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The mountainous eastern shore of the Adriatic Sea and its hinterlands in Europe’s Balkan Peninsula have one of the world’s highest densities of countries: six, across a broad equilateral triangle of 212,000km². All six states – Albania, Bosnia & Herzegovina, Kosovo, Montenegro, North Macedonia and Serbia – are historically characterised by political non-alignment, carrying over from the Cold War period, and all the more notable for the presence of the EU to the north (Croatia, Hungary and Romania) and east (Bulgaria and Greece).

A nine-plant, 9Mt/yr local cement sector serves the 16.8m-strong population of the unconsolidated ‘bloc.’ Albania has 2.8Mt/yr (31%), Serbia 2.7Mt/yr (30%), Bosnia & Herzegovina 1.6Mt/yr (18%), North Macedonia 1.4Mt/yr (15%) and Kosovo 500,000t/yr (6%), while Montenegro has no cement capacity – for now. Altogether, this gives this quarter of South East Europe a capacity per capita of 539kg/yr. The industry consists entirely of companies based outside of the region. Albania’s two plants are Lebanese and Greek-owned (by Seament Holding and Titan Cement Group respectively). Titan Cement Group also controls single-plant Kosovo and North Macedonia, and competes in the Serbian cement industry alongside larger and smaller plants belonging to Switzerland-based Holcim and Ireland-based CRH, respectively. Lastly, Bosnia & Herzegovina’s capacity is shared evenly between Germany-based Heidelberg Materials and Hungary-based Talentis International Construction, with one plant each.

Lafarge Srbija, Holcim's subsidiary in Serbia, announced plans for its second plant in the country, at Ratari in Belgrade, last week. No capacity has yet emerged, but the plant will cost €110m, making something in the region of the country’s existing 0.6 – 1.2Mt/yr plants seem likely. This would give Serbia over a third of total capacity in the Central Balkans and twice the number of plants of any other country there, expanding its per-capita capacity by 22 – 44%, from a regionally low 408kg/yr to 500 – 590kg/yr.

In announcing the upcoming Ratari cement plant, Lafarge Srbija laid emphasis on its sustainability. The plant will use 1Mt/yr of ash from the adjacent Nikola Tesla B thermal power plant as a raw material in its cement production. In this way, it will help to clear the Nikola Tesla B plant’s 1600 hectare ash dumps, from which only 180,000t of ash was harvested in 2023. Circularity has been front and centre of Holcim’s discussions of its growth in Serbia for some time. When Lafarge Srbija acquired aggregates producer Teko Mining Serbia in 2022, the group indicated that the business would play a part in its development of construction and demolition materials (CDM)-based cement and concrete.

Holcim’s Strategy 2025 growth plan entails bolt-on acquisitions in ‘mature markets,’ backed by strategic divestments elsewhere. Other companies have been more explicit about a realignment towards metropolitan markets, above all in North America, at a time when they are also diversifying away from cement and into other materials. Just why a leading producer should look to build cement capacity in Serbia warrants investigation.

Serbia is the only Central Balkan member of Cembureau, the European cement association. In a European market report for 2022, the association attributed to it the continent’s fastest declining cement consumption (jointly with Slovakia), down by 11% year-on-year. Like the rest of Europe, Serbia is also gradually shrinking, its population dwindling by 0.7% year-on-year to 6.62m in 2023, which limits hopes for a longer-term recovery. Serbia remains the largest country in the Central Balkans, with 39% of the total regional population.

Several factors have compounded Serbia’s difficulties as a cement-producing country. Firstly, like the Nikola Tesla B thermal power plant, its kilns run on coal. 50% of this coal originated in Russia and Ukraine in 2021, causing the entire operation to become ‘imperilled’ after the former’s brutal invasion of the latter in February 2022, according to the Serbian Cement Industry Association. In planning terms, this was a case of putting half one’s eggs in two baskets – and dropping them both.

Secondly, Serbia’s choice of export markets is mainly confined to either the EU or global markets via the River Danube, Black Sea and Mediterranean. Either way, it is in competition with a cement exporting giant: Türkiye. Serbia sold €19.7m-worth of cement in the EU in 2023, up by 63% over the three-year period since 2020 – 31% behind Türkiye’s €28.8m (more than double its 2020 figure).¹ One other Central Balkan country had a greater reliance on the EU market: Bosnia & Herzegovina. It exported €48.4m-worth of cement there, quadruple its 2020 figure and behind only China (€133m) and the UK (€54.7) in cement exports to the bloc by value.

Bosnia & Herzegovina’s cement industry underwent a different permutation at the start of 2024: an acquisition, replacing one EU-based player with another. Lukavac Cement, which operates the 800,000t/yr Lukavac cement plant in Tuzla, changed hands from Austria-based building materials producer Asamer Baustoffe to Hungary-based property developer Talentis International Construction. Talentis International Construction belongs to one of Hungary’s major family-owned conglomerates, Mészáros Csoport.

Besides Central Europe, Balkan countries have found a ready source of investments in the past decade in China. In construction alone, Chinese investments total €13.2bn in Serbia, €2.4bn in Bosnia & Herzegovina, €915m in Montenegro and €650m in North Macedonia.² This can be a booster shot to all-important domestic cement markets, but has some risks. Montenegro previously faced bankruptcy after Export-Import Bank of China began to call in an €847m loan for construction of the still upcoming A1 motorway in the country’s Northern Region. This did not put off the Montenegrin government from signing a new memorandum of understanding (MoU) with China-based Shandong Foreign Economic and Technical Cooperation and Shandong Luqiao Group for construction of a new €54m coast road in the Coastal Region in mid-2023.

In Montenegro, UK-based private equity firm Chayton Capital is currently funding a feasibility study for a partly state-owned cement plant and building materials complex at the Pljevlja energy hub in the Northern Region. Along with an upgrade to the existing Pljevlja coal-fired power plant, the project will cost €700m.

In 2026, EU member states will begin to partly tax third-country imports of cement and other products against their specific CO₂ emissions, progressing to the implementation of a 100% Carbon Border Adjustment Mechanism (CBAM) by 2034. Montenegro led the Central Balkans’ preparations for the EU’s CBAM roll-out with the introduction of its own emissions trading system in early 2021. Bosnia & Herzegovina will follow its example by 2026, but other countries in the region have struggled to conceive of the arrangement except as part of future EU accession agreements.

Based on the average specific CO₂ emissions of cement produced in the EU, the World Bank has forecast that exporters to the bloc will be disadvantaged if their own specific emissions exceed 5.52kg CO₂eq/€.³ By contrast, any figure below this ought to offer an increased competitive edge. Albanian cement has average emissions of 4.71kg CO₂eq/€, 15% below ‘biting point’ and 13% below Türkiye’s 5.39CO₂eq/€. Albania’s government consolidated its anticipated gains by quintupling the coal tax for 2024 to €0.15/kg. The figure is based on the International Monetary Fund’s recommended minimum CO₂ emissions tax of €55.80/t, 21% shy of the current EU Emissions Trading Scheme (ETS) credit price of €70.49/t.⁴

The Central Balkans is a region of apparently slow markets and industry growth regardless – to 11 cement plants, following the completion of current and upcoming projects. A recurrent theme of capital expenditure investments and the way investors talk about them may help to explain this: sustainability. Looking at the mix of technologies in the current nine plants, these include wet kilns and fuels lines built for conventional fossil fuels. This is not to presume that any given plant might not be happy with its existing equipment as is. Nonetheless, the overall picture is of a set of veteran plants with scope to benefit from the kind of investments which all four global cement producers active in the region are already carrying out elsewhere in Europe. Such plans may already be in motion. In late 2023, Titan Cement Group’s North Macedonian subsidiary Cementarnica Usje secured shareholder approval to take two new loans of up to €27m combined.

As the latest news from Serbia showed, taking care of existing plants does not preclude also building new ones. The cement industry of the Central Balkans is finding its position in the new reduced-CO₂ global cement trade – one in which old and new work together.

References

1. Trend Economy, ‘European Union – Imports and Exports – Articles of cement,’ 28 January 2024, https://trendeconomy.com/data/h2/EuropeanUnion/6810#

2. American Enterprise Institute, 'China Global Investment Tracker,' 3 February 2024 https://www.aei.org/china-global-investment-tracker/

3. World Bank Group, ‘Relative CBAM Exposure Index,’ 15 June 2023, https://www.worldbank.org/en/data/interactive/2023/06/15/relative-cbam-exposure-index

4. Ember, 'Carbon Price Tracker,' 26 August 2024, https://ember-climate.org/data/data-tools/carbon-price-viewer/

Kyrgyzstan: China-based Yunsheng Mining (Yunnan) and China Yunsheng Group have signed an agreement with the Kyrgyz government to build a cement plant in Tyup, Issyk-Kul region. Business World Magazine has reported that the partners will also establish a hydroelectric power plant next to the plant. Yunsheng Mining (Yunnan) said that the project will help to promote a new model of economic cooperation between Kyrgyzstan and China, based on the integration of commodities and energy.

Serbia: Lafarge Serbia is set to build a new cement plant in Ratari near Obrenovac, which will utilise 1Mt/yr of ash from the nearby Nikola Tesla B power plant as a raw material in cement production, reports Balkan Green Energy News. This €110m investment marks Serbia's first cement plant built next to a power plant to harness ash directly from the source and address the country’s problem of ash accumulation in dumps.

CEO of Lafarge Serbia Dimitrije Knjeginjić said "Fly ash cannot be used in the cement or concrete industry, or many other industries, without prior processing. This is exactly what the Ratari plant will be dealing with. We will grind, classify and select 1Mt/yr of ash to produce new construction materials."

Kenya: Mombasa Cement will build a 20MW power plant at its Vipingo plant in Kilifi County, to help reduce energy costs. The US$19.4m project will generate 10MW of electricity using a waste heat recovery system and 10MW from solid fuels. The waste heat will be recovered from flue gases emitted during cement production. The plant has two clinker production lines. The power generated will be used onsite to support cement production.

Nigeria: An update has been released on the cement plant planned in Bauchi State, on which Global Cement previously reported on 11 June 2024. On 7 August 2024, the Bauchi State government signed a Memorandum of Understanding (MoU) worth US$1.5bn with Resident Cement Company to establish a cement plant in Gwana District, the Nigerian Tribune reports. The plant is expected to produce 10Mt/yr of cement. The project includes a 100MW power plant, a dam and other amenities for the community, which will reportedly help to attract foreign investment and boost the local economy.

Nigeria: The Mangal Cement plant in Iluagba, Kogi State has successfully produced its first bag of cement. The plant is capable of producing 6000t/day of cement. The US$1.5bn facility aims to transform the local cement industry and will create 10,000 new direct and indirect jobs, Dateline Nigeria has reported. Mangal Industries has partnered with China-based Sinoma International Engineering for the plant’s construction, with a reported cost of US$600m.

Finland-based Wärtsilä has won a 10-year operations and maintenance agreement for a 50MW captive power plant to power the facility. Initially, the plant will use liquid fuel, but a pipeline will be constructed to allow it to use natural gas.

Chair Alhaji Dahiru Mangal said “This factory will employ the latest technology and adhere to the highest environmental standards. It is part of our ambitious programme to address Nigeria’s infrastructure and housing deficits, while demonstrating our confidence in the region’s economic outlook.”

Ukraine: PrJSC Kryvy Rih Cement, under the initiative of Concorde Capital founder Ihor Mazepa, will build a 24MW power generation facility to ensure continuous plant operations, according to Interfax Ukraine. The project will reportedly cost around US$15m, with a payback period of three to four years.

Ihor Mazepa posted on Facebook "This is a necessary measure to keep business from stopping. In general, I see the prospect of investing in energy projects. Therefore, in a short period we will build 40MW of storage capacity, which will balance the energy market. We see a good return on investment in the amount which can reach up to 30% depending on the market development scenario."

Adani Group’s subsidiary Ambuja Cements signed a deal this week to buy Penna Cement for US$1.25bn. The agreement adds 14Mt/yr of cement production capacity to the group with a focus in the south of India. The acquisition is a big step towards the group’s target of reaching a capacity of 140Mt/yr by 2028. Ajay Kapur, the head of Ambuja Cements, also singled out the advantage the company hopes to gain from taking control of Penna Cement’s terminals saying that they would “prove to be a gamechanger by giving access to the eastern and southern parts of peninsular India.” The move is expected to increase the group’s market share in India by 2%, and by 8% in South India.

Penna Cement operates four integrated plants in Andhra Pradesh and Telangana with a capacity of 7Mt/yr. Two of these units also include waste heat recovery installations and one has a captive power plant. It runs two grinding plants in Andhra Pradesh and Maharashtra with a capacity of 3Mt/yr. Another integrated plant is being built at Jodhpur in Rajasthan and a grinding plant at Krishnapatnam in Andhra Pradesh. Finally, the company owns four bulk cement terminals at Kolkata, Gopalpur, Karaikal and Kochi in India, one at Colombo in Sri Lanka and it also owns a 25,000t cement carrier.

Adani Group’s march towards that target of 140Mt/yr by 2028 started off in mid-2022 when it purchased Ambuja Cements and ACC from Holcim. This gave it a starting capacity of 68Mt/yr in the cement sector. Various smaller additions followed including new plants at Ametha and Dahej and the acquisitions of Asian Cement and Concrete, MyHome Industries and Sanghi Industries. The latter company was the biggest of these purchases. Once the in-progress projects from Penna Cement are built, Adani Group should have a capacity of 93Mt/yr. Another 20Mt/yr is reportedly at various stages of execution. The remaining 27Mt/yr is described as being ‘blueprint ready.’

Generally, the local financial press has been in favour of the transaction agreeing with the geographic advantages of Adani Group increasing its presence in the southern states. The benefits of the high number of railway sidings at Penna Cement’s plants were also commented upon as a means for Ambuja Cements to reduce its costs per tonne of cement. The logistics benefit from the port terminals is also expected by Adani Group’s chief financial officer to reduce the group’s logistics costs with an impact expected within the next year. However, it has been reported that Penna Cement’s operating performance had been weaker in the last financial year due to low sales volumes, poor operational efficiency and high coal costs. A takeover by Adani Group could certainly fix the latter two issues. Yet, it has also been reported that competition in the cement markets in Andhra Pradesh and Telangana is up, due to a mismatch between supply and demand. So, improving Penna Cement’s capacity utilisation in these regions might be harder to solve than simply being absorbed into Adani Group.

India’s two largest cement producers both have plans in motion to mount up production capacity by the end of the decade in what has been dubbed ‘the battle of the billionaires.’ The market leader is UltraTech Cement and it has shown reluctance to cede ground to the cement newcomer Adani Group. The former company’s current target is to make it to just under 190Mt/yr by 2027. It said it had a capacity of 152Mt/yr in May 2024. It is ahead of Adani Group by this measure but there is still plenty of scope for surprises. Given the rivalry between the companies there is a regular stream of speculation about which of the smaller cement producers they might be about to buy at any given time. For example, in October 2023 HeidelbergCement India was rumoured to be courting offers from UltraTech Cement, Adani Group and JSW Cement. Last week, Adani Group was reportedly interested in buying either Saurashtra Cement, the cement business of Jaiprakash Associates, Vadraj Cement or… Penna Cement. Occasionally the rumours are true after all. UltraTech Cement remains in first place for now but the situation may change.

Nigeria: Finland-based Wärtsilä has signed a 10-year operations and maintenance (O&M) agreement for a captive power plant that provides the energy for Mangal Industries’ cement plant located in Kogi State. The cement plant has limited access to the local electricity grid and its power plant operates with five Wärtsilä 34DF dual-fuel engines delivering an output of 50MW. The O&M agreement is designed to ensure that the facility can reliably maintain its cement production target of 3Mt/yr.

The 10-year agreement starts immediately as the unit commences operations in the second quarter of 2024. It will run on liquid fuel initially but then switch to gas operation when a natural gas pipeline is commissioned. The power plant’s dual-fuel engines can be operated both on liquid fuel and natural gas. They could also be potentially converted to operate with low- or zero-carbon fuels in the future subject to availability.

Patrick Borstner, Director, Operations Africa at Wärtsilä Energy said, “Wärtsilä now has more than 400MW of installed capacity for the cement industry in Nigeria, and we are operating three captive power plants in three different states. This successful track record clearly indicates our capabilities and highlights the added value we can deliver to our customers through our experience and expertise in supporting their operations.”

Mangal Industries signed a contract with China-based Sinoma International Engineering in 2021 for the construction of a 3Mt/yr new integrated cement plant. Construction at the site commenced in mid-2022.

Zimbabwe: PPC Zimbabwe says that a planned fly ash beneficiation project at a power plant in Zimbabwe will now take place in early 2025 instead of in 2024. This is due to delays in accessing the power plant to complete the design and commercial contract, according to the cement producer. The Chronicle newspaper has reported that, as a result, PPC Zimbabwe’s capital expenditure investments so far in 2024 are behind its previous full-year guidance of US$31.8m.