Displaying items by tag: Russia

LafargeHolcim has stopped clinker production at its Voskresenskcement plant in the Moscow region of Russia. The move is part of reorganisation of the company's structure in Russia following market contraction. LafargeHolcim warned of declining cement volumes in its third quarter report for 2015 blaming a 'volatile' economic situation and low oil and gas prices negatively affecting construction activity.

Lafarge, before the merger with Holcim, reported that its cement volumes in Russia grew by 9% in 2014 compared to 2013 owing to the opening of its 2Mt/yr Ferzikovo plant in the Kaluga region in May 2014. It noted at that time that the construction market had slowed down in the fourth quarter of 2014. The Voskresenskcement plant had a Euro5m FLSmidth electrostatic precipitator fitted on one of its kilns in June 2014. This was part of a Euro60m upgrade project on Lafarge Russia's cement plants between 2008 and 2013. Also, in the run-up to the merger Lafarge Holcim sold its UralCement plant in Korkino to Buzzi Unicem.

LafargeHolcim is a relatively small player in the Russian cement industry but its experiences may be symbolic. Eurocement, the Russian market leader with 33% of cement production capacity, forecast that cement consumption in the country might fall by 5 – 10% in 2015. At that time, in June 2015, Eurocement president Mikhail Skorokhod blamed the high cost of borrowing and its effects on slowing new construction projects. Previously, the Russian Cement Association predicted that it expected domestic cement consumption to fall by 15% in 2015.

Unfortunately, it looks like the most pessimistic end of Eurocement's forecast may be correct. CMPRO data shows that cement consumption fell by 9.4% year-on-year to 49Mt in the first nine months of 2015. Data is yet to be publicly released for December 2015 but the cumulative totals for the first eleven months of 2015 hold with that decrease in cement consumption. Prior to this Russian cement production and consumption had been growing annually since 2009.

Particular declines in cement consumption for the first nine months of 2015 have been reported in the Volga Federal District, the Siberian Federal District, the Ural Federal district and the Northwestern Federal District of Russia. However, it should be noted that these regions had all had a production deficit of cement for most of 2010 to 2013 according to EY analysis. These regions all had cement oversupply problems during the boom years of growth and are now suffering even more as the market contracts. The three biggest cement producing regions in Russia are the Central Federal District followed by the Volga Federal District and then the Siberian Federal District.

Alongside all of this, Eurocement planned to sign US$280m of contracts with Sinoma in November 2014 to build new clinker production lines at three plants. This followed an earlier US$580m set of deals with CNBM and Sinoma to build new plants. On 1 February 2016 Rolt Company announced that it had started project development on four power plants for Eurocement.

Eurocement's financial status is unknown but it may now be regretting all that spending. Last week, on 25 January 2016, Sherbank CIB announced that it held 6% of LafargeHolcim's shares following a repurchase deal with Eurocement. This follows a request for a US$634m loan from Sherbank in mid-2015. Unless growth resumes in the construction market it may have paid over US$850m to build new cement plants at the peak of the Russian market. Add in currency exchange effects and 2016 may be a bumpy year for Eurocement and the Russian cement market as a whole.

Russia: Rolt Company has started project development on four power plants under a contract with Eurocement Group. The plants are intended for cement factories situated in Central and North Caucasian Federal Districts of Russian Federation.

Each power plant will have a total electric output of 100MW. Rolt Company will develop the projects of power plants construction for Lipetskcement (23.2MW), Oskolcement, Kavkazcement and Voronezhsky affiliate of Eurocement Group (15.2MW each).

Russia: LafargeHolcim has permanently stopped clinker production at its Voskresenskcement plant in the Moscow region due to market constraction and oversupply. The decision is part of a reorganisation its cement production structure in the Central region of Russia to fight the impact of the recession in the construction sector. The new structure includes cement production at the Schurovo (Moscow region) and Ferzikovo (Kaluga region) plants, leveraging their competitive cost structure.

"With the reorganisation of its cement production structure in the Central region of Russia the company ensures its viability and is well positioned in the country to meet customer requirements and make a valuable contribution to the Group," said Guillermo Brusco, CEO of LafargeHolcim Russia.

Staff at Voskresenskcement will be transferred internally where possible. Current customers of Voskresenskcement will be offered products from the Schurovo and Ferzikovo plants.

Russia: Sberbank CIB, the investment banking arm of Russian lender Sberbank, has announced that it holds 6% of LafargeHolcim following a repurchase deal with Eurocement. Under the terms of the agreement, Sberbank CIB had organised financing for Eurocement Holding AG in return for 37m shares in LafargeHolcim. Eurocement has the right to buy back the shares at a specific price and on a certain date.

The agreement was implemented on 21 January 2016. No further details were disclosed. Before the repurchase deal Eurocement was among the largest shareholders of LafargeHolcim.

We'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!

Here 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.

Russia: The Slantsev cement plant, part of HeidelbergCement and operating in Cesla, Leningrad, plans to upgrade its production and continue development of the quarry. The investments in the project will amount to Euro14.5m.

Russia: LafargeHolcim's plant in Kolomna, Moscow has begun production of a new cement base for mortars under the Kelma brand. It is characterised by high strength, fine adhesion to surfaces and a long retention of mobility that provides for the mortar's plasticity necessary for construction works without adding extra water. The product is being sold in 50kg bags.

Russia/China: A delegation from Conch company, one of China's largest building materials corporations, has visited Russia to see the cement plants of Eurocement. At the meeting, which was held at Eurocement's central office, the group's president Mikhail Skorokhod explained the group's key projects to the Chinese representatives and discussed possible areas of cooperation.

"Conch has the most modern equipment for the production of cement and has considerable experience in operating production lines. It is extremely interesting for Eurocement to study its experience as well as to consider its foreign experience for the development of the national building materials industry in Russia," said Skorokhod. "I am convinced that our Chinese colleagues would also be interested in getting acquainted with the activities of the Russian cement sector leader. This meeting will be the beginning of a fruitful and mutually beneficial cooperation."

The Chinese delegation will visit Mikhailovcement, Ulyanovskecement and Sengleevskiycement during the visit.

Russia: Mordovcement, part of Eurocement, has launched an investment programme to rebuild local railway infrastructure.

The investment offers funding for the full replacement of 9.1km of track and 42 switches. The proposed repairs will guarantee the continued safe use of the railway infrastructure for the supply of raw materials. The US$3.14m project will raise the turnover of wagons for the loading of cement and will help to establish the stable delivery of cars of raw materials from the quarry to the production area. The development will boost the reliability of the railway track as a whole and extend its lifecycle, reducing the complexity and cost of maintenance and obtaining economic benefits during its operation.