Global Cement Newsletter

Issue: GCW370 / 12 September 2018

Headlines


The Federación Interamericana del Cemento (FICEM) held its 2018 technical congress in Panama City last week and was attended by Global Cement. We’ll run a full write-up of the event in the October 2018 issue of Global Cement Magazine. The short version is that the conference was technically good but, from our perspective, it could have done with more regional analysis. Given that the event is for the local industry this is not a big issue as most of the delegates will know their own markets inside out and many were happy to discuss just this when asked. Likewise, FICEM’s in-house publication also included plenty of local data.

The nearest the presentations came to this was a global overview of the cement industry by Arnaud Pinatel of On Field Investment Research ahead of a market report the analysts are about to release. Although it covered the global cement industry the key local news was that the Latin American sector’s production capacity had grown by 3% from 2010 to 2018 but that prices had fallen in this time. The forecast suggested that cement sales volumes were expected to grow by 3% in 2019 - supported by Brazil, Peru and Bolivia - but that prices were also expected to fall by 1%, mainly due to issues in Argentina.

That last point is especially interesting over the last week because the Argentine cement body, the Asociación de Fabricantes de Cemento Portland (AFCP), released its figures last week to reveal that cement despatches rose by 4.2% year-on-year for the first eight months of 2018. However, at the same time the general news broke that the International Monetary Fund (IMF) was providing an emergency loan to support the country’s economy. The government was keen to shore up confidence in the economy and attributed the growth in the cement sector to the ‘most ambitious infrastructure plan in history.’

Only last year in 2017 the industry was riding a construction boom with cement shortages, new production capacity announced and the initial public offering of Loma Negra. Bailouts from the IMF don’t fit this picture of the poster boy for the South American construction industry. And, if a financial correction is pending, the new capacity that has been ordered may arrive at a bad time. This is a pretty worrying situation.

Meanwhile, across the Uruguay River into Brazil something long expected and hopefully more encouraging has occurred: the acquisition of cement plants. Italy’s Buzzi Unicem revealed that it had struck a deal to buy a 50% stake in the Brazilian company BCPAR from Grupo Ricardo Brennand for Euro150m. The arrangements cover two integrated plants: one 2.4Mt/yr unit at Sete Lagoas in Minas Gerais and a 1.7Mt/yr unit at Pitimbu in Paraíba. Buzzi has also added an option to buy the other half of the business until 2025.

It’s hard to place a value on the sale, but it looks as if Buzzi has picked up the capacity for just under US$100/t, subject to future variation on how well the company does. At that price though this a low figure and a bargain for Buzzi. Given the pain the Brazilian cement industry had been through in recent years some form of traction is welcome. Unfortunately, Grupo Ricardo Brennand has surely lost money on the deal given that the two plants were commissioned in 2011 and 2015 respectively. The complexity of the financial arrangements suggest that Ricardo Brennand is fighting to stay in the game if and when the recovery comes. If Buzzi has moved in then this suggests that it thinks it will make their money back and that it reckons that the bottom of the construction industry trough has been reached. A Brazilian take on this situation would be fascinating.

With these kinds of events happening the same week as the FICEM technical congress it really shows how vibrant and varied the region’s cement industry is. Next year’s conference will surely be even more interesting as market events in Brazil, Argentina and other countries develop.


Spain: Votorantim Group has appointed Alan Svaiter as the chief executive officer (CEO) of Votorantim Cimentos España. He succeeds Jorge Wagner, who has been promoted to the role of CEO of Votorantim Cimentos Europe, Asia and Africa. In his new position Svaiter heads a subsidiary running four cement plants, two mills, 29 concrete plants, eight aggregate operations and one mortar plant. He also directs a team of more than 500 people.

Svaiter, a Brazilian national, joined Votorantim Group in 2008. After leading the logistics of its cement division for two years he was appointed the director of Engemix, the company’s concrete business in Brazil. In 2014 he became director of the supply chain of the cement group for the entire Brazilian market.

Svaiter, a production engineer trained at the Pontifical Catholic University of Rio de Janeiro, holds a master's degree from the INSEAD business school. He started his professional career working for the Ambev brewery before joining the mining company Vale.


Paraguay: The government has appointed Javier María Rodríguez as the president of Industria Nacional del Cemento’s (INC). He succeeds César Bogado, who was the interim president of the state-owned cement producer, according to the La Nación newspaper. Julio Ullón, the head of the civil cabinet, welcomed Rodríguez to the role and urged the new administration to, ‘continue to win national demand.’


UK: Peter Cornell will join the Board of Breedon Group as an independent non-executive director on 1 October 2018. He is a Partner in Metric Capital, a Special Situations Fund targeting mid-sized companies throughout Europe with approximately Euro2bn of assets currently under management.

Prior to founding Metric Capital with his two partners in 2011, Peter was a Managing Director at Terra Firma, one of Europe's leading private equity firms. He formerly spent more than 20 years with international law firm Clifford Chance, latterly as Global Managing Partner.

Peter is currently non-executive Chairman of Grant Thornton and Lexington Consultants, a professional service firm consultancy. He is also a non-executive director of Schroders Limited, F&C Commercial Property Holdings Limited and IE Business School in Madrid.


Argentina: Carlos Casado has become the new Director of Operations at Holcim Argentina. He previously held positions for Holcim and LafargeHolcim in Europe, Asia and Latin America. He will be based in Córdoba and will control plants in Córdoba, Jujuy, Mendoza and Buenos Aires. Casado is an industrial engineer from the Polytechnic University of Valencia, Spain, who has 17 years of experience in the LafargeHolcim group.


Australia: Cement fibreboard maker James Hardie has picked its president of international operations Jack Truong to succeed Louis Gries as its new President and CEO. Dr Truong, who currently heads the firm's Asia Pacific fibre cement business and the Europe building products unit, will become global president and CEO for a six-month transition period as Mr Gries winds down his 13-year spell in charge. A former chief executive of Electrolux North America, Dr Truong has held his current role since April 2017.

“Jack offers the ideal combination of commercial expertise, operational excellence, and leadership in order to continue to grow the business and maintain the industry-leading performance, across the multiple geographies established by Louis over a long period," said chairman Michael Hammes.


India: The National Council for Cement and Building Materials (NCCBM), has appointed Mahendra Singhi, Group CEO of Dalmia Cement (Bharat) Ltd as its new Chairman. Mr Singhi has been a part of the board of Governors of NCCBM since 2013.

Commenting on the occasion, NCCBM Director General, Ashutosh Saxena, said, "We are fortunate to have someone of Mr Singhi’s calibre and experience to lead NCCBM. We are at a critical phase of development of our centres of excellence and we need renewed leadership to successfully implement our research, strengthen our technology initiatives and take advantage of the opportunities ahead for sustainable development of cement and construction sector. Mahendra Singhi is a technology visionary with a proven track record of execution. Furthermore, as a member of NCCBM’s board of governors for the past five years, he has a deep understanding of its capabilities and potential."

A prominent figure in the Indian manufacturing industry, Mahendra Singhi has played a prominent role in the growth and development of the country’s cement sector over the last 40 years. Beginning in 1978 with Birla Group, he has held leadership positions with major cement companies: Shree Digvijay Cement, UltraTech Cement and Shree Cement, in various capacities. He led Shree Cement before his present appointment. He serves as co-chair of the Cement Sustainability Initiative (CSI) in India and Vice-President of Cement Manufacturer’s Association (CMA).

On his appointment Mahendra Singhi said, "I am really honoured to be trusted with the top job at NCCBM, after successfully completing five wonderful years of association with the council. It has been a tremendously rewarding journey over the years of my work in the cement industry. It would be my utmost endeavour to promote research and scientific work connected with waste to wealth, cement and building materials trade and industry and I am certain that together with NCCBM, we will make huge strides and carry out many ambitious projects to make impact on society worldwide."


Egypt: Helwan Cement has agreed to sell its white cement plant in Minya Governorate to Emmar Industries. The transaction is planned to take place following the de-merger of the white cement unit from the rest of the company. The subsidiary of HeidelbergCement and Suez Cement said that the sale was part of its plan to restructure the business and improve its financial position. The company previously said it had received bid for the white cement plant in June 2018.


Egypt: The Ministry of Public Business Sector has shut down the National Company for Cement due to mounting losses. Hisham Tawfik, the Minister of Public Business, said that the plant’s losses had reached Euro43m in the last year, according to Egypt Today magazine. Its creditors include the Gas Company and the Egyptian Electricity Company.

The company’s registration with the local stock exchange was closed in August 2018. The government is now intending to sell its stocks in the Suez Cement Company and Al-Nahda Company. The company’s assets will then be sold. The minister said that workers aged 50 years or more will receive redundancy and that younger workers will be moved to other cement companies.

The cement producer reported mounting losses in recent years due to higher production costs. Reportedly, the cost of producing one ton of cement was 60% higher than the average comparable cost of its competitors. In addition the company was paying its workers twice the average wage than other state-owned businesses.


Japan: Taiheiyo Cement says that an earthquake that took place in early September 2018 in Hokkaido has had a limited effect upon its business. No injuries to employees were reported. Cement production at its Kamiiso plant is continuing using in-house power generation although the unit is working on saving energy. The 6.7 magnitude earthquake has caused widespread disruption on the island, including knocking out local power generation.


Gabon: Morocco’s Ciments de l’Afrique (CIMAF) says it plans to start a new production line at its Cimgabon integrated plant by November 2018. The measure has been announced to meet a sudden surge in demand, according to the L’union newspaper. Cement prices have reportedly nearly doubled in the high construction season.

The cement producer first announced the new clinker production line in mid-2017. It will increase the plant’s production capacity to 0.85Mt/yr from 0.5Mt/yr at present. In addition the company has launched a Euro10m project for an admixture unit for completion by mid-2019.


Ireland: Quinn Cement has launched a new range of bagged cement products in Ireland following its launch previously in the UK. The company invested over Euro3m in their cement plant to bring the new range to the market, which includes three new cement products: General Purpose Cement, Master Grade Cement and Premium Grade Cement.

General Purpose Cement is intended to be a versatile cement product, suitable for general use, particularly in smaller jobs and repairs. Master Grade Cement is targeted at plastering and mortar due to its workability. Premium Grade Cement is a high-strength product at 42.5N.

“We’re delighted to bring the new range to Ireland, particularly given the success we’ve seen in the British market, where bagged cement sales have seen a huge increase since the range was launched earlier this year. News of the Irish launch has been very well received by our merchant customers, and the demand to stock the new products here has been growing since they were unveiled for the British market. In particular, we expect the weatherproof bags to be very popular across Ireland, as they have been in Britain,” said Quinn Building Products’ Irish Sales and Marketing Director, Seamus McMahon.


Bangladesh: A lighter vessel carrying around 1500t of clinker has capsized near Bhasanchar of Noakhali in the Bay of Bengal. Mohammed Selim, deputy director of Bangladesh Inland Water Transport Authority (BIWTA), Chittagong said that all the 13 crew members of MV Sheikh Parvin were rescued, according to the Daily Star newspaper.


Ireland: An Euro22bn audit of CRH has been put out to tender, as mandatory rotation rules require it to replace incumbent EY. The move was announced in CRH's 2017 annual report, which said EY would have to be replaced by 2021 in order to comply with European Union (EU) rules designed to increase the independence of auditors.

Ireland has adopted a strict interpretation of the EU rules by requiring financial institutions and listed companies to replace auditors every 10 years. This contrasts with the UK's more liberal regime, which only requires audits to be put out to tender every 10 years, leaving companies free to reappoint their existing auditors. EY is based in the UK. It is possible that CRH may be seeking to reappoint a non-UK firm prior to the UK’s departure from the EU on 29 March 2019.


Pakistan/Afghanistan: Pakistan’s cement industry has urged the government to increase the customs duty on the import of clinker to support local manufacturers. It also wants a reduction in the cost of doing business in the country to encourage domestic sales. The industry stakeholders said that Pakistan has been losing ‘a major chunk’ of its market in Afghanistan to Iranian cement, due to its higher energy costs.

The costs of electricity and gas in Pakistan are reportedly the highest in the region, while additional duties on coal imports have nullified the lower cost of coal on the global markets. Locally, high government taxes have encouraged imports of under-invoiced Iranian cement imports, resulting in drop in domestic sales.

According to the latest data, domestic consumption has dropped by almost 14% over the past three years. The domestic cement dispatches in the first two months of the current fiscal year declined by 5.3% year-on-year. In the north, cement dispatches declined by 8.8% while in south zone they declined by 10.9%. In July 2018 the overall growth in the industry was 5.1%, while in August 2018 the overall decline was 8%.

The industry recommended that imports of cement should not be allowed until the importers register themselves with the Pakistan Standards and Quality Control Authority to certify the quality of their cement.


India: UltraTech Cement has announced that it is joining EP100, a global leadership initiative that brings together a growing group of ‘energy-smart companies.’ The company said that becoming a member reaffirms UltraTech's commitment to driving sustainability across its value chain and accelerating business growth. By becoming a member of EP100, UltraTech has committed to double its energy productivity, a critical lever it to reduce the CO2 intensity of its operations. It will provide a strategic boost to UltraTech's low carbon growth target of reducing carbon intensity by 25% by 2021 against its 2005 baseline.

K K Maheshwari, Managing Director of UltraTech Cement said, “UltraTech Cement has always been at the forefront in adopting sustainable processes in its business operations. The company has some of the best performing plants on energy metrics across the world. As a responsible organisation, we realise the need for further substantial improvements in energy productivity. Our membership of EP100, we believe, will play a catalytic role in helping us accelerate towards doubling our energy productivity, which is a key strategic lever to achieve sustainable business growth.”

Helen Clarkson chief executive officer (CEO) of The Climate Group, said, ''It's hugely encouraging to see UltraTech, one of the leading cement producers globally, step up on energy efficiency. This is a win-win for emissions reduction and business growth. We need to see many more cement companies and other large energy users in hard-to-abate sectors follow UltraTech's lead.''

Founded by The Climate Group, EP100 constitutes companies that commit to using energy more productively. Energy productivity is a way of measuring energy efficiency that aligns directly with business growth and sustainable development goals.


Germany: Two workers have in died an accident at a construction site within the HeidelbergCement Schelklingen cement plant, when a 40m-high scaffold collapsed within a silo. Four others were involved, with one slightly injured. All six operatives had entered the silo from the top. Spokesperson Elke Schönig said that the scaffolding had become ‘staggered’ for unknown reasons and then partially collapsed. The incident will be investigated.


Democratic Republic of the Congo: The Minister of State for Foreign Trade, Jean Lucien Bussa Tongba has extended a measure restricting imports of grey cement, clinkers (and selected other commodities) in the western part of the country for 12 months, effective 3 September 2018.

The extension of this measure comes after an evaluation meeting with the Federation of Enterprises of Congo (FEC). It is part of the protection of local industries against smuggling, fraud and other illicit transactions that characterise imports of these products.

According to the Ministry of Commerce, offenders will be exposed to the law given the necessary provisions made for its application in all of its rigour. For its part, the FEC, in a letter addressed to the Minister of State for Commerce, thanked the government for safeguarding the industries of the country. The employers believe that this decision will contribute to the development of local industries and strengthen a frank collaboration between the Congolese government and the FEC.


Namibia: Ohorongo Cement officially inaugurated its 5MW photovoltaic solar plant this week at its head offices at Farm Sargber near Otavi in the Otjozondjupa Region.

Speaking at the opening, Tom Alweendo, Minister of Mines and Energy said that solar electricity generation had grown so exponentially in Namibia since the inception of the Renewable Energy Feed-In Tariff programme in 2014.


Bolivia: The cement producer Fancesa has started legal action against transport industry leaders Oscar Reynolds and Macguiver Rosales over threats and criminal association, after they stopped transporting its cement. Fancesa earlier reduced the rate paid to hauliers to transport cement from its plant to Santa Cruz by 13.7% to US$1.88/bag (50kg), prompting hauliers to stop transporting its cement.


Brazil: Italy’s Buzzi Unicem has announced that it has reached an agreement to buy a 50% stake in the Brazilian company BCPAR from Grupo Ricardo Brennand for Euro150m. BCPAR operates two integrated cement plants, one in the north east state of Paraíba and one in the south east state of Minas Gerais. The Minas Gerais plant started operations in May 2011 and has an annual production capacity of 2.4Mt/yr of cement. The Paraíba plant was commissioned in August 2015 and it has a capacity of 1.7Mt/yr. Buzzi Unicem will retain the right to buy the remaining 50% of BCPAR from Ricardo Brennand until 1 January 2025.

Buzzi Unicem said in a press release that the agreement reached allows it to extend its industrial operations to the largest economy in South America and improve the geographical diversification of its regional presence. Buzzi Unicem believes that the current downturn in the Brazilian economy, and in particular of the local cement industry, can be positively resolved, starting from 2019. It adds that Brazil's key macroeconomic data concerning cement production are encouraging. The population is expected to grow at an average rate of 1.1%/yr and per capita cement consumption is currently at its lowest levels in years.


Zimbabwe: Lafarge and PPC are reported to be ‘scrambling’ to contain cement shortages in Zimbabwe. Capacity is down owing to maintenance and operational issues and there have been problems importing some raw materials due to a lack of foreign currency. Shortages of cement and related products have hit the country in the past week, with wholesalers, supermarkets and other retailers running out of stock.

PPC Zimbabwe’s managing director, Kelibone Masiyane, said that the ‘current cement shortage is temporary’ and Lafarge has authorisation to import up to 5000t. Some of this had reportedly come in from Mozambique over the Forbes border crossing.


Brazil: Cemex Latam Holdings (CLH), the subsidiary of Mexican cement company Cemex in Central and South America and the Caribbean region, together with its subsidiary Corporacion Cementera Latinoamericana, expect to finalise the sale of Brazilian cement producer Cimento Vencemos Do Amazonas (CVDA) for around US$30m by the end of 2018. On 25 May 2018, the pair agreed to sell all of the shares they own in CVDA to Brazilian cement company Votorantim Cimentos.


Pakistan: Overall cement sales in Pakistan fell by 2% year-on-year to 7Mt in the first two months of the current fiscal year, which began on 1 July 2018. Domestic sales dropped by 5.3% to 5.9Mt, while exports increased by 21.5% to 1.1Mt.

A spokesperson from the All Pakistan Cement Manufacturers Association (APCMA) said that the industry had been expecting slower growth at home but had not expected a contraction. He added that in July 2018 overall sales had grown by 5% but they fell by 8% in August 2018.


Argentina: Both the sale and consumption of cement grew by 17% in August 2018 compared to July 2018, according to the national government. With sales of 1.1Mt, August 2018 also grew 0.1% compared to August 2017.

"The August figures are very positive in this economic context, which shows that construction, public and private, continues to advance,” said Guillermo Dietrich, Minister of Transportation. “The sale of cement maintains the same values as in August 2017, setting a historical record. We are facing the most ambitious infrastructure plan in history and that does not stop."


Nigeria: BUA Group has announced that it will commence core drilling in Ebonyi State, prior to establishing a greenfield cement plant there. Speaking in the state capital Abakalik on 5 September 2018, BUA’s Managing Director Kabiru Rabiu said that he was surprised there was no cement plant already in the state, despite there being enormous limestone deposits. Ibeto Cement is in the process of setting up two integrated cement plants in the state.

"We are here because the state is blessed,” said Rabiu. “It has a huge deposit of limestone that is very high in quality. The state also has coal, which is necessary for cement production. The state is strategically located; it is close to Enugu, close to Cross River State and close to the Middle Belt.”