Displaying items by tag: Heidelberg Materials

US: Heidelberg Materials subsidiary Mason City Cement plans to invest US$4 - 5m in upgrades to its kiln line by 2026. Upon completion, the work will enable the plant to achieve an alternative fuel (AF) substitution rate of 50%.

Heidelberg Materials' North America regional vice president of government affairs and communications David Perkins said "We want to be proactive as a company and really try to lower our carbon footprint and energy intensity, while recognising we have to be competitive." He added "We're a long-term industry on the cement side because of the investment that's required to produce it."

After the initial shocking coverage of the Russian invasion of Ukraine, which began in February 2022, came announcements of the most extensive sanctions in history by the EU, G7 nations and others against Russia. In the EU, this effectively deconsolidated companies' Russian subsidiaries, leaving decision makers with the choice whether to sell up or hold out for better times.¹ Four Russian-facing EU cement producers - Buzzi Unicem, CRH, Heidelberg Materials and Holcim - finalised their strategic responses in March 2022.

One year on, on 15 March 2023, 666 (21%) of 3110 eligible multinationals have withdrawn from Russia, according to the KSE Institute.² Ireland-based CRH led the cement sector exit. It abandoned its Finland-based subsidiary Rudus' ready-mix concrete joint venture, LujaBetomix, on 2 March 2022. Switzerland-based Holcim took longer, but affected its exit on 14 December 2022, agreeing to sell Holcim Russia to local management. One condition of the sale was a rebrand (to Cementum, in February 2023) to withdraw the Holcim name from Russia. Unlike CRH, Holcim's Russian business included multiple cement plants - though the producer stated that it contributed less than 1% of group sales during 2021.

The KSE Institute uses the equivocal label of 'waiting' for companies which have paused investments, or scaled back operations, in Russia, while retaining their subsidiaries. This applies to 500 companies globally (16% of the pre-war total). Germany-based Heidelberg Materials acted swiftly to freeze further investments in HeidelbergCement Russia on 10 March 2022. At that time, its three cement plants were in winter shutdown. In terms of capacity, the 4.7Mt/yr-capacity Heidelberg Materials Russia constitutes 2.8% of Heidelberg Materials. In 2022, Heidelberg Materials suffered a Euro102m impairment on account of its Russian business. CEO Dominik von Achten, announcing the freeze, had described the subsidiary as a 'pure local business with no imports or exports.' Its website has since come offline, but the corporate structure presumably maintains in its frozen isolation.

1220 global multinationals - 39% of all those previously operating in Russia - are still 'continuing operations.' Among these is Buzzi Unicem. Having decided that 12 months was long enough, the Ukrainian National Agency for the Prevention of Corruption (NAPC) placed Italy-based Buzzi Unicem on its list of Russian war sponsors on 8 March 2023 for the actions of its subsidiary SLK Cement. A scathing denouncement accompanied the listing, in which the NAPC set out its main charges. It accused Buzzi Unicem of:

1. Expanding its business in Russia since the invasion;

2. Supplying its products to Russian state-owned businesses, including energy suppliers Rosatom and Rosneft;

3. Voicing support for the invasion via its social media presence.

The NAPC concluded “Buzzi Unicem's continued business in Russia means direct support and sponsorship of terrorism by Russia.”

Buzzi Unicem responded in no uncertain terms that these allegations are untrue: it has no business in Russia, and the entity bearing its logo on its (SLK Cement's) website is entirely independent in its decision-making and commercial actions.

This goes to the root of what it means to be a subsidiary of a corporation. Buzzi Unicem seeks to define the relationship as beginning and ending in operational involvement. Yet Buzzi Unicem and other corporations have invested large sums in businesses like SLK Cement. According to the NAPC, Buzzi Unicem paid Euro62m in taxes alone in Russia between 2016 and 2021. Whether they have elected to 'continue operations,' 'wait' or write in favourable buy-back options into sales contracts, as has happened in other industries, companies can be expected to seek to return to their investment.

As such, it is not entirely surprising that Buzzi Unicem should have followed up its rebuttal with a defence of SLK Cement. It stated "SLK Cement is a Russian domiciled entity operating exclusively in that country and therefore subject to domestic legislation. Payment of taxes and having employees being mobilised to the army are not discretionary decisions, rather legal obligations within the Russian jurisdiction."

In the decision to sell or hold, multinationals face the usual considerations: can they afford to yield their market share to other - less conscientious - competitors? Or, in this instance, those from Türkiye, India and China, whose potential investments are unrestrained by sanctions? Even as Holcim thrashed out its exit deal in October 2022, China-based West China Cement announced plans for a new US$260m, 1.2Mt/yr cement plant in Tatarstan, Volga Federal District. Meanwhile, Cemros (formerly Eurocement) is carrying out a Euro3m mill upgrade at its Lipetsk integrated cement plant in Central Federal District, which will increase the plant's capacity by 20% upon commissioning in early 2023. Between them, Central Federal District and Volga Federal District host four former Holcim cement plants.

12 months into the Russian invasion of Ukraine, an onslaught of withdrawals has shrunk, but not collapsed, the Russian economy.³ The Russian government insists that cement demand remains high (up by 2.1% year-on-year to 58.3Mt during the first 11 months of 2022, according to the Russian cement association Soyuzcement).⁴ The country has substituted new sources of imports for those lost since the beginning of the invasion, the government claims. It is even preparing for a cement shortage from 2024 onward by 'further developing domestic production capacities.'

Far from shrinking, Russian cement production rose by approximately 2.5% year-on-year to 60.7Mt in 2022.^{4, 5} The two aforementioned districts - Central Federal District and Volga Federal District - contributed a healthy 15.3Mt (25%) and 13.4Mt (22%) respectively. If the statistics are to be believed, the EU's recalled producers are missing out on a bonanza.

At the same time, all four EU-based producers face the parallel burden of increased costs in their key markets, as sanctions keep energy prices at an all-time high, and nowhere more so than in Europe. These sanctions purport to target Russian businesses and individuals, but their bite is far less discriminating. Companies may well wonder why they are being penalised by governments whose policies failed to prevent a Russian invasion of Ukraine in the first place.

We have no idea what will happen in Ukraine and Russia in the rest of 2023, but we can be sure it will be uncertain territory for the two countries’ cement producers. Those with (former) assets in the Russian market will have to continue their delicate balancing act.

1. European Commission, 'Frequently Asked Questions,' 16 March 2022, https://trade.ec.europa.eu/doclib/docs/2022/march/tradoc_160079.pdf

2. KSE Institute, 'Stop Doing Business with Russia,' 15 March 2023, https://leave-russia.org/leaving-companies?flt%5B147%5D%5Beq%5D%5B%5D=9062

3. European Council, 'Infographic - Impact of sanctions on the Russian economy ,' 9 March 2023, https://www.consilium.europa.eu/en/infographics/impact-sanctions-russian-economy/

4. Soyuzcement, 'Cement Review,' December 2022, https://soyuzcem.ru/documents/%D0%A6%D0%B5%D0%BC%D0%B5%D0%BD%D1%82%D0%BD%D0%BE%D0%B5_%D0%BE%D0%B1%D0%BE%D0%B7%D1%80%D0%B5%D0%BD%D0%B8%D0%B5_%D0%B4%D0%B5%D0%BA%D0%B0%D0%B1%D1%80%D1%8C%202022.pdf

5. BusinessStat, 'In 2022, 60.7 million tons of cement were produced in Russia,' 21 February 2023, https://marketing.rbc.ru/articles/14025/

The key trends to note from the financial results of cement producers in 2022 released so far are that sales revenues are up, sales volumes of cement are mostly down and earnings have mostly dropped too. Readers are not going to be surprised that 2022 was a tough year for business as the raw materials and services inflation coming out of the coronavirus period was heightened by energy cost spikes caused by the Russian invasion of Ukraine. Producers put their prices up in response to deliver often record high annual revenues.

Graph 1: Sales revenue from selected cement producers in 2021 and 2022. Source: Company reports. Note: Figures calculated for UltraTech Cement.

What sticks out by looking at the sales volumes of cement figures in Graph 2 (below) is that Holcim’s cement sales volumes were about the same as Heidelberg Materials’ were in 2022, at around 120Mt. Remember, Holcim’s cement sales volumes were 200Mt in 2021 and 256Mt in 2015 at the time of the merger with Lafarge. Large divestments have followed with the sale to Adani Group of Holcim’s India-based companies in 2022 being one of the biggest. UltraTech Cement, meanwhile, has been steadily increasing its India-based cement production capacity.

Graph 2: Cement sales volumes from selected cement producers in 2021 and 2022. Source: Company reports. Note: Figures calculated for UltraTech Cement.

By company, Holcim’s diversification and regionalisation strategy appears to be paying off well. Reducing its exposure to the cement market is giving it a strong story to tell as it grows its light building materials division, frames this as a success in sustainability and moves out of developing markets. How well this will work if and when it ends the divestment and investment stage remains to be seen. One point to highlight is that its operating profit fell by 18% year-on-year on a like-for-like basis to US$3.43bn in 2022. As well as contending with high costs in 2022, a subsidiary connected to the group was fined US$778m by the US Department of Justice in late 2022.

Heidelberg Materials’ approach to the current economic conditions in 2022 seems to have been to keep its head down and push on for decarbonisation rather than diversifying its business. So it followed the ‘sales up, costs up but earnings down’ pattern of a few of the other cement companies covered here. Although, that said, it did diversify its name to ‘Materials’ from ‘Cement’ in September 2022.

Cemex experienced the same problems as the other companies for most of 2022 but conditions started to improve in the fourth quarter in most of its territories. In particular, it reported that earnings started to grow in Mexico towards the end of 2022 despite falling sales volumes of cement. It attributed this to its pricing strategy. Of note this week, the Mexican government is preparing to support higher levels of imports of cement into the country due to a shortage in the southeast of the country.

Buzzi Unicem, meanwhile, noticed a faster slowdown in cement deliveries in its key markets in Italy, the US and Eastern Europe in the last quarter of 2022 from a general trend that could also be seen earlier in the year. In its largest market, the US, it reported that investment in residential construction slowed. This was further affected by the growing cost of building materials and the rate of inflation, although increasing spending on infrastructure helped to keep domestic consumption stable. A favourable currency exchange rate between the US and the Euro also helped the company to report provisional earnings growth. Vicat’s US businesses in the US and Brazil helped cushion the group somewhat with a large rise in sales revenue. However, earnings in the US were hit by the costs related to the start up of the new kiln at the Ragland plant in Alabama, as well as general energy cost inflation. Its business in France fought against inflation with ‘significant’ price rises delivering a high increase in sales revenue but this was insufficient to prevent earnings from dropping.

The non-European based cement producers present a different picture. Despite the high energy costs, UltraTech Cement managed to increase its revenue and sales volumes of cement in 2022. Its net profit fell though year-on-year in the nine months to 31 December 2022. The company is targeting a cement production capacity of 159Mt/yr by around the 2025 financial year with the aim of becoming the largest cement producing company in the world outside of China. Dangote Cement managed to raise its prices at home in Nigeria to fight off inflation and hold revenue and earnings up. This was harder internationally though with supply chain disruption, high commodity prices, high freight rates and a plant shutdown in Congo blamed for holding earnings back.

Inflation and the energy markets will be clear concerns in 2023. If energy prices for industry stabilise globally then there is more of a chance for business as usual as markets cope better with higher costs. The continued dilemma for multinational cement companies remains whether to decarbonise through diversification or investment in new processes, and how far to go along either path. Meanwhile, the large regional producers are starting to show themselves outside of China, as UltraTech Cement’s growth trajectory testifies. One test for these companies is balancing the risk of expansion versus potential tighter local environmental regulations. The environmental rules of export markets are also a factor to consider here with the head of AdBri calling this week for an Australian equivalent to the European Union’s border adjustment mechanism to block so-called ‘dirty’ imports.

The next set of financial results from the cement sector in 2022 to look out for will be those from the large China-based cement producers. Once these are released we will examine them in more detail.

Germany: The Science-Based Targets Initiative (SBTi) has validated Heidelberg Materials' new 2030 CO2 reduction targets. The targets have a base year of 2020 and conform to a 1.5°C climate change framework. Per tonne of cementitious material, the producer is now committed to reducing its Scope 1 CO2 emissions by 24%, its Scope 2 CO2 emissions by 65% and its Scope 3 emissions by 25%.

Heidelberg Materials' chief sustainability officer Nicola Kimm said “As reflected in our updated Sustainability Commitments 2030, climate action is a crucial element of Heidelberg Materials’ sustainability strategy. The SBTi validation shows that our sustainability agenda not only includes the most ambitious reduction target in the cement industry – but also a realistic, measurable plan in line with the 1.5°C scenario. We follow a clear, science-based approach, reducing our carbon footprint through the levers of product and process innovation and industrial-scale carbon capture, utilisation and storage. By closing the carbon and material loops, we will lead the sustainable transformation of our sector.”

In 2019, Heidelberg Materials became the first cement company to secure SBTi validation for its emissions reduction commitments.

Germany: Heidelberg Materials' sales increased by 13% year-on-year to Euro21.1bn in 2022 from Euro18.7bn in 2021. This was despite a 6.1% drop in cement and clinker volumes, to 119Mt from 127Mt. Heidelberg Materials' cement and clinker volumes fell by 10% in Western and Southern Europe, by 7.8% in Northern and Eastern Europe-Central Asia, by 14% in North America, by 1.3% in Africa-Eastern Mediterranean Basin and by under 1% in Asia-Pacific. The group's materials costs rose by 23% to Euro21.4bn from Euro18.8bn. Meanwhile, its profit dropped by 9.4% to Euro1.72bn from Euro1.9bn.

Chief executive officer Dominik von Achten said "It’s evident that we can only be profitable in the long term by shaping our future as a company in a climate-compatible way, further reducing the footprint of our products and closing material loops. We are making good strides in all areas. Compared with the previous year, we were able to reduce our specific net CO₂ emissions by another 2% in 2022. Our carbon capture, utilisation and storage projects launched worldwide are progressing favourably. At our CCS project in Brevik, Norway, we are well on track with the construction of the world's first CO₂ capture plant in our industry, and we look forward to commissioning in 2024." Von Achten continued "We have made a good start to 2023. The fourth quarter showed that we have laid a good foundation for the development in this year. Volatility on energy and raw material markets remains high, but the current easing in energy prices is giving us some breathing room. On the demand side, government infrastructure plans should compensate for the decline in private housing construction. We are optimistic about the further course of the year.”

US: The Department of Energy’s (DOE) Carbon Storage Assurance Facility Enterprise (CarbonSAFE) initiative has awarded funding of US$8.9m to Heidelberg Materials North America to study the subsurface geology for suitability for the storage of carbon dioxide at the Mitchell integrated cement plant in Indiana. The proposed project will geologically characterise several prospective reservoirs under the Mitchell plant for storage of more than 50Mt of CO₂ over a 30-year timeframe.

The award, which is managed by the National Energy Technology Laboratory, will be issued to the Illinois State Geological Survey at the University of Illinois (ISGS) as the prime contractor, with the company acting as a technical and industrial partner. Heidelberg Materials is contributing about US$1.5m in funding while ISGS will be contributing approximately US$0.6m for a project total of US$11.1m. The funding was part of a DOE initiative that generated nearly US$125m in funding for 10 projects to characterise suitability for carbon storage across the US.

Heidelberg Materials’ Mitchell cement plant is being upgraded with a new production line. Full production on the new line is anticipated to start in early 2023.

Cemex launched a new waste management division called Regenera this week. Cemex describes Regenera as a “business that provides circularity solutions, including reception, management, recycling, and coprocessing of waste.” The Mexico-based company has a long and leading history with sourcing and using alternative fuels in the cement sector and the new organisation looks set to utilise this experience. What is notable though is how the business is targeting three waste streams: municipal and industrial; industrial by-products; and construction, demolition and excavation waste (CDEW). Bringing the three waste streams together in this way appears to be novel for the heavy building materials sector, particularly the inclusion of CDEW, which we will explore further here.

CDEW is split into fractions, just like the municipal and solid waste streams that end up as alternative fuels at cement plants, but the biggest fractions are generally concrete, followed by bricks. The recycled concrete is then typically used as an aggregate, either in new concrete production or in areas like road construction and earthworks. The use of recycled aggregates (RA) made from CDEW goes back to at least the 1930s in its current form although ‘reusing’ materials from structures such as castles and churches goes back far further. Recycling and reusing CDEW gained a boost in 2020 when the European Union (EU) set a 70% recovery target. However, within the EU the CDEW recycling rates vary considerably and that 2020 target includes the use of CDEW in backfill applications.

In its launch statement for Regenera, Cemex noted that it operates a dock in Paris, where it receives a variety of materials, including construction debris, excavated material and inert soil. These materials are sorted, processed and then transformed into recycled aggregates or organic material used to restore quarries. Cemex then promptly followed up the official launch of Regenera on 30 January 2023 with the acquisition of a majority stake in Shtang Recycle, an Israel-based CDEW recycling company. It added that Shtang Recycle is preparing to build a recycling plant with a production capacity of 0.6Mt/yr of CDEW waste materials. The output from the plant will be used as raw materials for aggregate production.

The focus on CDEW recycling was flagged up at Cemex’s investor event in November 2022. It said that it was targeting a recycling rate of 14Mt/yr of construction and demolition waste by 2030. Other managed waste stream goals included doubling the amount of municipal and industrial waste it manages, to achieve a 50% to fossil fuel substitution rate, and increasing its usage of alternative raw materials and by-products by 30%, thereby eliminating 13Mt/yr of extracted materials.

Cemex is not alone in targeting the CDEW waste sector. Holcim’s recent work in the area goes back to at least 2016 when a recycling unit near its Retznei cement plant in Austria started processing 130,000t/yr of CDEW. It announced in December 2022 that it was setting up a similar recycling centre, also in Austria, at its Mannersdorf cement plant. In October 2022 Holcim acquired Wiltshire Heavy Building Materials in the UK. This company recycles 150,000t/yr of construction and demolition waste into aggregates and concrete. Holcim linked the acquisition to its Strategy 25 target of recycling 10Mt/yr of construction and demolition waste by 2025.

Activity by other cement companies includes the commissioning of a construction waste recycling plant at Gennevilliers in France by CRH-subsidiary Eqiom in April 2022. It was aiming for a target of 50,000t in 2022. In November 2022 Heidelberg Materials agreed to acquire RWG Holding based in Berlin, Germany. Then, in December 2022, it announced a deal to buy Mick George Group in the UK. Both proposed acquisitions are subject to competition authority approval. Heidelberg Materials’ current target is to offer circular alternatives for half of its concrete products by 2030.

The moves by the bigger cement companies into the CDEW sector follow sustainable thinking and the waste hierarchy. Yet the big prize here is to gain a route to dispose of some of their CO₂ emissions through recarbonation and this has been flagged up in several net-zero roadmaps for the cement sector such as those by Cembureau and the Global Cement and Concrete Association (GCCA). Holcim has been involved in the FastCarb project in France, running a pilot at its Val d’Azergues cement plant in 2021. Heidelberg Materials has been testing its own process with so-called recycled concrete paste. The development now appears to be that utilising CDEW has entered the sustainability strategies for some of the big cement-concrete-aggregate producers, targets have been set and acquisitions are happening.

For more information on Heidelberg Materials research into concrete recycling read the January 2023 issue of Global Cement Magazine

Democratic Republic of Congo: Heidelberg Materials has appointed Abderrahim Touile as the plant manager of its Lukala cement plant, operated by local subsidiary Cimenterie de Lukala.

Touile previously worked as the Industry Director for Vicat in Mauritania. He also worked as production manager for Ciments de l'Afrique (CIMAF) in Burkina Faso. Before these roles he held production roles with Lafarge in Morocco and South Africa between 2002 and 2015. Amongst other business and management qualification, Touile holds as master’s degree in business administration (MBA) from the Sorbonne Business School in France.

Sweden: Cementa is running trials on a pilot water treatment plant in the File Hajdar limestone quarry near its Slite cement plant in Gotland. The pilot plant has been running since September 2022 and the subsidiary of Germany-based Heidelberg materials describes the first results as ‘promising.’ The cement company plans to build and pay for a full-scale water treatment plant at the site. Engineering and design company AFRY has been collaborating with Cementa on the project.

Matilda Hoffstedt, the manager of the Slite cement plant, said “We can contribute to greatly strengthening the public water supply here in northern Gotland. The results from the pilot project are extremely promising and we see that a new water plant would really make a difference to the water supply throughout the year.”

Cementa started work on the water project in 2021 with a feasibility study and plans for the pilot. The entire feasibility study is expected to be completed in the summer of 2023 and the goal is to be able to put a full-scale water plant into operation in 2027. However, Cementa says that it needs a long-term permit for its mining operations in Gotland in order to invest in the project. The cement producer has faced opposition to renewing its permit at the site since 2021. A perceived threat to the area’s drinking water supplies has been a repeated concern made by groups against continued quarrying in the area.

Bulgaria: The European Union (EU) Innovation Fund has awarded a Euro190m grant to Devnya Cement and oil and gas producer Petroceltic for their 800,000t/yr ANRAV carbon capture, transportation and storage project. Devnya Cement's parent company Heidelberg Materials says that the partners expect to commission the full-chain project in 2028.

Heidelberg Materials Northern and Eastern Europe-Central Asia board member Ernest Jelito said "Devnya Cement's Devnya plant will be the first carbon-neutral cement plant in the country and the region. ANRAV will also enable other industrial players to join the carbon chain in the future and share storage capacity. In this way, we want to not only decarbonise our company in Bulgaria, but also provide opportunities for the whole region."