South African cement producers may be cheered this week with the news that Iranian cement is causing grief in Pakistan once more. Imported cement from Iran is allegedly undercutting local product in Pakistan through massive 'under-invoicing.' Sources quoted in Pakistan – itself a cement exporter (!) – described the situation as 'incomprehensible.'

The issue here is that Iran is doing to South Africa what Pakistan is doing to South Africa: selling cement cheaper than locally produced product. It's especially ironic this week because one Pakistani cement producer, Lucky Cement, is taking the fight against South African anti-dumping duties to the courts.

A report from July 2015 reckoned that Pakistan's cement exports might drop by 10 – 15% at the start of 2016 as economic sanctions on Iran are lifted. The report had a bit more sense than the usual scaremongering. It predicted that removing sanctions in Iran would not affect competition in Afghanistan as Iranian producers generally targeted Kandahar.

Despite this, cement exports to Afghanistan from Pakistan hit a high of 4.73Mt in the 2010 – 2011 financial year, according to All Pakistan Cement Manufacturers Association (APCMA) data. Since then they dwindled slightly for the next couple of years before decreasing more sharply from mid-2013. Overall exports fell by 11.57% to 7.2Mt in the 2014 – 2015 period. Pakistan's exports to Afghanistan may have been hit by the departure of North Atlantic Treaty Organisation (NATO) forces and a new cement plant in neighbouring Tajikistan.

In part the battle seems to be about tax. In June 2015 the APCMA lobbied the Pakistan government to cut duties. At the time these included a 5% federal excise duty and a 17% general sales tax on the retail price of cement. One APCMA spokesman reckoned that these taxes added US$1.56 per bag of cement. More recently the APCMA rallied against a tax on cement exports and an increase in import duties on coal. In this climate, repeated news stories on Iranian exports to Pakistan dodging taxes don't sound so good.

Meanwhile, back in South Africa, Lucky Cement has started to take legal action against anti-dumping duties imposed upon its cement exports by the International Trade Administration Commission of South Africa (ITAC). The ITAC imposed provisional anti-dumping duties of 14.3 – 77.2% on Portland Cement originating in or imported from Pakistan from 15 May 2015 for six months. The duty was imposed on bagged cement. Pakistan-based cement producers may defend themselves by saying that they are following the laws of the countries they are exporting to. In theory Iranian exports to Pakistan that pay the correct taxes should be the same price as Pakistani products.

What this debacle shows is that things could get a whole lot worse for coastal cement markets within easy reach of Iran once the sanctions fall. National bodies like the ITAC across the Middle East, South Asia and East Africa should start tightening up their import policies now.

UK: Simon Vivian, Chief Executive of Breedon Aggregates Limited, has been appointed as Chairman of the UK's Mineral Products Association (MPA) for the next two years. He succeeded Bill Brett, effective 1 September 2015. Vivian is the third chairman of the MPA to date to serve from an independent company.

"We are delighted that Simon has agreed to pick up the baton from Bill. His wide industry knowledge and experience will be invaluable to the association as we look to set the agenda for the industry for the next 10 years and respond to the challenges ahead," said MPA Chief Executive Nigel Jackson

The MPA looks out for the interests of the UK's cement producers.

India: UltraTech Cement Ltd has reported that the tenure of S Rajgopal, Independent Director of the company, ended upon the conclusion of the annual general meeting of the company held on 28 August 2015.

The Chinese stock market volatility this week has not been a surprise for the cement industry. The question for both the local cement industry and the wider economy is how the current economic jitters are being managed. Are we witnessing the long expected hard landing of the Chinese economy or will the state planners been able to dodge it?

Growth in the housing market and infrastructure spending has been falling. The country's cement producers have reduced their production growth as the industry consolidates. First half profits in 2015 have fallen for many Chinese cement producers including China Resources Cement and Asia Cement. Anhui Conch, one of the top three cement producers in the world, reported that its first quarter profits in 2015 fell by 31%.

Chinese cement production figures have always seemed incompatible with other data suggesting incomplete information. For example, the Global Cement Directory 2015 reported China's cement production capacity at 1.48Bnt/yr. At full capacity utilisation this would suggest a national cement consumption of 1057kg/capita, a figure that bears no resemblance to any other country on earth with the exception of petrochemical giants like Saudi Arabia and Qatar. Although, to be fair to China, it's recent economic growth has been unprecedented. Poor reporting, the country's unique state regulated capitalism, language difficulties and other factors may all have contributed to confusion among western analysts.

In mid-August 2015 China devalued the Yuan in its biggest drop in 20 years. It is likely it was a strategy to boost exports to rally markets against a sliding stock market since mid June. At the time of writing the Chinese authorities have now tried cutting interest rates with a similar aim and the markets have rallied.

The effect of a devalued Yuan is relevant due to China's overcapacity in several heavy industries such as a steel and cement. Already European and North American steel bodies have cried out against the threat of fresh Chinese exports undercutting their business. Clinker exports are likely to pose less of a risk given its relative low value and high transport costs. Even so, China exported less than 15Mt in 2013, a tiny portion of its production capacity. Altering the exchange rate might well help that export figure creep up. This would be bad news for local cement producers in coastal areas of East Africa for example. Here, Chinese imports might be harder to resist than, say, southern Asian ones, due to Chinese investment in the region. Recent spats over Chinese cement imports in Kenya and Zimbabwe underline this issue.

More worrying for the wider cement industry will be the risk of Chinese cement plant manufacturers and suppliers further undercutting western firms. Eurocement signed a deal with Sinoma in November 2014 for the Chinese equipment producer to supply three 3Mt/yr production lines for US$93.3m each or just over US$30m per 1Mt of production capacity. Compare this to FLSmidth's charge to a Qatari firm of US$190m in October 2014 to build a 2.24Mt/yr production line or just over US$80m per 1Mt of production capacity. This is not a completely fair comparison due to the plants being in completely different regions, but it gives some idea of the price pressures non-Chinese equipment manufacturers face. In their defence the usual argument is that their equipment is better made. However, cement producers being able to buy even cheaper Chinese kit will not help their plight. Today we report on Dangote Cement signing yet more contracts with Sinoma to build new cement plants in Africa.

The actions of the Chinese financial authorities show that they are trying careful tweaks one-by-one to fix the situation. The real problem though is that, as China transitions from a developing nation into a developed one, broader structural changes to the general economy may be required instead of tweaks. A massively over-producing cement industry is a symptom of this and how the country copes with it is instructive to how it will succeed overall. Bold attempts to consolidate the industry have shown willingness in recent years. Unfortunately the current crisis may artificially prop up an industry that should be reducing in size.

Kenya: The board of directors of the East African Portland Cement company (EAPCC) has appointed Albert Sigei as its Chief Operating Officer with effect from 24 August, 2015. Sigei will be responsible for production operations, production engineering, supply chain management and sales and marketing. He will be based in the Athi River Office.

Sigei has worked in the cement industry for 18 years. His last role was as the Vice-President of Business Support & Ready Mix operations with Lafarge in Nigeria. He has previously worked with Pricewaterhouse Coopers. Sigei holds a BSc in Engineering from the University of Nairobi.

In early 2014 the top of the global cement producer charts looked very different to how it does today. The big four multinationals, Lafarge, Holcim, HeidelbergCement and Cemex, were clearly out in front and ahead of the rest of the global top 10. While there was discrepancy in their sizes, the largest, Lafarge (224Mt/yr) had just over twice the cement capacity of fourth-placed Cemex (95Mt/yr), with Holcim (218Mt/yr) and HeidelbergCement (122Mt/yr) between these extremes.¹ With an impressive 659Mt/yr of capacity between them, these four accounted for just shy of half of global cement capacity outside of China.

However, as those with even a passing interest in the cement sector will know, this is no longer the case. The merger between Lafarge and Holcim and the subsequent acquisition of Italcementi by HeidelbergCement has stretched out the range of the top producers significantly. Today LafargeHolcim has around 340Mt/yr of installed capacity and HeidelbergCement 200Mt/yr. Meanwhile Cemex is still 'stuck in the 90s,' with a capacity of around 92Mt/yr following the sale of its Croatian cement assets last week. The Mexican 'giant' is now almost a quarter of the size of LafargeHolcim. What does this mean for the world's number three (excluding Chinese producers) and what might the future hold?

Well... the old adage goes that you have to move forward to stand still. However, Cemex has not moved forward over the past two years, meaning that is hasn't kept up the pace with its immediate rivals. It hasn't been able to, hemmed in by the debt that it took on from its poorly-timed acquisition of Rinker in 2007. Indeed, Cemex is looking to contract further, with aims to shed a further Euro600 - 1100m of non-core assets in 2015.² Against improved positions at LafargeHolcim and HeidelbergCement, Cemex increasingly looks like an 'Americas specialist' rather than a full-blown multinational. A stake in Cemex LatAm Holdings is up for sale, but the sale of more cement plants may also be on the way. This is all being done to improve Cemex's investment grade rating from B-plus, four grades below investment grade.

If Cemex does have to shed further physical assets on the ground, it is very unlikely that it would chose to do so in the Americas, where it is a very major player. It is number one in Mexico, third in the US and well-postitioned in numerous growth markets in Central America. If push comes to shove, it is far more likely that it would sell assets that are further from home. These are in Europe, the Middle East and the Far East.

Cemex has 43% of its production capacity outside the Americas. Certain assets, such as those in Thailand, Bangladesh and the Philippines, may be appealing to CRH, which is already set to acquire LafargeHolcim divestments there and is known to be considering other purchases in the region.³ Cemex also owns several cement plants in better-performing EU economies like Germany and the UK. In Germany, the company has already completed a small downsizing exercise by selling its Kollenbach plant to Holcim (LafargeHolcim). Meanwhile, Cemex UK is a major player in the UK, where the Competition Commission has recently been very keen to increase the number of producers. Elsewhere, Cemex's share in Assuit Cement in Egypt could provide much needed revenue, as could its small stake in the Emirati markets.

Thinking more radically, and in keeping with the current trend of mega-mergers and large-scale acquisitions, could Cemex find itself the target of the next global cement mega-merger / acquisition? Certainly, its strength in Central and South America completely complements HeidelbergCement's lack of coverage here, making a future 'HeidelbergCemex' a potential winner.

The other option, if/when Cemex regains its investment rating, would be for Cemex to acquire or merge with a company further down the list of global cement produers. Africa is an obvious target, with rapid growth and a lack of Cemex assets at present. A foreigner buying up Dangote is probably out of the question, but PPC would be an interesting target, as would increasingly isolated Brazilian producers that could help shore up Cemex's South American position.

If the past 18 months in the global cement industry have shown anything, it is that we should expect the unexpected. It will be very interesting to see how all players, both large and small, will react to the recent goings on in the rest of 2015 and beyond.

1. 1. Saunders A.; 'Top 75 Cement Producers,' in Global Cement Magazine – December 2013. Epsom, UK, December 2013.

1. 2. Reuters website, 'Mexico's Cemex could sell part of business to pay down debt: CEO,' 10 February 2015. http://www.reuters.com/article/2015/02/11/us-mexico-cemex-idUSKBN0LF05320150211.

1. 3. Global Cement website, 'CRH investment spend set to pass Euro7bn with South Korea cement deal,' 12 June 2015, http://www.globalcement.com/news/item/3721-crh-investment-spend-set-to-pass-euro7bn-with-south-korea-cement-deal.

India: Prism Cement Limited has appointed Vivek Krishan Agnihotri as a director following the resignation of the previous director. The Board has also appointed Agnihotri as the executive director of cement, effective from 17 August 2015.

Take a moment to spy on the Citeureup cement plant in Indonesia. It's gargantuan! The Indocement site is one of the largest cement factories on the world. It has nine production lines with a cement production capacity of 11.9Mt/yr.

The news this week that Indocement intends to stop production at three cement production lines at its Citeureup plant strikes an uncertain tone. The decision underpins the impression of a readjusting Indonesian cement market despite the HeidelbergCement subsidiary saying that the capacity will be replaced by a new 4.4Mt/yr line at the site at the end of 2015. Temporarily reducing production capacity by 35% may not seem much on a industrial site that can produce more cement than many countries! However, a single factory this massive is likely to be particularly vulnerable to market changes.

Zooming out to the national picture, Indocement reported that its revenue dropped by 6.6% year-on-year for the first half of 2015. Domestic sales volumes of cement fell by 8.1% as domestic cement consumption in the country generally fell by 4.2%. The cement producer blamed the falls on economic stagnation and delayed government spending on infrastructure projects.

In its outlook Indocement lamented the loss of subsidies on electricity and fuels in Indonesia. Back in 2014 the government raised electric prices via a tariff under the previous administration before lowering them slightly. Then the new government raised fuel prices in November 2014 by removing subsidies with the intention of siphoning the savings to infrastructure spending. At the time a Semen Indonesia representative told the Jarkata Post that he expected cement sales to rise by 6% in 2015. This estimate had already followed a downward adjustment of predicted sales in 2014 due to familiar sounding delays in infrastructure projects (due to an election year) and a slowing economy.

In addition to this the government also imposed price cuts on cement on state-run producers in January 2015. Semen Indonesia then saw its domestic sales volumes fall by 5.3% in January – May 2015 to 9.91Mt. Subsequently Semen Indonesia saw its net profit drop by 21% year-on-year to US$163m for the first half of 2015. Around a month before its mid-year results it reported to local media that it was concentrating on exports in 2015. Reported exports have risen by over 700% to 0.18Mt in January – May 2015. Other producers such as LafargeHolcim have also reported 'challenging' market conditions. Nationally, cement demand dropped by 3.8% year-on-year to 22.9Mt for the first five months of 2015 according to Indonesian Cement Association data. This was the biggest fall since 2009.

All in all it sounds like the good times may be gone for the Indonesian cement industry, at least for now. The local economy as a whole is in a recession following two consecutive quarters of declining growth in gross domestic product (GDP). Yet cement producers are still forlornly hoping for infrastructure spending to kick in. Throw in worries about the effects of a US interest rate rise on Indonesian borrowing and the situation is looking dicey. Indocement's Citeureup complex may seem even more outsized in a year's time.

UPDATE:  A reader has pointed out that we linked the aerial photo at the start of this article to the smaller of the two cement plants in the area. This has now been changed. Note the trucks queuing to enter the plant.

India: Mangalam Cement Limited has announced that Anil Kumar Mandot has resigned from the post of CFO. The board of directors has appointed Yaswant Mishra as CFO with effect from 7 August 2015. This is in addition to his present designation of president (corporate).

A member of the Global Cement LinkedIn group recently posed a question about the relative sizes of LafargeHolcim and Nigeria's Dangote Cement in the African cement market. The correspondent wanted to get a handle on their relative sizes and how the situation would change as a result of the merger. Would Dangote lose its position as Africa's number one producer? If so, would its aggressive expansion allow it to regain its position at the number one spot?

As both one of the most rapidly-growing markets in the world for cement and the one with the most potential for future gains, Africa has been discussed in this column on many previous occasions. However, we have previously considered Africa's different regional markets, be it Dangote-dominated West Africa, North Africa, rapidly-growing East Africa or the far south, where PPC is looking to counter Dangote's growing strength.

However, the formation of LafargeHolcim and the news that HeidelbergCement will acquire Italcementi (starting with an immediate 45% stake), has massively consolidated the African market. In conjunction with Dangote's rapid development, these deals have transformed the African cement sector from one with a large number of small national and regional markets into a far more homogeneous entity. A number of key players, namely LafargeHolcim, Dangote Cement, HeidelbergCement and PPC, are present in numerous important markets all over the continent.

In answer to the aforementioned LinkedIn group member, the Global Cement Lafarge-Holcim Merger Report, states that LafargeHolcim controls 47.1Mt/yr of capacity in Africa. The new group is present in markets as diverse as Egypt, Morocco, Nigeria, South Africa and Zimbabwe. It is currently Africa's largest cement producer.

The second-largest producer at the moment is Dangote Cement, the only African-based large multinational cement producer. According to its website, it has 31.2Mt/yr of capacity currently active in Africa. The group is rapidly expanding. "We hope to commission four other cement plants in Senegal, South Africa, Cameroon and Tanzania before the end of 2015," said Aiko Dangote, Dangote Group President this week.

The new Dangote capacity that we can identify adds 4Mt/yr. This takes Dangote's total to 35.2Mt/yr. This is close to the 37.1Mt/yr of African capacity that LafargeHolcim actually owns, but Dangote is always planning its next move. Indeed this week it was rumoured to have been looking at purchasing Italcementi itself, hence HeidelbergCement's rapid movement.

In its press-release, HeidelbergCement suggests that the purchase of Italcementi will give it a position as strong as Dangote in the African market at around 30Mt/yr. It will add strong positions in Morocco and Egypt to its existing strengths on the West African coast. For its part, South Africa-based PPC currently has around 8Mt/yr of capacity in South Africa (4Mt/yr), Botswana, Zimbabwe and Ethiopia. It is currently installing capacity in the Democratic Republic of Congo and as far afield as Algeria, where it is involved in a joint venture with a local group.

Between them, these 'Big Four' share approximately 116Mt/yr of capacity in Africa. According to the Global Cement Directory 2015, this is just over half of Africa's 225Mt/yr of cement production capacity. This proportion will only increase as Dangote and PPC enlarge their presences.

The multinational players will likely not expand as rapidly, even in Africa. At the launch of LafargeHolcim, Group CEO Eric Olsen was pretty clear that the company does not plan any 'capital-intensive' expansions in the coming years. HeidelbergCement's future actions are less predictable, especially as we are yet to hear about any divestments that may be required from HeidelbergCement and Italcementi in order to satisfy competition authorities around the world.

Whatever happens in the future, it is clear that the African cement industry has undergone a significant transformation in the past few weeks. With per-capita cement consumption far lower than on other continents, there will be plenty of room for growth as well as for more acquisitions, divestments, mergers and expansion projects from the 'Big Four' and others in the coming years.