Global Cement Newsletter

Issue: GCW366 / 16 August 2018

Headlines


There have been quite a few new cement plant project announcements in the past week, with expansions announced in Mexico, Nigeria, Bangladesh, Indonesia, India and Uzbekistan. 11.8Mt/yr of new capacity has been announced in just a week, mostly from a whopping 9.0Mt/yr project in Central Sulawesi, Indonesia, the first in that Province. Notable in this project, as well as two of the others, is the involvement, once again, of large Chinese-based cement plant manufacturers and / or finance and associated influence from Chinese parties.

Of course, this trend is nothing new. The rise of Chinese cement plant manufacturers, particularly into Africa and other developing cement markets, has been covered in previous Global Cement Weekly columns. However, it does appear to be stepping up a notch in 2018 compared to previous years. So far this year we have reported on 21 confirmed Chinese cement plants being built in 15 countries other than China, from the planning stage to ‘up-and-running.’ A total of 37.2Mt/yr, more than the capacity of Germany, is being built across Algeria, Cambodia, Cameroon, Indonesia, Kyrgyzstan, Namibia, Nepal, Nigeria, Pakistan, Russia, Tajikistan, Turkey, Ukraine, Uzbekistan and Zambia. That’s not including a similarly large number of news stories where the supplier is not explicitly stated. This is seen a lot in Indian projects, as well as in Vietnam, where the cement sector appears to still be expanding, despite the government’s pronouncements. In many of these cases, and elsewhere, these unidentified suppliers are likely to be Chinese.

The driver for this increase in Chinese-led cement sector investment is, of course, the severe overcapacity in China’s domestic cement sector. The government is currently undertaking its most drastic capacity reduction measures so far. The ongoing integration of Sinoma and CNBM is one example of the lengths it will go to to reduce the current inefficiencies in the sector. This week the Chinese government reiterated its strict prohibition on new greenfield cement plants. It also warned that any producer that wants to upgrade its plant with a new line must only install the same capacity as the line that will be replaced, amid concerns that some were flouting this rule. This comes as the profits of major producers have been rising. Presumably the government would like them to climb further still.

So where does this leave the more established (read ‘European’) cement plant manufacturers such as Fives, FLSmidth, KHD and thyssenkrupp Industrial Solutions, some of which are fully or partly-owned by Chinese companies? Well, with fewer full-line projects available in developing regions due to the rise of the Chinese, they have become increasingly specialised in specific areas. Those that want European equipment will increasingly specify a pyro-line from Supplier A, a mill or two from Supplier B, conveyors and storage from supplier C, and so on. Arranging this, as it turns out, is something that Chinese plant manufacturers are quite keen to do. Take, for example, FLSmidth working for Sinoma (China) alongside Atlas Copco (Sweden) and Kawasaki Heavy Industries (Japan) on a cement plant in Indonesia. Indeed, FLSmidth signed a framework with CNBM on future collaborations in July 2018. FLSmidth and CNBM already have an extensive ‘back catalogue’ of joint projects. FLSmidth has valuable expertise that Chinese firms need to complete these kinds of projects.

Of course, another European supplier, Germany’s KHD, is mostly owned by China’s AVIC. In a forthcoming interview in the September 2018 issue of Global Cement Magazine, KHD’s CEO Gerold Keune states that the Engineering, Procurement and Construction (EPC) scene is now ‘completely dominated’ by Chinese suppliers. KHD fits in by providing a wide range of equipment but, crucially, great expertise in pyroprocessing and crushing solutions. It itself relies on smaller firms to provide their knowledge to specific parts of a larger project, be it conveyors, feeding systems or silos. Everyone is getting better and better, but in a smaller and smaller area.

Also in the September 2018 issue of Global Cement Magazine will be a report from the VDMA’s Large Industrial Plant Manufacturer’s group (AGAB) in Germany, which highlights another advantage for the Europeans: Digitisation. According to a VDMA survey, the industry anticipates a positive influence from digitisation activities on sales and earnings and expects to see margins improve by up to 10% as a result of the efficiencies it offers over the next three years. In this regard they are ahead of the Chinese mega-suppliers.

The conclusion from this wide-ranging column? The integration of Chinese weight and European know-how is stepping up a notch and will only accelerate from here. Can everyone be ‘winners?’ The next few years may reveal some of the answers.


Nigeria: The Cement Company of Northern Nigeria (CCNN) has announced the appointment of Yusuf Binji as its new Managing Director, effective 1 September 2018.

Prior to this appointment, Binji was the Managing Director of Obu Cement Company, a subsidiary of BUA Cement in Okpella, Edo State, a position he has held since February 2017.

Speaking on the appointment, Abdul Samad Rabiu, the Chairman of CCNN Board of Directors, said that Binji’s appointment was part of a restructuring effort aimed at further positioning the company for better business performance.

Binji brings with him almost 30 years experience garnered from the African cement industry, having worked with HeidelbergCement Africa, CCNN and BUA Cement in various capacities.

Binji is a chemical engineering graduate from Ahmadinejad Bello University, Nigeria and also studied at the University College, London, UK. He is a fellow of Nigerian Society of Engineers, the Solar Energy Society of Nigeria and the Nigerian Society of Chemical Engineers. He is also a registered engineer with the Council for Regulation of Engineering in Nigeria (COREN) and an associate member of the UK’s Institution of Chemical Engineers.


US: Eagle Materials Inc. has announced that Michael Haack has been named as its new President in addition to his role as Chief Operating Officer (COO). The announcement was made by Dave Powers, Eagle’s Chief Executive Officer (CEO). "Michael has been serving as our COO since 2014 and has distinguished himself across all of our lines of business,” said Powers. “This expansion of Michael's role reflects the company's significant growth in recent years and the opportunity to build our leadership capacity, as we extend Eagle's track-record as the benchmark operating performer in the industry."

Michael Haack added, "I am excited to take on this expanded responsibility, as we continue to pursue our well-established strategy of value creation and capitalise on the many opportunities we see ahead."

Prior to joining Eagle, Haack spent 17 years at Halliburton Energy Services, holding successively senior operating positions, culminating with the management of Global Operations for Sperry Drilling, a multi-billion dollar company in the drilling and evaluation division of Halliburton. Haack holds a Master of Science degree from Texas A&M University and a Bachelor of Science degree from Purdue University, both in Industrial Engineering, as well as an MBA from Rice University.


Mexico: Elementia has said that it will install a new cement grinding plant in Yucatán. It will invest US$30m and will start at a capacity of 0.25Mt/yr. Commercial operation is expected within the first half of 2019.


UK: The Times has reported on preliminary tests at Lancaster University, Lancashire, UK, which indicate that adding nanoplatelets from carrots and/or sugar beets to concrete significantly enhances its strength.

Including nanoplatelets is reported to increase the concentration of calcium silicate hydrate, leading directly to stronger cement. The researcher reported that, when platelets are added, 40kg less cement is required to make a cubic metre of concrete with the same strength as a sample that does not contain nanoplatelets. This leads to lower CO2 emissions.

The team added that nanoplatelets performed better than other additives, such as graphene. The concrete made also had a denser microstructure, which helps to prevent corrosion, extending concrete life.


Indonesia: A Chinese company, in cooperation with PT Banggai Citra Lestari, has announced that it will build a cement factory in the district of Banggai, Central Sulawesi. It will be the first cement factory in the Province.

"We already carried out a survey for a location in the sub-district of Balantak and we already have the mining license," said Budi Kurniadi, CEO of PT Banggai Citra Lestari at a meeting with Central Sulawesi Governor Longki Djanggola. He was speaking alongside the project manager Wang Yong.

Kurniadi announced that his company and the unnamed Chinese partner would build a factory with a production capacity of 9.0Mt/yr of cement. Governor Longki Djanggola said he appreciated the plan and pledged to facilitate implementation of the project.


India: Rain Industries has approved an upgrade project on a cement mill at Rain Cement’s Boincheruvupalli Village plant in Andhra Pradesh. The project is approved up to a cost of US$5.9m, funded through internal accruals. It is expected to be completed by 30 June 2019. After the upgrade the plant’s grinding capacity will increase from 2.0Mt/yr to 2.8Mt/yr.


Pakistan: Kohat Cement Company Ltd. has ordered four vertical roller mills (VRM) from Germany’s Loesche in order to expand its cement plant in Kohat, 160km west of Pakistan’s capital Islamabad.

The order comprises a 4-roller raw material mill with a material throughput of 500t/hr and two cement mills each with a grinding capacity of 210t/hr of Portland cement. The order is finally complemented by another vertical roller mill for grinding 50t/hr of anthracite. They will all be used on the same cement production line, which Kohat Cement is in the process of building. The lead time for the mills will be eight months.

The plant’s production capacity is currently around 2.8Mt/yr of Portland and white cement. When the new line enters production, the plant’s capacity will rise by 2.2Mt/yr to reach 5.0Mt/yr.


Brazil: SNIC, Brazil's national cement industry union, has announced that sales of cement in Brazil came to 4.6Mt in July 2018. The figure is down by 2.5% in comparison to July 2017. In the comparison for working days, the drop reached 4.6% in July 2018 in the year-on-year comparison, and 9.5% in comparison with June 2018. In the first seven months of 2018 domestic cement sales totalled 30.4Mt, a fall of 1.7%. SNIC forecasts a drop of 1-2% for 2018 compared to 2017.


Colombia: DANE, Colombia's national department for statistics, has announced that sales of grey cement stood at 0.94Mt between January and June 2018, which represented an increase of 3.6% compared to the same period of 2017. A DANE report indicated a gradual recovery of the sector after a sales drop of 10% registered in March 2018. However, the Colombian Association of Concrete Producers (Asocreto) has predicted that consumption would close the year with similar results to those posted in 2017, when sales were lower than in 2015 and 2016.


Colombia: Cementos Argos has announced that its second quarter net profit for 2018 slid by 59.7% to US$10m, due to a slowdown in the construction sector. Its operating revenue rose by 1.4% to US$741.6m during the same period.

“A recovery in demand is expected during the second half of the year given the increase in consumer confidence and positive signs for the residential sector, especially in social housing," said Cementos Argos in a statement.


Sri Lanka: Tokyo Cement plc, which operates grinding plants and bulk cement terminals in Sri Lanka, lost US$3.78m in the three months to 30 June 2018 due to falling revenues, as well as a one-off loss of US$2.37m on the sale of a ship. The group had reported a profit of US$5.04m in the same period of 2017.

In the three months to 30 June 2018 Tokyo Cement’s gross profit fell by 27% year-on-year to US$9.36m, with revenues falling by 4% to US$48m and costs rising by 4% to US$39m.

Tokyo reported to its shareholders that delayed local government polls had halted small projects country-wide, leading to a slowdown in the construction sector.


Pakistan: Cement exports by sea from Pakistan increased by 133.7% from 144,000t in July 2017 to 340,000t in July 2018. The increase in exports via sea offset a decrease in overland exports to Afghanistan and India. Pakistan’s exports to Afghanistan and India decreased by around 44.9% and 44.4% respectively in July 2018. Hence, overall exports increased by 9.3% in July 2018 to 0.53Mt from 0.48Mt in July 2017.


China: Asia Cement (China) said that its profit attributable to owners for the six months that ended on 30 June 2018 surged by a factor of 10.7 to reach US$139.3m compared to the same period of 2017. Revenue amounted to US$718.8m, an increase of 47% from a year earlier.

Meanwhile, China Resources Cement (CRC) announced that its net profit for the first six months of 2018 was US$2.0bn, a rise of 145.5% year-on-year. CRC’s turnover amounted to US$2.36bn, an increase of 40.4% from a year earlier.

The Chinese government has once again reiterated that it will continue to strictly prohibit cement companies from adding new capacity, despite improving profits. Years of efforts to cut excess capacity in the sector have helped to improve the industry's profits, but signs are emerging that some factories are increasing new capacity, according to Ministry of Industry and Information Technology, which released a joint statement with the state economic planning agency. It said that expansion projects to produce more cement, won't be approved. In addition, factories' plans to replace out-dated capacity with new capacity must comply with government rules.


India: The Madras High Court has pulled up Chettinad Cement Corportation (Chettinad) for encroaching upon public land to construct railway track to its factory at Ariyalur. It has ordered a probe by an IAS officer. Justice SM Subramaniam also ordered a probe into the role of government officials, who may have colluded with the factory management to squat on government land without permission.

"Such industries cannot encroach upon the government land, which is not only a water body, but also used as a pathway by the villagers and the people of that locality,” said Justice Subramaniam.

The court passed the order while dismissing a plea moved by Chettiand against the action of the sub-collector against the encroachment. The court further directed the district administration to evict all such encroachments made by the company on the land and water bodies within two weeks.


China: Energy Engineering Group Guangdong Power Engineering is seeking US$100m of project financing for a cement plant that is being built by the Bangladesh-based Deshbandhu Group, according to company secretary Duan Qiurong.

On 2 August 2018 it was announced that Energy China had signed a contract with Deshbandhu to construct a cement plant with a daily production capacity of 1500t/day. Duan said that the company will be responsible for the project's financing. The funding will mainly come from China’s policy banks and international policy banks along with the Bangladesh government and international bank consortia.


Australia: James Hardie Industries increased its net profit by 58% year-on-year to US$90.6m in the three months to 30 June 2018. Adjusted earnings before interest and tax (EBIT) were up by 21% to US$107.1m. Net sales were up by 28% to US$651m.

CEO Louis Gries said, "Our North America Fibre Cement Segment delivered solid top line growth of 10% for the quarter. Volumes increased by 5%, with our interiors business having only marginal growth and our exteriors business returning to growth above our addressable market. While we have returned to growth above our market index in our exteriors business, increased traction will be required to hit our 2019 financial year targeted range.”

“Within our Asia Pacific Fibre Cement Segment, net sales increased 15% for the quarter, primarily due to the strong growth in our Australian business,” added Gries. “Furthermore, EBIT increased 7% for the quarter, driven by the strong performance of our Australian business, partially offset by the performance of our New Zealand business.”


Japan: Taiheiyo Cement has reported its financial results for the first quarter of its 2019 fiscal year, a period that ended on 30 June 2018.

During the three month period, its revenue was US$1.9bn, a 5.5% increase from US$1.8bn in the same period of its 2018 fiscal year. Taiheiyo’s operating profit was US$88.0m, a 10% year-on-year increase from US$79.8m. Its net profit was US$55.3m, a year-on-year increase of 32.6% from US$41.7m.


Argentina: Loma Negra has announced its results for the three and six-month periods that ended on 30 June 2018. Its net revenue rose by 37.2% year-on-year to US$202m, mainly driven by growth in its core cement, masonry and lime businesses in Argentina. Argentine cement, masonry and lime net revenues rose by 33.4%, despite relatively flat sales volumes.
Consolidated adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) rose by 26.9% year-on-year to US$49m, mainly driven by the 36.6% increase in adjusted EBITDA from Argentina. Cement, masonry and lime sales in Argentina came to US$42m.

Commenting on the financial and operating performance for the second quarter of 2018, Sergio Fairman, Loma Negra’s Chief Executive Officer, said, "Our core business, cement in Argentina, continued to deliver a solid performance, posting both revenue growth and EBITDA margin expansion despite the current challenging macroeconomic environment in the country. This was achieved despite relatively flat volumes year-on-year, as we continue with our strategy of balancing profitability and market position. Sustained growth in concrete volume demand, by contrast, was supported by ongoing implementation of public infrastructure projects in our key markets."

"Looking ahead, we remain cautiously optimistic with the cement demand outlook in Argentina. Despite the potential impact of an adverse macro environment in the second half of the year and, given current market conditions, we believe the industry could reach similar record volumes (to those) achieved last year."


Puerto Rico: Total cement sales in Puerto Rico expanded by 30% in July 2018, compared to July 2017, representing the seventh consecutive monthly increase. Sales of cement rose to 50,739t. Cement production rose by 19% over the same period.


Lithuania: Akmenes Cementas, Lithuania’s only cement producer, has announced that it expects improved cement sales in 2018 compared to 2017 and hopes to halve its annual loss.

The company suffered a net loss of Euro5.5m in 107, 21.7% lower than a Euro7.0m loss in 2016. Turnover in 2017 grew by 11% to Euro56.7m. The company sold 1.04Mt of cement, 4% more than in 2016.
In 2017 Akmenes sold 58% of its produce to the local market. It exported 35% to other EU countries and 7% to Belarus. The company hopes to increase cement sales and to halve its losses.


Italy: A 37-year old maintenance worker died on 9 August 2018 at the Buzzi Cement plant at Fanna, Pordenone, Italy. It was his first day on the job. Initial investigations have indicated that he was electrocuted by touching live electrical equipment. Investigations continue.


Nigeria: A team of US investors announced that it will seek to revitalise Nigercem, located in Nkalagu, Ebonyi State. Addressing a cross section of stakeholders on 9 August 2018, the Chief Executive of Ibeto Nigeria Limited, Chief Cletus Ibeto said, “I am standing before you with a team of American financiers, who are here on an assessment visit to the plant.”

In her remarks, the leader of the American foreign investors, Amanda Wester, said, “We extol Ibeto Nigeria Limited the core investor in Nigercem in its commitment to establish a new 6000t/day process cement plant and 45MW capacity power plant in this first phase of the project at Nkalagu.


Uzbekistan: Tajik-Chinese joint venture Chzhungtsai Mohir Cement is planning to build a cement plant near Tuda in the Boisoun district of the Surkhandarya region in Uzbekistan. The unit will have a production capacity of 1.2Mt/yr, according to Asia-Plus. The company operates a 1.2Mt/yr cement plant in Tajikistan than opened in 2016. Tajikistan exported 0.66Mt of cement in the first half of 2018 and 0.36Mt of this went to neighbouring Uzbekistan.


Kazakhstan: Local cement production rose by 11.5% year-on-year to 4.63Mt in the first half of 2018 from 4.16Mt in the same period in 2017, according to Kazakhstan Newsline. Previously, production rose by 1.5% in the first half of 2017 from 4.09Mt in the same period in 2016.


Philippines: Eagle Cement’s income rose in the first half of 2018, while its input costs also increased due to rising fuel prices and negative currency effects. Its net income grew by 4.6% year-on-year to US$43.8m from US$41.9m in the same period in 2017. Its net sales rose by 9.8% to US$155m from US$141m. The company operates an integrated plant at Barangay Akle, San Ildefonso in Bulacan and a cement grinding plant at Limay in Bataan.


US: Monarch Cement’s net sales fell by 3% year-on-year to US$74.3m in the first half of 2018 from US$76.8m in the same period in 2017. Its net income decreased by 42% to US$4.8m from US$8.23m. The building materials company operates a cement plant at Humboldt, Kansas and a terminal at Des Moines, Iowa.


Panama: Production of Ordinary Portland Cement (OPC) has fallen due to a strike in the construction industry. OPC production fell by 15% year-on-year to 0.71Mt in the first five months of 2018 from 0.83Mt in the same period in 2017, according to the La Prensa newspaper. Production of other building materials, including concrete, have also been negatively affected.


Germany: ThyssenKrupp’s overall performance has suffered from the poor results of its Industrial Solutions division. In the first nine months of its financial year, which ended on 30 June 2018, the order intake of its Industrial Solutions division, which includes building cement plants, fell by 32% year-on-year to Euro2.82bn from Euro4.15bn. Its net sales decreased by 10% to Euro3.59bn from Euro4bn. Overall, the group’s order intake and net sales also fell slightly. However, most divisions and overall performance improved in the third quarter.

“We see a mixed picture. The bottom line is, that we are not satisfied with the current results”, said Guido Kerkhoff, chairman of the executive board of ThyssenKrupp. “There’s no point in sugar-coating it. Notably the cash flow is unsatisfactory, and that is not a situation which can be sustained long term. We have to improve significantly across all our businesses. That is what we are now working hard to deliver.”

With respect to the cement sector the group said that had received small and medium-size orders for plants and machines in Mexico, West Africa and India. Despite this it described the current market as beset by production overcapacity.