
Displaying items by tag: Iran
A pessimist's guide to the cement industry in 2016
06 January 2016We're going to start 2016 with a list of some of the worst things that could happen to the global cement industry this year. The idea is taken from Bloomberg Business who ran 'A Pessimist's Guide to the World in 2016' in mid-December 2015. For some of these suggestions there will be both winners and losers. Remember: forewarned is forearmed.
Continuing low oil prices hit Russia and other petro-propped economies
Cheaper fossil fuels should mean cheaper energy bills for cement producers. However, that saving must be compared to the overall cost to the global cement industry of poor construction markets in Russia and other economies that rely on oil. For example, Russian construction output fell by 4.5% to US$81bn in 2014 according to PMR. It is possible that the fuels bill saving worldwide is greater than the contraction of certain construction markets. If it is though, is this a price that the cement industry is willing to pay?
China enters a recession
The long-expected Chinese 'hard landing' seems closer than ever, as economic growth slows. It hasn't happened yet (according to official figures at least) but the 7% drop in Chinese markets on 4 January 2015 gives observers the jitters. The financial reverberations from a full Chinese financial crash would be felt around the world, derailing emerging economies due to reducing demand for exports and commodities. Naturally, construction markets would suffer. This would add to the woes currently being experienced by Brazil, Russia and South Africa. The other worry for the cement industry specifically might be the complications from a desperate Chinese industry trying to flood the outside world with even more of its products and services, including lots of cement.
Climate change impacts cement plants
Normally when it comes to climate change the cement industry worries about the effects of carbon taxation and pollution controls. However, media reporting about flooding in the UK in late December 2015 and strong El Niño effects elsewhere makes a pessimist wonder about the effects of hotter and wetter weather upon the infrastructure of the industry. The cost to repair the flooded Cemex UK South Ferriby cement plant in 2014 was rumoured to run to Euro14m and production stopped for a whole year. Costs like these are something the industry could do without.
International sanctions remain in place for Iran
Hoping that lifting economic sanctions from Iran will boost the fortunes of multinational cement producers and equipment manufacturers may be wishful thinking. Yet if the sanctions stay in place due to deteriorating relations between Iran and Saudi Arabia then nobody can discover what opportunities there might be in the world's fourth largest cement producing nation. Of course Iran's geographical neighbours across the Gulf (and in Pakistan) might be hoping that the sanctions stay in place for a very long time indeed.
Sub-Saharan Africa builds production capacity too fast
Multinationals and local cement producers alike are scrambling to build cement plants in sub-Saharan Africa. Demand for cement and low per capita consumption suggest that it is a clear investment opportunity as development kicks in. However, we have already reported on scraps between local cement associations and importers from other continents. If the cement producers build capacity faster than these countries develop, then a crash can't be too far fround the corner and everybody loses.
The UK leads an exodus from the European Union
For the cement industry a UK exit, to be voted on later in 2016, from the European Union (EU) isn't necessarily a bad things. What would be negative though is a badly handled exit process as vast swathes of trade legislation is renegotiated. What a 'Brexit' might initiate are further exits from the EU, leading to further trade disruption on a larger scale. None of this would aid Europe's economic recovery in the short term.
US Presidential elections slow the construction market
Irish bookmaker Paddy Power is currently placing odds of 9/2 for Donald Trump to be elected the next US president in late 2016. He's the second favourite candidate after Hillary Clinton despite not even having been nominated as the Republican party's presidential candidate yet. Whoever becomes the next president, the political uncertainty that occurs as the election progresses may impact upon the US construction market. It would be unfortunate to discover that the sector is weaker than expected if, say, the election rhetoric turns nasty.
Next week: reasons to be cheerful.
Happy New Year from Global Cement!
2015 in cement
16 December 2015Here are the major stories from the cement industry in 2015 as the year draws to a close. Remember this is just one view of the year's events. If you think we've missed anything important let us know via LinkedIn, Twitter or This email address is being protected from spambots. You need JavaScript enabled to view it..
Will the year of the mega-mergers pay off?
2015 showed a global cement industry that was consolidating. Amongst the multinational producers Lafarge and Holcim finished their merger and HeidelbergCement announced that it was buying Italcementi. Yet alongside this international trend the large Chinese cement producers, who represent over a quarter of the world's production capacity, have continued their own-government-favoured consolidation. The on-going boardroom scuffles at Shanshui have been a lively example of this.
Where this will leave the cement industry as a whole in 2016 is uncertain but mergers and consolidation are no 'magic bullet' for difficult market conditions. After the fanfare subsided from the launch of LafargeHolcim the first quarterly report emerged in late November 2015 reporting falling net sales, net volumes and profit markers.
BRICing it – growth stalls in Brazil, Russia, India and China
The economies of the BRIC nations – Brazil, Russia, India and China – have all suffered in 2015. Brazil and Russia are enduring recessions. Growth in China and India is slowing down. All of this has a knock on in their respective construction sectors.
Over in China, we report today that production capacity utilisation is estimated to be 65% and that cement companies lost US$2.63bn in the first nine months of 2015. The same source says that at least 500Mt/yr of production capacity needs to be eliminated. That represents nearly a third of Chinese total production capacity or about an eighth of global cement production capacity.
Multinationals African plans accelerate
One consequence of all these international mergers is the transformation of the situation in Africa. Suddenly LafargeHolcim has become the biggest cement producer on the continent, followed by HeidelbergCement, Dangote and PPC. Africa becomes the big hope for the multinationals as established markets continues to flounder and growth in Asian and South American markets slackens. Perversely though, should African development growth slow it may cast a poor light on the mega-mergers of 2015 in the coming years.
Dangote Cement is growing fast and it may overtake HeidlebergCement soon as the second largest cement producer in Africa. Yet it may not be plain sailing for the Nigerian company. As we report today, sources in Gambia say that Dangote's plans to open a cement plant are on hold in part to protect its domestic suppliers.
The Gambian government has denied a licence to Dangote to open a cement plant. Dangote has built its empire in recent years by forcing out cement importers from Nigeria. As it expands in other countries in Africa it may now be facing a backlash to playing the nationalist card at home as other countries too desire 'self-sufficiency' in cement production.
Iran shakes off the sanctions
In July 2015 Iran and the P5+1 countries agreed to lift trade sanctions from Iran. The implications for the local cement industry are immense given that the country was the joint-fourth largest producer in 2014, based on United States Geological Survey data. Remove the sanctions and, in theory, the local economy should boom leading to plenty of construction activity. Notably, at the launch of LafargeHolcim the new CEO Eric Olsen was asked for the new group's position on Iran. It didn't have one but this will change.
China expands along the Silk Road
China's cement industry may be suffering at home but it has been steadily expanding in Central Asia. Notably Huaxin Cement has plants in Kazakhstan and Tajikistan and it has new projects in the pipeline. Business may be down at home but steady advancement abroad may offer the Chinese cement industry the lifeline it needs.
Cop out at COP21?
And finally... The 2015 Paris Climate Conference announced a diplomatic coup d'etat in December 2015. However, it apparently forgot to include any binding targets. The Cement Sustainability Initiative (CSI) pre-empted the decision by announced its aim to reduce CO2 emissions by clinker producers by 20 - 25% by 2030... Provided the entire cement industry follows its lead. Cement plants burning vast swathes of dirty fossil fuels may not have to worry quite yet.
For more a more detailed look at trends in the cement industry check out the Global Cement Top 100 Report in the December 2015 issue of Global Cement Magazine.
Global Cement Weekly will return on 6 January 2016. Enjoy the holidays if you have them.
Iran snookers Pakistan’s cement exporters
02 September 2015South African cement producers may be cheered this week with the news that Iranian cement is causing grief in Pakistan once more. Imported cement from Iran is allegedly undercutting local product in Pakistan through massive 'under-invoicing.' Sources quoted in Pakistan – itself a cement exporter (!) – described the situation as 'incomprehensible.'
The issue here is that Iran is doing to South Africa what Pakistan is doing to South Africa: selling cement cheaper than locally produced product. It's especially ironic this week because one Pakistani cement producer, Lucky Cement, is taking the fight against South African anti-dumping duties to the courts.
A report from July 2015 reckoned that Pakistan's cement exports might drop by 10 – 15% at the start of 2016 as economic sanctions on Iran are lifted. The report had a bit more sense than the usual scaremongering. It predicted that removing sanctions in Iran would not affect competition in Afghanistan as Iranian producers generally targeted Kandahar.
Despite this, cement exports to Afghanistan from Pakistan hit a high of 4.73Mt in the 2010 – 2011 financial year, according to All Pakistan Cement Manufacturers Association (APCMA) data. Since then they dwindled slightly for the next couple of years before decreasing more sharply from mid-2013. Overall exports fell by 11.57% to 7.2Mt in the 2014 – 2015 period. Pakistan's exports to Afghanistan may have been hit by the departure of North Atlantic Treaty Organisation (NATO) forces and a new cement plant in neighbouring Tajikistan.
In part the battle seems to be about tax. In June 2015 the APCMA lobbied the Pakistan government to cut duties. At the time these included a 5% federal excise duty and a 17% general sales tax on the retail price of cement. One APCMA spokesman reckoned that these taxes added US$1.56 per bag of cement. More recently the APCMA rallied against a tax on cement exports and an increase in import duties on coal. In this climate, repeated news stories on Iranian exports to Pakistan dodging taxes don't sound so good.
Meanwhile, back in South Africa, Lucky Cement has started to take legal action against anti-dumping duties imposed upon its cement exports by the International Trade Administration Commission of South Africa (ITAC). The ITAC imposed provisional anti-dumping duties of 14.3 – 77.2% on Portland Cement originating in or imported from Pakistan from 15 May 2015 for six months. The duty was imposed on bagged cement. Pakistan-based cement producers may defend themselves by saying that they are following the laws of the countries they are exporting to. In theory Iranian exports to Pakistan that pay the correct taxes should be the same price as Pakistani products.
What this debacle shows is that things could get a whole lot worse for coastal cement markets within easy reach of Iran once the sanctions fall. National bodies like the ITAC across the Middle East, South Asia and East Africa should start tightening up their import policies now.
At today's official launch of LafargeHolcim, CEO Eric Olsen was asked to comment on the group's position in Iran. It doesn't have one, but that won't necessarily always be the case given events in Austria this week.
On Tuesday 14 July 2015, Iran and the P5+1 countries (US, UK, France, China, Russia and Germany) agreed an historic deal to limit Iranian nuclear activity in return for a significant lifting of existing trade sanctions at a meeting in Vienna. The country's cement industry will be delighted by this agreement. The talks, in progress since 2006, could mark what has been termed a 'new chapter' in relations between Iran and the rest of the world by Iranian President Hassan Rouhani. For his part, US President Barack Obama stated that the deal would ensure that 'every pathway to a nuclear weapon is cut off' for Iran, but critics from the US, Iran, Israel and elsewhere, suggest that cutting all routes will not be possible. They are alarmed and have warned that the deal could lead to an arms race between Iran and Saudi Arabia, amid increasing animosity in the Middle East.
While the geopolitical implications of the deal are huge, the lifting of trade restrictions will greatly improve Iran's ability to deal internationally. This includes allowing increased oil exports. An article by Reuters anticipates that Iranian oil production could increase drastically from around 1 million barrels per day (mbpd) at present, possibly to its former peak of 3mbpd. (What this might do to the global oil price could be the subject of an entirely separate column). The easing of banking restrictions will make Iranian products more competitive and increase trade in many sectors.
Against this backdrop sits the Iranian cement industry, the world's third or fourth largest by production in 2014, depending on your source. It has an incredible 84.4Mt/yr of cement production capacity in a country of 77.5 million people. Assuming that it could produce and consume all of that cement at home, this would represent consumption of around 1100kg/capita/yr, far above the 600-800kg/capita/yr rate that is typical of a rapidly-developing economy.
Of course, Iran has not been consuming anything like this level of cement recently. According to figures released by its Employers Guild Association this week, Iran made 66.4Mt of cement in its 1393 calendar year, which ended on 21 March 2015. Assuming the above capacity, this gives Iran a cement utilisation capacity of around 78%.
Much of the cement made in Iran was exported in 2014 and so far in 2015. The country exported an incredible 18.4Mt/yr of cement and clinker in the year to 21 March 2015, up from 18.8Mt a year earlier. A large amount of this cement was available at low cost, to the extent that Iran has been accused (along with Pakistan) of dumping cement in the Middle East and East Africa. (Pakistani producers have even pointed out that Iranian cement is making inroads into the Afghan market, more traditionally a target for exports from Pakistan).
So what might happen to the cement trade dynamic in the region? Some suggest that the easing of sanctions can only increase the potential for Iranian cement imports in the region. Trade should become easier, facilitating exports.
Indeed, this is a factor, but it is only part of the equation. Instead, it is likely that, having earned foreign exchange via increased oil sales, Iran will be able to spend more at home. Reuters anticipates that demand for steel and cement will skyrocket as the country undertakes much-needed construction and infrastructure works. This situation would be similar to Saudi Arabia and other Gulf Cooperation Council (GCC) states. How Saudi Arabia reacts to this, both politically and in terms of cement trade, will be of high interest in the region and around the world.
Instead of increasing cement exports, the effect of the lifting of sanctions may decrease them. This will surely be welcome news to local producers currently being undercut in East Africa, as well as exporters in Pakistan, India and elsewhere. Could Pakistan even find itself exporting to Iran? If a US-Iran nuclear deal is possible, anything can happen...
Made in Russia
30 October 2013Eurocement recently trumpeted the production of two new types of cement at its Podgorensky plant in Voronezh Region. A focus on standards follows a self-declared offensive being taken by the leading Russian cement producer against foreign imports since August 2013.
When the 3Mt/yr Podgorensky plant reached its full production capacity in July 2013, Eurocement president Mikhail Skorokhod gave a press conference to promote his products over the imports from Iran and Turkey. Some of the more humorous comments Skorokhod made to the press included suggesting that Iranian cement might be radioactive and the revelation that the title of Eurocement's in-house magazine, 'All Shades of Grey', might be inspired by an erotic novel with a similar name ('50 Shades of Grey').
More seriously, Russia's southern regions between the Black Sea and the Caspian Sea are vulnerable to foreign imports. Both Turkey and Iran have high cement production capacities and they have access to the country via these two seas. In addition to rising housing construction in Russia since 2010, cement demand is expected to further take a boost from building associated with the Sochi 2014 Winter Olympics and the 2018 FIFA World Cup.
As stated by Skorokhod, the Podgorensky cement plant was created to fight foreign imports. Hence the focus on standards and government approval. The cement types in question - TSEM I 52.5N and TSEM II/ A-Sh 42.5N - were certified by NIIMosstroy (the Moscow Construction Research Institute) with additional testing conducted by the Voronezh Regional Center for Hygiene and Epidemiology. The move was similar to attempts made in recent years by local producers in southern and eastern Africa to focus consumers' minds on quality versus the potential risks of low-cost imports.
Eurocement clearly wants to fight imports head on given that, according to CMPRO data, total cement imports to Russia nearly doubled from 2.8Mt in 2011 to 5.1Mt in 2012. Turkey, Belarus and Iran were the main importers in 2012. In 2012 cement imports as a percentage of consumption hit their highest level since 2008. At the same time Russian consumption of cement rose by 13% to 65Mt in 2012 from 58Mt in 2012.
Back in August 2013, Skorokhod said that the Podgorensky plant had cut imports to the southern ports. With no figures available yet for imports in 2013 we can only wait and see.
Iraq: right time, right place?
01 May 2013Chinese and Iranian companies have released information on two new projects in Iraq. Chinese cement equipment provider Sinoma has signed a contract with the Faruk Investment Group to build a cement clinker production line and the Islamic Republic News Agency has reported Iran's intention to build a 2Mt/yr plant.
Sinoma's project seems targeted at the domestic market. It is based at Sulaymaniyah, at one of Faruk Group's two plants that it runs with Lafarge near the northern Kurdish city. Lafarge also runs a third plant in Kerbala that announced the arrangement of a US$70m loan for renovations in January 2013. Lafarge holds a cement production capacity of 6.5Mt/yr, 20% of Iraq's total installed capacity of 32.5Mt/yr. Although, following years of neglect installed capacity and actual cement produced can vary significantly. Faruk Group's decision to choose Sinoma marks a move away from the German firm ThyssenKruppPolysius whom they have used previously. The new line will be Sinoma's seventh in Iraq through its Nanjing subsidiary.
Meanwhile, the Iranian project carries more international motives because the clinker for the plant will come exclusively from Iran. The build is based in the southern Muthanna province and is being overseen by the Iranian Azar-Abadegan Khoy cement plant. As reported in late January 2013, clinker stocks rose in Iran due to a decline in cement demand in the country. Iraq is one of the countries Iran has been able to export cement to during the 2012 – 2013 Persian year. In this context expanding into Iraq makes a lot of sense to combat potential Iranian overcapacity.
In addition all the products made at this plant will carry Iranian branding. Given that this plant is in southern Iraq relatively near to the Saudi border this will complicate any plans to sell stock across the border. As we report this week in Global Cement Weekly, Saudi cement producers have been asked to build reserves of cement to manage the shortage better.
Both projects reveal some of the issues facing Iraq's cement industry, specifically Iraq's redevelopment and the pressures it faces lying between massive demand for cement in Saudi Arabia and overcapacity in Iran. After years of low capacity utilisation rates, Iraq is predicted to hit a production capacity of 22Mt/yr by the end of 2014 with demand expected to reach 35Mt/yr.
For more information on the Iraqi cement industry read Global Cement Magazine's article.
What cost for Iran’s cement industry?
30 January 2013The Iranian authorities may have taken glee in recent months in reporting that their country is on course to become the third biggest cement producer in the world. It's the position normally taken by the US in recent years (after China and India). For a country reeling from US-led sanctions it must provide some comfort. Yet what is the cost of this industrial 'victory'?
In December 2012 Iran's production for the first eight months of the Iranian calendar year beat the previous period by 6% to 49Mt. Current projections see the country hitting 75Mt by the end of the 2012-2013 year and then 85Mt by the close of the 2013-2014 year. Claims that Iran is now becoming the world's third biggest producer fit with estimated cement production figures for 2011 from the US Geological Survey (USGS) putting Iran behind China and India. The US produced 68Mt in 2011. A rough estimate for Portland cement shipped in the US in 2012 from USGS data is 79Mt.
Two stories this week build up a complex picture of the cement industry in Iran. Iranian news agencies have been reporting frequently how well the domestic industry has done in recent months. The latest concerns how Iran's Bank of Industry & Mine has allocated around Euro400m to complete 15 cement projects since 2010. However, also this week, we can report that Iran is facing a seasonal decline of cement demand leading to large stores of clinker in some plants. One can't quite imagine the state run news agencies reporting that they have larger stores of clinker than the US.
Despite the increasingly complicated international trade sanctions in force against Iran, exports are booming. In the current Iranian calendar year they have jumped by 30% to 9Mt, going principally to Iraq, Central Asia, United Arab Emirates and Afghanistan, where it has displaced a significant proportion of Pakistani exports. As our columnist Yves De Moor commented in the November 2012 issue of Global Cement Magazine, Iranian cement is cheap due to overcapacity but hard to import due to the sanctions.
In the absence of recent consumption figures for Iran, comparing the US and Iran on a graph of cement consumption per capita against GDP per capita helps. The US remains at the upper end of the distribution curve at 250kg/capita and US$48,000/capita. Iran is flying off above the other end of the curve at 1000kg/capita and US$13,000/capita. This suggests either overcapacity or a production boom.
Further overcapacity can only push the price of exported cement down further making neighbouring markets more willing to brave the sanctions. This may support Iran's economy as President Mahmud Ahmadinezhad has stated that non-oil exports are one way his country can overcome the sanctions. Additionally, overcapacity offers some political capital on the world stage. The cost for the Iranian cement industry if and when the sanctions end may be devastating though.