Global Cement Newsletter

Issue: GCW344 / 14 March 2018

Headlines


The latest data from the United States Geological Survey (USGS) shows that cement shipments rose by 2.4% year-on-year to 95.5Mt in 2017. Readers with elephantine memories may remember that the Portland Cement Association (PCA) revised its forecast for 2017 down to 3.1% from 4.2% in a release made in late 2016. Shipments and consumption are different metrics but the PCA was heading in the right direction. Unfortunately, however ebullient the PCA’s chief economist Ed Sullivan was at the IEEE-PCA in 2017 about growth in the US in 2018 and 2019, the necessary rise required seems quite steep. President Donald Trump may have handed the major cement producers a tax break but until his infrastructure spending materializes the US construction industry is on its own.

Graph 1: Clinker production in the US, 2013 – 2017. Source: USGS.

Graph 1: Clinker production in the US, 2013 – 2017. Source: USGS.

Viewing the US as a whole is a little unfair given its wide regional variation. As can be seen in Graph 1 clinker production jumped up from 2013 to a high of 76.5Mt in 2015 before taking a dip in 2016 and then rising again to 76.9Mt in 2017. Cement shipments of Ordinary Portland and blended cement show a similar trend over the same timescale except without the decrease in 2016. Interestingly, imports of cement and clinker rose by 18% to 13.6Mt in that year. The major exporters to the US were Canada, Greece, China and Turkey, in that order.

Graph 2: Cement and clinker imported for consumption to the US in 2017 by country. Source: USGS.

Graph 2: Cement and clinker imported for consumption to the US in 2017 by country. Source: USGS.

From a producer perspective LafargeHolcim described 2017 as a ‘disappointing’ year, with overall net sales down slightly on a like-for-like basis. The group remained optimistic for 2018 though, with its hopes pinned on rising employment and housing construction. HeidelbergCement rode high on its acquisition of Italcementi’s local subsidiary Essroc, which enabled it to grow its business in the northeast and midwest. Its cement sales volumes rose by 2.3% to 4.1Mt. CRH noted similar cement sales volume growth of 3% and attributed this to stronger demand. Its business also benefited from the acquisition of Suwannee American Cement with its 1Mt/yr cement plant in Florida. Further growth to its production base is also expected soon as it completes its acquisition of Ash Grove Cement.

By contrast Buzzi Unicem reported a tougher year with its net sales barely increasing from 2016 to 2017. It blamed a tough first half of the year for this as well as weather-related issues due to Hurricane Harvey and then snow in December 2017. Cemex too reported harder conditions in the US, with cement sales volumes down by 6% for the year. Although on a like-for-like basis with plant sales excluded it reported this as a rise of 2%. Again, it blamed the weather but it did note an increase in residential housing construction as the year progressed.

In this kind of mixed environment for cement producers no wonder the PCA backed or, perhaps more accurately, reminded the President of his pledge to spend US$1.5tn to be invested in infrastructure. As per usual the PCA forecasts fair weather ahead for the US industry once the latest roadblock is overcome. At the last assessment it was inflationary pressure. As ever the government opening its cheque book to build things is exactly what the industry needs to build on its promise. Until then expect more of the same. One more thing to consider though is that the Trump administration is also trying to change the ratio of federal-to-state funding for cross-state infrastructure projects. If the states end up having to pay more money for these kinds of projects these may end up running out of funds, delaying or cancelling them. Counting on that infrastructure spend may be unwise until if or when the cement orders come piling in.


Malaysia: Lafarge Malaysia has appointed Mario Gross as its president and chief executive officer (CEO) from 1 April 2018. He succeeds Thierry Legrand, according to the Business Times newspaper. Gross, aged 39 years, holds 15 years of experience in the building materials industry, with roles in Germany, China, Thailand and Switzerland. He joins Lafarge Malaysia from Switzerland’s Sika.


Germany: Italy’s Buzzi Unicem, though its German subsidiary Dyckerhoff, has signed a purchase agreement to acquire Portlandzementwerke Seibel & Söhne. The completion of the transfer of shares is subject to the clearance of the German Federal Cartel Authority and is expected within the next weeks. Portlandzementwerke Seibel & Söhne operates a cement plant in Erwitte, North Rhine-Westphalia. No value for the deal has been disclosed.


Jamaica: Caribbean Cement plans to raise the production of gypsum and limestone from its quarries. It intends to increase the size of its Halberstadt Gypsum Quarry to 200,000t/yr and build a new 800,000t/yr limestone quarry at Harbour Head, according to the Gleaner newspaper. Both quarries will be near to the cement producer’s plant at Rockfort in Kingston. The plan requires approval from the National Environment & Planning Agency.

Caribbean Cement says that the expansions to its quarrying operations are required to secure supply of these materials. It has not commented on the size of the investment required for the project. Its quarries are operated through a subsidiary, Jamaica Gypsum & Quarries.


India: With a merger of LafargeHolcim subsidiaries ACC and Ambuja Cement on hold, the two companies have proposed entering into a Master Supply Agreement (MSA) with each other with the aims of increasing synergies, reducing operational costs and increasing the companies’ joint sustainability.

This agreement is for supply of cement, clinker, raw materials (including fuel, fly ash, slag, gypsum etc), spare parts and for providing toll grinding services at certain plants. This will be executed through purchase orders, subject to a pricing formula. This will enable each company to optimise the cost of servicing markets by using each other’s plant’s capabilities, maximise the utilisation of assets to generate additional sales for each company and make best use of their joint spare inventory.


Philippines: Ionic Cementworks Industries has received approval from the Philippines board of investment to set up a 2Mt/yr integrated cement plant in Pagbilao, Quezon Province, according to Inside International Industrials, which quoted a source close to the company. The cost of the plant is estimated to be in the region of US$230m and the plant expected to commence commercial operations in 2021.


Mexico: Cemex has announced that it has become the first company in the cement industry to successfully operate plants by remote control, from its central location in Monterrey, Nuevo León. According to the company, the Cemento Control Center (C3) operates 365 days a year, tracking live data from the operation of 14 cement plants, 25 kilns and 86 mills in Mexico. It also monitors a cement plant in Colombia and another in the US.

In a statement, Cemex said that the continuous monitoring of the system provides information on each stage of the production process, as well as the performance of the equipment installed in the cement plants. It allows the C3 operators to not only monitor the plants, but also to take immediate corrective actions, in coordination with local operations staff and with access to existing intelligent control systems. This helps to minimise any deviation from the objectives of safety, environmental control, efficiency and product quality.

"Cemex created the C3 system to take more effective advantage of the resources and technological innovation available through the company's global operating network," said the statement from Cemex. The company's vice president of operations, Edgar Ángeles, added that the company has applied the most modern technology to develop a unique system in the current cement industry. With the operation of C3, Cemex says that the plants have already seen a 50% reduction in the number of operational accidents as well benefits from immediate sharing of best practice and the generation of shared knowelege and expertise.


Algeria: Work on the construction of low CO2 cement plant will commence shortly in Bellara, El Milia, according to the local Minister of Environment. The plant, a project by an Algerian-Emirati-Indian partnership, will produce cement using slag and fly ash from the nearby Bellara power station and steel complex, as well as its own clinker. It will have a capacity of 2Mt/yr for the local and export market. It will generate 143 direct jobs when fully operational.


India: France’s Vicat plans to spend Euro223m towards upgrading a cement plant and building a new one in India. Group chairman Guy Sidos signed two memoranda of understanding on a recent French business delegation to India, according to the Economic Times newspaper. Vicat’s local subsidiary, Kalburgi Cement, plans to spend Euro140 on an upgrade to its Karnataka cement plant. The upgrade will add 2.25Mt/yr of cement capacity and will be completed by the first quarter of 2023. It also plans to invest Euro60m towards building a new 1.75Mt/yr plant in the Vizianagaram district of Andhra Pradesh. The new plant is scheduled for completion in mid-2022. Once both projects are completed Kalburgi Cement will have a total cement production capacity of 6.75Mt/yr from two units.


India: The government of Haryana is investigating the transfer of around 122 acres belonging to the Associated Cement Companies’ (ACC) closed Bhupendra Cement plant to a Mumbai-based builder. According to Kalka MLA Latika Sharma, the land’s lease said it could only be used for industrial use, according to the Times of India newspaper. However, the builder it has been transferred to intends to build a town. Education minister Ram Bilas Sharma Sharma told the state congress that the Haryana Police had gathered ‘strong’ material on alleged irregularities in the entire issue and the government had decided to get the matter probed by the state vigilance bureau. The Bhupendra Cement plant at Surajpur near Pinjore was originally built in 1937. It was closed in 1997 on environmental grounds.


Cambodia: Mines and Energy Minister Suy Sem says that a new 1.7Mt/yr cement plant in Battambang province is set to start production in mid-march 2017. Although the minister did not specify which plant was due to open, the only unit with that production capacity is Battambang Conch Cement, a joint venture between China’s Conch International Holdings and local cement firm Battambang KT Cement, according to the Phnom Penh Post newspaper. Construction at the site started in late 2016 with an investment of around US$230m. With the completion of this latest plant the country is now expected to be able to meet its own domestic demand with local supply.


Ivory Coast: Intercem has received an order for a ship-unloading project for Ciments de l'Afrique (CIMAF) and has completed a project for Cim Ivoire. Both projects were received from Sea Invest on behalf of the end clients.

The CIMAF project for a cement grinding plant in San Pedro was agreed in February 2018. The order is an expansion of an existing ship unloading system. The contract was agreed by the Vice President of CIMAF in San Pedro, Melik Sefrioui, and Intercem’s General Manager, Olaf Michelswirth. The order includes a 3D scan of the existing system to ensure planning security. Intercem will perform the engineering, the foundation works, the deliveries, the assembly and the commissioning. Completion of the order is scheduled for the fourth quarter of 2018.
The order for Cim Ivoire was first received in late 2016. It included the delivery of trough belt conveyors as well as all related components and the transfer tower on an engineering, procurement, and construction (EPC) base: from the piling, the foundation works, the steel construction, the cladding of the building, the roofing of the belt bridges, the necessary filters and chutes to the electrical equipment.

The ship unloading system includes two belts with a length of 100m and a capacity of 1200t/hr. The first belt can be charged with material from a hopper over its entire length. Two towers were built, one with a height of about 8m and one of about 34m of height. A generator situated in the lower part of the transfer tower two assures the emergency power supply.

The ship unloading system is connected to two 50,000t clinker silos and the raw material shed for Cim Ivoire. Thus a truck-free unloading of clinker and raw material will be achieved to suit the new regulations of the port authorities in Abidjan.


US: The United States Geological Survey (USGS) reports that shipments of Ordinary Portland and blended cement rose by 2.4% year-on-year to 95.5Mt in 2017 from 93.3Mt in 2016. Increases of over 5% were reported in Arizona and New Mexico, Kansas, Missouri, Texas and Washington. However, shipments fell by 14% in Illinois. Imports rose by 5.6% to 11.3Mt. Clinker production increased by 1.4% to 76.8Mt from 75.8Mt. Major importers of cement into the US were Canada with 4.4Mt, Greece with 2.3Mt and China with 2Mt.


Argentina: Loma Negra’s sales and earnings have increased due to a strong market recovery in its domestic market. Its sales revenue rose by 54.8% year-on-year to US$752m in 2017 from US$486m in 2016. Its adjusted earnings before, interest, taxation, depreciation and amortisation (EBITDA) rose by 67.7% to US$194m from US$116m. Its cement and lime sales rose by 18.6% to 6.99Mt from 5.89Mt. The cement producer also benefited from an increased equity share of Paraguay’s Yguazú Cementos during the year.

“2017 was a pivotal year for Loma Negra marked by achieving significant milestones. Key events for the company last year included: volume and sales expansion benefitting from the economic momentum in Argentina, record EBITDA, commenced expansion of the L’Amalí plant and ending the year with the successful Initial Public Offering (IPO) – the largest Argentine IPO in almost 25 years and the largest ever for a cement company,” said Sergio Faifman, Loma Negra’s Chief Executive Officer.


Australia: The New South Wales Environment Protection Authority (EPA) has fined Port Kembla Milling’s cement and slag grinding plant US$23,000 for allegedly storing raw materials in the open, in breach of its licence conditions. Raw materials, including gypsum and limestone, were allegedly stored in the open at the subsidiary of Cement Australia on at least five occasions since January 2016 in breach of the site’s planning approval and licence conditions. Such materials should be stored in an enclosed location to prevent dust emissions.

“The requirement to store materials in an enclosed building is a key way to ensure dust emissions from bulk materials are prevented. A measure that is very important given the residential areas near Port Kembla port,” said EPA Regional Director Metropolitan Giselle Howard.

In addition to the fines, the EPA has also required Port Kembla Milling to complete an independent raw materials handling audit to confirm appropriate storage and management systems are put in place. The company has made some initial steps to respond to this request, and the EPA will continue to work with the licensee to ensure full compliance.


India: NCL Industries has completed a production capacity upgrade project for both clinker and cement. Commercial operations for the upgrade started on 7 March 2018. The cement producer increased its clinker capacity to 2.6Mt/yr and cement capacity to 2.7Mt/yr in 2017. It operates an integrated cement plant at Simhapuri in Telangana and a cement grinding plant at Kondapalli in Andhra Pradesh. It sells cement under the Nagarjuna Cement brand.


India: Nitin Gadkari, the Minister Of Road Transport And Highways, says that the government is considering taking action against cement producers for cartel activity, according to the ET Now television channel. The sector has faced various claims of alleged cartel-like activity. In early 2017 the Competition Commission of India found seven cement companies guilty of bid rigging and cartelisation and imposed a total fine of nearly US$30m on them. This followed a US$1bn fine levied on ACC, ACL, Binani, Century, India Cements, JK Cement, Lafarge, Ramco, UltraTech, Jaiprakash Associates and the Cement Manufacturers Association in August 2016.


Tanzania: The government has given Tanzania Portland Cement two months to reduce its dust emissions or face closure. Alphaxard Kangi Lugola, the Deputy Minister of State in the Vice President's Office (Union and Environment), said that dust from the plant was causing health issues with local residents, according to the Citizen newspaper. The National Environment Management Council will monitor the plant for compliance. The cement producer said that the plant would work on reducing its emissions.


India: The Ministry of Coal has cancelled Jaypee Cement’s coal block at Mandla in Madhya Pradesh citing breach of agreement. In a letter the ministry said that the cement producer was ‘not serious about the development of the coal mine,’ according to the Business Standard newspaper. The ministry has accused Jaypee Cement of switching the plant using coal from the mine without permission and of exceeding the agreed output.

The Mandla coal mine was allocated to Jaypee Cement in March 2015 after a bidding process. At first it supplied Jaypee’s Balaji cement plant in Andhra Pradesh. However, production from the mine switched to the Shahabad cement plant in June 2017 following the acquisition of the Balaji plant by UltraTech Cement.