Displaying items by tag: coronavirus

India: Dalmia Bharat subsidiary Dalmia Cement and other companies are introducing a raft of new safety measures to counteract an increase in coronavirus cases, according to the Economic Times newspaper. The companies’ efforts include creating bio-bubbles for workers, reintroducing working from home where possible, changing shift patterns, conducting rapid testing and, not allowing outsiders into facilities without a negative coronavirus test and organising vaccination stations.

Nepal: Cement producers are unable to fully exploit increased demand following the coronavirus outbreak’s decline due to problems accessing reliable electricity. The Kathmandu Post newspaper has reported that outages and reduced power have stopped production for some companies and led to increased costs. Brij Cement has reportedly resorted to diesel generators, increasing cement’s production costs by US$0.26/bag.

Brij Cement’s general manager Ravi Kumar said, "It is difficult to run a factory without regular electricity supply. And even if there is power supply, it keeps fluctuating, causing problems."

China: China National Building Materials (CNBM) has provided details of its subsidiaries’ efforts to prepare for the resumption of work following the end of the coronavirus outbreak in China and prevention of further outbreaks. The group set out 10 management measures, according to which its subsidiaries: implemented government and group regulations and requirements, took effective measures for work resumption, promoted Covid-19 awareness, formulated response measures, organised epidemic prevention and control, health-checked staff, provided sanitary equipment, controlled contact at work, including with outsiders, established isolation sites and disposed of hazardous materials.

The group said, “Each subsidiary overcame difficulties such as shortage of raw materials for production, poor transportation of products, difficulty in controlling the personnel that pick up goods in plant, and shortage of anti-epidemic materials to coordinate and promote the resumption of production.” It added, “The resumption of production has stabilised the enterprise's efficiency and staff, and maintained the orderly connection of the production chain of the whole building materials industry. We believe that as long as we have firm confidence, withstand the pressure and redouble our efforts, we will be able to minimise the adverse impact of the epidemic and make positive contributions to the stable development of economy and society.”

UK: Business consultant Catax has reported an 8% year-on-year rise in the UK construction sector’s research and development spending in 2020 to Euro432m from Euro401m in 2019. Total UK spending in the area across all sectors grew by 5% year-on-year to Euro45.1m. Gross domestic product fell by 9%.

Chief executive officer Mark Tighe said, “The pandemic stopped businesses in their tracks but those reliant on innovation clearly didn’t take their foot off the gas.” He added, “The construction sector shut completely in the first lockdown but, even so, the industry still grew its research and development spending on an annual basis last year. This will put the sector on a strong footing as we recover from the impact of the pandemic.”

Financial results for 2020 from the major Chinese cement companies are now out, making it time for a recap. Firstly, information from the China Cement Association (CCA) is worth looking at. The country had a cement production capacity of 1.83Bnt/yr in 2020. For an idea of the current pace of industry growth, 26 new integrated production lines were built in 2020 with a clinker production capacity of just under 40Mt/yr.

This is as one might expect from the world’s biggest cement market. However, the CCA also revealed that the country has over 3400 domestic cement companies, of which two thirds are independent cement grinding companies. Most of these were reportedly created during the late 2000s as dry kilns started to predominate. The CCA is concerned with the quality of the cement some of these companies produce and the lack of order in this part of the market such as regional imbalances. This suggests that the government’s attempts to consolidate the cement industry as a whole had led to the independent companies heading down the supply chain. It also raises the possibility that the government-led consolidation drive may move to grinding next. One news story to remember here is that in February 2021 the CCA called for its industry to respect competition laws following a government investigation. Later in the month it emerged that eight cement companies in Shandong Province had been fined US$35m for price fixing in a sophisticated cartel whereby the perpetrators went as far arranging a formal price management committee to regulate the market.

The CCA described 2020 as a year of sudden decline, rapid recovery and stability. Coronavirus hit cement output in the first quarter of 2020 leading to unprecedented monthly year-on-year declines before it bounced right back in a classic ‘V’ shaped recovery pattern. Despite the pandemic and bad weather later in the year, annual output rose by 2% year-on-year to 2.37Bnt in 2020 from 2.32Bnt in 2019. This has carried on into 2021 with a 61% increase in January and February 2021 to 241Mt from 150Mt in the same period in 2020. That’s not surprising given that China was suffering from the pandemic in these months in 2020 but the growth also suggests that the industry may have gone past stability and is growing beyond simply compensating for lost ground.

Graph 1: Year-on-year change in cement output in China, January 2010 - February 2021. Source: National Bureau of Statistics of China. Note that accumulated data is issued for January and February each year so these months show a mean figure.

Chart 2: Annual cement production growth by Province in 2020. Source: China Cement Association.

Chart 2 above shows cement production in 2020 from a provincial perspective. Note the sharp decline, more than 10% year-on-year, in Hubei Province (shown in dark green). Its capital Wuhan is where the first documented outbreak of coronavirus took place followed by a severe lockdown. Zooming further out, China’s clinker imports grew by 47% year-on-year to 33.4Mt in 2020. This is the third consecutive year of import growth, according to the CCA. The leading sources were Vietnam (59%), Indonesia (10%), Thailand (10%) and Japan (8%). China has become the main export destination for South East Asian cement producers and Chinese imports are expected to continue growing in 2021.

Graph 2: Revenue of large Chinese cement producers in 2020 and 2019. Source: Company reports.

Moving to the financial figures from the larger Chinese cement producers, CNBM and Anhui Conch remain the world’s two largest cement producing companies by revenue, beating multinational peers such as CRH, LafargeHolcim and HeidelbergCement. Anhui Conch appeared to be one of the winners in 2020 and Huaxin Cement appeared to be one of the losers. This is misleading from a cement perspective because Anhui Conch’s increased revenue actually arose from its businesses selling materials other than clinker and cement products. Its cement sales and cement trading revenue remained stable. On the other hand, Huaxin Cement was based, as it describes, in the epicentre of the epidemic and it then had to contend with flooding along the Yangtze River later in the year. Under these conditions, it is unsurprising that its revenue fell.

CNBM’s cement sales revenue fell by 3% year-on-year to US$19.5bn in 2020 with sales from its new materials and engineering compensating. Anhui Conch noted falling product prices in 2020 to varying degrees in most of the different regions of China except for the south. CNBM broadly agreed with this assessment in its financial results. Anhui Conch also reported that its export sales volumes and revenue fell by 51% and 45% year-on-year respectively due to the effects of coronavirus in overseas markets. The last point is interesting given that China increasingly appears in lists of major cement and clinker exporters to different countries. This seems to be more through the sheer size of the domestic sector rather than any concerted efforts at targeting exports.

One major story on CNBM over the last 15 months has been its drive to further consolidate its subsidiaries. In early March 2021 it said it was intending to increase its stake in Tianshan Cement to 88% from 46% and other related transactions. This followed the announcement of restructuring plans in mid-2020 whereby subsidiary Tianshan Cement would take control of China United Cement, North Cement, Sinoma Cement, South Cement, Southwest Cement and CNBM Investment. The move was expected to significantly increase operational efficiency of its constituent cement companies as they would be able to start acting in a more coordinated manner and address ‘fundamental’ issues with production overcapacity nationally.

In summary, the Chinese cement market appears to have more than compensated for the shocks it faced in 2020 with growth in January and February 2021 surpassing the depression in early 2020. Market consolidation is continuing, notably with CNBM’s efforts to better control the world’s largest cement producing company. Alongside this the CCA may be starting to suggest that rationalisation efforts previously focused on integrated plants should perhaps be now looking at the more independent grinding sector. The government continues to tighten regulations on new production capacity and is in the process of introducing new rules increasing the ratio of old lines that have to be shut down before new ones can be built. Finally, China introduced its interim national emissions trading scheme in February 2021, which has large implications for the cement sector in the future, even if the current price lags well behind Europe at present.

China: CNBM’s revenue rose by 0.5% year-on-year to US$38.9bn in 2020 from US$38.7bn in 2019. Its profit for the year grew by 17% to US$3.30bn from US$2.81bn. However, its cement sales revenue fell by 3% to US$19.5bn from US$20.0bn and its concrete sales fell slightly to US$7.80bn. Cement-based earnings before interest, taxation, depreciation and amortisation (EBITDA) fell slightly to US$5.73bn and concrete-based EBITDA rose by 53% to US$794m. Both cement and concrete sales volumes grew slightly to 340Mt and 112Mm³ respectively. Overall group revenue rose due to sales by the group’s new materials and engineering divisions. The share of its overseas revenue fell to 2% in 2020 from 13% in 2019 due to declines in most regions with the exception of the Americas and Oceania.

“2020 was an extraordinary year, faced with severe and complicated domestic and international environment, especially the serious impact from Covid-19,” said Cao Jianglin, chairman of CNBM. He added, “The foundation of economic recovery in China is not yet solid, and the task of industry transformation and upgrading is arduous.” The company plans to continue implementing supply side structural supply reforms and work towards government CO₂ emission peak targets and carbon neutrality plans.

Indonesia: Semen Indonesia has detailed its plans for future exports of cement to North America. The Investor Daily newspaper has reported that the producer and subsidiary Solusi Bangun Indonesia will target 0.5 – 1Mt of cement exports to North America in 2021, according to president director Hendi Santoso. The export plans will be carried out in partnership with Japan-based Taiheiyo Cement, which already has a US market presence and owns a 15% stake in Solusi Bangun Indonesia. Hendi said that the move aims to ‘cushion’ the decline in domestic cement sales, down by 28% bulk and 13% bagged year-on-year in 2020. The company successfully exported cement to Australia, Bangladesh, China, Fiji and Sri Lanka in 2020.

President commissioner Rudi Antara said, "The Covid-19 outbreak still colours our lives. There is no other choice but to increase business efficiency and the top line outside of our main markets."

France: Hoffmann Green Cement’s consolidated net revenue fell by 19% year-on-year to Euro504,000 in 2020 from Euro620,000 in 2019. Net loss was Euro6.12m, up by 41% from Euro4.34m. Loss in earnings before interest, taxation, depreciation and amortisation (EBITDA) more than doubled to Euro4.13m from Euro1.85m. During the year, the group began construction of its second cement plant, in Vendée, France.

Co-chairs Julien Blanchard and David Hoffman said, “We are happy with what we achieved at Hoffmann Green in 2020, in spite of the pandemic. We signed numerous technical and commercial collaboration contracts with key players in the construction sector such as Groupe GCC, KP1, Cemex and Eiffage Génie Civil, taking our order book to over 190,000t to date.” They reconfirmed the target of a 3% French cement market share by 2025/2026, adding, “The commercial dynamic continues at the beginning of 2021 with the signing of contracts with Ouest Réalisations for the construction of housing, and EdyCem to develop low carbon footprint concretes.”

Blanchard and Hoffmann called 2020 ‘the year of increasing production volumes,’ adding that the group expects on-going and future environmental legislation in all its regions to bolster demand.

Germany: ThyssenKrupp has launched an initiative to supply coronavirus testing kits for employees to self-test with. The supplier said that initiative supports the German federal government’s national testing strategy.

Chief human resources officer Oliver Burkhard said, “The health of our employees is our top priority. We want to offer our workforce the best possible protection – quickly, pragmatically and unbureaucratically. The free self-tests are an important part of our strategy for containing the coronavirus pandemic. The expansion of our company’s testing capacities shows that we are taking our social responsibility very seriously and doing everything we can to help.”

Nigeria: Dangote Cement has recorded sales of US$2.52bn in 2020, up by 16% year-on-year from US$2.18bn in 2019. Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 21% to US$1.17bn from US$965m. Total cement sales volumes rose by 8% to 25.7Mt from 23.7Mt and Nigerian cement sales rose by 13% to 15.9Mt from 14.1Mt. Highlights for the year included the start of clinker exports from the Apapa terminal and the commissioning of the Onne cement terminal in Nigeria. The group also commissioned a gas power plant in Tanzania.

Chief executive officer Michel Puchercos said, “Despite the impact of the Covid-19 pandemic, 2020 was a record year for Dangote Cement across the board. Several firsts made 2020 a productive year such as our maiden clinker shipment, maiden bond issuance and successful buyback programme. We increased our capacity by 3Mt/yr in Nigeria, commissioned our two export terminals and commissioned our gas power plant in Tanzania. All this was achieved whilst we focused on protecting our people, customers, and communities from the impact of the pandemic.”