Global Cement Newsletter

Issue: GCW375 / 17 October 2018

Headlines


Well, it turns out that the European cement industry wasn’t kidding when it raised the risks of the climate mitigation on the sector. This week three (!) integrated plants have been earmarked for closure.

Cementa in Sweden said that it was considering closing its Degerhamn plant due to increased environmental regulations. Today, local press in Spain is reporting that Cemex España is planning to shut down two of its plants. These are plants in different parts of Europe with different local market dynamics but both are within the European Union (EU). That’s three plants closing out of 219 in the EU, or a loss of around 1% of production capacity.

Last week’s column on the United Nations’ (UN) Intergovernmental Panel on Climate Change (IPCC) report on Global Warming raised the way the cement sector is tackling climate change and the existing and impending legislation. President of the German Cement Works Association (VDZ) Christian Knell’s opening words at the VDZ Congress in September 2018 seem prescient. He said, “To be able to realise our efforts in terms of climate protection and at the same time not to lose competitiveness, we need research policy-related support for our investment in breakthrough technologies and the corresponding demonstration projects.” The add-on was that the industry needed to focus on how the development of carbon abatement technologies can meet the 2050 climate goals and, specifically, that suitable boundary conditions would have to be created. The press releases accompanying his speech emphasised that, “on-going trends in European emissions trading and the ‘rapidly increasing’ price of CO2 were already today leading to considerable costs for cement manufacturers.”

These words are similar to the comments Albert Scheuer, a board member of HeidelbergCement, made at the Innovation in Industrial Carbon Capture Conference early in 2018 about dividing the mounting environmental costs of cement and concrete between producers and society in general. Considering how much cementitious building materials most people use throughout their lives compared to the relative low price of cement, this argument carries some weight. In addition, the sustainability credentials of concrete buildings through longer lifespan and durability through extreme weather events is another argument that industry advocates such as the Portland Cement Association (PCA) in the US have been hawking in recent years.

Cementa, a subsidiary of HeidelbergCement, blamed anticipated tightening of environmental regulations for its decision. Although it said that the plant had made improvements over the years, the expected difficulty (read: cost) to make further improvements was becoming too hard. Shifting production to the company’s other two plants in the region, Slite on Gotland and Brevik in Norway, will reduce CO2 emissions by 260,000t/yr.

In Spain, the news from Cemex follows a half-year report from Oficemen, the local cement association, that predicted growth for the year but not as fast as previously expected. The problem was that continued declines in the export market, the 13th decline month-by-month in a row, offset the domestic growth. Oficement president Jesús Ortiz also took time to blame rising electricity costs, expected to rise by 20% year-on-year by the end of 2018.

Market issues in Spain aren’t in doubt, but the real question for both Sweden and Spain is whether EU CO2 legislation right now is causing cement producers to shut plants. The CO2 emissions allowance price hit a high of Euro22/t in September 2018, the highest price in a decade. Allowances have stayed below Euro10/t since 2011 and the price has more than doubled in 2018. Throw in the mood music of the IPCC and the trend seems irresistible. How many more plants in Europe are at risk to shut next? No doubt the European cement producers have charts marking the viability of their plants against the CO2 price. This would be a very interesting graph to get our hands on.

The 2nd FutureCem Conference on CO2 reduction strategies for the cement industry will take place in May 2019 in London, UK


Germany: Pietro de Michieli has been appointed as the managing director of Aumund. He assumed the role at the start of September 2018 and will focus on equipment sales, spare parts and after sales service.

Previously, de Michieli was the managing director of OMG MGM Cranes, part of Bedeschi Group. Prior to that he was chief operating officer of Bedeschi and a member of the board of directors responsible for the business unit bulk handling, marine logistics and mining and minerals, with a particular focus on sales, marketing, design, manufacturing, purchasing and project management.
Earlier in his career he was projects director with Endeco Engineering Design Construction and project manager at Danieli. He holds a doctorate in electro-mechanical engineering from the University of Padua, Italy.

Since January 2018 de Michieli has been a member of the board of directors of PEMA (Port Equipment Manufacturers Association), a forum and public voice for the global port equipment and technology sectors. He will support a bid for membership of PEMA by the Aumund group of companies.


Spain: Miguel Ángel López has been appointed as the chief executive officer (CEO) of Siemens Spain following the resignation of Rosa García García. García has decided to leave the company and will handover the role on 1 December 2018 and then continue in an advisory role until the end of the year. López, aged 53 years, has been working most recently as the chief financial officer (CFO) of Siemens Gamesa Renewable Energy (SGRE). The CFO role will be filled by David Mesonero, currently SGRE's Head of Corporate Development, Strategy and Integration.


Italy: Giulio Bozzini has been appointed as the chief financial officer (CFO) of Tenova. He will report to chief executive officer (CEO) Andrea Lovato.

He holds 30 years of financial and operational experience working for multinational companies. Since 1994, he has worked in Saipem, eventually becoming chief financial and strategy officer. From 2012 to 2016 was the executive vice president planning and control for Eni, an oil and gas subsidiary of Saipem. Bozzini graduated in Business Administration from Bocconi University in Milan.


Spain: Cemex España is preparing to close its cement plants at Gádor in Almería and Lloseta in Baleares. It has blamed reduced demand for cement and European regulations on CO2 emissions for the decision, according to the Cinco Días newspaper. The closures will affect 200 employees and the cement producer is has started to hold union discussions. Cemex will retain integrated plants at Morata de Jalón, Alicante, Alcanar, Castillejo Anover and Buñol.


Lesotho: Lafarge South Africa and Lephema Executive Group have launched a cement plant project, Maloti Mountain Cement. Thesele Maseribane, Minister of Communications, attended the ceremony with representatives of Lafarge South Africa, according to the Informative newspaper. Although reported at an ‘initial stage’ of development, the project has hired 150 employees.


China: Guangdong Tapai has ordered two coal mills from Germany’s Loesche for its two 10,000t/day clinker production lines in Jiaoling, Meizhou in Guangdong. This is a repeat order, following an order for two LM 35.3 D coal mills that was made in 2015. The 3-roller mill grinds 50t/hr of pulverised coal to a fineness of 3% with a sieving residue of 0.08 mm. The installed power is 1200kW. The order has been placed through Loesche Shanghai and the two newly ordered coal mills are expected to be delivered in April 2019.


Peru: Cal & Cemento Sur (Calcesur) plans to add a sixth production line to its cement and lime plant in Puno at the end of October 2018. The upgrade will increase the unit’s production capacity to 1Mt/yr from 0.63Mt/yr, according to the Gestion newspaper. The company says that following the expansion the site will be the largest lime plant in Latin America.

The subsidiary of Gloria Group has targeted a 12% year-on-year growth in sales in 2019. It plans to sell lime to the mining sector in northern Chile and it is also focusing on Ecuador and Bolivia. The company plans to launch lime-sand bricks in 2019 for local demand and in Chile.

The cement and lime producer also plans to launch its Tipo LH cement product at the end of October 2018 and to sell cement in 25kg bags. At present, the company sells 42.5kg bags.


France/Syria: A judicial investigation has seized Euro4m from former Lafarge executives, including former chief executive officer (CEO) Bruno Lafont, as part of a probe into the company’s conduct in Syria. Sources quoted by the Agence France Presse said that Euro2.5m was confiscated from Lafont’s leaving package of Euro8.4m as Lafarge merged with Holcim to form LafargeHolcim. Funds were also taken from Bruno Pescheux and Frédéric Jolibois, the former directors of Lafarge Cement Syria, and from Christian Herrault, a dormer deputy general regional manager with overview of Syria.

Lafarge SA, a subsidiary of LafargeHolcim, has been placed under judicial investigation over its actions in Syria between 2011 and 2014. It has been accused of complicity in crimes against humanity and financing terrorism. A panel of three judges in Paris has ordered Lafarge to pay over Euro30m as a security deposit ahead of the trial. Eight former executives, including Lafont, have been charged in connection to the investigation.


Sweden: Cementa says it is considering decommissioning clinker and cement production at its 0.3Mt/yr Degerhamn plant due to increased environmental regulations. Production will be shifted to other local plants at Slite on Gotland and Brevik in Norway, and the site retained as a port terminal.

The subsidiary of Germany’s HeidelbergCement said that although the unit had made several investments over the years to reduce its environmental impact its production equipment was difficult to adapt to future requirements for lower CO2 emissions. Concentrating production to the other plants would mean a reduction in CO2 emissions of 260,000t/yr.

75 employees work at the plant at Degerhamn. Union negotiations will start immediately and upon their conclusion the cement producer will make a final decision about the future of the plant. If decommissioning goes ahead then clinker and cement production will cease in 2019.


Niger: Nigeria’s Dangote Cement has started building a 2.5Mt/yr cement plant at Keita, near Tahoua. The project has a cost of US$275m, according to the Agence France Presse and local media. Construction is expected to last until the end of 2020. The unit will also include a 100MW captive coal-fired power plant.

The new plant is expected to reduce the price of cement locally, as the country mostly imports cement from Nigeria and Benin. Nouvelle Cimenterie de Niger (NCN) has been intermittently building an integrated plant at Malbaza since 2011.


Nigeria: The Cement Company of Northern Nigeria (CCNN) says it has received clearance by the Securities and Exchange Commission (SEC) and the Nigerian Stock Exchange (NSE) for its proposed merger with Kalambaina Cement. Following the merger all of the assets, liabilities, licences and undertakings will be taken over by the CCNN, according to the Punch newspaper. The completion of the proposed merger is subject to the approval of the shareholders of the CCNN and Kalambaina Cement and the final regulatory approvals from SEC, the NSE, Federal Inland Revenue Service and the Federal High Court.


Pakistan: A report issued by the Punjab Anti-Corruption Establishment Lahore (ACE) to the Supreme Court has found irregularities committed by government departments in connection to the setting up of cement plants by DG Khan and Bestway Cement in Chakwal. The investigation followed a probe by the Supreme Court into water usage by cement companies near the Katas Raj Temples, according to the Dawn newspaper. The allegations include a delay by the district government of Chakwal, industries, environment, mine and mineral departments into declaring so-called ‘negative’ areas that would have otherwise prevented the plants being built between 2003 and 2008. Other findings of the report include irregularities into how both companies acquired land and a disregard for environmental protocol.


Italy: CIFA has celebrated its 90th anniversary with an update to the company museum, the launch of a special edition vehicle-mounted pump and a series of special events. The museum, based at the company headquarters in Senago, has introduced news areas dedicated to hybrid technology and carbon fibres. The special edition pump products are available for the K42L, K45H and the new K47H models and include special anniversary colours, celebratory plaques and a 90th anniversary logo. The company was specialises in concrete pumps was originally founded on 7 July 1928 by Carlo Ausenda.


India: Shailendra Chouksey, president of the Cement Manufacturers Association (CMA), has warned that cement prices could rise by up to 10% due to growing fuel and transportation costs. The local industry grew by 14% in the first half of the 2018 – 2019 year, according to the Press Trust of India.

"There is a very dire need to correct the pricing. In the last year we have seen 60-70% rise in the cost of fuel. To recover at least some portion of this increase, we need to increase the prices of cement," said Chouksey. He added that cement prices had been ‘almost stagnant’ since around 2011. However, he conceded that the industry still has surplus capacity.


Pakistan: Maple Leaf Cement’s new 7300t/day clinker production line at its Iskanderabad cement plant is expected to start in the second quarter of 2019. The project has a cost of just below US$200m, funded through bank loans, a right issue and internal revenue. Denmark’s FLSmdith is supplying the equipment and Descon Engineering holds the contract for civil construction and mechanical erection work. 70% of civil work and 30% of plant erection was reported completed by the end of September 2018.


Nepal: A limestone ban in the Katari municipality has hit Saurya Cement and Cosmos Cement. The local government has banned cement producers from extracting and transporting limestone on tax grounds, according to the Himalayan Times newspaper. However, Saurya Cement said that the authorities had stopped the transportation of limestone without consultation. Krishnaraj Dulal, the director Cosmos Cement, added that the company was not required to pay tax locally as it was paying the Department of Mines at the national level.


Sweden: Cementa plans to electrify its cement plant at Slite in Gotland as part of its Cemzero project. The subsidiary of Germany’s HeidelbergCement plans to make its plant CO2 neutral by 2030, according to Helagotland. However, the plan is limited by a lack of technology to fully electrify large-scale manufacturing at the site. The company also holds concerns about where it would source larger quantities of electricity.


Philippines: Around 4500 bags of cement have been salvaged from the MV Star Liberty that ran aground in early September 2018. The ship ran aground at the San Jose de Buenavista Port due to the strong waves caused by the southwest monsoon, according to the Philippines News Agency. The ship was carrying a consignment of 20,000 bags at the time. The salvaged cement has been stored at a dump in Barangay Pantao. The salvage team are hoping to complete the removal of the cement from the ship by the end of October 2018 and then the ship may be transported back to Cebu for repairs.


Peru: UNACEM has purchased Cementos Portland (Cempor) for US$28m. It acquired a full stake in the company from Chile's Cementos Bío Bío and Brazil’s Votorantim Cimentos, according to Semana Económica magazine. Cementos Bío Bío and Votorantim originally planned to build a US$150m cement plant in Lima. However, this was delayed by a legal battle over environmental issues initiated by Unacem. The Peruvian cement producer operates an integrated plant in Lima.


Pakistan: Aly Khan, the chairman of Pioneer Cement, has blamed falling profits on competition on prices and rising costs of raw materials. The company’s profit after taxation nearly halved year-on-year to US$16.9m in the year that ended on 30 June 2018 to US$31.1m in the same period in 2017. Its sales revenue fell slightly to US$111m due to a steep decline in clinker sales. Despite this, cement sales volumes grew by 9% to 1.5Mt from 1.4Mt.


India: A joint-venture project involving the Steel Authority of India (SAIL) to build a new cement plant at Sundargarh in Odisha has stalled. Following support by local politicians for the plans in February 2017 no further action has been taken, according to the New Indian Express newspaper. SAIL originally made plans in 2006 to use blast furnace slag from the Rourkela Steel Plant and fly ash of NTPC-SAIL Power Company for the unit. It also intended pick up the lease for a limestone mine at Purunapani. However, it later ran into troubles securing state agreement to use the mine.


UAE: Al Khair National has suspended talks to sell a 38% stake in Gulf Cement to Liberty House Group. Negotiations originally started in December 2017.


Mauritius: Dominique Billon, the general manager of Kolos, says that the local cement market has grown by 10% so far in 2018. He added that his company holds a 44% market share, according to Le Défi Plus newspaper. Local demand has risen due to infrastructure projects including the Metro Express and the Côte d'Or Smart City. Kolos operates a 60,000t cement terminal in the country. Its cement products include Kolos Plus and Kolos Classic.


India: Tamil Nadu Cements Corporation plans to start commercial operation of a new 1Mt/yr production line at its Ariyalur plant in Tamil Nadu in early 2019. Construction work on the US$100m project was originally started in May 2016 and it is due to be completed in October 2018, according to the Hindu newspaper. Testing and trial runs will then start in November 2018. Following the upgrade, the state-owned plant will have a total production capacity of 1.5Mt/yr.


India: Kesoram Industries has received approval from the state government of Karnataka to buy 675 acres of land for mining limestone reserves. The subsidiary of BK Birla Group plans to use the acquisition to increase its existing limestone reserves, according to the Hindu newspaper. The amount the cement producer will pay for the land is still being negotiated and will be paid over a two-year period.


China: Jianghua Conch has launched a 5.9MW solar plant project. Its subsidiary, Jianghua Conch New Energy, will build the unit. No date for the completion of the project has been disclosed. Jianghua Conch is a subsidiary of Anhui Conch based in Hunan province.


US: Canada’s McInnis Cement has officially opened its terminal in the Bronx, New York. The terminal can store up to 44,000t of cement and most of this will be delivered by ship. City Council Member and Land Use Committee Chair Rafael Salamanca, Bronx Community Board 2 Chair, Bobby Crespo and members of several Bronx organisations and the local business community joined McInnis Cement executives to celebrate the opening of the unit, the first new industrial maritime project built on the South Bronx waterfront in more than half a century.


Spain: Demand for cement in Spain in the first half of 2018 was 8% higher than in the first half of 2017, according to the national cement association Oficemen. The rate of growth was down, however. The country recorded an 11% year-on-year increase in demand between the first half of 2016 and the first half of 2017. Oficemen had expected demand to pick up by 12% for the whole of 2018 but now expects an increase of 7% instead. If realised, this would mean sales of around 13.3Mt for 2018.

“At the beginning of the year, the Department of Studies of Oficemen expected to close 2018 with a 12% increase in domestic demand. Now, with public works almost paralysed, we are talking about lowering our forecasts by 5 percentage points,” explained the president of Oficemen, Jesús Ortiz. “The weak recovery of the construction that began in Spain in 2017 depends on the building sector. Although it is growing at a good pace, it does so from absolute values that are still very low.” It is estimated that 2018 will close with around 100,000 new homes started, a figure that, while ignoring the years of the construction boom, represents less than half of the average of the homes that were built in Spain in the period 1970-1995.

“Public investment in Spain remains at 63% of the average investment of Germany, the UK, France and Italy, which takes us dangerously away from our neighbours. There is a consequent loss of competitiveness for our country, especially in the most exposed sectors: exports, tourism, treatment and prevention of environmental risks, driver safety, and so on,“ added Ortiz.

Cement exports were also down year-on-year, for the 13th month in a row. Ortiz primarily blamed this on the devaluation of the Turkish Lira, which has helped Turkish cement exports advance their competitiveness compared to Spain. He also highlighted rising electricity costs, which are expected to be 20% higher at the end of 2018 than at the start. This will make electricity 28% more expensive than for German cement producers, according to Ortiz. “What has recovered in the domestic market in these two years, is being lost abroad, with production that remains stagnant at 20Mt since 2013, a figure that accounts for half of the installed capacity of our factories. Therefore, the uncertainty and concern for our industry is maintained,” concluded Ortiz.


Netherlands: Van Aalst says that NACC Alicudi is the world’s first cement carrier equipped with International Maritime Organization (IMO) Tier III compliant diesel engines driving the bulk handling system. Converted in 2017 with a Van Aalst dry bulk handling system, the vessel became a 120m self-discharging cement carrier, with a cement handling system based on compressors and vacuum pumps, driven by Tier III Scania engines. This has created a ‘unique’ vacuum-pressure system for pneumatic conveyance of cement, fly ash and granulated slag.

Directly after completion of the conversion, the NACC Alicudi entered the trade for a three-year contract on the east coast of the US and Canada, an area that has been a NOx Emission Control Area (ECA) for new built and converted vessels since January 2016. Van Aalst says that this approach fits well with the environmental policies of both NovaAlgoma Cement Carriers and McInnis Cement. The high emission standards of the vessel will enable a shift to the US Gulf of Mexico, Puerto Rico and Hawaii.