two idled kilns in Chihuahua to increase production of both oil well cement and construction cement.

Mexico: Grupo Cementos de Chihuahua’s net sales rose by 11% year-on-year to US$667m in the first nine months of 2018 from US$610m in the same period in 2017. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 16.3% to US$199m from US$171m. It attributed the growth to building demand and rising prices in both the US and Mexico. Notable events in the third quarter of 2018 included: the operational integration of the Trident cement plant in Montana; completion of construction of the Rapid City, South Dakota plant expansion and start of the tie-in process; and reactivation of two idled kilns in Chihuahua to meet growing demand in the US and Mexico.

UK: Cement companies from Asia and North America are the latest to join the Global Cement and Concrete Association (GCCA), bringing the total number of member companies to 20. News members include Mexico’s Grupo Cementos de Chihuahua (GCC), Israel’s Nesher Israel Cement, India’s Shree Cement and Taiwan’s Taiwan Cement Corporation. The number of GCCA affiliates is also growing with the addition of the Cámara Nacional del Cemento in Mexico the Federación Interamericana del Cemento (FICEM) in Colombia and the Union of Cement Producers – Soyuzcement in Russia.

GCCA members now include: Buzzi Unicem, Cementos Argos, Cementos Pacasmayo, Cemex, Çimsa Çimento, CNBM, CRH, Dangote Cement, Eurocement, GCC, HeidelbergCement, LafargeHolcim, Nesher Israel Cement, SCG Cement, Shree Cement Ltd, Taiheiyo Cement, Taiwan Cement Corporation, Titan Cement, UltraTech Cement and Votorantim.

The association added that further applications for membership and affiliate status have been received and are being processed.

Cementos Fortaleza started building its new grinding plant in Merida this week. The 0.25Mt/yr unit is expected to open in July 2019. It marks the first new plant in the country in a while and it will be only the second in the south-eastern state of Yucatan, joining Cemex’s integrated plant. It follows a number of upgrades at existing plants over the last two years, such as various mill orders by Cruz Azul from European suppliers (as part of an upgrade at two of its plants) and Elementia’s upgrade to its Tula plant.

Note that Cementos Fortaleza is a subsidiary of Elementia, the building materials company partly-owned by ‘Mexico’s richest man’ Carlos Slim. The group has steadily been expanding with its purchase of the remaining share in Cementos Fortaleza in 2015, acquiring a controlling stake in Giant Cement in the US in 2016 and a project to build a grinding plant in Costa Rica in early 2018.

The other big news story this week with implications for the cement sector was the arrangement of the US-Mexico-Canada Agreement (USMCA), the successor to the North American Free Trade Agreement (NAFTA). Although the exact details of the deal are still emerging, the consensus is that the cement industry in Mexico is unlikely to be affected much. The two points that might have implications for the cement industry are changes to rules of origin regulations and tariffs on imports made by low-wage workers. Both clauses are targeted at the automotive sector to protect US industry so it is unlikely that cement will be affected. In addition it is worth remembering that Mexico was the fifth largest exporter of cement and clinker to the US in 2017 after Canada, Greece, China and Turkey. And, all the major Mexican cement producers operate plants in the US, further protecting them from any potential negative consequences of the USMCA.

Graph 1: Mexican cement production, 2009 – 2017. Source: Camara Nacional del Cemento (CANCEM).

Back in Mexico, the graph above shows that production has been growing in fits and starts over the last decade. The last growth trend started in 2013 but it stalled in 2017. However, the Camara Nacional del Cemento (CANCEM) was forecasting growth of 2.5% year-on-year for 2018 in April 2018. The last time this column covered Mexico, back in early 2017, we produced a breakdown of the industry by company and production capacity. This is worth looking at for an overview of the production base.

Cemex, the largest local producer, reported Ordinary Portland Cement sales volume growth of 3% year-on-year in the second quarter of 2018 but flat growth for the first half of the year. This growth was supported by good activity in the formal residential sector with support from the industrial and commercial sector. LafargeHolcim released less detailed figures for the first half of 2018 but it attributed its strong performance in Latin America to Mexico. Overall cement sales for the region grew by 12.1% to 12.6Mt, in part due to large infrastructure projects in Mexico, such as the new Mexico City International airport. The third biggest producer, Grupo Cementos de Chihuahua, said that its cement sales volumes rose by 2.5% in the first half of the year, supported by rising prices.

As reported in early 2017, the Mexican cement industry is moving ahead with confidence. A modest amount of production capacity is being built, the steady market growth since 2013 looks set to continue after a minor blip in 2017 and the main producers are all reporting good performance so far in 2018. Finally, the USMCA looks unlikely to trouble Mexican producers much and their diversified holdings will certainly help them if it does. For the moment - bravo!

US: The Federal Trade Commission (FTC) has approved a final order settling changes for Ireland’s CRH acquisition of Ash Grove Cement following a period for public comment. The FTC issued its consent for the transaction in June 2018 on the condition that CRH sell the Three Forks cement plant in Montana to Mexico’s Grupo Cementos de Chihuahua (GCC).

Also under the settlement, because the CRH cement plant in Montana currently sells a significant amount of cement into Canada through two CRH terminals in Alberta, GCC will have the option to use those terminals for three years. CRH also has agreed to purchase, at GCC’s option, cement produced at the plant for distribution in Canada for up to three years. The FTC also forced CRH to sell other assets in Montana, Nebraska and Kansas.