Displaying items by tag: Infrastructure

Philippines: Taiheiyo Cement Philippines plans to install a second production line at its 0.8Mt/yr San Fernando cement plant in Cebu. The Philippines Department of Trade and industry says that the new line will more than double the plant’s capacity to 3Mt/yr. It will also entail an upgrade to reduce its total energy-related CO2 emissions by 10%. The Philippine Daily Enquirer newspaper has reported that the producer will additionally build a 700,000t/yr terminal at Calaca in Batangas. The facility will cost US$68.4m. Altogether, the company expects its growth plans to generate 2000 new jobs in the Philippines. The Philippines government has committed 6% of gross domestic product (GDP) to infrastructure investments annually.

Taiheiyo Cement Philippines previously indicated in August 2022 that the San Fernando cement plant might eventually expand to a capacity of 5Mt/yr. At that time, it expected to commission the new Line 2 in May 2024.

Special trade representative to the Philippine Trade and Investment Centre in Tokyo, Dita Angara-Mathay, said "The company's latest announcement materialises its plans to expand to Luzon from its long-time base in the Visayan region."

Australia: Alternative cement and concrete producers have welcomed a new Australian civil engineering standard that allows builders to use reduced-CO₂ geopolymer concrete in infrastructure projects. Wagners, which produces Earth Friendly Concrete (EFC), said that the revision has removed on if its key barriers to wider market acceptance. EFC replaces 100% of cement with supplementary cementitious materials, including ground granulated blast furnace slag (GGBFS) and pulverised fly ash, by virtue of its binder technology. Wagners previously supplied EFC for the London Power Tunnels project in the UK, based on local technical approval-based building codes. The producer now expects a new standard like the Australian one to follow in the EU.

The government in Indonesia made building new cement capacity harder this week. The new rules are intended to strengthen the local sector in the face of a utilisation rate of only 53%. A moratorium policy and/or new investment arrangements have been placed on new cement plant projects. Instead, companies have been asked to focus on the regions of Papua, West Papua, Maluku and North Maluku instead, where demand for cement is higher than what the local production base can produce. Ignatius Warsito, the Director General of the Chemical, Pharmaceutical and Textile Industry at the Ministry of Industry, said that the new rules would be reconsidered once the capacity utilisation rate reaches 85%.

Other measures the government is also looking at include increasing exports of cement, changing regulations related to the coal Public Service Agency (BLU) and improving overland transport. On that last point the authorities and the cement producers are looking at how logistics costs can avoid rising in the face of the impending Zero Over Dimension Over Load (ODOL) policy. Proposals the sector has submitted include implementing a multi-axle policy for trucks and improving the quality of certain roads to allow for higher capacity vehicles.

As one of the government’s focus areas - coal - suggests, fuel prices have been a headache for the cement sector in recent years. Warsito noted that international coal prices started to rise in late 2020. This was likely due to the logistical mess that the coronavirus pandemic caused to the global economy. Higher coal prices caused a “significant” effect on the cement industry through both higher production costs and restrictions on supplies. One irony to note here is that Indonesia is one of the world’s leading coal producers. Donny Arsal, the head of Semen Indonesia, told the government in 2022 that the war in Ukraine had enticed local coal companies to export more coal due to the rising international price. At this time he lobbied the administration to use its local domestic market obligation (DMO) subsidy to better serve the cement sector by giving it more coal at a fixed price.

Graph 1: Cement demand and capacity in Indonesia. Source: Semen Indonesia and Indonesia Cement Association.

Overcapacity has been a recurring feature of the Indonesian cement market since at least the 1990s as the demand and capacity have grown sometimes out of step. The capacity utilisation rate reached 90% in the early 1990s only to fall to 50% by the end of that decade due to the Asian financial crisis. More recently Holcim left the market in 2019 when it sold its business to the Semen Indonesia. The state-owned company consolidated more than half of the country’s cement production capacity at the time. According to its data for the first quarter of 2023 it has a 51% market share and a 46% production capacity share. It also said that 92% of local demand was catered for from four of the country’s 14 producers, namely: Semen Indonesia; Indocement; Conch; and Merah Putih.

A recent study by the Jakarta Post newspaper suggested that after a poor first half in 2023, cement demand was expected to rebound and create modest overall annual growth by the end of the year. The key reasons for this outlook are increased government infrastructure spending, ongoing work on the new capital city Nusantara and anticipated price stability. The new city project, for example, is expected to require 1.6Mt of cement in the 2022 - 2024 period. Risk factors, of course, abound such as a global economic slowdown, financial problems at some of the government-owned construction companies like Waskita Karya and new capacity. A new 8Mt/yr (!) plant owned by local company Kobexindo and China-based Honshi Cement, for instance, is scheduled to start operation in the second half of 2023 in East Kalimantan. Even though the government says that the new unit will export 90% of its production, it will place pressure on other existing sites hoping to increase exports.

The country’s largest cement producer being majority owned by the government is a pertinent feature here given that the same government has also effectively banned new capacity. Semen Indonesia’s earnings before interest, taxation, depreciation and amortisation (EBITDA) have fallen each year consecutively since 2020. As mentioned above overcapacity has long been present in the local sector and recent events have made it worse. Yet, the companies that are likely to benefit the most from a block on newer, competitive cement plants are likely to be the established players. That said, though, with the utilisation just above 50% and new projects like the Kobexindo-Honshi plant on the way, the government likely feels it has to take some form of action. Other tools at its disposal include a national carbon exchange set to launch in September 2023. Power companies will participate from the start with cement producers anticipated to follow at a later stage. Despite the uncertain short-to-medium term outlook the cement sector in Indonesia remains one of the largest in the world with plenty of business to be done. Denmark-based FLSmidth was clearly mindful of this when it opened a new office in Jakarta in April 2023.

India: Birla Corporation says that it expects to sell 18.1Mt of cement during the 2024 financial year (1 April 2023 - 31 March 2024), up by 15% year-on-year from 15.7Mt in the 2023 financial year. That financial year, sales grew by 11% year-on-year. Looking ahead, the producer expects its new 3.9Mt/yr Mukutban cement plant in Maharashtra increase its sales. It said that it may also carry out future expansions at its Chanderia cement plant in Rajasthan.

The Hindu BusinessLine newspaper has reported that managing director and CEO Sandip Ghose said "Our strategy is based on prices not going up significantly. Volumes are going to move in a healthy manner unless there are any major dislocations, disruptions or hiccups going forward. I am very bullish on the India growth story." Regarding the company's Gujarat market in Western India, he said "Gujarat had gone through exponential growth in the past year, which boosted certain companies' profitability because of the bullet train, the expressway and other developments." Ghose forecast similar demand growth in Madhya Pradesh and Uttar Pradesh.

Saudi Arabia: Hoffmann Green Cement Technologies (HGCT) and property developer Shurfah Holding have signed a letter of intent to conclude a licensing agreement for use of HGCT’s technology by the state-owned construction firm. BusinessWire News has reported that HGCT plans to build four new units to produce its clinker-free alternative cement in Saudi Arabia. Construction will begin in 2024. Shurfah Holding said that the partnership signals progress towards the development of smart cities under the state’s Vision 2030 economic plan.

HGCT co-founders Julien Blanchard and David Hoffmann thanked Shurfah Holding and said that the partnership represents an acceleration in the producer’s international development.

US: Heidelberg Materials North America inaugurated its 2.4Mt/yr Mitchell cement plant in Indiana on 14 July 2023. The plant is equipped with a 3600 bag/hr rotary packer, and also boasts a 154,000t-capacity clinker storage dome. It will produce Heidelberg Materials North America's EcoCem Portland limestone cement (PLC), alongside other products. The producer said that the new plant will help to address US cement supply chain constraints amid a planned US$110bn infrastructure overhaul.

Heidelberg Materials North America president and chief executive officer Chris Ward said "The plant will reduce CO₂ emissions per tonne of clinker by almost 30%, mainly through operating on natural gas. Our investment in the Mitchell facility helps us lower our carbon footprint, while serving the growing demand for more sustainable products in this key market.”

Türkiye: Marmara Çimento has secured environmental clearance to build a new cement plant at Çiftalan in Istanbul Region. PortsEurope News has reported that the plant is associated with a US$3.08m port construction project called the Çiftalan Marmara Cement Port project. Marmara Çimento submitted plans for the project in December 2021. The planned port will have sufficient berth for two 200m vessels to dock.

Marmara Çimento says that the upcoming Çiftalan plant will supply cement for use in the Kanal Istanbul Black Sea-Marmara shipping canal project.

US: Eagle Materials reported sales of US$2.1bn in 2022, up by 15% year-on-year from 2021 levels. The producer's earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 19% to US$782m. Its cement sales rose by 7% to US$1.1bn due to increased prices, despite a drop in volumes. Throughout the year, the company increased its production of Portland limestone cement (PLC).

President and CEO Michael Haack said "Looking ahead, we anticipate continued attractive fundamentals in our markets, despite headwinds relating to higher interest rates and affordability constraints in single-family residential construction. Among the favourable demand factors we expect will affect our results in future periods are projected funding increases for infrastructure projects and healthy demand for heavy industrial projects and multi-family residential construction. We remain well-positioned to capitalise on these conditions, given our geographical footprint across the (Central) US Heartland and fast-growing Sun Belt (Southern US) and our financial strength and flexibility."

India: Ramco Cements' sales were US$987m during the 2023 financial year, up by 36% year-on-year from US$726m during the 2022 financial year. The producer sold 15Mt of cement and dry mortar products, up by 36%. The Times of India newspaper has reported that the producer's profit after tax declined by 62% to US$41.5m from US$108m.

The producer expects that anticipated infrastructure investments and a 'normal' monsoon will maintain strong cement demand in India in the full-year 2023 financial year. It forecast growth in its profit margins from the second quarter of the 2024 financial year (July - September 2023) onward.

Nigeria: Dangote Cement recorded sales of US$609m during the first quarter of 2023, down by 13% year-on-year from US$699m during the first quarter of 2022. The producer reported a 25% decline in its cement sales volumes to 3.6Mt from 4.8Mt. Operating costs rose by 6% to US$355m from US$335m. Dangote Cement said that its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 14% to US$458m from US$403m.

Dangote Cement chief executive officer Arvind Pathak said “The cash crunch coupled with the uncertainty around the general elections led to a slowdown in key private and public infrastructure investments in Nigeria. Consequently, our domestic operations recorded a drop in volume." Pathak continued “In fulfilling our commitment to creating additional value for our shareholders, we have received regulatory approval for our second buyback programme. We will continue to monitor the evolving business environment and market conditions in making decisions on tranches."