Displaying items by tag: Price

Mexico: Increases in raw material prices and energy costs, as a result of high inflation levels, will affect the operating margins of cement companies listed on the Mexican Stock Exchange in the first quarter of 2022, according to analysts quoted by CE NoticiasFinancieras.

Jacobo Rodríguez, director of Economic Analysis at Black Wallstreet Capital, explained that, "Despite the fact that companies are slow to pass on the increase in their costs to their final products, we will see pressure on their margins in their results in the first quarter of the year and from now on.”

Heriberto Sandoval, investment advisor at Increase Kapital, said “The cement industry is strongly affected by the increase in energy costs and, considering that the high cost pressures worldwide will be longer lasting than originally thought, this will lead to a decrease in earnings before interest, tax, depreciation and amortisation (EBITDA) this year.”

Mexican cement companies recorded a decline in the price of their shares between January and March 2022. Market leader Cemex led the way, with a 23.59% drop in the value of its shares. The second largest drop was seen by GCC, which lost 9.5% of its value. Cementos Moctezuma’s shares also lost 3.05% of their value in the first quarter of 2022.

US: Lhoist North America and Mississippi Lime Company have announced price increases for their products subject to existing contractual obligations.

Lhoist North America increased its prices by 10% for lime, limestone and clay products from the start of April 2022. It blamed this on inflation upon the cost of chemical additives, electricity, explosives, diesel, mining equipment, spare parts, inbound transportation, mining services and other inputs.

Mississippi Lime Company has announced that it will increase its prices by 7% from the start of May 2022. It cited a combination of market demand, inflation and supply chain issues.

China: CNBM’s sales revenue grew by 7% year-on-year to US$43.1bn in 2021 from US$40.1bn. Its sales volumes of cement and clinker fell by 3% to 332Mt and 13% to 40.4Mt respectively. Concrete sales volumes increased slightly to 112Mm³. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 7% to US$8.11bn from US$7.6bn. The group increased its average cement prices by 10% in 2021. However, the group’s sales revenue from its engineering division fell by 29% to US$421m from US$590m, although its earnings recovered significantly. The group blamed this on “great uncertainty” in overseas markets due to the coronavirus pandemic although it said that producer’s willingness to invest was starting to recover.

Zhou Yuxian, chair of CNBM, said “The year 2021 was an extraordinary and tough year. In the face of complex environment abroad and numerous risks and challenges, China adhered to the general keynote of seeking progress in a stable manner, coordinating prevention and control of the Covid-19 pandemic and the development of economy and society, continuing the national economic recovery, taking a new step in building a new development pattern and achieving a good start of the 14th Five-Year Plan.”

Brazil: InterCement’s sales revenue grew by 33% year-on-year to US$1.69bn in 2021 from US$1.28bn in 2020. Its cement and clinker sales volumes rose by 6.2% to 20.1Mt from 18.9Mt. All operating regions were reported to have growing volumes. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 37% to US$470m from US$343m. The group said that, although input costs kept rising in 2021, it offset this with price increases.

Malaysia: Sharuddin Omar Hashim, the managing director of Cement Industries of Malaysia Berhad (CIMA), says that rising input materials, especially coal, are driving up the cost of cement. He blamed the mounting price of coal on Indonesia’s export ban and the war in Ukraine, according to the Malaysian National News Agency. Sharuddin said that coal had previously cost up to US$70/t but it was now US$200/t, with the possibility of reaching US$400/t. Other raw material costs were also reported to have risen sharply due to logistic problems following the Covid-19 pandemic. Sharuddin added that his company is trying to optimise production and reduce production costs through the use of other alternative materials.

Oman: The Ministry of Commerce, Industry and Investment Promotion has held a meeting with cement companies, importers, distributors and related government departments to discuss cement shortages in some regions of the country. One local plant has suspended production due to high input costs, according to the Oman Daily Observer newspaper. However, Oman Cement Company says it is prepared to boost its production by 10% to meet local demand. Following the meeting the ministry has taken several steps to ensure the availability of cement across the country and maintain prices. These include increasing the production output at some cement plants and increasing imports.

Thailand: Siam Cement Group (SCG) says that it is reviewing its planned US$2.4bn investment programme for 2022 due to the changing conditions it faces following the Russian invasion of Ukraine and ensuing cost rises. The Bangkok Post newspaper has reported that the company has recorded a rise in raw materials and energy costs across its businesses.

President and chief executive officer Roongrote Rangsiyopash said "We will delay some new investment projects, especially greenfield investments, and consider increasing more investments under merger and acquisition plans to avoid possible impact on our long-term financial management." Rangsiyopash added "Prices of cement and building materials will also gradually increase."

Ghana: The Chamber of Cement Manufacturers (COCMAG) has lobbied against the government’s decision to reduce the benchmark value to 30% from 50%. It says that a reduction in discounts on selected imports will result in higher production costs that could be passed on to the price of cement, according to the Business and Financial Times newspaper. Local limestone producers are also reported to be trying to increase their prices by over 60%, which could also put up prices. COCMAG has cited growing clinker, transport and fuel input costs as a potential source of higher production costs as well as negative currency exchange effects. COCMAG wants the government to maintain the benchmark value at 50% for input materials for cement production

The benchmark system was introduced in 2019 as a way of discounting the price of certain imports. Under the policy, certain commodities were benchmarked to world prices as a risk management tool.

US: Eagle Materials’ consolidated sales rose by 13% year-on-year to US$1.45bn in the third quarter of the 2022 financial year from US$1.28bn in the corresponding quarter of the 2021 financial year. Its sales of cement rose by 12% year-on-year to US$261m, while its earnings from the segment were US$79.8m, up by 13%. Cement volumes totalled 2Mt, up by 7% from third-quarter 2021 financial year levels.

Chief executive officer and president Michael Haack said that the results reflected both continued strength in US construction activity and excellent execution by Eagle Materials as Covid-19-related supply chain challenges continued. He said “We continue to see positive demand trends across our geographic footprint, driven by increased residential construction activity and expanded infrastructure investment. These trends should support growing construction activity and contribute to attractive pricing across our heavy and light materials businesses. We enter the last quarter of our fiscal year in a position of strength, with an excellent balance sheet enabling us to continue to execute on our core strategies.”

Haack added “I’m also proud to share that, during the first nine months of our fiscal year, we achieved the best safety performance in our history, demonstrating our deep commitment to our people and their wellbeing. During the quarter, we also continued to make strides towards our environmental stewardship goals. We are now producing and selling our eco-friendly Portland limestone cement (PLC) from four Eagle cement facilities.”

Russia made imports easier last week. At the end of January 2022 an order from Rosstandart, the national standisation agency, relaxed inspection controls allowing for simpler imports from countries outside the Eurasian Economic Union (EAEU). Previously each such batch required a 28 day inspection period. This has now been dropped to encourage more imports of cement. Deputy Industry and Trade Minister Viktor Yevtukhov explained the reasoning behind the measure to InterFax, “In order to avoid problems in the domestic Russian cement market in the future, it is necessary to spur competition. It will balance the prices for this basic building material and will restrain their growth in case of such risks.”

Some idea of the situation facing the Russian cement market at the moment can be gleaned from market data supplied by CM Pro. Production rose by 7% year-on-year to 56.4Mt in the 11 months to November 2021. Imports rose by 26% to 1.6Mt at the same time. The Ministry of Industry and Trade has attributed this to a construction boom created by growth in both government-funded infrastructure projects and domestic housing. It also noted a local shortage and price increases in the Central Federal District in the autumn of 2021, although it said it redistributed cement from other regions to remedy the situation. This imbalance in the country’s main cement producing and consuming region, including Moscow, can also be seen in the figures. Production was about 2Mt below consumption in this area in 2019 and 2020. Yet so far, to November 2021, this gap grew to 2.7Mt. At the same time the price of cement reportedly jumped by 20% from November 2020 to December 2021.

Graph 1: Cement production in Russia, 2015 – 2021. Source: CM Pro and estimate from Global Cement.

It has been reported that the Ministry of Industry and Trade has also been wondering publicly why a study conducted in 2021 found that the national cement sector had an apparent operating capacity of 65Mt/yr compared to a total production capacity of 105Mt/yr, including mothballed and inactive plants and production lines. In other words the sector has been operating at a 62% production utilisation rate and the government is trying to coax it higher by opening up imports. And just to make sure that there was no confusion on the matter, Yevtukhov added, “I am sure that if the domestic producers will cope with the task of increasing the real volume of cement production and will not allow prices for their products to increase above the rate of inflation, the market will self-regulate, and additional imports of cement to Russia (which are traditionally small) will not be needed."

Given the country’s large size, imports seem to be mainly a threat to producers in the big population centres around Moscow and the Volga with good international transport links. Producers appear to have received and understood the message from the government as they have pledged to increase real operating capacity by 3 – 5Mt. The bear in the room for both Russian and European cement producers though is what happens in Ukraine in 2022. With North Atlantic Treaty Organization (NATO) members threatening economic sanctions and Russia supplying a significant share of Europe’s gas supply, any progression from the current rhetoric could cause discomfort to markets in both Russia and Europe. Turkish cement exporters, manufacturing in a NATO member country and hoping to take advantage of increased exports to Russia, could be in a particular bind if events heat up. All of this indicates that Smikom picked an interesting time to buy Russia’s largest cement producer, Eurocement, back in mid-2021. There’s an ongoing construction boom but also risks aplenty.

With apposite timing, LafargeHolcim Russia announced this week that it was going to reopen its integrated Voskresensk cement plant near Moscow. The unit was originally stopped in 2016. Now it plans to spend Euro23m on restarting the plant and building a dry construction mix unit at the site. Who says big government doesn’t work?