Displaying items by tag: weather

Ireland: CRH expects to record increased earnings before interest, taxation, depreciation and amortisation (EBITDA) and profit before tax in its 2022 results. The producer has predicted an EBITDA of US$5.5bn, up by 10% year-on-year from US$5bn in 2021. This would entail a 0.8% year-on-year decline in its fourth-quarter EBITDA in the year. The producer also expects its profit after tax to rise by comparison to its 2021 figure of US$3.1bn.

CRH said that its projection “captures the impact of bad weather, higher energy costs in Europe, the risk of destocking in the building products chain and all this against tough comparisons from 2021.”

US: Eagle Materials’ consolidated sales were US$1.68bn during the first nine months of its 2023 financial year, up by 16% year-on-year from US$1.45bn in the corresponding period of the 2022 financial year. Its net earnings were US$361m, up by 20% year-on-year from US$300m.

In its cement business, the group noted a drop in volumes and a rise in prices year-on-year during the third quarter of the 2023 financial year. Low inventory levels and ‘difficult weather’ reportedly impacted on demand. The group’s cement volumes fell by 13% year-on-year to 1.7Mt. This resulted in a 2% drop in the cement business’ revenues, to US$256m.

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.

China: Sichuan Yadong Cement’s plant in Sichuan has restarted production following a suspension of electricity to industrial users due to a heat wave. The local authorities stopped supplying industrial plants in late August 2022. The subsidiary of Taiwan-based Asia Cement Corporation also reduced staff levels at the plant to cope with the extreme weather event.

Boral admitted this week that high energy costs in Australia had forced it to reduce production levels. Chief executive officer Zlatko Todorcevski revealed to Reuters that the company was temporarily cutting back some unspecified areas of its operations. He also said that it was going to have to pass on growing energy prices directly on its customers.

This has followed mounting alarm at fuel prices in successive financial reports by the building materials company leading to revised earnings guidance being issued in May 2022. Bad weather was responsible for the larger share of the expected additional adverse impact to underlying earnings in its 2022 financial year but around US$10m was anticipated from rising fuel prices. Growing coal and electricity prices were said to be impacting its production and logistics costs, with price rises in January and February 2022 having proved insufficient to keep up with inflation. In a trading update in March 2022 the company said that its exposure to coal prices was unhedged for the second half of its 2022 financial year, to June 2022.

An energy crisis in Australia may seem hard to understand given that the country is one of the world’s biggest exporters of coal and gas. Yet, the country has faced a number of problems with its electricity generation sector in 2022 with disruptions to coal supplies to power stations, outages, ongoing maintenance and a cold winter that adversely affected the market. This led the Australian Energy Market Operator to suspend the country’s main wholesale market on 15 June 2022 in an attempt to stabilise the supply of electricity. New South Wales has also reportedly forced coal mines to prioritise the local market over exports. Energy minister Chris Bowen even asked the residents of New South Wales to try and reduce electricity use in the evenings in an attempt to prevent blackouts. However, with the consumer electricity market now looking more stable, attention has turned to industrial users such as Boral.

Global Cement Weekly has covered energy costs for cement producers a couple of times in the last year. There has been plenty of angst about growing energy costs on cement company balance sheets since mid-2021 as the logistics problems following the lifting of the coronavirus-lockdowns became clear. The biggest story at this time was an energy crisis in China that caused supplies to be rationed to industrial users. This then intensified with the start of the war in Ukraine in February 2022 and energy prices went up everywhere as economic sanctions were imposed upon Russia. One standout was Turkey where cement producers publicly raised the alarm about jumps in coal prices.

Recently, some North American lime producers such as Lhoist North America and the Mississippi Lime Company have been notably bold in announcing price rises due to energy costs and other factors. This week, for example, Lhoist North America said it had raised the price of its lime products by up to 45%. It cited the ‘challenging circumstance’ for all parties at an ‘unprecedented’ time. One alternative to the direct approach of simply putting up prices has been the use of energy surcharges. Japan-based Taiheiyo Cement announced earlier in June 2022 that it was going to introduce a coal surcharge for its cementitious products in September 2022 due to rising energy prices. Its system is based on the coal price with revisions planned every two months. The scheme will run for one year in the first instance. How customers will react to this remains to be seen.

We have looked above at a few disparate examples of the problems that energy costs have been causing cement and lime producers over the last month. These issues look set to continue in an acute phase while the war in Ukraine rages on, but the longer term trends from the economic recovery from coronavirus will undoubtedly last for longer. As examples in Australia and China have shown, local energy crises can easily spill over into the industrial sector as domestic users are prioritised. So, even if cement companies source their supplies carefully, they may face issues if the wider market struggles. Meanwhile, cement producers face the dilemma of justifying price rises to customers adapting to mounting inflation. Taiheiyo Cement has shown one way of doing this. The problems caused by surging energy prices to other cement companies look set to become more apparent in the next few months as reporting of the first half of the year emerges.

Australia: Boral has updated the market that ‘exceptional’ wet weather on the East coast of Australia ‘significantly’ disrupted its New South Wales and South East Queensland operations in February and early March 2022. The Australian newspaper has reported that CEO Zlatko Todorcevski has forecast that the disruption to cement production and deliveries will have a negative impact of US$17.1m on the producer’s earnings in the first quarter of 2022. Coal and diesel costs have also risen ‘sharply’ so far in the quarter, to partly offset which the company has raised its cement prices. It now forecasts full-year earnings from continuing operations, excluding property, of US$108 – 115m.

Philippines: Cemex says that its integrated APO Cement plant in Naga City, Cebu is operational following Typhoon Odette. It reported to the Philippine Stock Exchange that the site had suffered property damage but that key production equipment had not sustained major damage. However, it has scaled back product dispatch due to infrastructure and logistical challenges caused by the aftermath of the typhoon. It also offered its thoughts to “those adversely affected by the storm and said that, “The safety and well-being of employees, contractors and communities are an immediate concern.

It’s time for a macroscopic view of the Chinese cement sector this week with the release of the half-year financial results by some of the larger Chinese cement producers. On the national level the picture so far in 2021 has been one of continued recovery from the coronavirus lockdowns at the start of the year and then a slowing market as state controls on real estate speculation started to take effect. However, poor weather in the spring and mounting raw material prices appear to have compounded the effects of the real estate regulations, leading to price falls.

Cement output data from the National Bureau of Statistics of China in Graph 1 shows that local production took a knock in the first quarter of 2020 due to the coronavirus pandemic and this strongly recovered in the same period in 2021. The market recovered fast in mid-2020 and so the year-on-year growth for the second quarter was less in 2021. Output on a monthly basis remained ahead year-on-year from April 2020 and stayed ahead until May 2021. However, output in June 2021 was behind the figure in June 2020 and the figure for July 2021 was behind both July 2020 and July 2019.

Graph 1: Cement output by quarter in China, 2019 – mid-2021. Source: National Bureau of Statistics of China.

The Chinese Cement Association (CCA) was lamenting falling cement prices at the start of July 2021. It blamed the situation on slowing infrastructure development in some regions, increasing government restrictions on real estate development, especially poor mid-year weather and higher input prices such as for steel. China Resources Cement (CRC) expanded upon the point about increasing real estate regulations in its financial results for the first half of 2021 explaining that the Chinese government has been promoting a policy that aims to ensure that “residential properties are not for speculation” including controls on the financing of real estate. Later in mid-August 2021 the CCA reported that prices were recovering in east and central-southern regions although the situation remained poor in Guizhou province with shipments down to 60% of normal levels. Production control measures are expected to be implemented to stabilise the situation.

Graph 2: Sales revenue of large Chinese cement producers in first half of year, 2019 – 2021. Source: Company reports.

On the corporate side the sales revenue from some of the large Chinese cement producers mostly show the usual gap-tooth pattern that coronavirus has created everywhere as the market recovered. Notably Anhui Conch managed to avoid falling sales year-on-year in the first half of 2020. However, the CCA’s observation above about rising input costs is visible in the falling profits of some (but not all) of the companies covered here. For example, Anhui Conch’s net profit fell by 7% year-on-year to US$2.32bn in the first half of 2021. It blamed this on a significant rise in the price of raw coal. CRC also reported falling profits attributable to increased production costs.

CNBM reported an increase to cement and clinker sales volumes of 7.6% to 177Mt and concrete sales volumes by 13.4% to 52Mm³. It noted that, “In the first half of 2021, the national cement market showed the characteristics of high price level fluctuation adjustment.” From January to April 2021 local fiscal policy boosted demand for cement but from May 2021 continuous heavy rainfall and increasing bulk commodity prices slowed infrastructure project development. Anhui Conch’s cement and clinker sales volumes for both production and trading grew by 11.5% to 208Mt. It reported stable market demand in eastern, central and southern regions but noted falling prices in the west.

Looking ahead, two issues, among many, to consider are carbon trading and imports. The former has been coming for a while and was launched formally online nationally in mid-July 2021 for the power generation industry. The carbon price was nearly Euro7/t in late July 2021 in China compared to around Euro53/t in the European Union. Cement and steel are expected to join the Chinese national scheme in the next phase although analysts believe that issues such as data gathering, permit allocation rules, accounting standards, sector reduction targets and related financial support all need to be improved before this can happen. Imports are a connected issue and it has been interesting in recent months to hear financial analysts point out the risks, for example, of major exporting nations such as Vietnam relying on China so much. The CCA reckons that China imported 33.4Mt of clinker in 2020, an increase of 47% year-on-year, with 60% of this derived from Vietnam. With the Chinese government trying to tackle cement production overcapacity and meet growing environmental targets, imports look set to become a ‘hot ticket’ issue. In this context it is telling to see talk from the CCA of ensuring standards for imports such as verified carbon emissions. Naturally, the imports that could be trusted the most will probably be the ones from plants that Chinese cement producers have built themselves overseas. As waste importers into China found out previously, relying heavily on one market with strong state controls carries considerable risks. Cement exporters in South-East Asia take note.

China: China Tianrui Group has recorded first-half consolidated sales of US$883m in 2021, up by 9% year-on-year from US$809m in the first half of 2020. Cement sales volumes grew by 10.6% to 17.5Mt from 15.8Mt. Its profit attributable to owners was US$116m, up by 5% from US$111m. The group reported that the national cement industry recorded record production in the first half of 2021 however this slowed in May and June due to poor weather and increasing commodity prices.

Belgium: Magotteaux says that its production plants at Vaux-sous-Chèvremont and Trooz near Liege were ‘severely hit’ by flooding in mid-July 2021. The industrial equipment and services supplier is currently assessing the extent of the damage but production is expected to be affected. It reported that all of its staff were safe following the incident.