Global Cement Newsletter

Issue: GCW350 / 25 April 2018

Headlines


No consolidation has happened yet in the Saudi Arabian cement industry but exports have started to be announced. Yanbu Cement signed an export deal in March 2018 to despatch 1Mt of clinker and 0.5Mt of cement from one year from 1 April 2018. Prior to that, Al Jouf Cement Company started a contract to export 72.000t/yr to Jordan from late February 2018. Earlier still, Bahrain was expected to benefit from a lifting of cement export tariffs at the end of January 2018.

Its early days yet but some of sort of action is starting to happen about the country’s falling cement sales. If export deals are in the early stages of being set following the lifting of the ban, then local movements of cement have intensified. As Al Rajhi Capital reports in its latest market update, that producers have been forced by low sales and high inventory levels to take action. It says that cement companies have started to sell products in different parts of the country than they do normally leading to a ‘price war’. The financial services and analytical company has pinpointed the central region as the key battleground as company market shares have fallen over the last six months as northern producers have moved in.

Graph 1: Cement sales (Mt) by quarter in Saudi Arabia, 2015 to March 2018. Source: Yamama Cement. 

Graph 1: Cement sales (Mt) by quarter in Saudi Arabia, 2015 to March 2018. Source: Yamama Cement.

Cement sales fell by 15% year-on-year to 11.8Mt in the first quarter of 2018 from 13.7Mt in the same period in 2017. This is the first time in recent years that sales did not rise from the fourth quarter to the following first quarter. Not a good sign. Despite the bad news, a few producers did mange to increases their deliveries in the first quarter, including Saudi Cement, Hail Cement, Umm Al Qura Cement and United Cement.

Bizarrely, into this sales environment, plans for the long delayed Al Baha Cement cement plant project have re-emerged. The project previously has received coverage at various stages over the years. This time it has reportedly gained a licence to set up the company and it hopes to start tendering for the build in the second half of 2018. The investors may want to leave it a little longer given the current state of the Saudi cement industry.


Switzerland: LafargeHolcim has appointed Feliciano González Muñoz as its new Head of Human Resources (HR). He takes on the role from 1 May 2018. He will succeed Caroline Luscombe who has decided to pursue opportunities outside of the company. González Muñoz will report to the group’s chief executive officer Jan Jenisch. However, in line with simplification and lean management, the Head of HR will not be a member of the executive committee, bringing it down to eight members.

Currently HR Director for Europe, Feliciano González Muñoz, aged 54 years and who is a Spanish national, has worked for more than 11 years in senior HR roles with the company. Feliciano González Muñoz has a PhD in Law from Universidad Complutense de Madrid and holds an MBA from Instituto de Empresa, Madrid.


Nigeria: Dangote Cement has appointed former Xstrata CEO Mick Davis as a non-executive director alongside Cherie Blair, a lawyer and the wife of ex-UK Prime Minister Tony Blair. The new board appointments are targeted at strengthening the company’s board, according to Bloomberg. While the company did not explain the reason for such high-level appointments, it has been reported that the company is planning to relaunch its bid to be listed on the London Stock Exchange (LSE). According to Bloomberg, Dangote has already approached investment bankers to discuss a potential UK listing.

Davis ran Xstrata, the mining giant now owned by Glencore, for 12 years to 2013. He is now the chairman of Macsteel and the CEO of the UK’s ruling Conservative party. Cherie Blair’s other board positions include Renault SA.


India: Votorantim Cimentos is rumoured to be selling its 75% stake in Gujarat-based Shree Digvijay Cement as part of its strategy to prioritise assets and reduce debt, according to ‘sources close to the company.’

The news comes as the company struggles amid rising competition among mid-sized Indian cement producers. It made a net profit of US$2.0m in the 12 months to 31 March 2018 from a turnover of US$63.5m. In 2012, before Votorantim took over the company, it made a net profit of US$1.2m from a turnover of US$64.2m.


China: Hong Kong based CK Infrastructure Holdings (CKI) has acquired a 1Mt/yr cement grinding station and three quay berths in Yunfu City, Guangdong, for an investment of US$28.5m. The three berths can handle 3Mt/yr.

The group said it hopes to expand its infrastructure investment portfolio in mainland China. "The acquisition is deemed to be another robust investment with stable returns for CKI," it said in a statement, explaining that demand for cement has been growing on the mainland. "The acquisition of the jetty further realises the vertical integrated production of cement, brings about competitive advantages, and enhances operation efficiency," the statement added.


Peru: Cementos Pacasmayo has seen its sales volumes of cement, concrete and blocks rise by 7.8% year-on-year in the first quarter of 2018, primarily due to increased sales volume of cement to the public sector and the self-construction segment. Its revenues increased by 12.8%, also due to higher cement sales, as well as an average cement price increase.

Cementos Pacasmayo’s net income was US$9.22m, a 37.3% increase, mainly due to higher sales and operating profit. Consolidated earnings before interest, tax, depreciation and amortisation (EBITDA) were US$29.2m.


Mexico: Grupo Cementos de Chihuahua (GCC) recorded a 13.6% increase in sales in the first quarter of 2018, with US sales up by 11.9% and Mexican sales up by 18.0%. Earnings before interest, tax, depreciation and amortisation (EBITDA) increased by 46.0%, while its net income rose by 554.6% to US$11.3m.

GGC said that the increases reflect strong cement demand and favourable cement pricing environments in both the United States and Mexico, increased ready-mix demand in Mexico, the effect of Mexican Peso appreciation compared to the US Dollar, and strict control of operating expenses.

Enrique Escalante, GCC's CEO, said, "Our US operations are catching the tailwind from the strong market in 2017 and the benefit of relatively mild winter weather in some of our markets. In Mexico, sales volumes were above our expectations. Our EBITDA margin in Mexico reached an all-time record of 42.7% and US margins were 16.6%, the highest for a first quarter since the 2009 financial crisis."


Mexico: Cemex has predicted that the cement sector in Mexico will grow by 2-3% during 2018. Fernando Gonzalez, CEO, explained that the growth would be due to an increase in residential and commercial construction. He noted that these segments would compensate for an expected reduction in infrastructure works.


China: Anhui Conch Cement’s sales revenue rose by 38% year-on-year to US$2.98bn in the first quarter of 2018 from US$2.16bn in the same period in 2017. Its net profit rose more than doubled to US$757m from US$341m, according to Dow Jones. The rise in sales and profits has been attributed to rising cement prices in smaller cities and demand from the Xiongan New Area project. The cement producer also said that it received a government subsidy of US$18m.


Colombia: The Superintendent of Industry and Commerce (SIC) has confirmed a US$73.5m fine issued against six top executives and cement companies for alleged market collusion. SIC says that Cementos Argos, Cemex and Holcim failed to provide an economically reasonable explanation for similar pricing, according to the El Colombiano newspaper. Cemex has accepted the decision and not filed an appeal. Cementos Argos and Holcim will take the case to the Dispute Tribunal.


Nigeria: Dangote Cement will use two vertical roller mills (VRM) from Germany’s Loesche for a new production line at its Obajana plant in Kogi State. The order comprises a six-roller mill for raw cement meal with a capacity of 580t/hr, the largest roller mill for raw material in the Loesche range, and a three-roller mill with a modular design featuring a drive power range of 1000kW for grinding hard coal and lignite with a throughput of up to 70t/hr.

The scope of delivery also includes a LDC classifier for the raw cement mill and a LSKS ZD classifier for the coal mill, which is characterised by individually adjustable grain size separation. The raw material mill is equipped with metal-matrix-compound (MMX) technology. The two mill gear units are equipped with state monitoring and remote access for remote monitoring. Loesche is also contributing to the design and planning of the entire plant as well as the engineering for the electrical measurement, control and regulation technology and complete automation. The delivery date is scheduled for the third quarter of 2018.

The contract partner for this project is China’s Sinoma International Engineering, which has previously installed a seven clinker and cement raw meal VRMs for the Obajana plant. The site has a cement production capacity of over 12Mt/yr and it is the largest cement plant in Sub-Saharan Africa.


Ghana: Diamond Cement has signed a memorandum of understanding (MOU) with the Ghana Ports and Harbours Authority (GPHA) to build a port at Kedzi in the Keta Municipality of the Volta Region. The site is being developed to help the cement producer import raw materials, according to the Ghanaian Times. At present it uses the port of Lome in Togo.


Paraguay: Edgar Acosta, the general manager of Yguazu Cementos, has called for a law banning imports of clinker to be lifted. Acosta, the former president of Industria Nacional del Cemento (INC), argues that the legislation is ‘unfair competition’ as it was introduced in 2006 when INC was the only cement producer in the country, according to the ABC newspaper. However, at present INC imports large volumes of clinker despite owning large reserves of limestone in the country. Of the 550,000t of cement produced by INC in 2017, more than 50% was made with imported clinker. INC imports clinker from Uruguay, Spain and Greece.


India: Commissioning of the new 3000t/day production line at Tancem’s Ariyalur plant in Tamil Nadu is expected to take place in the second quarter of 2018. Construction work is reported as almost complete. Larsen & Toubro (L&T) is the lead contractor on the project with Denmark’s FLSmidth hired by L&T to provide the design, engineering, manufacturing and supply of all equipment. FLSmidth’s scope of supply includes providing key components for the line including raw material crushing equipment, limestone storage, raw and coal grinding, single-string ILC pyro processing system with cooler, cement grinding and packing and loading systems.


Algeria: LafargeHolcim Algeria has conducted its fourth cement export operation to West Africa. Nearly 8500t of Ordinary Portland Cement were despatched from the port of Arzew in Oran, according to the Algeria Press Service. It follows previous batches in December 2017, March 2018 and the start of April 2018.

The subsidiary of LafargeHolcim aims to increase its cement and clinker exports to West Africa to 5Mt by 2020. In Algeria the company runs two cement plants at M'Sila and Oggaz in Mascara. It also operates a plant at Biskra as a joint-venture with Souakri Group and it manages SCMI’s Meftah's plant in a partnership.


Philippines: Phinma Group plans to buy a cement plant in Mariveles in Bataan and use it as a terminal to discharges exports from Vietnam. President and chief executive officer Ramon del Rosario, Jr added that the site will be operational by May 2019, according to GMA News. The site will be used to import and process 2mt/yr of cement. A deep water port at Mariveles is anticipated to allow Panamax size ships to discharge cement.


Australia: Adelaide Brighton has signed a deal with BHP Billiton for the continuation of supply of cement and lime to BHP’s Olympic Dam mine in South Australia. The new contract maintains and extends the long-term relationship between subsidiaries of the companies. It is expected this relationship will continue for a number of years.


India: UltraTech Cement has commissioned a new 2.5Mt/yr plant at Manawar, Dhar District in Madhya Pradesh. The cement producer said that it set a record by commissioning the plant in less than a year and that it cost less than US$225m.

The plant’s kiln is designed for different types of energy sources, including alternative fuels. The unit also includes a 1.75Mt/yr grinding unit at the site with an auto-loading facility. Another additional 1.75Mt/yr grinding unit and a 13MW waste heat recovery unit are also being built. Both of these projects are expected to be completed before September 2018.

The new plant is planned to take advantage of the state’s main industrial belt, the Dewas-Ratlam-Pithampurlndore. Following the commissioning of the plant, UltraTech Cement has 19 integrated cement plants in the country with a total cement production capacity of 96.5Mt/yr.


India: M P Birla Cement has launched its new so-called premium brand ‘Perfect Plus’ from its Maihar plant in Madhya Pradesh and its Chanderia plant in Rajasthan. The product uses deflocculated fine particles of cement to form a Calcium-Silicate-Hydrate (C-S-H) gel that improves the quality of the concrete made from it. Reported advantages for concrete made from the product include high early strength, reduce permeability and better water demand to reduce voids and increase strength.


Bangladesh/India: Lafarge Umiam Mining has won the Outstanding Achievement Award from the Indian Bureau of Mines. The subsidiary of LafargeHolcim was cited as a role model for other mining operators in India's north-eastern region, according to the Financial Express newspaper. It also picked up an award for health and safety. Lafarge Umiam Mining operates a mine in Meghalaya in India that provides raw materials to LafargeHolcim Bangladesh’s integrated plant at Chhatak in Sylhet.


Iran: Cement production remained stagnant at 54.5Mt during the Iranian financial year that ended on 20 March 2018. Clinker production was reported as 57.9Mt, according to ISNA. The country produced 54.1Mt of cement in the preceding financial year. The lack of growth has been blamed on a recession in the construction sector, poor supply of gas to industrial users and declines in the export market.

Exports fell by 9% year-on-year to 5.8Mt in the 2018 period, according to Abdolreza Sheikhan, the secretary of Iran's Cement Industry Employers Association, with particular declines noted in Iraq and Afghanistan. Iraq temporarily banned imports from Iran in 2015 due to low quality but volumes fell following the resumption of trade. Cement shipments to Russia have also reportedly been returned due to quality issues. An arrangement with the Islamic Republic of Iran Shipping Lines to implement a 30% discount for cement cargos to Persian Gulf states has been agreed but it is yet to be implemented.


Vietnam: Nguyễn Quang Cung, vice chairman of the Vietnam Building Material Association, says that local industry cement exports grew strongly in the first quarter of 2018 due to Chinese cement plants shutting down because of pollution and power shortages. He made the comments at the Vietbuild conference, according to the Viet Nam News newspaper. Local cement production rose by 18% year-on-year in the first quarter and exports rose by 68%.

Cung said that the Chinese government ordered the closure of a series of cement plants from 15 November 2017 to 15 March 2018 due to environmental concerns and a shortage of electricity during the winter. These circumstances turned China, the global clinker exporter in 2016, into an importer of cement at the end of 2017. It has mainly imported clinker from Vietnam, at a volume of 1.5Mt/month. Vietnam’s clinker exports ‘skyrocketed’ in 2017 due to this.

The association expected the country to export 15Mt of clinker in 2017 but it exported nearly 21Mt instead. It also anticipates that plant closures in China will increase in 2018.


Malawi: Shayona Cement plans to more than double production at its integrated plant at Kasungu in Lilongwe. The unit has a clinker production capacity of 1200t/day and this will be increased to 3000t/day. The cement producer is also considering expansion to other countries in the continent.