Global Cement Newsletter

Issue: GCW335 / 10 January 2018

Headlines


Recent data from Cemsuisse, the Swiss Cement Industry Association, shows that cement shipments fell by 2.8% year-on-year to 4.3Mt in 2017. The local industry has fluctuated from a high of just below 4.7Mt in 2011 with various peaks and troughs since then as can be seen in Graph 1. The current drop has been blamed on a poor start and end to 2017 despite some rallying activity in the third quarter.

Graph 1: Cement deliveries in Switzerland, 2010 – 2017. Source: Cemsuisse. 

Graph 1: Cement deliveries in Switzerland, 2010 – 2017. Source: Cemsuisse.

The local industry tends to get overlooked somewhat due to its modest size, its geographically landlocked position and its exclusion from the European Union (EU) despite being surrounded by member states. This is a mistake though because the territory offers lessons on how a developed cement industry can function and co-exist with a large neighbour. In Switzerland’s case it has access to the EU market through a series of bilateral agreements that provide parity with EU legislation. After a potential crisis over immigration following a local referendum in 2014, Switzerland and the EU came to an agreement in 2016 that softened the labour rules for foreigners. Pertinent to the cement industry, the EU and Switzerland signed a deal to link emissions trading systems in 2017. It is currently anticipated to come into force in 2019. Trading in the EU may come at the price of free movement of labour but emissions trading parity will also help to protect Switzerland’s cement plants.

The country has a cement production capacity of 4.3Mt/yr according to Global Cement Directory 2017 data. This divides into three plants operated by LafargeHolcim, two by Ireland’s CRH’s local subsidiary Jura Cement and one by Vigier Cement, a subsidiary of France’s Vicat. Most of these plants are around the 0.8Mt/yr mark, with the exception of Jura’s smaller Cornaux plant.

After a strong performance in 2016 with growing cement sales volumes, LafargeHolcim started 2017 with continued positive cement sales but this failed to compensate for low aggregate sales and falling ready-mix (RMX) concrete sales. CRH reported a similar experience that it blamed on poor weather at the start of the year and a competitive environment. This then led to an 8% fall in cement sales in the first nine months of 2017 with RMX sales and operating profit down too. Vicat’s experience in the country followed that of its competitors, with cement sales rising slightly over the first three quarters but concrete and aggregate sales dropping. Among other reasons it blamed the situation on the completion of road and civil engineering projects.

Cembureau, the European Cement Association of which Cemsuisse is a member, forecast a stable year in 2017 following the wind-down of infrastructure projects with support from the housing sector. However, it then expected the market to soften as demographic trends saw slower growth in population reduce housing demand. This state appears to have arrived early. On the plus side though the industry’s sustainability credentials have grown as the split between truck and train transport of cement hit its highest ratio in favour of rail in 2017 at 53%. The trend switched from truck to train in 2013 and it hasn’t looked back since then.

As a mature economy in the heart of Europe, Switzerland generally pops up in the industry news as the home of the world’s largest non-Chinese cement multinational, LafargeHolcim. That company’s headquarters are in Jona and Holcim had its headquarters in Holderbank. LafargeHolcim’s single largest shareholder, with an 11% share, is the Swiss billionaire Thomas Schmidheiny, who inherited his portion of the family business. He notably called for a better deal for Holcim during the merger negotiations between Lafarge and Holcim in 2015 and boardroom struggles have dogged the combined company ever since. Consideration should also be granted to the country’s other engineering and construction industry related multinationals such as ABB, Sika and the like. By the numbers Switzerland has a case for being one of the world’s most important nations for the cement industry.


US: Lehigh Cement has made three appointments to the management of its Mitchell cement plant at Allentown in Pennsylvania.

Quentin McGahey, former plant manager at the Mitchell cement plant, has been appointed as Vice President, Cement Operations Northeast, based in Allentown, Pennsylvania. McGahey joined Lehigh Cement Company in 2016 and has more than 22 years of experience in mining and cement manufacturing. McGahey also served as an army officer before beginning his civilian career.

Jerry Miller, former assistant plant manager at the Mitchell plant, is now plant manager at the unit. Miller joined the company in 1980 and has more than 37 years of cement production and management experience at the company’s facilities in Indiana, Pennsylvania and Iowa.

Cody Hall, former safety manager at the Mitchell plant, is now assistant plant manager. Hall joined Lehigh Cement Company in 1995 and has more than 21 years of cement industry and management experience.


UK: Aggregate Industries has appointed Pablo Libreros as the managing director of its aggregates division. Libreros joined Aggregate Industries in 2017 as Director of Growth and Innovation from the LafargeHolcim Group, where he was previously chief executive officer (CEO) for its Costa Rica business. Prior to this he held various senior roles, including Logistics Director and Supply Chain Director, within the group’s Brazil division.


US: Summit Materials has appointed Karl H Watson Jr as its chief operating officer and executive vice president. He suceeds Douglas C Rauh.

Watson holds over 25 years of experience in the construction materials industry. In 2017, he served as President, Cement & Southwest Ready Mix at Martin Marietta Materials. Prior to joining Martin Marietta, Watson served in various leadership positions at Cemex, including President, Cemex USA. Prior to Cemex's acquisition of Rinker Group, Watson held various executive positions at Rinker in both the US and Australia.

Watson is currently on the board of directors of the Texas Aggregates & Concrete Association and on the executive committee of the Portland Cement Association where he served as the vice chairman from 2013 to 2015. He is a past chairman of the National Ready Mix Concrete Association and the Florida Concrete and Products Association and was on the board of directors of the National Stone, Sand and Gravel Association from 2007 to 2011. Watson has a Bachelor's of Science degree in Business Administration from Palm Beach Atlantic University.


Germany: Schenck Process has appointed Keith Cochrane as chairman and Harry Kenyon-Slaney as a member of its Advisory Board. The appointments follow the completion of Blackstone’s acquisition of the measuring and process technology equipment company.

Cochrane is currently the interim chief executive officer (CEO) of Carillion, prior to which he served as the CEO of the Weir Group, a manufacturer of highly-engineered products and services for the minerals, oil and gas and power industries. He joined Weir as Finance Director in July 2006 and was appointed CEO in November 2009. In 2015, Cochrane was appointed as the UK Government’s Lead Non-Executive Director for the Scotland Office and Office of the Advocate General. He is a Chartered Accountant and a member of the Institute of Chartered Accountants of Scotland. Cochrane was elected a Fellow of the Royal Society of Edinburgh and appointed CBE in 2016.

Kenyon-Slaney is currently Non-Executive Chairman at Gem Diamonds having been appointed in June 2017. He holds over 33 years of experience in the mining industry, principally with Rio Tinto. Until 2015, Kenyon-Slaney was a member of the Group Executive committee of Rio Tinto where he held the roles of CEO of Energy, and before that CEO of Diamonds and Minerals. Kenyon-Slaney also serves as a senior advisor to McKinsey & Co.

In addition, Lionel Assant, Juergen Pinker and Saleh Panahi, all of Blackstone, have been appointed to the Advisory Board.


US: Motion Industries has made three appointments to its management with effect from 11 December 2017.

Randy Breaux has been promoted to Executive Vice President of Marketing, Distribution, and Purchasing. In 2016, he was promoted to his most recent position of Senior Vice President of Marketing, Distribution, and Purchasing. He joined Motion Industries in 2011 as Senior Vice President after over 20 years at Baldor Electric.

Kevin Storer has been promoted to Executive Vice President of US Operations and President of MI Mexico, and will maintain responsibility for all field branch sales in the US and Mexico. He began his career with Motion Industries in the West Group in 1987 before being promoted in 2016 to his most recent position as Senior Vice President of US Operations and President of MI Mexico.

Mark Stoneburner has been promoted to Senior Vice President of Industry Segments and Business Development. He joined Motion Industries in 2016 as Corporate Account Vice President - Industry Segments, bringing with him 33 years of industry experience. Stoneburner will continue to share responsibility for merger and acquisition (M&A) strategy.

Motion Industries is an industrial parts distributor of bearings, mechanical power transmission, electrical and industrial automation, hydraulic and industrial hose, hydraulic and pneumatic components, industrial products, safety products, and material handling. It is a subsidiary of Genuine Parts Company based in the US.


Pakistan: A new production line at Attock Cement’s Hub plant in Balochistan has started operation. The line has a cement production capacity of 1.2Mt/yr and it increases the company’s total production capacity to 3Mt/yr. The line was first announced in 2015 at a cost of US$120m. Loesche provided a cement mill for the project in 2017 under contract from the Hefei Cement Research & Design Institute.


Bangladesh: Lafarge Holcim Bangladesh has completed its purchase of Holcim Cement Bangladesh for US$60.2m. The deal includes three cement grinding mills with a total production capacity of 2.2Mt/yr. Lafarge Holcim Bangladesh, formerly known as Lafarge Surma Cement, is a joint venture between LafargeHolcim, Cementos Molins and other local partners.


Vietnam: The Vietnam Cement Industry Corporation’s (Vicem) cement sales rose by 3% year-on-year to 26.6Mt in 2017. 23.6Mt of cement and clinker were sold locally and 3Mt were exported, a drop of 3%, according to the Viet Nam News newspaper. In 2018 the state-owned cement producer plans to produce 19.7Mt of clinker, a rise of 2%, and to sell over 28Mt of cement and clinker, a rise of 4%. The company intends to focus on ‘high-efficiency’ products to reach this target.


India: Ambuja Cement has been ranked seventh in the Construction Material category of the Dow Jones Sustainability Index (DJSJ) 2017. The subsidiary of LafargeHolcim was invited to participate in the DJSI Emerging Markets Index and beat its score from 2016. Each year about 2500 global companies, listed on the stock exchange, belonging to about 59 economic sectors, are invited to participate in the DJSI.


Algeria: Groupe des Ciments d’Algérie’s (GICA) cement production rose by 11% year-on-year to 14Mt in 2017 from 12.6Mt in 2016. The cement producer beat its own forecast of 13.2Mt for the year, according to the L’Expression newspaper. Production rose in 2017 due to the opening of its Aïn El Kebira, Sétif cement plant in the first quarter. Local production capacity is forecast to reach 40.6Mt/yr by 2020 with 20Mt/yr supplied by GICA, 11.1Mt/yr supplied by LafargeHolcim and the remainder from other companies.


Uganda: Three new cement plants or upgrades to existing plants opening in 2018 are expected to dwarf local demand. Hima Cement, a subsidiary of LafargeHolcim, plans to open a new 1Mt/yr grinding plant at Nyakesi, Tororo Cement is expanding its plant to 3Mt/yr and Kenya's National Cement is building a plant at Mbale, according to the Ugandan Independent newspaper. Following completion of the three projects local production capacity will rise to 6.8Mt/yr from 3.6Mt/yr. Local demand is 2.4Mt/yr.

Cement industry executives are expecting growth in the construction industry as the government starts infrastructure projects in the oil and gas sector. The cement producers also expect export markets to support local production capacity growth, particularly in South Sudan, western Kenya and eastern Democratic Republic of Congo.


Colombia: Cemex Colombia has paid a US$25.3m fine to the Superintendent of Industry and Commerce (SIC). The penalty follows an investigation into price fixing by Cemex, Cementos Argos, and Holcim and six senior managers, according to the El Economista newspaper. However Cemex plans to lodge an appeal with the Contentious Administrative Court to reverse the fine.

The fine covers behaviour by the companies between January 2010 and December 2012. SIC’s investigation discovered that collusion between the cement producers artificially increased the price of cement by 30% despite inflation being 9% during the period.


Germany: The former Portland-Zementwerke Gebr. Seibel’s cement plant at Erwitte in North Rhine-Westphalia has rebranded within the Thomas Gruppe. The name change follows the purchase of the plant and its limestone deposits by Thomas Gruppe in late 2017.


Switzerland: Data from the Swiss Cement Industry Association (Cemsuisse) report that cement shipments fell by 2.8% year-on-year to 4.3Mt in 2017. In 2016 shipments rose by 4.2% to 4.4Mt, according to the Swiss Telegraphic Agency. An initial drop in shipments in the first half of 2017 was partly absorbed by better trading subsequently. However, the fourth quarter of 2017 saw falling sales volumes. Rail shipments increased considerably, by 53%, during 2017.


Canada: Caisse de dépôt et placement du Québec (CDPQ), the owner of McInnis Cement, has hired advisors to consider options for the cement producer including a sale or bringing in a new investor. No final decision has been made and the pension investment management company may decide to keep McInnis Cement, according to sources quoted by Bloomberg. CDPQ took control of the McInnis Cement project in 2016 following cost overruns and delays. The plant eventually opened in mid-2017.


India: Sanghi Cement plans to upgrade its production capacity to 8.1Mt/yr from 4.1Mt/yr. The expansion plan will consist of a 3.3Mt/yr upgrade to its cement plant at Sanghipuram in Gujarat and a 2Mt/yr upgrade to its satellite grinding plant. In addition the cement producer plans to build a 65MW thermal power plant at the main plant. The cost of the project will be US$197m and this will be mostly funded from borrowing.


India: The deadline for bidding for Binani Cement has been extended until 15 January 2018 as the cement company takes potential buyers on a tour of its grinding plant in Dubai. The Rajasthan-based cement producer is being sold following bankruptcy proceedings, according to the Daily News & Analysis newspaper. The family-owned company with cement plants in Indian, China and the UAE has attracted a high level of interest from both international and local cement companies.


Indonesia: Semen Indonesia forecasts that domestic cement consumption will grow at a rate of 5 – 7% year-on-year in 2018, a lower rate than the level of 7.8% recorded for the first 11 months of 2017. Semen Indonesia corporate secretary Agung Wiharto said that the prediction was based on continued demand for cement from government infrastructure projects, according to the Jakarta Post. The company also took other factors - such as inflation, political stability and market confidence - into account in its sales projection. Indocement has also forecast a cement consumption growth rate of 5 – 6% in 2018. Both companies reported reduced earnings in the third quarter of 2017.


China: Clinker imports more than quadrupled to 184,600t in the first 11 months of 2017. Data published by the Chinese Cement Association suggests that rising domestic cement prices encouraged the import market, according to Caixin Media. Most of the imports were purchased from Vietnam by companies based in Hainan, Shangdong, Zhejiang and Beijing.


India: The credit agency ICRA forecasts that rising energy and freight costs due to higher pet coke, coal and diesel prices during the first half of 2017 – 2018 financial year may hit the profits of cement producers. Petcoke prices grew by 32% year-on-year in the first half of the year and coal prices rose by 44%, according to the Press Trust of India. Sabyasachi Majumdar, an analyst at ICRA, said that higher power, fuel and freight costs were likely to continue. He added that the ability of cement companies to raise their prices was crucial to maintaining profit levels.


Uzbekistan: Aumund Fördertechnik has provided an update on an order for Almalyk Mining and Processing (AGMK) for a 1.5Mt/yr cement plant it is building in Sherabad. In May 2017 Aumund won the order for three drag chain conveyors with capacities from 7.5t/hr to 200t/hr for discharge of limestone, gypsum and pozzolan for the plant. In October 2017 an additional order was added for a Louise type drag chain conveyor for discharge of clinker dust.

Overall, Aumund is providing over 250t of machinery to AGMK. In 2018 the engineering company will supply to Uzbekistan at least 10 belt chain bucket elevators with capacities from 21t/hr to 500t/hr, and centre distances between 16.6m and 120m. The largest item in the delivery is a pan conveyor, with a centre distance of 148m and a clinker conveying capacity of 300t/hr. The clinker conveying system comprises two further Aumund pan conveyors with the same capacity but centre distances of 54m and 65m. There are also 19 silo discharge gates included in the package.


Cuba: The Punta Alegre gypsum mine near Ciego de Ávila supplied over 56,400t of gypsum to the local cement industry in 2017. The mine mainly supplied Cementos Cienfuegos, according to the Invasor newspaper. Despite the disruption caused by Hurricane Irma in mid-2017 the mine beat its annual production target of 50,000t. The unit installed a new mill from Chinese suppliers that increased its production capacity to 100t/hr in 2015.