Global Cement Newsletter

Issue: GCW369 / 05 September 2018

Headlines


What’s long, thin and has already exported more than 20Mt of cement in 2018? The answer is Vietnam, which reported this week that it exported 20.1Mt of cement between 1 January 2018 and 31 August 2018. That’s 106 - 112% of its annual ‘target’ in just eight months and around the same amount as it claims to have exported during the whole of 2017. Total cement production in Vietnam was 63.9Mt between January and August 2018, meaning that the country has exported 31.3% of the cement it made over this period. Vietnam itself consumed ‘just’ 43.8Mt. The government target for Vietnamese cement consumption during 2018 is around 65 - 66Mt. That’s basically the amount it has already made.

From a market-led mind-set these targets seem fairly large, huge even, especially the export target. Indeed the concept of such national targets is in itself an alien concept. In most of the world, imports and exports are results of market supply and demand trends, not drivers prescribed by the government.

The reasons behind this apparent desire to export these very large volumes of cement are, therefore, probably best understood from within Vietnam, and we won’t speculate too much on them here. However, Vietnam is clearly determined to continue to produce ever more cement than it can use. In what other country could a major government-owned producer export more than 70% of the cement it makes? In the first half of 2018 Vicem did just that, shipping 11.7Mt of cement overseas from the 14.2Mt that it made.

In 2017 Vietnam’s export target was 15Mt. It ended up smashing this to the tune of 5Mt, 33% more than the target. At the current rate the sector looks like it could overshoot even more spectacularly this year, perhaps hitting as much as 30Mt of cement exports in 2018. This is more than a big European country like Germany can produce! It certainly sounds like a lot but… is it really an exceptional number?

Looking at data from World’s Top Exports (WTEx), which we advise delving into, it seems that this would be a very high number indeed. It reports that a total of 166.6Mt of cement were exported internationally in 2017. It reports that the top exporter was not, as you may by this point have been primed to suggest, Vietnam. It wasn’t even China, as the former number one was bumped into second place (12.91Mt) by Thailand (13.03Mt). Turkey was third (12.79Mt), with Japan fourth (11.93Mt) and Vietnam was listed as fifth (9.53Mt).

All of these biggest exporters except Turkey are in the Far East, an area swamped with cheap cement. China’s average export selling price according to WTEx was US$45/t, against a global average of US$55/t. Thailand undercut it by US$3/t at US$42/t, perhaps explaining its rise to the top spot. Turkey’s average export price was also US$42/t, although it is located in a region that has a lot of saturated markets and others that are growing rapidly. Its average export distance was second only to China’s. Vietnam’s average cement export price was US$51/t, higher than the others. This does not tie in with the apparent rise in exports so far in 2018. This price may have since fallen. Surprisingly, Japan had the lowest export price of the top five exporters by volume at just US$30/t in 2017.

So, to re-answer the question posed two paragraphs above, 30Mt is a very high number indeed. But you’ll have spotted the large discrepancy between WTEx’s 9.53Mt figure for Vietnam, which relies on reciprocal import partner data, and the government’s official line of 21Mt for 2017. One is tempted to ask where the other 50% of the exports reported by the Vietnamese actually ended up, especially given that WTEx reports a US$1.5bn difference in the value of exports and imports across the year. Imports were valued at US$8.8bn but exports were valued at US$10.3bn.

The mystery destination of all that cement, real or imagined, could be the topic of an entire separate column. What appears to be the case at present, is that rampant Vietnamese cement overcapacity is here to stay. The country, as well as Japan, Turkey, Thailand et. al., could stand to benefit in the short term, as China acts ever more aggressively to end its own oversupply situation. However, there could come a time when it has to take its foot off the gas. There are no signs of that yet though.


Canada: Kate Strachan has become the new plant manager of the Lafarge Exshaw plant in Alberta, the largest in Canada. She took up the position in June 2018.

Born and raised in Warrington, UK, Strachan moved to Canada with her family when she was 10 years old, following her father’s job in marine engineering. She graduated from the University of Victoria with a mechanical engineering degree in 2000 before joining Lafarge Canada’s Richmond plant in the mechanical engineering department. Over the next 12 years she moved up through the mechanical department, eventually becoming the maintenance coordinator and then production coordinator at the plant.

After holding that position for several years she was promoted to production manager for Lafarge’s Sugar Creek plant in Missouri, US, but returned to Canada in less than a year to assist with the Exshaw plant’s US$600m expansion. “The commissioning of a new plant line is a once in a lifetime opportunity, so it was something I couldn’t really pass up,” said Strachan.

After spending nearly two years as the plant’s production manager, Strachan assumed her new role as plant manager in June 2018, taking over from Jim Bachmann, who was the plant manager since 2015.


China: Wu Xu has been appointed as the chairman of Taiyuan Lionhead Cement. The 54-year old Chinese national is a graduate from the Chongqing Construction Workers College, he holds a master's degree in business administration from Chongqing University and he has attended the China Europe International Business School. From 1982 to 1991 Xu was the chief engineer of Chongqing Building Management Station and was the executive vice general manager of China Chongqing International for Economy & Technology Cooperation in the early 1990s. In 1994 he founded Sincere Group and has since been its chairman and president.


Ukraine: Vitaly Gorgoliuk has been appointed as the new chief executive officer (CEO) of Eurocement Group Ukraine. He succeeds Denis Galchev. Eurocement Group Ukraine is a subsidiary of Russia’s Eurocement Group.


Iran: Cement exports from Iran registered growth of 32% during the first four months of the country’s current fiscal year (20 March 2018 – 22 July 2018), according to the Islamic Republic’s Customs Administration data.

The country exported US$107m worth of cement during the period. The volume rose to 2.7Mt, 24% more than in the comparable period of the previous fiscal year. The country also exported 2.2Mt of clinker worth US$60m in the same period of time.

Iran exported cement to 27 countries across the world in the period, including Kuwait, Iraq, Afghanistan and Bangladesh, with exports to Oman and Kuwait growing strongly.

The latest data of the Iranian Ministry of Industries, Mining and Trade says that the country’s total cement output amounted to 13.36Mt during the same first quarter period, a year-on-year fall of 5.7%.


Algeria: Egypt’s Qalaa Holdings has announced that its subsidiary ASEC Cement is looking to exit from Algeria-based Zahana Cement Factory. ASEC holds around a 35% stake in the Algerian facility and has so far invested US$62m in the plant, taking its capacity to 0.75Mt/yr. A new 1.6Mt/yr production line is currently being constructed at the plant, with commissioning expected in early 2020.


Ukraine: Production of cement in Ukraine fell by 4.7% to 0.96Mt in July 2018 compared to the same month in 2017, according to the State Statistics Service. Production was also 6.1% less than in June 2018.

In the first seven months of 2018, cement production fell by 3.7% to 4.97Mt. Cement production was 9.31Mt for the whole of 2017.


UK: Breedon Group has reported its first half results for 2018, which showed a 16% year-on-year increase in revenue to Euro419.3m and a 3% fall in profit before tax to Euro33.7m. The group completed the acquisition of Ireland-based Lagan Group during the period under review, as well as other companies in the UK.

Peter Tom CBE, Executive Chairman, commented, “This was one of the busiest periods in the Group’s history, with four acquisitions completed by 1 July 2018, including our first outside Great Britain, coupled with continued organic investment in a number of key projects. We had anticipated a challenging 2018 and so it proved in the first half, with testing trading conditions exacerbated by the severe weather in the first quarter and rising input costs throughout the period. Despite these headwinds, we delivered a resilient performance.”

“We continue to view the medium- to long-term outlook in Great Britain positively, with infrastructure spending forecast to increase steadily over the next three years and government strategies to address our chronic housing shortage expected to fuel continued growth in the residential sector. Market conditions in Ireland are expected to be even healthier, with construction output in the Republic forecast to grow by approximately 28% in the three years to 2020 and Northern Ireland expected to sustain construction output at approximately Euro3.33bn/yr from 2018 to 2022.”


Bolivia: Transport firms in Chuquisaca in Bolivia are reported to be ‘in state of emergency’ after they decided to stop carrying cement on behalf of local producer Fancesa. The cement producer recently decided to lower the fare it pays for trips from its plant to Santa Cruz to US$1.88/bag (50kg) from US$2.18/bag, a fall of 13.7%.


Dominican Republic: Colombia’s Cementos Argos has announced that it recorded positive results in the Dominican Republic during the first half of 2018. In this period, the company saw overall revenues experience a year-on-year increase of 7%, while net profits expanded by 23%. These positive results helped the company to report a good performance in its Caribbean-Central American regional operations, which recorded earnings before interest, tax, depreciation and amortisation (EBITDA) of US$99m and revenues of US$299m in the period under review, marking increases of 3.9% and 2.6%, respectively.


Nepal: A consortium of Nepal’s five commercial banks has approved credit worth US$140.5m to Hongshi Shivam Cement Private Limited, a Nepal-China joint venture company, in one of the largest ever finance pledges by Nepali commercial banks to any industry or infrastructure project. Company officials said that they would use the loan pledged by the commercial banks to start commercial production of cement at Hongshi Shivam’s 6000t/day plant.

The consortium led by Nepal’s NMB Bank, co-led by Nepal Investment Bank and participated in by Prabhu Bank, Everest Bank and Nepal SBI Bank, pledged the loan to the cement company, which has been conducting trial production of cement since May 2018.

The joint venture said that the loan was sought from Nepali banks to conclude financial closure of the cement plant. It has already received approval to inject Foreign Direct Investment (FDI) worth US$86m from Investment Board of Nepal and the central bank. The Chinese joint-venture partner has pledged to inject total FDI of US$360m, making it the largest FDI ever in the country’s cement industry.


Vietnam: The Vietnamese cement sector exported 2.01Mt of cement in August 2018, a 44% year-on-year increase but 90,000t less than in July 2018. During the first eight months of 2018, cement exports reached 20.1Mt, exceeding the whole year target of 18-19Mt, according to the Ministry of Construction’s Building Material Department (BMD).

Total production stood at 63.9Mt in the first eight months, a year-on-year increase of 30%. The domestic market consumed 43.8Mt. According to the BMD, the industry is likely to reach its consumption target of 65-66Mt in the domestic market for the whole of 2018.

On top of Vietnam’s current large cement capacity, the list of cement projects that are expected to come into operation after 2018 include some very large capacity projects. These include Sông Lam Cement’s production lines 3 and 4 with a total capacity of 3.8Mt/yr, Thái Nguyên Group’s Hà Tiên Cement Project in Bình Phước with an annual capacity of 4.5Mt/yr and the Tân Thắng Cement Project in Nghệ An Province with an annual capacity of 1.8Mt/yr.


India: JK Lakshmi Cement has recently ramped up the production capacity of its grinding units in the state to cater to growing cement demand in Gujarat and Maharashtra. The cement maker operates two grinding units in Gujarat, one at Kalol near Ahmedabad and one in Surat.

"Our combined capacity at both these locations has been raised to about 2.5Mt/yr from 1.5Mt/yr earlier," said Shailendra Chouksey, whole-time director of JK Lakshmi Cement. "We have been expecting reasonable growth in the cement sector largely driven by various government initiatives, as well as focus on infrastructure projects.”


Nigeria: Dangote Group is the most admired brand in Nigeria according to a survey of around 50 brands by marketing agency Brand Nigeria. Several variables such as innovation capacity, product quality, online presence, leadership and presence of products in the local market, have led Dangote to lead this ranking, according to the reserach team.


Bolivia: Emisa has reported that it will stop cement production at its plant in Oruro to concentrate on cement distribution instead. Its existing mills were built in 1946 and their technology is now outdated. Local workers were offered either jobs in other plants, voluntary retirement or a redundancy package.


India: The KCP Ltd cement unit II at Ramakrishnapuram in Krishna district has bagged the ‘Excellent Energy Efficient Unit’ award from the Confederation of Indian Industry (CII). The award is given to the cement plant with lowest specific electrical energy consumption for cement production compared to the national average and lowest specific heat consumption for clinker production as against the industrial average.


Philippines: Holcim Philippines is reported to be considering additional clinker lines in line with the government's ‘Build Build Build’ infrastructure initiative. The LafargeHolcim subsidiary is already in the process of undertaking national expansion from 10Mt/yr in 2018 to 12Mt/yr in 2019.


Nigeria: Lafarge Africa Plc, part of LafargeHolcim, is erecting a new coal grinding plant at its cement plant in Ewekoro, Nigeria, with Germany’s Loesche GmbH as the supplier. The plant previously used natural gas as its main fuel but inadequate local supplies meant that a change to coal was necessary. The order was made by the project’s general contractor, China’s CBMI Construction Company.

Local lignite and petcoke will be used as grinding materials. The grinding capacity for coal is 23t/hr at 23% R90µm and for petcoke it is 16t/hr at 3% R90µm.

The engineering, the core components of the mill and of the classifier with central feed, the rotary gate and the mill gearbox with a nominal power of 450kW are all included in the scope of service. Naturally, the reliable coal mill type corresponds to the ATEX standard to ensure safe operation. This is in line with LafargeHolcim's declared goal, defining health and safety as an overarching value.


Chile: Cemento Polpaico, part of LafargeHolcim, reported a profit of US$5.93m in the first half of 2018, a 52.6% rise with respect to the US$3.9m profit it achieved in the first half of 2017. Its operating revenues from continuing activities were US$120.7m, a 32.2% year-on-year increase.

The company reported that the higher operating revenues were mainly due to an increase in sales volumes of cement and concrete, driven by the greater economic activity.


US: LafargeHolcim has acquired Metro Mix, LLC, a leading provider of ready-mix concrete in the Denver metropolitan area in Colorado. With Metro Mix, LafargeHolcim reports that it has further strengthened its position in the United States, where it is already present with operations in cement, ready-mix concrete, aggregates and asphalt.

Jan Jenisch, CEO of LafargeHolcim, said, “This is our fourth acquisition this year, in line with our Strategy 2022 - 'Building for Growth'. Metro Mix's operations are highly complementary to our existing footprint and will allow us to gain a larger share in a growing market with immediate commercial and operational synergies. I very much welcome all employees of Metro Mix to our company.”
Metro Mix operates two ready-mix concrete plants and reported net sales of around US$30m in 2017.


Morocco: Cement consumption in Morocco was higher in July 2018 than for any July since 2012 at 1.3Mt, a 0.1Mt (7.8%) year-on-year increase.

The upturn was reported by local press as having been expected by cement companies, which now hope to finish the year level or even slightly up on 2017, if conditions remain favourable.

According to data provided by the Professional Association of Cement Manufacturers (PCA), 10 out of 12 regions saw consumption increase in July 2018. Increases range from 0.33% for Oriental to 40.55% for Guelmim-Oued Noun.

Casablanca-Settat still has the lion's share of Moroccan cement consumption. The region was able to absorb 282,680t, an increase of 3.8% year-on-year. This zone was followed by Marrakech-Safi, which its volumes sold rise by nearly 21% compared to July 2017, thus accumulating 180,131t.


Colombia: Cement production reached 1.02Mt in Colombia in July 2018, a 5.2% year-on-year fall compared to July 2017, according to DANE, the country’s statistics authority. In July 2018 the country shipped 0.99Mt to the domestic market, a 4.7% year-on-year fall.

So far in 2018, cement production reached 6.98Mt, a decrease of 1.8% compared to the period January - July 2017. In the 12 months to the end of July 2018, cement production reached 12.2Mt, a decrease of 2.2% compared to the period August 2016 to July 2017.


UK/Nigeria: Aliko Dangote, the owner of Dangote Cement, has reiterated his intention to list the company on the London Stock Exchange (LSE), following a meeting with the UK Prime Minister Theresa May in Lagos. May was in the country as part of a multi-stop trade tour of African nations ahead of the UK’s departure from the European Union in March 2019. Dangote Cement is worth an estimated US$7bn.

During the visit May said, “Already the finance and business links between Lagos and London are bringing enormous benefits to businesses and people in the UK and in Nigeria. London is a world-leading financial centre and, as the UK leaves the European Union, it will play an even greater role in financing the fastest-growing economies across Africa and the world.”


Kenya: The Capital Markets Authority (CMA) has extended the suspension of ARM Cement’s shares from trading on the Nairobi bourse for a further 21 working days. According to a public notice the shares of the cement maker will remain suspended until 27 September 2018.

“The extension of suspension in trading of the company’s shares takes effect from 30 August 2018 and shall remain in force for a further 21 working days,” said the NSE.

ARM Cement, which is grappling with US$140m of debt, was previously suspended from the bourse for seven working days from starting 20 August 2018.


Uganda: President Yoweri Museveni has commissioned the Simba Cement plant in Mukuju Sub-County in Tororo District in Eastern Uganda.

The factory, which currently employs about 400 workers, was built in two and half years by Mepani Technical Services, at an estimated cost of US$55m. It is the second cement plant in Tororo District.

President Museveni, who on arrival at the factory made an inspection tour of the facility, urged Ugandans to be enterprising and disciplined. He added that, with the abundant natural resources with which Uganda is endowed, there is tremendous potential for development.

Musaveni commended the pledge by the factory to employ local youths and advised the company to employ at least 30% youth workers. He also praised Tororo District for the peaceful approach in handling their district’s matters.

The Managing Director of Simba Cement factory, Guru Narendra Raval, said that the reduction in the price of cement due to the new capacity the plant had brought was in line with President Museveni's dream of having Ugandans living in cemented houses. He said, “The President asked me to build a cement factory and now I have built it. I am not here to make profits but to make Ugandan lives better.”


Russia/Ukraine: The Cabinet of Ministers has banned clinker imports from Russia. The government says that cement imports from Russia almost doubled in 2017, according to Interfax. Its share in total imports in 2017 was 85 - 87%, and in January - May 2018 it grew to 100%.

"The introduction of cement clinkers into the list of goods banned to import into Ukraine from Russia is carried out as part of the policy of economic opposition to discriminatory actions against Ukraine by the aggressor state," said the Ministry of Economic Development and Trade. It added the ban is expected to increase local production. Although a cement deficit is not expected, the ministry said that, if necessary, additional clinker could be imported from the European Union (EU).

According to the draft resolution, the ban on the import of Russian clinker will come into force 10 days after the publication of the document.


Australia: Boral’s cement business, Boral Australia, reported a 2% year-on-year rise in cement sales volumes in the financial year to 30 June 2018. Its external sales fell but this was compensated for by growing local sales in support of its concrete business. It’s said that the earnings and margins for its cement business improved due to an improvement programme. However, these benefits were partly offset by cost inflation and higher energy costs.

Overall, Boral Australia’s sales revenue rose by 34% year-on-year to US$2.62bn in the financial year to 30 June 2018 from US$2.40bn in the same period in 2017. Boral Australia’s earnings before interest, taxation, depreciation and amortisation (EBTIDA) increased by 15% to US$462m from US$402m. Total group sales rose by 34% to US$4.28bn and EBITDA grew by 47% to US$770m due to the acquisition of Headwaters.

“We have continued to optimise our networks and grow volumes in Australian east coast markets, where demand is very strong, and we continue to focus on full cost recovery through price and strengthening margins through improvement programs,” said chief executive officer and managing director Mike Kane.


Uruguay: An 88 day strike has reduced cement sales at Administración Nacional de Combustibles, Alcoholes y Portland (ANCAP). Its cement sales fell by 24.1% year-on-year to 0.12Mt in the first half of 2018 from 0.16Mt in the same period in 2017. Despite this, the loss from its cement business decreased to US$3.4m from US$6.06m. Its earnings were also negatively affected by rising petcoke prices. Overall, the oil and gas company reported a profit of US$52.6m across all business lines.


Brazil: Brazil's antitrust watchdog Cade has approved a joint-venture between Votorantim Cimentos, Tigre Participações and Gerdau Aços Longos for a construction materials products loyalty scheme. The initiative will be called Juntos Somos Mais. Votorantim Cimentos will hold a 45% share of the scheme. The civil construction materials company Tigre and Gerdau Aços Longos, the steel division of the Gerdau, will hold a 27.5% share each.

Cade said that the companies will remain operationally and commercially independent in their main activities, so that the only common ground between them will be the functioning of the coalition's loyalty program. Other companies in the construction industry will be able to join the program as partners.


UK: Lafarge Cement is celebrating 50 years of production at its Cookstown plant in Northern Ireland. The plant opened in 1968 and today it employs almost 100 staff both in Cookstown and at a cement terminal in Belfast. Lafarge Cement was later acquired by Aggregate Industries in 2015 as part of the merger between Lafarge and Holcim that created LafargeHolcim.

“Fifty years is a significant milestone and follows the successful 60th anniversary celebrations that took place at our sister cement plant in Cauldon in 2017,” said plant manager Russell Larmour. “The success at Cookstown is testament to the many generations of people here in County Tyrone who have helped shape the business today. As we now look to the future, and many more years of production, we are committed to maintaining our position as a leading, sustainable business partner at the heart of the UK’s construction industry.”


US: Staff members from Ash Grove Cement, Argos USA and Lehigh Hanson have won awards at the Portland Cement Association’s (PCA) 2018 John P Gleason, Jr Leadership Awards. The awards recognise PCA members who have exhibited leadership in advancing industry programs and initiatives. The scheme is named after John ’Jay’ Gleason who served as PCA president from 1986 until his retirement in 2007.

Steve Minshall, Corporate Director, Safety and Health at Ash Grove Cement won the Business Continuity award. He has served on the PCA Occupational Health and Safety (OHS) Committee for two decades, where the PCA say he has proven to be a strong safety leader in implementing many programs and initiatives to reduce workplace injuries. He has led efforts to better partnership with regulatory agencies in pursuit of the common goal of safety. Finalists in this category were Brett Lindsay, Environmental & Energy Manager at Salt River Materials Group, and Steve Wilcox, Cement Technical Director at Argos USA.

Lori Tiefenthaler, Senior Director of Marketing at Lehigh Hanson won the Market Development award. As chair of the American Concrete Pavement Association (ACPA) in 2017, Tiefenthaler led efforts to better align the missions of allied cement and concrete associations, including an effort to launch PavementDesigner.org, which is a joint project between PCA, ACPA and National Ready Mixed Concrete Association. She has served on the executive board for the National Concrete Consortium, through which she has helped improve connections and outcomes for the cement and concrete industries with federal and state departments of transportation and academia. Finalists in this category were Bill Asselstine, Vice President Sustainability at St. Marys Cement/VCNA, and David Gray, Market Manager at GCC of America.

Gina Lotito, Vice President, Energy & Environmental, GCC of America won the Young Leaders award. She is an active member of the PCA Environment & Energy Committee, where she has been chair and vice chair of the Sustainable Manufacturing Subcommittee, and served on the Sustainable Development Committee. She has proven a leader in promoting the use of clean alternative fuels for cement production, and in federal advocacy efforts to lower regulatory barriers for using such fuels under the Non-Hazardous Secondary Materials Rule. Finalists in this category were Ed Griffith, Vice President Sales & Marketing, US at St. Marys Cement/VCNA and Adam Posly, Production Manager at LafargeHolcim US.


US: Illinois Cement has installed a Roll Gen System supplied by Martin Engineering at its La Salle plant in Illinois. The power station supplies energy to a remote conveyor location at the site. The patent-pending design uses the kinetic energy of the moving belt to generate enough electricity to drive an automated dust suppression system, a pneumatic belt cleaner tensioner and a series of air cannons, helping operators at the Illinois Cement Plant reduce dust and spillage, increase cargo flow efficiency and minimise labour costs for cleaning and maintenance.

The Martin Roll Gen System is designed to create a self-contained mini power station that allows operators to run electrical monitoring systems, safety devices and a variety of other components. Martin Engineering says that the device is considered a ‘significant’ step toward eliminating power production obstacles, as conveyors move into the next generation of ‘smart systems.’

“Running auxiliary power can be both complicated and costly, requiring expensive labour and oversized cables to accommodate the inevitable voltage drop over long runs, as well as transformers, conduit, junction boxes and other components,” said Andrew Timmerman, Product Development Engineer at Martin Engineering. “The entire project has been a success, particularly in how many man-hours we save in maintenance and upkeep. The tensioning system does a great job, and the Roll Gen puts out enough power that we’re considering adding an automated secondary cleaner and a vibrating dribble chute to capture even more carryback.”

Martin Engineering builds products for bulk materials handling. The company has it headquarters in Neponset, Illinois. It has offices in Brazil, China, France, Germany, Indonesia, Mexico, Peru, Russia, South Africa, Turkey, India and the UK.