Global Cement Newsletter

Issue: GCW401 / 24 April 2019

Headlines


One of the long running trends in the cement industry is that of production overcapacity. Sure enough more than a few news stories this week covered this, as various players reacted to international trade in clinker and cement. The Bangladesh Cement Manufacturers Association wants its government to cut import duties on clinker. Algeria’s shift from an importing cement nation to an exporting one continues.

Armenia and Afghanistan are coping with influxes of cement imports from neighbouring Iran. Pakistan’s cement exporters, who have been losing ground in Afghanistan, are once again lobbying to remove anti-dumping measures in South Africa. The argument between Hard Rock Cement and Arawak Cement in Barbados may have swung Hard Rock Cement’s way as the Caribbean Court of Justice (CCJ) has ruled in favour of lower tariffs for imports. Last week it was reported that the Rwanda Bureau of Standards had blocked cement imports from Uganda on quality requirement grounds.

The summarised version is that all this excess clinker and cement can cause arguments and market distortions as it finds new markets. Typically, the media reports upon the negative side of this, when the representatives of national industries defend their patch and speak out about ‘quality concerns,’ potential job losses and blows to the local economy. However, it isn’t always like this as the Afghan story shows this week. Here, although the Chamber of Commerce and Industries wants to promote locally produced cement, imports are welcome and the relative merits of different sources are discussed. Ditto the situation in Bangladesh where a predominantly grinding-based industry naturally wants to cut its raw material costs.

We’ve covered clinker and cement exports more than a few times, most recently in September 2018 when the jaw-dropping scale of Vietnam’s exports in 2018 started to become clear. Yet as the continued flow of news stores this week makes clear it’s a topic that never grows old.

Graph 1: Top cement exporting countries in 2018. Source: International Trade Centre. 

Graph 1: Top cement exporting countries in 2018. Source: International Trade Centre.

Looking globally raises a number of issues. First, a warning. The data in Graph 1 comes from the International Trade Centre (ITC), a comprehensive source of trade statistics. Most of its figures are in line with data from government bodies and trade associations but its export figure is around a tenth of the estimated export figure for Iran of around 13Mt for its 2018 - 2019 year. Last time this column looked at exports similar issues were noted with a discrepancy between Vietnam’s exports from the ITC compared to government data.

Iran aside, all the usual suspects are present and correct. A point of interest here is that the list is a mixture of countries that make the headlines for their exports, like Vietnam, and those that are quietly just getting on with business. Japan for example exported 10.7Mt in 2018. More telling are the changes in exports from 2017 to 2018. Exports fell in Japan, China and Spain. They rose in Vietnam, Thailand, Indonesia, Pakistan and South Korea.

Looking globally, China is the elephant in the room in this topic given its apparent massive production overcapacity. The industry here is structurally unable to export cement on the scale of other countries but, as its major companies expand internationally, this may change. Despite this China still managed to be the third biggest exporter of cement to the US in 2018 at 2Mt and the fifth biggest in the world. Yet, as the ITC data shows, its exports fell by 30% year-on-year to 9Mt in 2018.

Vietnam, Pakistan and Turkey continue to be some of the key exporting nations with production capacities rising in defiance of domestic realities. Pakistan, for example, is coming off a building boom from the China–Pakistan Economic Corridor infrastructure project and all those plants are now looking for new markets. Vietnam says it is benefitting from industry consolidation in China. Its exports grew by 55% year-on-year rise to 31.6Mt. It shipped 9.8Mt to China in 2018. Its main export markets in 2019 are expected to be the Philippines, Bangladesh, China, Taiwan and Peru. Turkey, meanwhile, struggled with general economic issues in 2018. Its cement exports fell by 6% to 7.5Mt in 2018 according to Turkish Cement Manufacturers Association data. Once again this is at odds with ITC data, which reports nearly twice as many exports.

This touches the tip of the iceberg of a big issue but while production over-capacity continues these kinds of trade arguments will endure. Vietnam, for example, may be enjoying supplying cement in China as that country scales down production. Yet, what will happen to all of those Vietnamese plants once Chinese consumption stabilises?! Similar bear traps lie in wait for the other major exports. Alongside this many of the multinational cement companies are pivoting to concrete production. This may be in recognition of the fact that in a clinker-abundant world profits should be sought elsewhere in the supply chain. A topic for another week.

For an overview of some of these themes and more read Dr Robert McCaffrey’s article ‘The Global Cement Industry in 2050’ in the May 2019 issue of Global Cement Magazine and his forthcoming keynote presentation at the 61st IEEE-IAS/PCA Cement Conference 2019 at St Louis in Missouri, US.


US: Eagle Materials is planning to appoint board vice-chairman Mike Nicolais as chairman. He will succeed Rick Stewart, who will continue working for the company as a director.

Nicolais currently serves as vice chairman at Highlander Partners, a Dallas-based private equity firm. From 2001 - 2003, he served as a partner in the private investment firm of Olivhan Investments, followed by being named managing director at Stephens. Previously, he spent 14 years in the investment banking division of Donaldson, Lufkin & Jenrette Securities, and was managing director and co-head of the company’s Dallas office.


Ireland: CRH’s sales rose by 7% year-on-year for the first quarter of 2019. It said that sales volumes benefited from mild weather conditions, good momentum across most of its major markets and price rises.

Sales from its Americas Materials business grew by 4% although it noted falling cement and concrete volumes in its West US and Canada regions. It also said that its acquisition of Ash Grove Cement that was completed in mid-2018 had met its synergy delivery programme targets. Sales from its Europe Materials business increased by 12% due in part to better weather than the first quarter in 2017. By key markets the group reported strong sales volumes in Germany, Poland, Romania and the Philippines.


India: ACC’s sales rose by 8% year-on-year to US$551m in the first quarter of 2019 from US$509m in the same period in 2018. Its sales volumes of cement grew by 6% to 7.5Mt from 7.1Mt. Ready-mix concrete (RMX) sales volumes grew by 19% to 0.94Mm3 from 0.79Mm3. Its operating earnings before interest, taxation, deprecation and amortisation (EBITDA) increased by 8% to US$76.1m from US$70.4m.

"Our three-pronged strategy of customised solutions for consumers, focus on premium products and operational improvements are enhancing our bottom-line and powering ACC's strong growth trajectory,” said Neeraj Akhoury, managing director and chief executive officer (CEO) of the subsidiary of LafargeHolcim.

The company noted that fuel and slag prices rose in the quarter although this was compensated by market growth, cost reductions, fuel mix improvements and general production optimisation. It added that plant capacity utilisation improved during the reporting period. ACC also commission eight new RMX plants in the first quarter of 2019, bringing its total to 80.


Mexico: Grupo Cementos de Chihuahua’s (GCC) sales fell in the first quarter of 2019 due to lower cement and concrete volumes in the US. Sales volumes rose in Mexico and the group described a ‘favourable pricing environment’ in both markets. Its net sales dropped by 1.9% year-on-year to US$163m from US$167m. Cement sales volumes fell by 7.3% in the US but they rose by 3.8% in Mexico. Earnings before interest, taxation, deprecation and amortisation (EBITDA) fell by 16% to US$38.3m from US$45.6m.

“The US operations slowed, with severe inclement weather continuing into the first quarter. However, there is a strong backlog and we are picking up the pace as the weather conditions improve,” said Enrique Escalante, GCC’s chief executive officer (CEO). He added that Chihuahua in Mexico continued to perform well driven by mining shipments, industrial maquiladora plants and warehouse construction and middle-income housing starts.


Bangladesh: The Bangladesh Cement Manufacturers Association (BCMA) has asked for import tariffs on clinker to be reduced. In a letter to the National Board of Revenue (NBR) it requested that the duty be cut to either US$2.40/t or a fixed rate of 5%, according to the Dhaka Tribune newspaper. Importers pay around US$6.00/t at present. The BCMA argues that the cement industry is paying more than other industries for its imports.

The association has also called for value added tax (VAT) on raw materials to be cut to 5% from 15%, reducing advance income tax to 2.5% from 5% and exempting regulatory duties for fly ash and import duties for cement bulk carriers.


Egypt: ASEC Engineering has renewed its technical management contract with Misr Beni Suef Cement until the end of 2023. ASEC originally worked on the first production line at the plant in 2001. It maintenance contract was renewed in 2007 with the addition of a new production line. The cement plant has a production capacity of 3.1Mt/yr.


Algeria: The Algerian cement industry has exported over 0.5Mt of clinker to Europe as part of a shift to international markets. Samir Setiti, the president of Groupe des Ciments d’Algérie’s (GICA) Sodismac subsidiary, said that the company was currently transporting 15,000t of clinker from its Beni Safi plant to the Ivory Coast from the Port of Ghazaouet, according to the L’Expression newspaper. This is part of 15 export operations the cement producer has conducted since May 2018.


Guinea: Mamady Touré, the adminstrative and finance director of Ciments de l’Afrique (CIMAF) Guinea, says that the company plans to triple the production of its Dubréka grinding plant to 1.5Mt/yr. The announcement was made as part of a lunch for customers, according to Guinée News.


Russia: Eurocement has resumed the packaging line at its Oskolcement plant. It sells products in 50kg bags. The packaging line uses equipment from Germany’s Haver & Boecker and Beumer.


France: Cemex says that it will match the donations made by its employees to help restore the Notre-Dame Cathedral in Paris. The donations will be handled by the Fondation du patrimoine (French Heritage Foundation), a private organisation dedicated to saving French cultural and natural heritage. The 800-year old cathedral was devastated by fire on 15 April 2019.

In addition, Cemex will help the reconstruction efforts through its range of technical and specialised products and services, the availability of its research and development centres based in Biel and Paris and assistance with material specifications and mix designs through its laboratory services.


Nigeria: The Cement Company of Northern Nigeria’s (CCNN) profit rose in 2018 following its merger with Kalambaina Cement. Its profit after tax grew by 77% year-on-year to US$15.9m in 2018 from US$8.9m in 2017, according to the Punch newspaper. It produced 0.76Mt of cement in 2018 and it sold 0.74Mt. The company is planning to expand its production distribution in north-east and north-central regions as it does not expect the north-west to absorb its enlarged production capacity of 2Mt/yr.


Nigeria: BUA Group has ordered a 48MW power plant from Finland’s Wärtsilä for a new production line at its Sokoto cement plant. The power plant will operate without connection to an electricity grid and it will operate on five Wärtsilä 34DF dual-fuel engines, running primarily on liquified natural gas (LNG) but with the capability to switch to low pour fuel oil (LPFO) if necessary. The site’s two existing power plants operate on heavy fuel oil (HFO).

The Wärtsilä equipment is scheduled for delivery at the end of 2019, and the new plant is expected to become operational in mid-2020. No price for the order has been disclosed.


Nigeria: David Umahi, the governor of Ebonyi state, has approved plans to set-up the Ebonyi Cement plant (Ebocem) at Ogboto in Ishielu. The local government will hold a 10% stake in the project, according to the Nigerian Tribune newspaper.


Armenia: Tigran Khachatryan, the Minister of Economic Development and Investments, says that the government is considering adding clinker to a list of goods subject to import duties. A tariff of around Euro40/t could be introduced for a year until April 2020, according to the ARMINFO News Agency. This would be similar to proposed duties on imported cement.

The measures are intended to protect local cement production. Khachatryan noted that imports from Iran could be up to a third of the price of locally manufactured cement due to cheaper energy supplies and state subsidies.


US: Eagle Materials are started a strategic review of its portfolio of businesses including heavy materials, light materials, and oil and gas proppants. It says it commissioned the review, “…following consultation and input from the company's largest shareholders.” During the process it will consider options, including divesting businesses.


US: Lehigh Cement and Argos USA have agreed to pay a US$1.5m fine for alleged Clean Air Act violations at the Martinsburg cement plant in West Virginia. Argos has owned the plant since December 2016 and Lehigh Cement was the previous owner. The violations occurred from 2013 to 2016. Neither Lehigh Cement nor Argos USA admitted liability for the alleged violations as part of the settlement.

The Environmental Protection Agency (EPA) cited the companies for various Clean Air Act violations based on responses to EPA information requests and data collected and reported under the plant’s permit. These included exceeding particulate matter emissions, non-compliance with opacity testing, failing to comply with requirements for operating a kiln with dioxin/furan emission limits, failing to perform required stack testing on a kiln’s exhaust in a timely manner and other violations.


Trinidad & Tobago: The Caribbean Court of Justice (CCJ) has ruled that Rock Hard Cement does not have to pay more than a 5% tariff on imported cement. The regional court was ruling on the duty liable for ‘other hydraulic cement,’ according to the Jamaica Gleaner newspaper. Rock Hard Cement’s competitor Trinidad Cement and its subsidiaries had argued that such imports be liable to a 60% import rate that the importer had previously paid due to Barbados’ exemption from the region’s Common External Tariff (CET) in 2001 and its subsequent re-entry in 2015.


Philippines: Republic Cement has launched Kapit-Balay Masonry Cement. The type S high-strength masonry cement product is intended for plastering, brick or block laying and block filling. The product is being produced at the company’s Danao plant in Debu.


Mauritius: Lafarge Mauritius has launched Lakaz Mazik, a cement bag that dissolves in a concrete mixer. The bag has been developed by Sweden’s BillerudKorsnäs, according to the L’Express newspaper.


US: Illinois State University has been awarded a US$15,000 grant by the Environmental Protection Agency (EPA) to research the use of recycled glass as a substitute for Ordinary Portland Cement and fly ash in controlled low-strength material (CLSM). CLSM, also called flowable fill, is a cement-based construction material commonly used for backfilling trenches or other excavations, as well as soil-stabilisation. It can be produced at any ready-mix concrete plant by mixing cement, fly ash, sand and water in the correct proportions.

Project lead Pranshoo Solanki said that preliminary results are promising, and show that required flow and strength can be met by replacing cement and fly ash with recycled glass powder.

The EPA grant is for phase one of the recycled glass project for research at the laboratory scale. Funding for phase two will then be sought to test the product in real-world trials.


Nigeria: Sinoria FABCOM, a Chinese building materials and structural engineering firm, has announced plans to open a fibre cement board manufacturing factory in Abuja. The company, which is part of the Chinese global giant Sinoma, already has an industrial complex in Kuje Abuja, where it makes roofing products.

Liuxing Wang, Managing Director of Sinoria FABCOM, said that the new line of products would be the first of their kind to be manufactured in West Africa. He added that his company had decided to diversify into fibre cement board due to Nigeria’s raw materials and the success that it has already had with its stone-coated roofing sheets in the country.

Wang further commended the administration of President Mohammadu Buhari for creating the ‘right atmosphere for industrial growth’ of the country, noting that within the next decade Nigeria stands the chance of becoming an industrial giant.


Pakistan: Cement exporters based in Pakistan have urged the Ministry of Commerce to approach South African authorities with the aim of overturning the existing anti-dumping duty on Pakistani cement.
"Before anti-dumping duty, annual cement exports to South Africa were worth US$700m. Now it has gone down to US$100m," said Mohammad Rafiq Memon, Chairman of the Pakistan-South Africa Business Forum (PSABF). He said that the forum was trying its best to get this issue resolved and that Pakistan’s Ministry of Commerce should send a delegation to South Africa to convince the authorities to review the duty. He added that he was optimistic that South Africa would review the anti-dumping duty on cement imports and said that the situation was likely to improve by 2020.

He said that PSABF also has plans to establish a trade centre in South Africa by the end of December 2019, at which Pakistani manufacturers and exporters would be able to display samples of their products and services, along with relevant contact information. This would result in effectively promoting Pakistani products, not only in the South African market, but in other African states.


Denmark: Aalborg Portland Cement increased its turnover by 5% to Euro1.19bn in 2018, from Euro1.14bn in 2017. It attributed the growth largely to acquisitions it made in recent years. It saw its sales drop slightly in Denmark but exports to nearby markets and to the US increased.

Aalborg Portland's profit after tax increased to Euro140m in 2018 from Euro119m in 2017. Its profit margin increased to 12.8% from 12.6%.


Switzerland: The Board of Directors of LafargeHolcim will propose that its shareholders approve the appointment of three new Members of the Board, after acknowledgement of the departure of two current Board members, at the Annual General Meeting on 15 May 2019.

The Board of Directors will nominate Colin Hall, Naina Lal Kidwai and Claudia Sender Ramirez for election as new Board Members. Nassef Sawiris and Gérard Lamarche have decided not to stand for re-election.

As the Head of Investments of Groupe Bruxelles Lambert, a major shareholder of LafargeHolcim, Colin Hall will add extensive experience in international finance to the Board. As one of India's most successful businesswomen, Naina Lal Kidwai held a number of senior leadership positions at ANZ Grindleys Bank and HSBC in India and Asia Pacific. She has a particular interest in environmental topics. Claudia Sender Ramirez will bring to the Board her wide-ranging marketing and emerging market experience from leadership positions at LATAM Airlines Group and Whirlpool in Latin America.

Beat Hess, Chairman of the Board of Directors at LafargeHolcim, said, "On behalf of the entire Board I would like to thank Nassef Sawiris and Gérard Lamarche for their important contribution to the success of our company over the past years. I am very delighted that we are proposing three new members whose unique experience will complement the expertise of our existing Board members. It is a particular pleasure for me that with the new nominations we will be able to further increase the geographical and gender diversity of our Board."

All other current members of the Board of Directors will be proposed for re-election at the Annual General Meeting: Beat Hess (Chairman), Oscar Fanjul (Vice-Chairman), Paul Desmarais, Jr., Patrick Kron, Adrian Loader, Jürg Oleas, Hanne Birgitte Breinbjerg Sørensen and Dieter Spälti.


Spain: Cement consumption in Catalonia between February 2018 and February 2019 reached 1.76Mt, 4.7% less than a year earlier, according to regional association Ciment Català. The president of the organisation, Salvador Fernández Capo, stressed that this situation could be explained by economic uncertainty, rising electricity prices and a lack of construction projects in the region.


Iran/Afghanistan: Exports of cement from Iran to Afghanistan have increased following the resumption of US-led sanctions on Iran. Speaking on Afghanistan’s Tolo News TV, Janagha Navid, the spokesman of Afghanistan's Chamber of Commerce and Industries, said that Afghanistan imports 80,000t/yr of cement, while stressing that the country’s domestic cement production capacity could increase to 420,000t/yr.

Navid added that cement imports from Pakistan had decreased, while imports from Iran had risen, due to depreciation of the Iranian Rial against foreign currencies. He further highlighted that Afghan customers prefer Iranian cement over Pakistani cement, citing quality considerations. In 2018, Iran exported US$127m-worth of cement to Afghanistan, broadly similar to imports from Pakistan, which came to US$132m.