Displaying items by tag: Supply

The Ministry of Trade in Türkiye said this week that it was monitoring developments in the construction industry. Specifically, the ministry is reacting to complaints it has received about the high price of cement and supply issues. It has been looking at exports of clinker and cement. The statement noted that prices had risen particularly in the last one to two months and that the government was prepared to take unspecified action to alleviate the situation.

The comments hark back to the autumn of 2021 when members of the Construction Contractors Confederation (IMKON) stopped working for two weeks in response to high prices including cement. At the time the ministry tightened its rules on exporting cement and clinker. This followed the start of an investigation into alleged anti-competitive behaviour by the regulator Rekabat Kurumu into nine cement producers in the first half of that year. Around the same time Türk Çimento, the Turkish Cement Manufacturers' Association, had also been warning about growing raw material and energy costs. It noted that declining domestic sales between 2017 and 2019 had encouraged its members to focus on export markets more. All of this was overshadowed in February 2022 when Russia invaded Ukraine and global energy prices spiked. Türk Çimento then warned of the trouble that high coal prices were causing the sector.

Graph 1: Domestic and export cement sales in Türkiye, January – September, 2017 – 2022. Source: Türk Çimento.

Graph 1 above shows that the trend towards exports that Türk Çimento pointed out in mid-2021 has continued. Domestic sales fell to a low of 33.2Mt in 2019, recovered to 2021 and dropped somewhat so far in 2022. As an aside, that decline in domestic sales from 2017 to 2019 was the first the local cement industry had experienced a fall in sales since at least 2002. Exports fell year-on-year in 2018 but have increased steadily since then to 14.6Mt in the first nine months of 2022. Exports represented 10% of total sales in 2017. So far in 2022 they have accounted for 27% of total sales. Türk Çimento’s take on the picture so far in 2022 is that it expects the domestic market to decline by 10% in 2022 in all regions of the country principally due to high commodity prices. Cement exports are expected to increase but clinker exports to decrease.

Commercially, Türkiye-based cement producers have reacted to high energy prices by upping their own product prices in turn. OYAK Çimento, for example, reported significant rises year-on-year in sales revenue and earnings in the first nine months of 2022. Net sales grew by 160% year-on-year to Euro403m and earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 202% to Euro106m. Akçansa and Çimsa reported a similar situation.

Despite the high energy costs, both investment and merger and acquisition activity has continued in the cement sector in 2022. In August 2022 Fernas Group completed its purchase of two integrated cement plants, a grinding plant and associated ready-mix concrete assets from Çimsa Çimento for US$110m. Later in the year, in November 2022, Safi Çimento acquired Sancim Bilecik Çimento’s integrated plant from Aşkale Çimento. Various upgrade projects to cement plants were also reported including projects at KÇS Kipaş Çimento’s Kahramanmaraş plant, Nuh Çimento’s Hereke cement plant, MEDCEM’s Silifke plant and OYAK Çimento’s Ünye plant.

Recent reporting by the Economist newspaper suggests that the government is targeting the domestic housing sector in response to higher than inflation price rises even compared to Türkiye’s high consumer price inflation rate. The next general election in June 2023 may also be encouraging legislators to look at the accommodation needs of their constituents. Whether this is connected to the Ministry of Trade’s recent decision is unknown. Cement producers have followed the money to lucrative export markets in recent years. How far the government is willing to intervene in this strategy could mark a change in direction for the sector.

Türkiye: The Ministry of Trade says it is monitoring developments in the construction sector with regards to high cement prices and supply problems. It is looking at exports in particular, according to the Hürriyet Daily News newspaper. It has taken action following complaints it received in late 2022. Previously in 2021 the government added cement and clinker to the list of products which require a permission to be exported. Government bodies including the Ministry of Trade, the Ministry of Treasury and Finance and the Turkish Competition Authority (Rekabet Kurumu) have each been recently conducing inspections of cement companies looking in domestic and export prices.

Nigeria: The Daily Independent newspaper has reported that BUA Cement is allegedly preparing a 'multi-million dollar lawsuit' against its gas supplier, Greenville Liquefied Natural Gas (Greenville LNG). The supplier reportedly raised prices, as stipulated in the parties' gas supply contract, following an increase in its costs. Greenville LNG attributed the increase to the dilapidation of roads and collapse of upstream gas infrastructure due to flooding, as well as a lack of access to imports. It said that none of its 44 other industrial customers has challenged the price change.

Greenville LNG chair Eddy Van Den Broeke said "It is not a breach of contract because not only are we continuing the gas supply to the BUA cement plant in Sokoto, but also because we are discussing in good faith the changed business and economic conditions that afflict both companies." He concluded “In this case, we only activated the contractual price adjustment clause. We cannot explain how it is possible that social media misrepresented so grossly the present circumstances and the conditions of our contract, which were not reflected at all."

Dominican Republic: Cemex Dominicana has announced the signing of a new sustainability agreement with food producer Nestlé Dominicana. Under the agreement, Cemex Dominicana will co-process Nestlé Dominicana's non-recyclable high-calorific solid industrial waste as alternative fuel (AF) in its cement plant.

Cemex's Dominican Republic, Puerto Rico and Haiti regional director José Antonio Cabrera said "This agreement with Nestlé allows us to continue promoting our Future in Action strategy by operating our cement plant with AF." He concluded "We are committed to becoming a net-zero CO₂ company."

South Korea: Truck drivers went on strike across South Korea on 24 November 2022. Reuters News has reported that the drivers demand that a government pay scheme be made permanent and extended to drivers in all sectors. A previous eight-day strike in June 2022 cost the South Korean cement industry US$79.8m. The Korean Cement Association said that most customers do not have cement in inventory beyond three days' supply, and will begin to run out from 27 November 2022.

Malaysia: Cahya Mata Sarawak has informed its customers that its cement despatches will be 'back to normal' by 6 November 2022. The producer's closure of its 1Mt/yr Kuching cement plant for maintenance, followed by unexpected raw materials supply issues, has caused a shortage of cement in western Sarawak State. Bernama Daily Malaysian News has reported that a 14-day delay to raw materials deliveries to the Kuching plant ensued due to heavy rains.

The producer said “We would like to apologise for the shortage of cement, and will strive to ensure a steady supply of cement to all of our customers.”

Cahya Mata Sarawak has successfully maintained regular supply of cement to other areas of Sarawak, including Bintulu, Miri and Sibu, through despatches of cement from its Bintulu grinding plant.

Germany: Ireland-based CRH has agreed to sell its subsidiaries Opterra Zement and Opterra Beton to Thomas Gruppe. Thomas Gruppe expects to complete its acquisition of the businesses later in 2022. Opterra Zement owns the 1.4Mt/yr Karsdorf, Saxony-Anhalt, cement plant and 0.5Mt/yr Sötenich, North Rhine-Westphalia, grinding plant, the latter of which is closed. Opterra Beton operates the Neufahrn, Bavaria, ready-mix concrete batching plant.

Thomas Gruppe said "For years, we have been pursuing a steady and long-term growth course in the field of cement and precast and ready-mix concrete. In the cement segment, our competitive position improved significantly with the purchase of the Erwitte (North Rhine-Westphalia) plant in 2017. Together with the grinding plant in Dorndorf (Thuringia), we have achieved a significantly larger area coverage in Germany, and also in the Netherlands, and benefit from synergy effects." It continued "We would like to continue on this growth course. An opportunity like the one to take over the cement plant in Karsdorf does not come often. The Karsdorf plant, with its gigantic limestone deposits, its market position of well over 1Mt/yr of cement and its experienced team, enables us better to supply our customers, and to leverage improvement potential. In addition, Karsdorf is of sufficient size for us to install CO₂ separation technology in its production of clinker for the Dorndorf grinding plant." Thomas Gruppe concluded "We are convinced that cement will become a clean building material and believe in its future."

India: Prism Cement, part of Prism Johnson, has signed supply agreements with three cement producers in Bihar and Uttar Pradesh. Mayflex Cement Industries, RLJ Infracement and Rockhill Hi-Tech Cement will supply the cement producer and distributor with cement from their respective grinding plants, which have a total capacity of 820,000t/yr. Prism Cement said that the agreements will help it to improve local availability in the strategic markets of Bihar and Uttar Pradesh. Bihar contributed 19% of Prism Johnson's cement sales by volume in the 2022 financial year, and Uttar Pradesh 55%.

Mayflex Cement Industries reportedly commissioned its new 300,000t/yr Faizabad grinding plant in Uttar Pradesh earlier in 2022.

Panama: Waste management company EMG has won a contract with Cemex Panama for the supply of solid recovered fuel (SRF) derived from commercial and industrial waste, beginning in early 2023. EMG is working to expand its SRF production capacity to 18,000t/yr from the start of the supply contract.

Russia: The Ministry of Industry and Trade of the Russian government says that building materials are in high supply, but projected possible future shortages, beginning in 2024. The ministry named white cement as one product which it has adequately secured through new import sources. Russian construction remains dependent on imports, and the government says that it will look to further develop domestic production capacities of non-metallic materials from 2024.