Global Cement Newsletter

Issue: GCW397 / 27 March 2019

Headlines


Cement price rises by the major Chinese cement producers boosted sales revenue and profits in 2018. This is quite a trick, given that overall cement sales in the country have fallen by 11% year-on-year to 2.17Bnt in 2018 from a high of 2.45Bnt in 2014.

Graph 1: Cement sales in China, 2009 – 2018. Source: National Bureau of Statistics China. 

Graph 1: Cement sales in China, 2009 – 2018. Source: National Bureau of Statistics China.

On the corporate side most of the major Chinese producers issued positive profit alerts towards the end of 2018 and this has been followed up by (mostly) glowing financial reports. Data from the National Development and Reform Commission in February 2019 showed that the profits of local cement companies more than doubled to US$64bn in 2018 compared to 2017. As mentioned above, this has been fueled by price rises. In December 2018 the average price of cement was 10.6% higher than in December 2017.

This has translated into a 19% year-on-year rise in sales revenue at China National Building Material Company (CNBM) to US$32.6bn in 2018 from US$27.4bn in 2017 and its profit grew by 44% to US$2.09bn from US$1.46bn. Anhui Conch’s performance was even better. Its revenue grew by 70.5% to US$19.1bn from US$11.2bn. However, differences emerge between the two companies in terms of cement sales volumes. CNBM’s sales volumes fell by 2.4% to 323Mt. However, Anhui Conch’s sales volumes increased by 25% to 368Mt. This may not be in line with the government’s plans to scale down production but it does fit the industry consolidation model, as the company acquired Guangdong Qingyuan Cement in 2018. The results from other producers such as China Shanshui Cement, West China Cement, Tianrui Cement and China Resources Cement all tell similar tales.

If the figures from the National Bureau of Statistics China (NBS) above are accurate then this is a drop of over 300Mt of cement sales over four years. This is more than the cement sales of every other country except India. Indeed, it’s more cement than some continents make! It marks the deceleration of the Chinese industry since 2014 and represents a major achievement. However, whether it is enough remains to be seen. After all, sales of over 1500kg/capita are still way above the consumption curve for developed Western-style economies. Yet, imports of cement to China from Vietnam rose in 2018, suggesting that the price rises are being driven by shortages of cement!

China is undoubtedly an exceptional case, as its economic star has blossomed in the last few decades and it has literally built itself into history. Yet one might expect its consumption to be around 1Bnt/yr, a per-capita level more similar to Spain and Italy prior to the financial crash. In other words, even if the recently observed 5% year-on-year contraction is maintained, the Chinese industry would only reach this (still very high) level by the mid 2030s. However, continued national development, mega-infrastructure projects, a shift to more exports and China’s unique market could hold the consumption per capita figure higher.

Meanwhile, Chinese producers are commissioning more and more projects outside of China. Notably, CNBM saw its cement sales everywhere except for the Middle East and China. Success abroad is not guaranteed. The story in the years to come will be the balance between projects at home and those abroad.


Australia: Raymond Barro will be appointed as the next chairman of Adelaide Brighton at the company’s annual general meeting (AGM) in May 2019. He succeeds Zlatko Todorcevski, who will become Lead Independent Director and deputy chairman. Todorcevski has spent less than a year in the role. The Barro family owns a 43% stake in Adelaide Brighton. Rhonda Barro was nominated as a director of Adelaide Brighton earlier in March 2019.


UK: John King Chains has appointed Julie Precious as Chain Division Key Account Manager. The role is a newly created one and part of the group’s UK Sales team. Precious holds Key Account Management experience having worked for various blue chip clients. She also holds 16 years’ worth of knowledge from working for a materials handling and chain conveyor business.


US: CalPortland has commissioned a new cement grinding mill and distribution system at its Oro Grande cement plant in California. The US$58.5m project includes the construction of the finish ball mill and two new cement shipping lanes with two new distribution silos. It completes a partial plant modernisation program that was originally completed in 2008, prior to the acquisition of the facility by CalPortland. The Oro Grande cement plant was purchased from Martin Marietta Materials in mid-2015.

“The addition of this modern finish mill and efficient distribution system allows the plant to operate to the best in class standards as originally designed. It will help provide the industry with the additional supply required for necessary rehabilitation and rapidly developing infrastructure in California and Nevada,” said Steve Regis, Senior Vice President Corporate Services, CalPortland.

The project began in January 2018 and was constructed by general contractor ThyssenKrupp and sub-contractor TIC (The Industrial Company), in collaboration with CalPortland’s Engineering Services team.

The mill is a Polysius two compartment mill with production capability of around 180t/hr. It is equipped with motor, mill and separator technology as well as cement cooler design technology. The system also employs mechanical conveyance (bucket elevator) to convey finished product to the new silos, reducing its energy requirements. These additional systems are being added to the Oro Grande plant.


Czech Republic: Cement Hranice’s sales grew in 2018 due to demand for building materials. Its sales rose by 10% year-on-year to Euro65.8m in 2018, according to the Czech News Agency. Its profit rose by 16% to Euro19.9m. As in previous years it supplied fellow subsidiaries of Buzzi Unicem in the Czech Republic and Slovakia.


Pakistan: Belorussian company Belaz has sold a dump truck to Pakistan for the first time. The 45t vehicle will be used to transport of gypsum and clay to a plant owned by Cherat Cement, according to the Dawn newspaper. It has been supplied via the distribution company Greaves. The cement producer plans to buy up to 15 such vehicles in the current year.


France: HGH Infrared Systems is expanding its brand name across its subsidiaries around the world. It says it is developing its brand image and communication strategy to suit its position as a global leader in the optronics market as its sales grow. Asia Infrared Systems, HGH’s subsidiary in Singapore, and Electro Optical Industries (EOI), will take on the HGH identity.

In 2016 HGH acquired EOI, a producer of electro optical test equipment based in Santa Barbara, California in the US. HGH’s and EOI’s products include SPYNEL thermal cameras, blackbody sources, integrating spheres, electro-optical test benches, NVD testing solutions and thermographic scanners. They cover the whole spectrum of light from visible to infrared radiation.

‘’By opting for a harmonised universal brand, we are strengthening our corporate culture and our shared commitment across our subsidiaries. This common identity is built upon quality care, customer service and innovation values, and opens door to a dynamic and highly promising future,’ said Thierry Campos, the chief executive officer (CEO) of HGH Infrared Systems.


China: China National Building Material Company (CNBM) revenue grew by 19% to US$32.6bn in 2018 from US$27.4bn in 2017. Its profit rose by 44% to US$2.09bn from US$1.46bn. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 18% to US$6.33bn from US$5.37bn.

By product line its cement sales rose by 25% to US$18.7bn from US$14.9bn. Concrete sales rose by 31% to US$6.17bn from US$4.70bn. Overall sales rose in most regions, with the exception of the Middle East and Africa. The group’s cement companies’ cement production volumes fell slightly to 336Mt and cement sales fell by 2.4% to 323Mt. Particular declines in cement sales were noted at North Cement, Sinoma Cement, Tianshan Cement, Ningxia Building Materials and Qilianshan. The group’s overall concrete sales volumes rose by 3.4% to 96Mm3.

Sales from its engineering services division rose by 9% to US$5.09bn from US$4.67bn.


Nigeria: BUA Group has signed a contract with Finland’s Wartsila Oy for construction of a 48MW power plant for Line 3 at its Sokoto Cement plant in Sokoto State. The announcement of the deal follows BUA’s January 2019 announcement that China’s CBMI would build the new line at the site.

Abdul Samad Rabiu , the executive chairman and chief executive officer (CEO) of BUA Group, signed on behalf of the group while Wartsila’s Head of Africa Magnus Miemois signed for the power plant provider.

BUA is Nigeria’s second-largest cement producer by volume, with assets that include the 6Mt/yr Obu Cement I & II plants in Okpella, Edo State, CCNN’s 1.5Mt/yr Kalambaina plant and the 0.5Mt/yr Sokoto cement plant.


Italy: The Buzzi Unicem cement plant in Monselice, Padua has come under fire from concerned locals following an emission of dust on 25 March 2019. Local press reported that the plant failed to notify residents following an emission of raw meal for at least three hours and not until plant staff had been telephoned by the media.

The plant uses marl and supplementary raw materials, the alleged unclear origins of which have particularly animated local environmentalists. Environment Councilor and mayoral candidate Gianni Mamprin said, “They say it’s just dust, but I don’t trust them. A plant of this type is incompatible with the tourism project that we want to implement in Monselice. Above all, Article 19 of the Environmental Plan of the Colli Park states that (it) is an incompatible plant in a natural park. If I am elected mayor of Monselice, I will actively commit to the closure of this unhealthy plant, because this territory does not need a factory that continually creates anxieties and doubts for citizens.”


Pakistan: The All Pakistan Cement Manufacturers Association (APCMA) has reported that cement exports during first eight months of the current Pakistani fiscal year, from 1 July 2018, saw growth of 52.3% year-on-year compared to the same period of the prior fiscal year. Exports were 4.65Mt compared to 3.05Mt.

In February 2019 exports were up by 69.1% year-on-year at 0.51Mt. The southern part of the country, particularly the Sindh region, fared considerably better than the national picture, as cement exports from the region increased by 185% to 0.35Mt in February 2019. Local consumption in the region was also higher, albeit less dramatically, with sales of 0.67Mt as compared to 0.61Mt a year earlier. However, plants in the north continued to suffer, with exports falling by 16% to 1.86Mt over the eight-month period from 2.21Mt a year earlier. In February 2019 exports from the north declined by 8.7% to 0.17Mt

Among other factors, the export of cement to India has been suspended due to a 200% increase in the import duty, as the Indian government had announced to de-list Pakistan from the status of ‘Most-Favoured Nation.’ The APCMA also said that rain in almost all parts of Pakistan had also affected construction activities.


Pakistan: Flying Cement has ordered a 71-6 OK model cement mill from Denmark’s FLSmidth for its new 7700t/day production line at its Mangwal plant. The mill will be designed to grind Ordinary Portland Cement (OPC) at a capacity of 415t/hr. Commissioning is expected in 2020, and the mill will be supplied together with an FLSmidth ILC Preheater System, 2-Base Kiln, Cross-Bar Cooler, ROKSH 119 Separator, MAAG WPV-5000 Gear, Heat Exchanger and three filters. No price for the order has been disclosed.


UAE: RAK Cement has postponed its acquisition of Newtech cement and the Al banna quarry due to incomplete financing. It previously announced the purchase in late February 2019. It planned to buy the assets for around US$123m.


Sri Lanka: Prime Minister Ranil Wickremesinghe has inaugurated the construction of a cement factory at the Port of Hambantota. He also marked the start of the construction of an oil refinery, according to the Daily News newspaper. An unnamed Chinese cement producer was linked to the project, with production scheduled to start in mid-2020.


Morocco: LafargeHolcim Morocco’s turnover fell by 2% year-on-year to Euro725m in 2018 from Euro743m in 2017. Its consolidated net profit dropped by 18% to Euro156m from Euro177m. The subsidiary of LafargeHolcim said that its sales had fallen less than the 5% that the local cement market suffered. It blamed a drop in operating income on lower revenue and rising petcoke costs. The cement producer said it was ‘confident’ about the fundamentals of the building materials sector. It plans to commission a new cement plant in the Souss region in 2020.


China: Anhui Conch’s revenue grew by 70.5% year-on-year to US$19.1bn in 2018 from US$11.2bn in 2017. Its sales volumes of cement rose by 25% to 368Mt. Its net profit increased by 88% to US$4.44bn from US$2.36bn. The cement producer attributed this to ‘significant’ growth in its prices.

During the reporting year the group commissioned four cement grinding units for its Yueqing Conch Cement and Jiande Conch subsidiaries. It also acquired Guangdong Qingyuan Cement, increasing its production capacity of clinker and cement by 2.7Mt and 4Mt respectively.

Outside of China, the group completed and commissioned two clinker production lines and four cement grinding units at Battambang Conch Cement in Cambodia and PT Conch North Sulawesi Cement in Indonesia. Its Luangprabang Conch Cement project in Laos has moved to the equipment installation phase and construction of Myanmar Conch Cement (Mandalay) in Myanmar has begun. Preliminary work has also started for the Vientiane Conch Cement project in Laos and the Qarshi Conch Cement project in Uzbekistan.

At the end of 2018 the group has a clinker and cement production capacities of 252Mt/yr and 353Mt/yr respectively.


China: China Shanshui Cement’s revenue grew by 19% year-on-year to US$2.63bn in 2018 from US$2.2bn in 2017. Its profit from operations nearly doubled to US$563m from US$295m. It reported growth in most of its operating regions, with the exception of Xinjiang Region, where revenue fell slightly to US$71.1m. It attributed its overall sales revenue growth to raised prices.


Mexico: Cemex says it has made ‘significant’ progress towards its US$1.5 – 2bn asset disposal target by the end of 2020. Since the target was announced in mid-2018 the group has announced the divestment of assets in northern Europe, a terminal in Manaus in Brazil, aggregates and ready-mix concrete (RMX) assets in Germany, its white cement business including the Buñol cement plant in Spain and other assets. These sales will generate around US$750m or half of its lower target.

“We remain completely committed towards the goal of achieving an investment grade capital structure and will continue our disciplined deleveraging and improvement of our capital structure,” said Fernando A Gonzalez, the chief executive officer (CEO) of Cemex.


Chile: Cementos Bío Bío has changed its name to Cbb as as part of a rebranding exercise to target the group for the digital age and to target growth outside of Chile. Chief executive officer (CEO) Enrique Elsaca said that the change is part of the company’s Transforma 2021 plan, including investment of US$150m in Chile, Argentina and Peru, according to the El Mercurio newspaper.

It is about to inaugurate a cement grinding plant at Arica in Chile, it plans to build a US$20m plant at Arequipa in Peru for commissionoing in early 2020 and it plans to upgrade its San Juan lime plant in Argentina. It also hopes to build a new lime plant in northern Argentina to supply the lithium business.


Bolivia: Weimar Pereira, vice-minister for Medium and Large Scale Industrial Production, says that the government is close to signing new rules for cement industries that will prioritise domestic products over imported asphalt on roads and for public works. He made the statement in talks with local producers Fábrica Nacional de Cemento (FANCESA) and Cooperativa Boliviana de Cemento, Industrias y Servicios (COBOCE) as well as union representatives, according to the Correo del Sur newspaper. The new rules are expected to be implemented by August 2019.


Poland: Germany’s Bilfinger is installing refractory linings at Cemex Polska’s Rudniki cement plant. It is also carrying out assembly work at various parts of the unit. The industrial services company is installing the refractory linings for parts of the plant, which entails using around 2000t of refractory material within a five-month period. It is part of the installation of a new cement clinker production line at the site.

The contract comes under Bilfinger’s Engineering & Maintenance Continental Europe division. Companies for which Bilfinger has worked on past contracts in Poland include cement producers CRH and Dyckerhoff.


UK: Aggregate Industries, a subsidiary of LafargeHolcim, has achieved recommendation for ISO 44001 certification for Collaborative Business Relationship Management Systems, awarded by the British Standards Institute. The certification was awarded company-wide to Aggregate Industries for demonstrating relationship management across a variety of projects, which include a multitude of internal business areas and external partners.

“I am incredibly proud of achieving this certification. ISO 44001 is quickly becoming a prerequisite for highways, infrastructure and major projects which specify requirements for the effective identification, development and management of collaborative business relationships,” said Paddy Murphy, Managing Director of Contracting at Aggregate Industries.


Spain: Turkey’s Çimsa Çimento has purchased Cemex’s white cement business in Spain, including its Buñol plant, for around US$180m. Cemex expects to sign the final agreement in April 2019 and close this divestment during the second half of 2019. The proposed divestment does not include Cemex’s white cement business in Mexico, nor its interest in Lehigh Cement in the US.

“With the purchase of the Buñol white cement plant in Spain, we are upgrading our game in the white cement sector, the highest value-added business in the global cement market. With the integration of the Buñol white cement plant to our production and distribution networks, we will increase our white cement production capacity by 40%, translating into Çimsa becoming the world's largest white cement company,” said Tamer Saka, the president of Sabancı Holding Cement Group and chairman of Çimsa. He added that Çimsa is among Turkey’s leading exporters. In 2018 it generated over 50% of its operational profit from overseas operations.

Once a final agreement is reached the transaction is subject to standard regulatory approval.


Greece: Titan Group’s profit growth in 2018 due to by its US operations. However, negative currency exchange rate effects have dragged on its financial results. Overall, its turnover fell by 1% year-on-year to Euro1.49bn in 2018 from Euro1.51bn. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) decreased by 5% to Euro260m from Euro273m. However, its net profit rose by 26% to Euro53.8m from Euro42.7m.

By region, the US region reported rising turnover and stable EBITDA in US Dollar terms. An improvement in results was recorded in Florida, counterbalanced the lower profitability of the mid-Atlantic region, which was affected by protracted inclement weather and an increase in competition in the broader New York area. The market remained poor in Greece with falling turnover and earnings. Markets in south-eastern Europe recorded increases, although rising energy costs wee a concern. Continued problems were reported in Egypt and Turkey due to additional input costs and market conditions respectively.


Germany: HeidelbergCement expects increasing sales volumes for its cement, aggregate and ready-mix concrete products in 2019. It plans to raise its prices to regain margins it lost in 2018. The building materials producer also intends to continue the cost cutting programme it started in November 2018. It said that energy cost inflation, improvements in Indonesia, Europe and North America, and new state infrastructure projects should result in a ‘solid result improvement.’

“In view of our strong positioning in raw material reserves and production sites in attractive locations, the unique vertical integration, our excellent product portfolio, and our industry-leading margin management, we believe we are well equipped for the opportunities and challenges of 2019,” said Bernd Scheifele, chairman of the managing board of HeidelbergCement. He added that the group will continue the digitalisation process of its entire value chain in order to further improve operational excellence.


Kuwait: Saudi Arabia’s Qassim Cement has signed a contract with the Al-Aradah Building Materials Company to export cement to Kuwait. It has agreed to transport 120,000t of cement until the end of 2019. The financial impact of the deal will be disclosed in the cement producer’s financial results later in the year.


Mexico/US: Cemex has entered into a global agreement with Petuum to implement its Industrial AI Autopilot software products for autonomous cement plant operations at its plants around the world. The products for cement plant operations are being deployed at select Cemex USA and Mexico plants and will continue to be rolled out in 2019.

"We expect our yield improvements and energy savings to be up to 7%, from the connected AI-based autopilots, which is game-changing for our industry,” said Rodrigo Quintero, Operations Digital Technologies Manager at Cemex.

Petuum says that its Industrial AI Autopilot suite of products can deliver real-time forecasts for key process variables, prescriptions for critical control variables and supervised autosteer aligned with business objectives for all cement plant operations including clinker cooler, preheater, rotary kiln, pyro-process, ball mill and vertical mill processes to achieve lowered energy consumption, optimised fuel mix and increased throughput while maintaining stable operation and product quality. The products are integrated with plant control systems and OSIsoft PI data infrastructure for scalable and standardised deployments across multiple lines and plants globally.

The joint Cemex and Petuum teams achieved a cruise-control-like supervised ‘autosteer mode,’ where the AI Autopilot could run operations with full engage-disengage control available to the operator.

To find out more about Pettum visit: https://petuum.com/


Poland: Lafarge Poland delivered over 0.2Mm3 of ready-mix concrete (RMX) in 2018 for use in various infrastructure initiatives including road expansion projects. In 2019 the company plans to produce 0.32Mm2 of concrete surfacing for a motorway extension. The subsidiary of LafargeHolcim set up its LH Engineering business in 2017 to help implement infrastructure projects. It offers engineering services and the delivery of building materials, including RMX, aggregates and other products.


Germany: Cemex has received certification from the Concrete Sustainability Council (CSC) certification for five of its ready-mix concrete (RMX) plants in Berlin and Potsdam. The CSC acts as a certification system, grading building materials facilities on environmental, social and governance practices throughout supply chains. The auditing was conducted by Kiwa Deutschland, an independent certification body recognised by the CSC.