Global Cement Newsletter

Issue: GCW357 / 13 June 2018

Headlines


Germany’s Knauf announced this week that it is set to buy North American wallboard producer USG. The news is relevant for the cement industry because both companies are prominent gypsum producers. They are leading gypsum wallboard producers, with assets around the world, including gypsum mines. Although their focus is on wallboard a significant proportion of raw gypsum ends up being used in cement production. Hence, the takeover of a major North American producer by a European one deserves attention.

First a little background on the deal between Knauf and USG. The takeover has been a particularly acrimonious one at times, with both parties throwing strong language at each other and, although it has avoided being a hostile takeover, at times it seemed close. The deal became public in March 2018 when USG publicly said that it had rejected a bid of US$5.9bn from Knauf. It described the offer at the time as ‘wholly inadequate.’ Knauf then fought back by sending a letter to USG’s shareholders urging them to vote against director nominees at the next annual general meeting. Knauf owns 10.5% of USG’s shares. Then, in April 2018, Warren Buffett, the chief executive officer of Berkshire Hathaway, USG’s largest shareholder with a 31% stake, swung behind Knauf’s scheme. At this point it was revealed that Buffett had facilitated the initial talks between USG and Knauf. He even described the investment in USG as ‘disappointing.’ Buffett’s public move against USG in April 2018 signalled the death knell to USG’s independence. The US$7bn deal between Knauf and USG was agreed and announced on 11 June 2018. The transaction is expected to complete in early 2019.

USG operates 12 mines or quarries in North America. It also has other assets around the world including three gypsum mines in Oman, Thailand and Australia respectively that it runs in conjunction with its USG Boral joint venture in the Middle East and Asia. By contrast Knauf held over 60 quarries in 2014 with a focus on Europe.

The interesting implications from the merger may arise from what Knauf plans to do in certain regions. North America for example saw a reduction in raw mined gypsum production since the financial crash in 2008 as building markets suffered. Rising levels of synthetic gypsum production from coal power plants partly compensated for this. Buying USG gives Knauf a truly global base of natural gypsum production with which it can supply both itself and any cement customers. Knauf has a real shot of cornering the market in raw gypsum production provided it can keep the price low enough to stop enough rival mines being opened. Knauf might decide, as the construction market continues to recover in the US, to bring in the extra gypsum from elsewhere if it proved cost effective. Hooking up USG-Boral gypsum resources in Asia with Knauf’s might have implications for cement producing countries that lack sufficient gypsum supplies such as India. Oman is building itself up as the major gypsum exporter to Asia and USG-Boral is a part of it, with major gypsum resources in the country.

In terms of the cement industry it seems likely that there will be no immediate shakeup of gypsum supply. Long term supply contracts with either USG or Knauf should remain as they were and will stransfer to the new enlarged company. Knauf’s main market for gypsum is to use it to make wallboard but gypsum use for cement is a significant market as well. The ‘fun’ starts when or if Knauf starts to reorganise its supply chains. As its focus is on the wallboard business there may be implications thereafter for cement users. And since Knauf’s only major competitor at scale is Saint-Gobain, the market has just shrunk.


US: Cadence Environmental Energy has promoted Ted T Reese to Executive Vice President. Cadence provides technology for waste fuel recycling and emission reduction technology to the cement industry and is the exclusive supplier of waste-derived fuels for Ash Grove Cement. As part of the company’s succession plan founder Ted J Reese plans to hand over the presidency to Ted T Reese in 2019.


Finland: Carina Geber-Teir has been appointed as Senior Vice President, Communications by Cargotec. She will take the post by September 2018 at the latest. She will be responsible for leading communications, investor relations and sustainability function. She will be a member of Cargotec's Extended Executive Board and report to chief executive officer (CEO) Mika Vehviläinen. She succeeds Leena Lie, who has taken a new job at Huhtamäki Oyj.

Geber-Teir, aged 46 years, joins Cargotec from OP Financial Group, where she has been a member of the Executive Board and Chief Communications Officer since 2009. Prior to this she was Communications Director at Varma Mutual Pension Insurance.


China: Anhui Conch has suspended production at three of its production lines at the cement plant run by its Tongling Conch subsidiary at Gusheng in Anhui province. The suspension has followed the temporary closure of a pier used by the plant in late May 2018 in accordance with new government regulations on drinking water supply and pollution.

Use of the pier has been suspended as it is close to the Tongling Water Treatment Plant. The pier is used to export cement and clinker products from the unit and bring in raw materials such as coal. The temporary suspension of the plant’s production lines will reduce its clinker production capacity by 58% to just under 9Mt/yr from 15Mt/yr.

The cement producer has defended its environmental record, pointing out that the pier was approved with all the necessary licences and environmental approvals in 1987. Construction of the water treatment plant started in 1992.

Clinker products produced by Tongling Conch are mainly sold to Anhui Conch’s subsidiaries, including cement grinding plants along the Yangtze River and on the coast. The company plans to source clinker from other plants to continue supporting the affected grinding plants.


India: My Home Industries is preparing to increase its cement production capacity by 50% to 15Mt/yr. At present the cement producer produces 10Mt/yr of cement from four plants, according to The Hindu newspaper. The company’s board is currently considering whether to build a new plant or expand an existing one. A final decision is expected in mid-June 2018.


India: JSW Cement has inaugurated a 6.5km railway siding to its 2.4Mt/yr Salboni cement grinding plant in West Bengal. The railway siding will connect the unit to the main railway line between Godapiasal and Salboni, according to the Economic Times newspaper. The new connection is expected to reduce logistics costs at the site.

The rail yard at the plant has five lines running parallel and connected to each other. Two lines are designated for receiving raw materials, two lines are dedicated for cement loading and the fifth line is reserved for engine reversal. The plant initially intends to receive two rakes of raw materials per day and one rake per day of cement for despatch.


Venezuela: The Cacique Yaracuy mini cement plant is reportedly three quarters complete. Installation of the equipment at the unit is yet to start, according to Radio Mundial. The project is being built by India’s Megatech International. The plant is expected to have a production capacity of 4 million bags of cement per year when operational.

In 2014 the governor of Yaracuy, Julio Leon said the government was developing a 600t/day cement plant in Peña under an agreement between Venezuela and India. The project was part of plans to build three mini plants in the country.


Central African Republic: Cameroon’s Quiferou has signed a deal with the government to produce cement. Quiferou plans to produce 0.35Mt/yr of cement locally, according to the African Press Agency. The project will be situated at Bomoko in the south west of the country.


Germany/Pakistan: Germany’s Loesche says it has sold over 400 vertical roller mills for cement and ground granulated blast furnace slag, following a sale to Kohat Cement. Two LM 53.3+3 CS type mills has been sold to the Pakistani cement producer. The plant will produce 210t/hr of Ordinary Portland Cement at a fineness of 9% R 45 μm. No value for the deal has been disclosed.

The first Loesche LM type mill was put into operation at Fos sur Mer in France in 1994. Sales of the mill type for cement and slag markets have accelerated since 2006. The engineering company sold 50 LM mills in the 10 years to 2004. It then sold another 50 mills to 2006. However, from 2006 to 2014 it sold 200 mills. It then sold a further 100 mills after 2014.


Oman: Suhar Cement, the Sultanate's third cement plant after Oman Cement and Raysut Cement, will come into operation later in 2018, helping add to domestic production capacity and reduce the nation's dependence on imports.

The new facility, featuring a cement-grinding unit with a capacity of around 240t/hr, is being developed by a partnership between Sohar Cement (70% of the equity) and UAE-based Fujairah Cement Company (30%). Construction work on the plant is nearing completion at a site located within Phase 7 of Suhar Industrial Estate, one of several industrial parks administered by the Public Establishment for Industrial Estates (PEIE) around Oman.

The original plans to bring the new cement plant into operation by the first quarter of 2018 have been hamstrung by two key factors: 1. The absence of a paved road to provide suitable access to the site of the plant, and; 2. A lack of power supply to the site. Both impediments are being addressed by the relevant government agencies following the intervention of the Implementation Support and Follow-up Unit (ISFU) - a special task force of the Diwan of Royal Court overseeing the timely execution of a number of proposals and initiatives designed to spur the nation's economic diversification.

Significantly, the new Suhar Cement plant, along with a flurry of other cement plant projects planned in the Special Economic Zone (SEZ) at Duqm, will go a long way in ramping up Oman's domestic cement production by 2021. By that year, and assuming all of the project proposals have progressed through to implementation and commissioning, Oman is projected to be self-sufficient in meeting its domestic cement requirements. At present, Oman is dependent on imports for just over half of its cement demand.


Brazil: Votorantim Cimentos, Brazil's largest producer of cement and other construction materials, is still evaluating its production loss after a recent 11 day truck drivers' strike, as well as calculating the impact of minimum freight prices. Brazil’s cement sector is highly dependent on road transport, with 96% of total shipments leaving plants by road, around 54Mt/yr.

"(The strike) will certainly impact the company's annual production," Walter Dissinger, Votorantim Cimentos president said. He added that Votorantim’s cement sales fell nearly 20% in May.


China: China Resources Cement (CRC) has said that it expects its profit attributable to the owners for the six months ending 30 June 2018 to significantly increase compared to the corresponding period of 2017. The expected growth was primarily attributable to the higher selling prices of cement products during the period, which rose by 33.4% year-on-year.


New Zealand: The Buller District Council has backed out of plans to buy Holcim Cement’s former Westport plant assets and land on the West Coast of New Zealand’s South Island, including a water supply and treatment plant, a quarry, land, silos and a packing plant.

Buller District Mayor Garry Howard said that the council has been negotiating for over a year on US$3.5m deal, but concerns over the Cape Foulwind site led to it abandoning its plans. He said that buying the former cement plant site could have made the council liable for remediation of the land. Howard says the council had been keen to get the quarry as a source of rock for river and coastal protection.
Westport lost over 100 jobs when Holcim closed the cement plant in 2016, after 58 years of operation.


Azerbaijan: Azerbaijan intends to become self sufficient in all building materials, according to the country’s Deputy Minister of Economy Niyazi Safarov, who was speaking during the recent Azerbaijan-EU Business Forum in Baku.
"Today, Azerbaijan is fully self-sufficient in many types of building materials, for example cement and brick,” said Safarov. "The development of the construction sector allows the creation of new jobs, attracts investment and increases demand in other sectors of the economy.”


Pakistan: Business activity slowed during the month of Ramadan in Pakistan, with cement demand also affected. In May 2018, domestic cement sales were the slowest seen in the current fiscal year, which runs until the end of June 2018, yet they still rose by 2.4%. When exports, which rose by 41.8%, are also included, the year-on-year change rises to 5.7%.

The All Pakistan Cement Manufacturers’ Association (APCMA) reported that 3.92Mt of cement was sold in May 2018 compared to 3.71Mt in May 2017. Sales in the country's northern region stood at 2.81Mt, compared to 2.8Mt in May 2017. In the south, sales came to 0.67Mt in May 2017, as opposed to 0.59Mt in May 2017. Exports from the northern region were 0.224Mt in May 2018 compared to 0.219Mt in May 2017. From the southern region, exports totalled 0.215Mt compared to just 0.09Mt in May 2017.

Total cement sales in the first 11 months of the 2018 Fiscal Year hit a record high, with 42.92Mt sold, a 14.2% rise year-on-year compared to 37.6Mt in the first 11 months of the 2017 Fiscal Year. The APCMA reported that the national capacity utilisation rate over the 11 months period was 94.7%, beating the previous 93.6% record from 1992-1993.

An APCMA spokesperson said the association anticipated that domestic cement consumption would once again rise after Ramadan, while a continued increase in exports was a welcome sign for the industry. However, he said the major factor behind the rise in exports had been the decline in the value of the Pakistani Rupee against the US Dollar, which greatly improved the competitiveness of cement manufacturers in global markets.


Chile: Cementos Bicentenario (BSA) has signed a deal with energy company Engie to supply its Quilicura grinding plant near Santiago with renewable energy. All of the energy supplied to the plant will come from renewable sources including solar and hydroelectric. The contract, equivalent to 35GWh, will see the plant achieve the I-REC certification.


Azerbaijan: Akkord Cement plans to increase production at its Gazakh plant to 1.3Mt/yr from 1Mt/yr. It is working with an unnamed German company on the investment for the project, according to the Trend News Agency. The cement producer mostly sells its cement locally, with some export sales to Georgia.


Russia: Iskitimcement has expanded its fleet with three Scania G Series 440LA6 trucks for around Euro0.5m. The new 28.1t vehicles, with trailers than can carry up to 30t, have been designed specifically for the Russian market. The new trucks will join the cement producer’s fleet to 26 vehicles to support its bulk cement business. In 2017 19.4% of Iskitimcement’s total volumes of products were delivered by truck.


Turkey: Germany’s Aumund Fördertechnik has been awarded projects by the Dinçer Çimento Group and Aşkale Çimento.

The scope of supply to Dinçer Çimento supports a new kiln production line at its plant near Bilecik near Bursa. It includes three Aumund BWZ chain bucket elevators with centre distances between 27m and 36m, and capacities of up to 400t/hr. These recirculation bucket elevators will be installed in the raw mill and in clinker conveying. Aumund BWG belt bucket elevators, six altogether, will be installed in the areas of raw meal conveying, heat exchanger, cement silo feed and in the packing plant. The belt bucket elevators have centre distances between 25m and 145m, and are designed for capacities from 120t/hr up to 500t/hr. Two Aumund KZB pan conveyors with a capacity of up to 300t/hr and a lift of 38.5m will be supplied to transport clinker to the clinker silo of the new line. Underneath the clinker silo three more 400t/hr Aumund pan conveyors will be installed, along with silo discharge gates. Another Aumund KZB pan conveyor with a lift of 25.5m and a capacity of up to 200t/hr will convey additives. Dispatch of the 15 Aumund machines for this order will be in stages, commencing in June 2018.

Aumund’s order for Aşkale Çimento is for a heavy-duty Aumund chain bucket elevator for recirculation of bulk material for the plant’s roller press. It has a centre distance of 47m and a capacity of up to 1250t/hr. It also includes an Aumund chain bucket elevator with a heavy-duty Aumund AU19 chain that has a breaking load of 2450kN.


South Africa: Magotteaux International has become a strategic equity partner in Grinding Media South Africa (GMSA). The decision follows an agreement between the Industrial Development Corporation (IDC) and Magotteaux on extending their partnership in GMSA. GMSA, a newly created company spun out of industrial group Scaw Metals, specialises in the manufacturing and design of grinding balls for use in the mining, cement and utilities industries.

The partnership will also enhance the technical and financial capacity of the business as well as provide access to new growth markets. As part of this partnership, Magotteaux will assume the operational management of GMSA upon conclusion of the agreement.

“Magotteaux has been collaborating closely with Scaw High Chromium grinding media for more than 30 years”, said Sébastien Dossogne, chief executive officer (CEO) of Magotteaux.


Mexico: Cemex has launched an online retail store to sell its construction material products. The new website is part of the company’s Cemex Go digital platform.

“Cemex’s launch of the Construrama Online Store builds on our efforts to transform the construction industry into a more efficient model. Our clients will now enjoy easy access to a wider catalogue of products and be able to select, purchase, and follow up on their online order, generating significant savings in productivity for our Construrama network of retail stores, builders, and final customers,” said Sergio Menéndez, Vice President of Distributor Sales of Cemex in Mexico.

The Construrama Online Store is part of the company’s commercial digital vision which aims to offer its clients a seamless experience for placing orders, live tracking of shipments and managing invoices and payments for Cemex’s main products.


US: The Portland Cement Association (PCA) has called on the US Congress to reauthorise Federal legislation to build, maintain and improve the country’s water infrastructure. The US House of Representatives is considering two-year reauthorisation of the Water Resources Development Act of 2018, while the US Senate is considering companion legislation, America’s Water Infrastructure Act of 2018.

“America deserves safe, strong and resilient water infrastructure – our economy depends on it,” said PCA President and chief executive office (CEO) Michael Ireland. “Water infrastructure built with concrete is long-lived, has a low life-cycle cost and is resilient to man-made and natural disasters. We need this legislation to ensure our drinking water is safe, our waterways are navigable and secure and that we have water infrastructure capable of serving generations to come.”

The PCA supports reauthorisation of water infrastructure legislation to include: increased investment in waterway and flood control infrastructure; increased funding for water infrastructure construction programs; and to promote resilient construction techniques that use materials such as concrete.


Philippines: Cemex Philippines has committed up to US$57m in 2018 towards the construction a new production line at its Solid Cement plant in Antipolo, Rizal. The project will increase the plant’s production capacity to 3.4Mt/yr from 1.9Mt/yr, according to GMA News. The overall budget for the project is US$225m. Environmental approval for the new line was obtained from the Department of Environment and Natural Resources in late 2017. The upgrade is scheduled to be operational by early 2020.


Chile: Cementos Bío Bío plans to start production at its new 0.15Mt/yr grinding plant at Arica in September 2018. The project has an investment of US$15m, according to the Economia y Negocios newspaper. The company wants the unit to reach its production capacity by 2021, with plans to subsequently double it to 0.3Mt/yr. The project is part of a US$150m investment that the cement producer is undertaking in the period to 2022.


Indonesia: Denmark’s FLSmidth is expected to secure a contract with Hongshi Holding Group to supply equipment for a new cement plant at Jember in East Java. Lu Jianlong, a manager at Hongshi's equipment supply department, told Inside International Industrials that the US$40m deal is due to be signed by the end of June 2018.

The project has a total investment of US$315m. Sinoma (Suzhou) Construction, a subsidiary of Sinoma International Engineering, is the engineering, procurement and construction (EPC) contractor for the project. Atlas Copco and Kawasaki Heavy Industries will also be providing equipment for the plant. The project will include a 12MW waste heat power generation system.


Germany/China: Siemens has signed 10 agreements with Chinese companies, including China Resources Cement, to support the Belt and Road Initiative (BRI). Other companies it has struck deals with include China Gezhouba Group Corporation International Engineering, Guangdong Yuedian Group, China National Chemical Engineering Group, China Railway Construction and China Civil Engineering Construction.

"As a long-term and well-established partner of China and its industries, we support the call of the Belt and Road Initiative and take another solid step forward on a larger scale and a wider scope", said Joe Kaeser, President and chief executive officer (CEO) of Siemens, witnessing the signing taking place during the BRI Summit in Beijing. He added that the BRI was a ‘wise and powerful’ for force for accelerating infrastructure development already in participating countries.


Azerbaijan: Holcim Azerbaijan has launched its Spesial 400 Cement product. The general-purpose cement product is intended for mid-strength concrete applications. It follows the launch of the Optimal 300 product in 2017.


Russia: Serebryansky Cement has completed a Euro2.1m upgrade project at its plant in the Ryazan region, according to the Beton Russia news website. The work included completely replacing the refractory lining of the plant’s kiln and modernising the mill’s liner plates.


UK: Hanson UK’s sustainability report for 2017 shows that its CO2 emissions per tonne of product have fallen by 7.2% to reach the lowest level for five years. However, the subsidiary of Germany’s HeidelbergCement may face issues meeting its target of a 10% reduction by 2020 from its 2010 figures as its CO2 emissions from production have rise by 5.7% since 2010.

Overall, the company described 2017 as a year of ‘solid’ progress. It passed its 2020 targets for reducing both mains water use and waste to landfill. The number of lost time injuries remained static at 21, but the frequency rate was down on the prior year and there was a three-month unbroken spell without a lost time injury. The building materials producer also launched HeidelbergCement’s Sustainability Commitments 2030, including a set of targets for the group to achieve by 2020.


Brazil/US/Vietnam: FCT Combustion has released details on new burner projects it is involved with. Selected projects include the commissioning of Gyro-Therm burners for Kilns 1 and 2 for use with natural gas, coal, petcoke and solid alternative fuels at Lehigh Cement’s Evansville plant in Pennnsylvania in the US. The supply also included the burner management system, valve trains, fans and other accessories.

The company is also working on an upgrade to the hot gas generator at Votorantim Cimentos’ Vidal Ramos plant in Santa Catarina, Brazil. Also in this country it is supplying Turbu-Jet AF burners with blowers, ignition and flame detection systems to CSN Cimentos’ Arcos plant in Minas Gerais.

Finally, in Vietnam the burner supplier is to provide a Turbu-Jet AF burner firing low calorific value coal with fuel oil to Vinacomin’s Quan Trieu Cement plant.