Global Cement Newsletter

Issue: GCW390 / 06 February 2019

Headlines


Two supplier news stories this week presented a snapshot of the global cement industry. The first was FLSmidth’s annual results for 2018. The second was the announcement by France’s Fives that it had signed a collaboration agreement with China’s CNBM.

Overall FLSmidth reported its highest order intake in six years with revenue growth driven by its minerals division. On the cement side though the equipment manufacturer was blunt, describing the market for new cement capacity as, “subdued with low plant utilisation globally.” In its assessment a slow increase in global consumption outside of China was not enough to absorb overall production overcapacity. It said it saw a ‘healthy’ level of small to mid-sized orders for grinding plants, upgrades, retrofits and single equipment orders. The market for replacements and upgrades was identified as a strategic focus. It also noted environmental upgrades for plants in China and India as environmental regulations tighten.

Fives’ news touched on the rivalry that western-based manufacturers have faced from Chinese competitors. Fives and CNBM have agreed to explore projects together in new plants, expansions and upgrades. Although the press release was brief, this seems to involve CNBM using Fives technology such as grinding mills, pyro-lines and burners. Like the rest of the industry Fives has had a tough time of it in recent years in the cement sector although 2018 seemed to have improved considerably at the nine-month stage in September 2018. So signing an agreement with a competitor at this stage is interesting. FLSmidth did a similar deal with CNBM in mid-2018 when it signed a framework agreement for future collaboration.

The context here is that the new plants that are being built are often part of China’s One Belt, One Road Initiative, typically in Central Asia or Africa. Mostly these plants are being financed by Chinese joint ventures and built by Chinese suppliers. This week Reuters published a map of new cement plants being built in 2018 with Chinese involvement along the silk road using Global Cement data. Rightly, FLSmidth and Fives are taking steps to be a part of this growth.

Figure 1: New Chinese cement plant projects outside of China in 2018. Source: Reuters using Global Cement data. 

Figure 1: New Chinese cement plant projects outside of China in 2018. Source: Reuters using Global Cement data.

There is a tendency in the western press to play up Chinese imperial ambitions exemplified by US Vice President Mike Pence’s comments at the Asia-Pacific Economic Cooperation summit in Papua New Guinea in November 2018. Yet, Sinoma International Engineering, one of CNBM’s engineering subsidiaries, reported that its new order intake fell by 14% year-on-year to US$4.56bn in 2018. No reason for the decrease was given but most of this fall seemed to come from its construction division. In turn most of this came from a fall in foreign orders. The implication is that China’s attempts to move its cement industry out of the country may not be happening fast enough to preserve the size of these companies.

Returning to European equipment suppliers, FLSmidth summed up its response to this situation in its annual report. The cement market is split between premium and mid-market projects, with the latter dominated by Asian suppliers. FLSmidth says it is targeting the mid-market by becoming the preferred original equipment manufacturer (OEM) of choice. They are not alone in their ambition as the Fives deal shows.


Australia: Jack Truong has been officially appointed as the chief executive officer (CEO) and executive director of James Hardie. He was first announced as CEO successor in September 2018. He succeeds Louis Gries, who has stepped down from the post in a structured transition process.

Truong has been President of International Operations at James Hardie since April 2017. Prior to James Hardie, he was the president and CEO of Electrolux North America and worked for 22 years at 3M Company, where he held senior leadership roles throughout the US, Europe and Asia-Pacific, including Vice President and General Manager of the Global Construction and Home Improvements Division and Global Office Supplies Division. Truong holds a PhD in chemical engineering from the Rensselaer Polytechnic Institute in New York.


Australia/New Zealand: George Agriogiannis has been appointed as the chief executive officer (CEO) at Holcim Australia and New Zealand. He succeeds Mark Campbell, according to the Australian newspaper. Agriogiannis was previously the executive general manager of concrete and aggregates at Adelaide Brighton. His departure coincides with new CEO Nick Miller officially taking up the post. Agriogiannis starts the new job with the LafargeHolcim subsidiary on 11 March 2019.


Nigeria: Olusegun Olusanya has resigned from the board of Dangote Cement. He was appointed as an independent non-executive director in late 2010. Prior to this, Olusanya held a number of management positions at banks, including Savannah Bank Nigeria, Afribank Nigeria, Union Bank and the National Bank of Nigeria. He is an accountant who holds a BSc in Accounting from the London School of Economics and an MSc in Economics & Finance.


Austria: Franz Struzl, the former chief executive officer (CEO) of RHI, has died at the age of 76 years. He was the CEO of the refractory producer from 2011 to 2016.

Struzl studied at the Vienna University of Economics and Business in 1965. After more than 40 years at Alpine Steel Group (later Voestalpine), he became the chairman of Voestalpine in 2001. He held this position until 2004 and soon afterwards became CEO of Voestalpine, Brazil (Villares Metals), remaining there until 2010. In 2011, he joined RHI as CEO. Struzl also participated in the first negotiations regarding the merger of RHI and Magnesita. He retired in 2016 due to illness.


India: Government data places the country’s cement production capacity utilisation rate at 59%. The local cement sector had a production capacity of 509Mt/yr and it produced 298Mt in 2018 from 143 integrated plants, 102 grinding plants, five standalone clinker plants and 62 mini plants. India has a cement consumption of 235kg/capita compared to the global average of 520kg/capita. The National Council for Cement and Building Materials with the cement section of Department for Promotion of Industry and Internal Trade released the information as part of the publication of ‘The Cement Industry – India 2018.’


India: ACC’s operating earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 11% year-on-year to US$267m in 2018 from US$296m in 2017. Its new sales increase by 12% to US$2.02bn from US$1.80bn. Cement sales volumes grew by 8.4% to 28.4Mt from 26.2Mt. Ready-mix concrete (RMX) sales grew by 16.6% to 3.16Mm3 from 2.71Mm3.

The cement producer said that despite rising prices of slag, petcoke and diesel it had focused on productivity and an improved raw material mix. It also built 18 new RMX plants during the year.


India: Birla Corporation’s earnings before interest, taxation, depreciation and amortisation (EBITDA) rose due to increased sales of blended cement in the last quarter of 2018. Blended cements represented 89% of its total sales volumes compared to 85% in the same period in 2017.

The company’s net sales grew by 14.6% to US$653m in the nine months to the end of 2018 from US$569m in the same period in 2017. Its EBITDA rose by 17.1% to US$96.8m from US$82.7m. Its cement production increased by 10.5% to 9.86Mt from 8.92Mt and its cement sales increased by 9.9% to 9.79Mt from 8.92Mt. It said that better sales in key markets had offset raw material price rises such as petcoke, coal and diesel. It noted that the price of diesel had risen by over 20% in the reporting period although it had started to soften in the most recent quarter.

The cement producer held a ground breaking ceremony in late January 2019 for a new plant being built by its RCCPL subsidiary at Yavatmai district in Maharashtra. The 3.9Mt/yr unit has an investment of US$342m and it includes a 40MW captive power plant and a 10.6MW waste heat recovery (WHR) system. Commissioning is scheduled for the 2021 – 2022 financial year. The company is also planning to upgrade RCCPL’s plant at Kundanganj with 1.2Mt/yr of additional production capacity. Other new projects include a 12.25MW WHR system at Maihar that is expected to be commissioned in mid-2019. It is building solar power plants at Maihar, Chanderia and Satna with 11MW, 3.6MW and 1.2MW capacity respectively. Birla Corporation also said that restrictions on using explosives placed on limestone mining at Chanderia in Rajasthan had increased its costs.


India: State-owned producer Malabar Cements will increase production following reduced production over the last three months. The state government of Kerala has intervened following price rises, according to the Hindu newspaper. Malabar Cement sells around 6 - 8% of the cement sold in the state. The state government is also considering regulating the price of cement.


Philippines: The Philippines Tariff Commission has started a formal investigation into the provisional safeguard tariff placed by the Department of Trade and Industry (DTI). Consumer group Laban Konsyumer asked the commission to place a temporary restraining order on the tax but the body said it lacked the power to do so, according to the Philippine Star newspaper. The commission has three months to reach its verdict. The DTI placed tariffs on cement imports in January 2019 to protect local producers.


Algeria: Youcef Yousfi, the Minister of Industry and Mines, says that the government is aiming for cement exports worth US$500m by 2023. This is based on a surplus of 10 – 15Mt of cement by this time, according to Télévision Algérienne. Cement exports reached 1Mt in 2018. This is expected to grow to 2Mt soon with 1.2Mt supplied by GICA Group.


Belarus: The government is considering offering subsidies to local cement producers. The matter was discussed at a meeting examining the performance of various companies chaired by the Belarusian president Alexander Lukashenko, according to the Belarusian Telegraph Agency. First Deputy Prime Minister Alexander Turchin said that cement companies had invested in projects only for the price of cement to fall ‘dramatically’ leading to financial losses. If any aid is provided it will come with government-enforced targets.


UK: Lafarge Cement, part of Aggregate Industries, has achieved BS EN ISO50001:2018 in Energy Management Systems after demonstrating its on-going commitment to energy efficiency. The certification requires companies to show continuous improvement in reducing the energy intensity of their operations.


US: The Portland Cement Association (PCA) has praised President Donald Trump’s call to rebuild the country’s infrastructure in his State of the Union address. Trump said that he wanted both political parties to work together to pass an infrastructure bill.

“The Portland Cement Association applauds President Trump for emphasising the political imperative of addressing America’s long-neglected infrastructure needs in his State of the Union address. America’s cement manufacturers are ready and willing to work with Congress and the Trump Administration to find a legislative solution that shores up our transportation and waterways in a fiscally responsible manner,” said PCA president and chief executive officer (CEO) Michael Ireland.


Paraguay: Local press is querying why state-owned cement company Industria Nacional del Cemento (INC) has signed a petcoke contract with Sanfil-GT consortium. A delivery of 12,000t of petcoke has been delayed for logistic reasons, according to the ABC newspaper. The consignment is part of a US$6.5m contract to supply 24,000t of petcoke. In 2018 INC awarded a tender to buy US$6m of Turkish-produced clinker from Sanfil-GT Scientific. However, the manufacturer, Cemco Cement Trading, later warned that neither Sanfil SA nor GT Scientific SA were authorised to market the commodity.


South Africa: PPC’s sales volume of cement fell by 2 – 3% year-on-year in the nine months to December 2018. The cement producer said that, although prices had risen, the market had shrunk by up to 5%. Imports grew by 80% year-on-year for the January to November 2018 period. It added that its Sure Range product line had continued to gain market share against Portland Pozzolana Cement (PPC) and blended products. Outside of South Africa the company said that growth had been low in Zimbabwe and Democratic Republic of Congo due to local market conditions. Better performance was noted in Rwanda and Ethiopia.


Uzbekistan: China’s Huaxin Cement plans to build a new 1.2Mt/yr cement plant in the Zafarabad district of Jizzakh region for US$150m. The unit will be commissioned in December 2019, according to the Trend News Agency. It intends to export about 0.12Mt of cement during the first stage of production. As part of the project, Huaxin Cement’s local subsidiary, Huaxin Cement Jizzakh, has been temporarily exempted from paying various tariffs, including income, property, custom and added taxes.


Uzbekistan: Representatives of France’s Freyssinet, a civil engineering company, have met with Uzbekistan Railways to discuss building a new 1Mt/yr cement plant in the Pakhtachi district of Samarkand. The unit will be used to provide cement and related products to the railway company. The construction of new infrastructure projects - including railway lines, subway lines and bridges – was also talked about at the meeting.


The Gambia: Cement importers have asked the government to treat all importers equally. Alhajie Cessay, a local importer, said that some government-preferred companies that import cement from Senegal are exempt from the tax, according to the Point newspaper. However, other importers have been subject to tariffs since the start of 2019.


Russia: Data from Rosstat shows that cement production fell by 1.9% year-on-year to 53.7Mt in 2018. The figures include Ordinary Portland Cement (OPC), alumina cement, slag cement and similar hydraulic cements.


UK: A consortium comprising Aggregate Industries, Innovatium and the University of Birmingham has gained funding from the Department for Business, Energy and Industrial Strategy (BEIS) to test a liquid air energy storage (LAES) energy efficiency technology under the government’s Industrial Energy Efficiency Accelerator (IEEA) programme. The IEEA programme, administered by the Carbon Trust on behalf of BEIS, will provide nearly Euro0.4m towards delivering a new compressed air system utilising LAES technology from initial laboratory testing to full operation at Aggregate Industries’ Bardon Hill quarry in Leicestershire.

PRISMA (Peak Reduction by Integrated Storage and Management of Air) by Innovatium is a LAES technology that stores energy in liquid air form to provide compressed air, allowing inefficient partially loaded, variable-demand compressors to be turned off, thus improving the total system efficiency by up to 57%. The PRISMA system will bring together a latent energy cold storage tank, filled with a phase change material (PCM) to store thermal energy, and a number of other off-the-shelf components to form a system that will work with Aggregate Industries’ existing compressed air network. The research group says that the integration of the equipment and components in an industrial setting, for the provision of compressed air, has never been attempted before.

“The project will help to address the ‘energy trilemma’ of managing energy efficiency, energy cost and energy security by: significantly improving the energy efficiency of our compressed air system; managing electricity costs by running the compressors out-of-hours, when electricity is cheaper; and helping to smooth and reduce the peak electrical demand on site. We are therefore very excited to be the first industrial partner to install the PRISMA system at our Bardon Hill quarry in Leicestershire,” said Richard Eaton, Energy Manager at Aggregate Industries.

The 24-month project will involve the development of the PCM at the University of Birmingham’s School of Chemical Engineering as well as the design, manufacture and assembly of multiple system components by Innovatium before installation of the system at Bardon Hill. The PRISMA Project has currently only been deployed in a simulated environment. Following successful delivery of the project, this scalable technology has multi-sectoral applications for compressed air systems both in the UK and globally. In the UK, the compressed air market is estimated at 1.3GW of installed electrical capacity across around 4500 sites and over 55,000 individual compressor units.


Oman: Raysut Cement has signed an agreement with Ayoki Engineering for upgrading its clinker cooler line three at its Salalah plant. The local engineering, procurement and construction (EPC) contractor will source the equipment from Germany’s IKN, according to the Muscat Daily newspaper.

The existing grate cooler at the unit will be replaced by a 4000t/day IKN Pendulum clinker cooler with a guaranteed capacity of 3500t/day clinker production. The project scope includes related civil works, supply and installation works of mechanical and electrical works. Sourcing and installation of the refractory will also be under the responsibility of Ayoki Engineering through IKN. Final installation of the project is planned for the fourth quarter of 2019.


Algeria: The Aïn Touta Cement (SCIMAT) plant near Batna has spent US$10m on a new filter. The investment is part of a group of improvements intended to increase production at the unit in 2019, according to Le Courrier d'Algérie newspaper. The company is also implementing a new integrated administration system.


India: JSW Cement plans to increase the production capacity to 3.6Mt/yr at its Salboni grinding plant in West Bengal. The unit has a capacity of 2.4Mt/yr at present, according to the Economic Times newspaper. The cement producer plans to strengthen its presence in eastern India starting with West Bengal, Bihar, Odisha and Jharkhand. The plant manufactures Portland Slag Cement and it hopes to tap into local demand for this product with the upgrade.


India: JK Cement’s income has fallen due to growing raw material, power, fuel and freight costs. Its income fell by 27% year-on-year to US$24.5m in the nine months to 31 December 2018 from US$34.2m in the same period in 2017. Its expenses rose by 2.5% to US$456m from US$445m. Its revenue increased by 1.4% to US$481m from US$474m. Additional costs also arose during the reporting period from an US$18,000 fine levied by the Competition Commission of India in August 2018. The cement producer is challenging the penalty.


Peru: Research from Scotiabank forecasts that cement consumption will grow by 6.5% in 2019 due to construction sector growth. The market will be supported by both private and public investment, according to the Gestión newspaper. Private investment will be supported by the mining industry. Infrastructure projects including Line 2 of the Lima Metro, the expansion of the Jorge Chávez Airport, the Port of San Martín, the Port of Salaverry and others are expected to support public investment. Local consumption of cement grew by 3.7% year-on-year in 2018, the highest rate of growth since 2013.


Nepal: Dhrubaraj Thapa, the chairman of the Nepal Cement Producers’ Association, says that the country has become self sufficient in cement production. Local producers are expected to start exporting cement in the next financial year, according to the Himalayan Times newspaper. The country produced 9Mt of cement in the 2017 – 2018 financial year from a production capacity of 13Mt/yr.


China/France: China’s CNBM and France’s Fives have signed a cooperation frame agreement for future collaboration. The cement plant equipment manufacturers will explore projects together, in plant upgrade, plant expansion and new plants to implement Fives technologies, such as the FCB Horomill grinding system, the FCB Pyro-line and Pillard burners on an international basis. The signing ceremony of the agreement took place in late January 2019 bringing together Song Zhi Ping, the chairman of CNBM and Frédéric Sanchez, the president of Fives.


Indonesia: LafargeHolcim has closed the divestment of its Holcim Indonesia. It has sold its 80.6% share of the subsidiary to Semen Indonesia for US$1.75bn. The deal was first announced in November 2018. The company said that the proceeds from the sale would ‘significantly’ improve its net debt to recurring earnings before interest, taxation, depreciation and amortisation (EBITDA) ratio by 0.2 with the target of two times or less to be achieved by the end of 2019. LafargeHolcim has been targeting divestments as part of its Strategy 2022 initiative.


Kuwait: ACICO Cement has ordered a second cement grinding mill from Spain’s Cemengal. The main equipment to be included in the contract includes a 5200 Kws ball mill with all the peripheral equipment from Cemengal and a fourth generation classifier from Magotteaux XP4i-130 for high strength cements. The projected grinding capacity will be 1Mt/yr of cement and the plant will be commissioned within the first half of 2020.

The project scope will include full engineering and complete supply of mechanical, process, electrical and automation equipment as well as the steel manufacturing from the raw materials handling areas up to the cement silos discharge. Site supervision, training and& commissioning will also be provided by Cemengal.


Ivory Coast: A new cement plant is being planned for construction near Gagnoa. Mayor Issouf Diabaté made the announcement to the city council, according to the Agence Ivoirienne de Presse. Sales tests on cement from the company building the plant are being conducted in the local market. The preferred location for the plant is in Galbré sub-prefecture between Soubré and Gagnoa.


Pakistan: Lucky Cement’s earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 16.5% year-on-year to US$51.3m in the six months to 31 December 2018 from US$63.7m in the same period in 2017. The cement producer said that its cost of sales rose by 14.2% due to mounting packaging, coal and other fuel prices. Its revenue grew by 6.2% to US$250m from US$235m. It attributed this to higher export volumes of cement and clinker. Its local sales of cement and clinker fell by 8.4% to 2.99Mt from 3.27Mt. Exports more than doubled to 1.02Mt from 0.5Mt. Accordingly, overall sales volumes increased by 6.8% to 4.01Mt from 3.76Mt.

The company reported that levelling work at its Samawah 1.2Mt/yr integrated cement plant project in Iraq started in January 2019. Civil work is scheduled to start in March 2019 and commercial production at the unit planned to start in mid-2020.


Pakistan: Power Cement has provided an update on construction work towards building a third line at its Nooriabad plant. 97% of the equipment ordered from Denmark’s FLSmdith has been received. 22% of errection work has been completed. The design phase of a new 40MW grid station and its fixing has been completed and civil work has commenced. Overall civil work is reported 91% complete.

The cement producer ordered the new 7700t/day line from FLSmidth in 2017. China’s TEPC has been handling the construction and errection contract. China’s CECC Tianjin (Pakistan) Electric Power Construction has been in charge of civil construction.


Cyprus: Vassiliko Cement has won the Gold Environmental Protection Award in 2018 at the Pancyprian Environmental Awards for Organisations and Businesses. The prize was given for the cement producer’s implementation of its Corporate Social Responsibility Policy. Company staff worked with local communities, non-government organisations (NGO) and others. The competition was organised by the Cyprus Center for Environmental Research and Education, in cooperation with the government and other groups.


Taiwan: Taiwan Cement has reassured the public about the quality and safety standards of its cement and other products. It follows fraud charges being issued to a former government official for supplying raw materials mixed with industrial waste to the cement producer, according to the Taipei Times. Taiwan Cement says it is conducting inspections on all raw materials, including taking random samples of the top and bottom layers of delivery trucks from suppliers.

Lai Chin-kun, a former Hualien County Council speaker, secured local government contracts for his family’s companies to dispose of industrial waste, including industrial byproducts and inorganic debris from electroplating, optoelectronics and display panel manufacturers and pulp paper processing companies. Another family company won a contract with Taiwan Cement in 2010 to supply limestone, clay, sand and other raw materials required for cement production.

Prosecutors allege that when supplying raw materials to Taiwan Cement, Lai instructed company drivers to fill the bottom half of the trucks with industrial waste and place natural materials, such as clay, sand and limestone, on the top half to fool inspectors. Lai reportedly made US$14.1m from the scheme from 2010 to 2015.


Philippines: Cemex Philippines has received a set of tax breaks and financial incentives for the new 1.5Mtyr production line it is planning to build at its Solid Cement plant in Antipolo, Rizal. Its subsidiary Solid Cement has obtained ‘pioneer’ status from the Board of Investment (BOI) but with ‘non-pioneer’ incentives, according to the Inquirer newspaper. This means that the project may be able to benefit from a longer income-tax holiday. The new production line is scheduled to be operational by early 2020.


Colombia: Ordinary Portland Cement production grew by 1.2% year-on-year to 12.5Mt in 2018 from 12.3Mt in 2017. Data from DANE, the Colombian statistics authority, shows that deliveries to the local market increased slightly, by 0.2%, to 12Mt. Production grew faster in December 2018 on a year-on-year basis with 6.8% growth.


Denmark: An improving mining market has driven FLSmidth’s sales, order intake and earnings in 2018. Its overall order intake grew by 13% year-on-year to Euro2.91bn in 2018 from Euro2.57bn in 2017. Its revenue increased by 4% to Euro2.51bn and its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 5% to Euro212m.

"The high order intake in 2018 is due to an improving mining market, but it also reflects the performance of our organisation, our position and strong lifecycle solutions. This combination lays a good foundation for future growth," said group chief executive officer (CEO) Thomas Schulz.

However, the group’s cement business order intake remained stable at Euro1.19bn. Sales revenue fell by 3% to Euro1.10bn and EBITDA dropped by 22% to Euro51m. It described the cement market as “very competitive with stable pricing at a low level.” It did note a ‘healthy level’ of small to mid-sized orders related to grinding plants, upgrades, retrofits and single equipment. Replacement and upgrade projects are anticipated to show continued growth in 2019.


Vietnam: Italy’s Bedeschi has signed a contract to supply a double roller crushing unit and relevant control panels for the Quicklime Plant being built in Hoa Binh, Northern Vietnam. The unit is being built by a local cement producer. Start-up is scheduled by mid-2020.