Displaying items by tag: Sinoma

Oman: Raysut Cement Company has ordered a waste heat recovery unit from China’s Sinoma. No cost for the deal or an expected timescale has been disclosed. The company says it is the first of its kind in the country. Once completed it is expected to reduce the company’s power costs at its plant by up to 30%.

The world’s largest cement producer China National Building Material (CNBM) released its half-year results this week and the figures were generally good. Despite falling production, the state-owned company has managed to raise its prices year-on-year to generate significant sales revenue and earnings increases. As usual the level of detail was fairly light, although not much lighter than some non-Chinese producers on the international market. The key point was that cement production fell by 5% year-on-year to 143Mt. This was due to poor demand, mounting environmental regulations and rising input costs.

The half-year report was significant because it is the first financial report from the company since its merger with China National Materials (Sinoma) completed in early May 2018. Just like the reports of LafargeHolcim and HeidelbergCement following mergers or acquisitions, CNBM has seen a boost to its performance. Further gains from scale and synergy are expected. The union has indisputably created the world’s biggest cement producer, putting aside any European or American cries of over-calculation of production capacity on the part of their Chinese rivals. However, size comes with particular problems.

Placed in a wider context CNBM and its owners, the Chinese government, are attempting to manage a wind-down from the biggest construction boom in human history. National Bureau of Statistics data show that sales of cement fell by 10% to 984Mt in the first half of 2018 from 1.1Bnt in the same period in 2017. So, falling cement production volumes are not a surprise. What is curious, though, is how cement prices have appeared to rise in a country with massive production overcapacity. Each of CNBM’s cement producing subsidiaries reported that its average selling price of cement grew year-on-year.

Graph 1: Sales of cement in China, 2014 – 2018. Source: National Bureau of Statistics of China.

Regional variation could explain some of this in a country as large as China and similar trends can be observed in India with its own diverse internal markets. The local focus on environmental regulations offers another explanation. In June 2018 the government’s State Council issued regulations to reduce the production capacity of construction materials, set up emission limits for pollution, implement peak shifting of production and to establish a ‘strict’ accountability mechanism for all of this. CNBM has followed these directives with its ‘Price – Cost – Profit’ (PCP) strategy and all of its subsidiaries have conformed to this. What is not covered in the report is whether there is a negative financial effect of peak shifting and other environmental regulations and how bad this is.

It’s easy to dismiss the performance of a state-controlled company but the enlarged CNBM is facing a unique set of challenges. It appears to be off to a great start but both its scale and its challenges are unprecedented. In its outlook for the second half of 2018 it said that the, “contradiction of overcapacity in the industry has not been changed fundamentally.” This suggests that, although cement prices and profits have held up so far, there is no guarantee that this situation will continue.

There have been quite a few new cement plant project announcements in the past week, with expansions announced in Mexico, Nigeria, Bangladesh, Indonesia, India and Uzbekistan. 11.8Mt/yr of new capacity has been announced in just a week, mostly from a whopping 9.0Mt/yr project in Central Sulawesi, Indonesia, the first in that Province. Notable in this project, as well as two of the others, is the involvement, once again, of large Chinese-based cement plant manufacturers and / or finance and associated influence from Chinese parties.

Of course, this trend is nothing new. The rise of Chinese cement plant manufacturers, particularly into Africa and other developing cement markets, has been covered in previous Global Cement Weekly columns. However, it does appear to be stepping up a notch in 2018 compared to previous years. So far this year we have reported on 21 confirmed Chinese cement plants being built in 15 countries other than China, from the planning stage to ‘up-and-running.’ A total of 37.2Mt/yr, more than the capacity of Germany, is being built across Algeria, Cambodia, Cameroon, Indonesia, Kyrgyzstan, Namibia, Nepal, Nigeria, Pakistan, Russia, Tajikistan, Turkey, Ukraine, Uzbekistan and Zambia. That’s not including a similarly large number of news stories where the supplier is not explicitly stated. This is seen a lot in Indian projects, as well as in Vietnam, where the cement sector appears to still be expanding, despite the government’s pronouncements. In many of these cases, and elsewhere, these unidentified suppliers are likely to be Chinese.

The driver for this increase in Chinese-led cement sector investment is, of course, the severe overcapacity in China’s domestic cement sector. The government is currently undertaking its most drastic capacity reduction measures so far. The ongoing integration of Sinoma and CNBM is one example of the lengths it will go to to reduce the current inefficiencies in the sector. This week the Chinese government reiterated its strict prohibition on new greenfield cement plants. It also warned that any producer that wants to upgrade its plant with a new line must only install the same capacity as the line that will be replaced, amid concerns that some were flouting this rule. This comes as the profits of major producers have been rising. Presumably the government would like them to climb further still.

So where does this leave the more established (read ‘European’) cement plant manufacturers such as Fives, FLSmidth, KHD and thyssenkrupp Industrial Solutions, some of which are fully or partly-owned by Chinese companies? Well, with fewer full-line projects available in developing regions due to the rise of the Chinese, they have become increasingly specialised in specific areas. Those that want European equipment will increasingly specify a pyro-line from Supplier A, a mill or two from Supplier B, conveyors and storage from supplier C, and so on. Arranging this, as it turns out, is something that Chinese plant manufacturers are quite keen to do. Take, for example, FLSmidth working for Sinoma (China) alongside Atlas Copco (Sweden) and Kawasaki Heavy Industries (Japan) on a cement plant in Indonesia. Indeed, FLSmidth signed a framework with CNBM on future collaborations in July 2018. FLSmidth and CNBM already have an extensive ‘back catalogue’ of joint projects. FLSmidth has valuable expertise that Chinese firms need to complete these kinds of projects.

Of course, another European supplier, Germany’s KHD, is mostly owned by China’s AVIC. In a forthcoming interview in the September 2018 issue of Global Cement Magazine, KHD’s CEO Gerold Keune states that the Engineering, Procurement and Construction (EPC) scene is now ‘completely dominated’ by Chinese suppliers. KHD fits in by providing a wide range of equipment but, crucially, great expertise in pyroprocessing and crushing solutions. It itself relies on smaller firms to provide their knowledge to specific parts of a larger project, be it conveyors, feeding systems or silos. Everyone is getting better and better, but in a smaller and smaller area.

Also in the September 2018 issue of Global Cement Magazine will be a report from the VDMA’s Large Industrial Plant Manufacturer’s group (AGAB) in Germany, which highlights another advantage for the Europeans: Digitisation. According to a VDMA survey, the industry anticipates a positive influence from digitisation activities on sales and earnings and expects to see margins improve by up to 10% as a result of the efficiencies it offers over the next three years. In this regard they are ahead of the Chinese mega-suppliers.

The conclusion from this wide-ranging column? The integration of Chinese weight and European know-how is stepping up a notch and will only accelerate from here. Can everyone be ‘winners?’ The next few years may reveal some of the answers.

Nigeria: Ibeto Cement plans to hire China’s Sinoma to build two cement plants at Nkalagu and Effium respectively in Ebonyi State. The first plant will be built next to the former Nigerian Cement plant at Nkalagu, according to the Vanguard newspaper. It will have a production capacity of 9000t/day. The second plant, at Effium, will have a production capacity of 3000t/day, due to smaller local limestone deposits.

Ibeto Cement signed a deal with Milost Global to secure funding worth US$850m in May 2018. Previously, it entered into an agreement with Sinoma International Engineering in 2015 to build a new plant at Enugu.

Russia: An investment deal has been signed between the Government of Bashkortostan, the Sichuan-Sibay Industrial Park and Jiunghe Sichuan Environmental Protection Company to build a 1.8Mt/yr cement plant in Sibay. The project has a cost of Euro168m, according to the RBC News Agency. Once operational the unit is expected to create around 200 jobs. The project as orignally scheduled to open in 2018 but construction work at the site has not started yet. Further repoting by the Russian Construction trade magazine says that the general contractor for the project will be Sinoma.

Democratic Republic of Congo: South Africa’s PPC says it is talks with China National Materials (Sinoma) over selling a majority stake in its operations in the country. In an interview with Bloomberg chief executive officer Johann Claassen said that deal would depend on the price and implications on the on-going merger between Sinoma and China National Building Material (CNBM). He added that the PPC’s cement plant in the Democratic Republic of Congo had proven ‘challenging’ and that the company had arranged a ‘debt holiday’ with lenders after the market ‘didn’t pan out as envisaged.’

China: The merger between China National Building Material (CNBM) and China National Materials (Sinoma) is looking likely to be completed in early May 2018. The companies have issued a scheduled timeline for key events of the withdrawal of Sinoma shares and the implementation of a share exchange. This process is expected to be completed on or around 3 May 2018 with CNBM updating its business registration at the Beijing Municipal Administration of Industry and Commerce as soon as possible thereafter. The merger marks the conglomeration of the leading Chinese cement producer and equipment manufacturer.

China: The China Securities Regulatory Commission (CSRC) has approved the merger between China National Building Material (CNBM) and China National Materials (Sinoma). The approval by the CSRC for the merger between the leading Chinese producer and the equipment manufacturer follows approval by the Anti-monopoly Bureau of the Ministry of Commerce and shareholder approval in December 2017 and approval by the Fair Trade Commission in South Korea in November 2017.

China: Italy’s Gambarotta Gschwendt has received an order from CBMI-Sinoma for four surface feeders and five apron feeders. The company manufactures bulk handling equipment such as elevators and conveyors.

Algeria: Biskria Cement has started the kiln on its second new production line at its plant in Biskra. The 6000t/day line was supplied by China’s Sinoma. The Chinese plant builder announced the US$267m order in 2015. It included two production lines from raw materials to despatch. The cement producer operates three cement production lines at its plant with a production capacity of 4Mt/yr.