Displaying items by tag: US
Cemex joins the divestment party
01 August 2018Cemex joined the divestment party this week with the news that it plans to sell up to US$2bn worth of assets by the end of 2020. Put that together with LafargeHolcim’s own divestment plan of selected assets worth up to US$2bn as part of its Strategy 2022 and there is potentially a lot of cement production infrastructure going on sale over the next few years.
Both companies say that they will start announcing the latest round of divestments in the second half of 2018. Prices vary considerably around the world - and remember this is not only cement - but at, say, US$250m per integrated plant that could amount to 16 units. That’s a big enough manufacturing base to build your very own cement production empire! So, which markets might the two companies be considering leaving?
Cemex’s weaker areas in its half-year report were its South, Central America and the Caribbean region and, to a lesser extent, its European region. The former reported falling sales, cement volumes and earnings. The latter reported falling earnings on a like-for-like basis with issues noted across cement, ready-mix concrete and aggregate business lines in the UK. Back in Central and South America, problems were noted in Colombia due to a 10% fall in cement sales in the first half. An important point to make here is that despatch figures from the National Administrative Department of Statistics (DANE) out this week suggest that Colombia’s overall cement market has picked up since April 2018 (see Graph 1), in contrast to Cemex’s experience. Panama, meanwhile, saw cement volumes wither by 22% due to the 30-day strike by construction workers. Other operations to consider for the chop might include Cemex Croatia, which the company attempted to sell to HeidelbergCement and Schwenk Zement in 2017, before the European Commission put an end to that idea.
Graph 1: Annual change of cement despatches in Columbia in 2017 and 2018. Source: DANE.
When asked directly during its second quarter results call which assets it was intending to sell, chief executive officer (CEO) Fernando Gonzalez didn’t answer on commercial grounds. What he did say though was that the company had faced ‘headwinds’ in the Philippines, Egypt and Colombia, particularly in relation to fuel prices. He also said that Cemex had finished its market analysis, that it knew exactly which assets it would like to sell already and that it was in ‘execution’ mode. In Gonzalez’s own words, “we do have a number of assets to be divested, either because they are low growth, or because they are not necessarily integrated to other business lines.”
As covered a couple of week ago, the obvious location for LafargeHolcim to exit is Indonesia. CEO Jan Jenisch continued to refuse to comment on rumours that the company was leaving the country during its second quarter results call. Yet, local production overcapacity, falling earnings and profits and an underperforming but still sparky market make it the ideal candidate. What Jenisch did reveal was that the country had ‘positive momentum.’ Perhaps more importantly he added, “We are not selling because we want to sell. We are selling for high valuations only.”
Other potential locations for LafargeHolcim to leave might include Brazil and parts of the Middle East and Africa. Brazil’s cement market recovery has been a few years coming and was delayed again by a truck drivers’ strike in May 2018. The Middle East Africa area was the worst performing region in LafargeHolcim’s mid-year results with problems noted in South Africa.
With all of this in mind we have a rough idea of what Cemex and LafargeHolcim might be considering selling. The obvious candidates for both companies seem to be solid markets that promise growth after a period of underperformance. Just like Colombia and Indonesia in fact. Looking at the track record for both of them in recent years Cemex has seemed to be more ready to sell individual plants such as the Odessa and Fairborn plants in the US to different buyers. LafargeHolcim for its part has generally gone for larger more complete sales of regional or country-based chunks of its business such as in Chile or Sri Lanka.
Finally, don’t forget that Cemex’s Fernando Gonzalez said in March 2018 that the company was considering acquisitions again after a decade of austerity. He mentioned an interest in India and in Brazil. If he meant that last one then maybe he should give LafargeHolcim’s Jan Jenisch a call.
Calgon Carbon appoints Steve Schott as president and CEO
01 August 2018US: Calgon Carbon has appointed Steve Schott as its president and chief executive officer (CEO) with effect from 3 August 2018. Schott will replace Randy Dearth, who announced he was leaving the company after six years.
Schott joined Calgon Carbon in 2007 as Executive Director of Finance. In 2010 he was promoted to Vice President and Chief Financial Officer with responsibility for all corporate financial functions. In 2015 he was promoted to Executive Vice President, Advanced Materials, Manufacturing, and Equipment. In this role, he also has responsibility for the company’s European operations, where Calgon Carbon is known as Chemviron.
Prior to joining Calgon Carbon, Schott spent eight years at DQE, a conglomerate whose primary business was electric energy. During his tenure, he held various positions including Controller, Vice President of Finance and Chief Financial Officer. Schott also spent 15 years at Deloitte & Touche where he was a senior manager in the auditing practice. He holds a B.S. in Business Administration from Duquesne University.
Turkey exported US$124m worth of cement in 2017
31 July 2018Turkey: İsmail Bulut, the head of the Turkish Cement Manufacturers Association (TÇMB), says that the local industry exported US$124m of cement in 2017. He told the Daily Sabah newspaper that the sector has a production capacity of 81Mt/yr. TÇMB data shows that it exported 7.98Mt of cement in 2017 to nearly 100 countries. The top destinations for Turkish cement included Syria, the US, Israel and Ghana. It also exported 4.93Mt of clinker led by Ghana, Colombia, Ivory Coast and Guinea. Despite the high levels of exports, the country also imported relatively small amounts of clinker for Greece and Bulgaria in 2017.
Bill Wagner appointed as Vice President of Argos USA
25 July 2018US: Cementos Argos has appointed Bill Wagner as the vice president of its US operations. Wagner, a US national, is a graduate of Georgia Southern University. He holds over 35 years of industry experience and is on the board of directors of the National Ready Mixed Concrete Association. He joined Cementos Argos in 2014 and worked as the head of its US concrete business.
US: Ametek Brookfield has appointed Hitesh Shah as Global Vice President Sales. He holds over 25 years’ experience in sales and executive positions in North America, India, the Middle East and Asia. He has worked for General Electric, Meggitt Sensing Systems and most recently served as Global Sales Director with Novanta. Hitesh has a graduate degree in Mechanical Engineering. He also served on the engineering faculty at the Maharaja Sayajirao University of Baroda in India.
Mexico: Grupo Cementos de Chihuahua’s (GCC) net sales rose by 11.4% year-on-year to US$399m in the first half of 2018 from US$358m in the same period in 2017. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 22% to US$115m from US$94.2m.
Its US sales rose by 11.1% to US$283m and its Mexican sales rose by 7% to US$60m. Cement sales volumes increased by 6.1% and 2.5% in the US and Mexico respectively. However, the cement producer reported falling sales volumes in the second quarter of 2018 in the US due to poor weather in Iowa, North Dakota and South Dakota and delays in paving projects.
Will the US trade war on China affect cement?
18 July 2018The US government proposed placing tariffs on cement this week as part of its slowly-escalating trade war against China. The latest list will face a 10% tariff from the end of August 2018 following a consultation period. Of relevance to the cement industry, it will include limestone flux, quicklime, slaked lime, gypsum, anhydrite, clinkers of Portland, aluminous, slag, supersulfate and similar hydraulic cements, white Portland cement, Portland cement, aluminous cement, slag cement, refractory cements, additives for cement, cement based building materials and more.
Graph 1: Imports of hydraulic cement and clinker to the US from China, 2012 – 2017. Source: United States Geologic Survey (USGS).
Graph 2: Major exporters of hydraulic cement and clinker (Mt) to the US in 2017. Source: United States Geologic Survey (USGS).
At face value it seems unlikely that the tariffs will do much direct damage to the cement sectors in either China or the US. United States Geological Survey (USGS) data reports that the US imported 2Mt of cement and clinker from China in 2017 out of a total of 13.6Mt of imports. China was the third-largest exporter of cement to the US after Canada and Greece. Given the mammoth size of the Chinese cement industry - it sold 2.3Bnt in 2017 according to National Bureau of Statistics of China - it is unlikely that losing this export stream will cause the sector to lose much sleep. If the exports are coming from smaller producers though it might well impact upon them disproportionally. Any potential shortfall in the US is likely to be met by any number of the world’s overproducing cement nations. Vietnam, Iran (!) and Indonesia are the first few candidates that spring to mind.
The other point to consider from the USGS data is that the value of the cement imported from China in 2017 was on the cheaper side. Altogether the value of Chinese imported cement came to US$132m in 2017. Yet it was the fifth cheapest for cost, insurance and freight per tonne out of 32 importing countries. Add a 10% tariff to that and it is still only the eighth cheapest. If these figures represent reality then it seems unlikely that tariffs will cause the Chinese imports to slow down much.
All of this pretty much fits the general impression of China as a country that produces the most cement in the world but it actually exports very little of it. Consultancies like Ad and Marcia Ligthart’s Cement Distribution Consultants have made a point of downplaying China’s export market in recent years due to a lack of deep water terminals for plants and a general inward focus. Yet the sheer amount of production capacity could have big implications if it ever does get properly connected to the sea.
Other products facing the new tariffs that have relevance for the cement industry include input materials like gypsum or secondary cementitious materials (SCM) like slag and fly ash. Gypsum isn’t likely to be a concern given the presence of established exporters in Canada, Spain, Thailand, Oman and the like. SCMs are more mercurial but don’t appear to be too intrinsic to the US market. Ferrous slag imports grew to 2Mt in 2015 according to USGS data but the main sources were Japan, Canada, Spain and Germany. Charles Zeynel of ZAG International at the Global Slag Conference 2018 posited that Chinese exports comprised up to 6Mt or 25% of the world market of traded international slag.
All of this suggests a symbolic nature to the US tariffs on Chinese cement and related products. Perhaps the real news story to have noted this week was the framework agreement signed between Denmark’s FLSmidth and China’s China National Building Material (CNBM), the world’s largest cement producer and one of its larger cement equipment manufacturers.
Typically many of the new cement plant projects Global Cement has reported upon recently involve a Chinese contractor that may or may not be using European engineering from companies like FLSmidth who previously would have been managing the build themselves. The point here is that new plants, production lines and upgrades at US cement plants might well be built by a Chinese company through its European partners. The new upgrade to Lehigh Hanson’s Mitchell plant in Indiana has been budgeted at US$600m. This is far more than the value of Chinese cement imported into the US in 2017.
US: Air Products is preparing to build a new global headquarters in Lehigh Valley, Pennsylvania. The new site will be situation around 2km from its existing location in Allentown. Ground breaking is expected in March 2019 with occupancy scheduled for the summer of 2021. The new location will be the base for approximately 2000 Air Products employees with capacity for growth.
The decision to change headquarters has been taken to allow the company to modernise its facilities. The new headquarters site will include new administration offices, a research and development (R&D) facility, and an enclosed parking structure for employees.
Air Products operates an industrial gases business providing atmospheric and process gases and related equipment to manufacturing markets, including the cement and lime industries as well as refining and petrochemical, metals, electronics, and food and beverage sectors. Air Products is also a supplier of liquefied natural gas process technology and equipment.
US: Lehigh Hanson’s Speed cement plant in Indiana will be converted into a distribution terminal. The decision follows an investment of US$600m towards upgrading the Mitchell cement plant in Indiana, according to the Evening News and Tribune newspaper. At present the Speed plant has a cement production capacity of 1Mt/yr and the Mitchell plant has a production capacity of 0.7Mt/yr. Following the upgrade the Mitchell plant will have a capacity of 2.8Mt/yr. Changing the focus of the Speed unit is expected to lead to the loss of 100 jobs. although half of these could be moved to Mitchell.
US: Lehigh Hanson plans to spend US$600m on modernising and upgrading its Mitchell cement plant in Indiana. The project will increase production capacity and reducing energy usage and emissions per ton of cement produced. The project is the largest expansion and modernisation that the subsidiary of Germany’s HeidelbergCement has undertaken in North America.
Lehigh Hanson is working with the Indiana Department of Environmental Management (IDEM) to obtain the required air permits and anticipates the permitting process to be completed in the summer of 2019. The company is also working with the Indiana Economic Development Corporation regarding available business incentives. Construction is scheduled to begin in 2020 and completion of the new plant is anticipated by the end of 2022. Once finished the upgrades will create around 50 new jobs at the unit.
The cement producer has also worked with local and state officials to develop increased infrastructure surrounding the plant, which will support the expanded operation. This includes a road connecting the plant to a local highway, alleviating truck congestion from the centre of town. Overall logistics will also change to accommodate additional rail activity to handle increased cement shipments from the plant.