Displaying items by tag: coronavirus

There has been a significant investment in the South Korean cement industry this week with the news that Hanil Hyundai Cement has ordered a steam-based waste heat recovery (WHR) system from Japan-based Kawasaki Heavy Industries. The 22.6MW system will be used on two of the production lines at the Yeongwol plant in Gangwon Province. The supplier says that installation is expected to generate about 30% of the energy the plant needs and save around 10,000t/yr of CO₂ in the process. Delivery is scheduled for late 2022.

This order may be the first investment following the announcement in late June 2021 that the state-owned Korea Development Bank had pledged around US$870m towards supporting the cement sector in making carbon reduction upgrades by 2025. These are intended to include moving away from burning fossil fuels in cement production and increasing the use of recycling materials. At the time of the agreement between the bank and the Korea Cement Association (KCA), Hanil Hyundai Cement noted that the local alternative fuels substitution rate was 24% compared to 46% in the European Union and 68% in Germany.

Graph 1: Cement production in South Korea, 2010 – 2020. Source: Korea Cement Association

By European or American standards South Korea kept its coronavirus cases under control in 2020. A robust testing and contract tracing regime (K-Quarantine) managed to prevent the country enforcing stricter measures until late in 2020. A fourth wave of infections, currently underway in July 2021, due to the more contagious Delta variant, has started to change this. Despite being able to keep its economy open though, the construction sector still took a hit although not as bad as initially feared.

Cement production fell by 6% year-on-year to 47.5Mt in 2020 from 50.6Mt in 2019 following a downward trend since 2017. The KCA expected worse after a poor third quarter in 2020 when it was preparing for shipments to fall below the level last seen in the midst of the International Monetary Fund (IMF) crisis in the late 1990s. On top of this the industry was also potentially facing a new tax on production towards the end of 2020. One large local producer, Ssangyong C&E, reported a 5% year-on-year drop in sales to US$864m in 2020 from US$910m in 2019. However, it managed to increase its operating profit over the same period. So far in 2021 the sector faced supply shortages in the spring. The KSA blamed the winter plant maintenance schedule and a lack of railway wagons and trucks.

The timing of the Korea Development Bank investment in the cement sector is interesting given the movement on the European Union carbon border adjustment mechanism. Cement exports seem unlikely to be affected but business lobbyists like the Federation of Korean Industries are well aware of the effects schemes like this might have upon commodities like steel and aluminium in the first phase and then the implications for car production later on. Target markets for cement exports such as the US, Peru, Chile and the Philippines might all become vulnerable should carbon-based trade restrictions become more prevalent. Of course export markets remain vulnerable to more usual hindrances. For example, in March 2021 the Philippines extended its safeguard measures on cement imports to various countries including South Korea.

Following a round of market consolidation in the late 2010s, the South Korean cement sector now appears to be entering a phase of sustainable realignment. In late May 2021 Prime Minister Moon Jae-in announced plans to hasten the country’s carbon reduction targets ahead of the United Nations Climate Change Conference scheduled for November 2021, including a carbon tax. With cement production on a downward trend since 2017 and the coronavirus crisis far from gone it will be instructive to see how far the intervention of the Korea Development Bank will go.

India: ACC’s net sales rose by 35% year-on-year to US$1.08bn in the first half of 2021 from US$799m in the same period in 2020.Its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 56% to US$232m from US$149m. Sales volumes of cement and ready-mixed concrete grew by 31% to 14.8Mt and by 32% to 1.41Mm³ respectively.

“I am proud of the way team ACC has recorded very good performance this quarter. With a strong focus on supply chain efficiencies and cost optimisation, the company has emerged stronger and more resilient. Waste heat recovery system projects at various sites are progressing well. The large cement capacity expansion project at Ametha in Madhya Pradesh has commenced,” said ACC’s managing director and chief executive officer, Sridhar Balakrishnan.

The subsidiary of Holcim Group added that it “believed strongly” in the resilience of the Indian economy following the coronavirus crisis. It expects cement demand to grow due to increased government spending on large scale infrastructure projects.

Peru: Cementos Pacasmayo’s sales have revived following a coronavirus-related lockdown in the second quarter in 2020. It attributed the rebound to sales of bagged cement to the self-construction sector and public sector reconstruction demand. It also noted that sales revenue and volumes in the second quarter of 2021 were ahead of comparable figures in the same period in 2019 before the pandemic started. Its sales revenue more than doubled to US$229m in the first half of 2021 from US$105m in the same period in 2020. Its consolidated earnings before interest, taxation, depreciation and amortisation (EBITDA) nearly tripled to US$49.4m from US$16.9m. Production volumes at the cement producer’s plants grew to 1.79Mt from 0.79Mt.

India: Shree Cement is on track to commission its 3.0Mt/yr cement grinding plant at Patas in Pune, Maharashtra in September 2021. The plant was originally scheduled for commissioning in late 2020 but this was delayed due to Covid-19 led-disruption. The unit has had an investment of around US$80m and it will source clinker from a group site in Karnataka. The plant is Shree Cement’s first in western India.

Portugal: Semapa subsidiary Secil is spending Euro86m on modernising its Outão cement plant in Setúbal. The Dinheiro Vivo has reported that the work will turn the facility into ‘the most sustainable cement plant in Europe,’ according to the company. It will reduce CO₂ emissions by 20%, end fossil fuel use and establish waste heat recovery to supply 30% of the plant’s electrical power needs. The government has granted the ‘Project of National Interest’ Euro14.5m in funding. The project will also expand the cement plant’s capacity by 30% to 1.3Mt from 1.0Mt.

Chief executive officer Carlos Abreu said "We have the ambition of reaching carbon neutrality in 2050 and this project is a step in that direction. Others will follow." He added "The Asian and American blocs are not always facing that direction, but the path is made by walking... and we will get there." Regarding the timing of the project, Abreu said "Secil was a very brave company here. The project was decided in 2019 before the pandemic broke out... We kept it, despite the fact that knowing that the pandemic was going to be, and is being, very difficult, but we believe that we had no other alternative."

Thailand: Siam Cement Group has furthered its contribution to the struggle against the Covid-19 pandemic with the opening of a modular intensive care unit (ICU) at Ratchapipat Hospital in Bangkok’s Thawi Watthana district, supported by donations from the company. The Nation newspaper has reported that the producer has donated around US$1m to the establishment of four new ICUs for the treatment of Covid-19 patients in partnership with Bangkok Metropolitan Administration. All four units will be in operation by August 2021, according to the partners. Each unit will have the capacity to treat 10 patients.

India: JK Cement has targeted a 10% year-on-year sales growth in its 2022 financial year, which ends on 31 March 2022. The Economic Times has reported that the company foresees sales growth due to the on-going government infrastructure investment push, minimal monsoon disruptions and pent-up cement demand following Covid-19-led disruptions. Cement chief operating officer Rajnish Kapur said that growth momentum from the end of the 2021 financial year will likely continue throughout the coming nine months, despite a Covid-19 led sales drop in the first quarter of the 2021 financial year.

The cement producer also expects that its new cement plant project at Panna in Madhya Pradesh is likely to be completed in the 2023 financial year due to Covid-19 related delays. The plant will bring its total cement production capacity to around 20Mt/yr from nearly 15Mt/yr at present once it is finished. The company is also considering acquisitions to further increase its capacity to 25Mt/yr by the mid-2020s.

Two news stories merit a closer look at Argentina this week. Firstly, Loma Negra fired up the kiln on its new 2.7Mt/yr production line at the L’Amalí cement plant in Olavarría. Work on the US$350m started in 2017 but was delayed due to the coronavirus pandemic. Notably, engineers from China-based Sinoma International Engineering, who built the plant, caused a stir when they arrived in Argentina in full personal protective equipment in late 2020 to continue work on the project. Full commissioning of the second line at the plant is scheduled for July or August 2021.

Almost at the same time, the Argentine government announced it had persuaded local building materials producers to stick to reference prices for construction materials, including cement, in order to control inflation. Loma Negra, Cemento Avellaneda and Petroquímica Comodoro Rivadavia (PCR) were said to be on board with the ‘voluntary’ plan. Building materials prices generally were reported to have risen 85% year-on-year in May 2021 compared to a national inflation rate of 49%. The new arrangement is planned to last until the end of 2021 with revisions to the reference prices every two months.

Graph 1: Cement sales in Argentina including imports and exports, 2016 – 2021. Note that the 2021 figure is an estimate. Source: Asociación de Fabricantes de Cemento Portland (AFCP).

Data from the Asociación de Fabricantes de Cemento Portland (AFCP) doesn’t show any obvious signs of disruption from inflation so far in 2021. Cement sales grew by 50.5% year-on-year to 4.55Mt in the five months to May 2021 from 3.02Mt in the same period in 2020. The cement market in Argentina didn’t shut down but it hit a low of 0.41Mt in April 2020 before compensating with a strong second half of the year, most likely due to pent-up demand as the economy reopened following local coronavirus-related lockdowns. At the time of writing the AFCP has forecast that cement sales will reach 11.3Mt in 2021, a slight rise over the 11.1Mt reported in 2019, when the market was more stable. However, cumulative sales to May 2021 are slightly behind similar sales in 2019.

Loma Negra’s upgrade at its L’Amalí plant follows Holcim Argentina’s inauguration of a new 0.5Mt/yr clinker production line at its Malagueño cement plant in Cordoba in May 2021. This project also added a 0.63Mt/yr cement grinding unit at the site as well as a new 120,000 bag/day despatch unit. Altogether it had a price of US$120m. This followed the announcement in late April 2021 that the subsidiary of LafargeHolcim was planning to open 1000 new branches of its Disensa retail chain in the country by 2024.

Loma Negra reported a 13% drop in sales to US$436m in 2020 from US$500m in 2019. However, its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3% to US$139m from US$136m. This was partly aided by the sales of its Paraguayan operations during 2020. At face value, Cemento Avellaneda had a tougher time of its in 2020 with its sales down by 22% to Euro111m and EBITDA down by 9% to Euro37m. However, once adjusted on a like-for-like basis with constant currencies and without a hyperinflation adjustment, its sales and earnings actually rose by 22% and 45% respectively.

Holcim Argentina’s director Christian Dedeu was interviewed by national news agency Télam in May 2021 around the time of the upgrade at the Malagueño cement plant was officially completed. When asked by the company had made the investment he said that the country had potential for both the residential and infrastructure sectors. He also pointed out that the subsidiary of Switzerland-based LafargeHolcim had been forced to import clinker at times of high demand previously. The announcements for both the Loma Negra and Holcim Argentina new lines were made at the end of 2017 when the market hit a high in sales volumes. Since then the country has faced rocketing inflation, further delays to it debt repayment programme to the International Monetary Fund (IMF) and the coronavirus pandemic. Producing more commodities, such as clinker, domestically certainly seems enticing with high inflation and unfavourable foreign currency exchange rates. So, the new production lines from Loma Negra and Holcim Argentina are well timed in this sense unless they get hit by any mounting input costs, from imported raw materials for example. On the other hand the government’s measures to curb inflation such as reference prices for cement may constrain the cement producers’ flexibility. As the local construction industry slowly recovers after 2020, continued uncertainty lies ahead.

Kuwait: The Ministry of Commerce and Industry has banned all export and re-export of cement and other construction materials from Kuwait. However, it has allowed individual citizens to import construction materials for personal use. The ban is part of a raft of a measures intended to stem the increase in building material prices. The Kuwait News Agency has reported that cement prices rose after the resurgence of the coronavirus outbreak in India suspended Indian imports.

The ministry subsidises building materials including cement and concrete. In May 2021 it paid US$45m towards such subsidies. It continues to monitor the cement market and cement production for ‘unlawful’ price rises.

Kuwait’s cement production capacity is 9.0Mt/yr, while 2020 consumption was 6.0Mt.

India: Two pipe bombs have been found by police at India Cements plant at Sankarnagar, Tirunelveli in Tamil Nadu. The explosives were discovered after the plant manager was asked for a ransom of around US$70,000, according to the Indo-Asian News Service. Police suspect that the bombs were left at the site by former employees whose contracts were terminated due to coronavirus-related restrictions. However, terrorist activity is also being considered. The cement producer said that no one was hurt in the incident and production at the site continues uninterrupted.