Global Cement Newsletter

Issue: GCW410 / 19 June 2019

Headlines


Tourah Cement in Egypt took the tough decision last week to temporarily stop production. It blamed this on an acute financial crisis rendering it unable to pay its running costs. The subsidiary of Germany’s HeidelbergCement was reported in the Global Cement Directory 2019 as already being partly closed. This latest news is regrettable but not surprising.

Graph 1: Cement consumption and production in Egypt. Sources: Industrial Development Agency, Global Cement Directory 2019, Cement division of the Building Materials Chamber of the Federation of Egyptian Industries.

Graph 1: Cement consumption and production in Egypt. Sources: Industrial Development Agency, Global Cement Directory 2019, Cement division of the Building Materials Chamber of the Federation of Egyptian Industries.

As Graph 1 shows that the backdrop here is of a local cement sector rife with overcapacity. Capacity utilisation rates have hovered around 70% in recent years. The sector breaks down into about a quarter of production capacity under state control and the remainder owned by private companies. Overall, about half of the production capacity is run by multinational companies like Greece’s Titan, France’s Vicat and Germany’s HeidelbergCement.

The country hosts some of the largest cement plants in the world as well as several very big plants by European or North American standards anyway. The whopping 13Mt/yr government/army-run El-Arish Cement plant at Beni Suef opened fully in 2018. It seemed likely that there were going to be losers in the industry following that kind of disruption from a state-owned player. Indeed, Medhat Istvanos, head of the cement division of the Building Materials Chamber of the Federation of Egyptian Industries, explicitly blamed the El-Arish Cement plant for making the situation worse in September 2018. He said that the decision to build the plant was ‘not based on precise information’ and that it had harmed local production.

In the wider picture, the cement sector started to move away from subsidised natural gas and heavy fuel oil to coal instead in the mid-2010s. Tourah Cement mentioned this in its statement about halting production. The government has supported the cement industry through large-scale infrastructure projects and a state-sponsored compensation system under the Contractors Compensation Act that offset the loss prompted by the Egyptian pound’s floatation in 2017.

However, overcapacity has consistently been a problem and this was clear when the El-Arish Cement plant was approved. Exports of cement crept up to 1Mt/yr in 2017 from 0.1Mt/yr in 2015. Yet, as the Low-Carbon Roadmap for the Egyptian Cement Industry pointed out, Egyptian FOB exports of cement cost US$20/t higher than regional competitors such as Turkey. At this kind of disadvantage Egypt lacks the traditional escape route for an overproducing cement sector.

In these kinds of conditions, consolidation appears to be crucial while organic or government-backed demand plays catch-up with the production base. Certainly Egypt has the population and the development potential as its economy grows in the medium to long term. The government stabilising the economy after recent troubles is crucial for the construction industry. In the meantime all is not lost as the focus is on efficiency gains and cost cutting. The growth of alternative fuels as the sector’s fuel mix continues to adjust to the new normal following the abolition of subsidies on natural gas is one example of this.


Belgium: Cembureau, the European cement association, has appointed Raoul de Parisot, advisor to the chairman and chief executive officer (CEO) of Vicat, as its new president. He will succeed Gonçalo Salazar Leite, the Vice-Chairman of SECIL. Isidoro Miranda Fernandez, CEO of LafargeHolcim Spain, will assume the position of Vice President.


Philippines: Eagle Cement says that the opening of its new Malabuyoc integrated 2Mt/yr plant in Cebu has been delayed by six months to mid-2021. The new unit had been scheduled to start operation in late 2020, according to the BusinessWorld newspaper. The holdup has been blamed on delays in obtaining permits for the project. However, the company intends to start selling cement in the Visayas region by the end of 2020 as originally promised.

John Paul L Ang, the president and chief executive Officer (CEO) of Eagle Cement, made the comments at the cement producer’s annual stockholders' meeting. Work on the new plant started in late 2017. Once complete the new line will bring the company’s total cement production capacity to 9.1Mt/yr. The project also includes port facilities and cement terminals that will serve markets in Visayas and Mindanao. Eagle Cement also operates an integrated plant at San Ildefonso, Bulacan and a grinding plant at Bataan.


Uzbekistan: German companies Phoenix Consulting and MN Medianet are planning to build a US$400m cement plant in the Farish district of the Jizzakh region. The unit will have a production capacity of 4Mt/yr, according to the Trend News Agency. It will operate as UTD Cement. The new plant is intended to produce 0.98Mt/yr of M500 type cement, 1.22Mt/yr of M600, 0.94Mt/yr of M900 and 0.86Mt/yr of white cement. It will also create up to 1500 jobs.

Phoenix Consulting is an independent, privately owned consulting and trading company operating worldwide with a focus on the Middle East and Europe. MN Medianet operates in the automated control systems sector.


Rwanda: The Rwandan government has started to sell its stake in Cimerwa. It holds a 16.5% stake in the cement producer via the Agaciro Development Fund, Rwanda's Sovereign Wealth Fund, according to the New Times newspaper. Other shareholders, including SORAS Group, Rwanda Social Security Board (RSSB), and Rwanda Investment Group (RIG), have also expressed interest in selling their shares, making a total of 49% of shares available. The government originally intended to start the sale in March 2019. Potential buyers have until 5 July 2019 to register their interest.

Cimerwa produced 0.36Mt of cement in 2018, a figure well below its production capacity of 0.6Mt/yr. However, the country imported 0.32Mt of cement in 2018 to meet local demand. The company has also made a loss in recent years. The integrated plant is run by South Africa’s PPC, which has a majority stake in the firm.


Ethiopia: Electricity rationing has been restricting the production of cement companies since it started in April 2019. Under a program implemented by Ethiopian Electric and the Ministry of Water and Energy, cement producers are only allowed to operate for 15 days per month, according to the Reporter newspaper. They say this has increased their production costs because cement production is a continuous process that requires start up and stoppage time. The Ministry of Trade has asked that cement producers do raise the price of cement despite the increase in production cost. Input and transport costs have also risen.

“There is a huge waste of resources when we start up and stop running our plant. Continuous production has cost benefits. We spend 24 hours warming up the plant. There is wastage of coal and electric power,” said Mesfine Abi, the chief executive officer (CEO) of Habesha Cement. He added that the company is facing growing maintenance costs as its machines fail to cope with repeated power cuts.

The national electricity power restrictions have been caused by water shortages at hydroelectric dams. Rainwater has started flowing back in the dam reservoirs but power rationing is not expected to be rescinded until early July 2019.


Egypt: Sinai Cement has started implementing its plans to improve its production efficiency. Vicat Egypt, one of the owners of the company, plans to invest Euro30m into its subsidiary. It has already granted Sinai Cement a loan of Euro10.6m and the cement company received a first tranche of Euro2.6m in April 2019.


Egypt: Tourah Cement says it has stopped production due to a financial crisis caused by oversupply in the local market. Jose Maria Magrina, the managing director of Tourah Cement, told employees in mid-June 2019 that production would be stopped temporarily as it couldn’t cover its costs, according to Mist News. Estimated national cement consumption is 50Mt/yr but total production capcaity is 85Mt/yr.

In a statement the subsidiary of Germany’s HeidelbergCement said that new plants had forced producers to lower prices below the cost of production. It has also blamed higher fuel prices due to a cut in government subsidies.


Nigeria: Dangote Cement plans to open terminals at Lagos and Port Harcourt to export clinker to its grinding plants in West Africa. Chairman Aliko Dangote made the announcement at the company’s annual general meeting, according to the Punch newspaper. At present it exports 1Mt/yr, although it could export up to 8Mt/yr to generate up to US$700m in revenue. Group chief executive officer (CEO) Joseph Makoju it is a ‘major priority’ for Dangote Cement to replace non-African imports in Cameroon, increase foreign revenue and raise the capacity utilisation of its Nigerian plants.


Vietnam: Cement producers including Vissai Cement and the Vietnam Cement Industry Corporation (VICEM) have reported difficulties in buying coal domestically. Hoang Manh Truong, the chairman of Vissai Cement, said that the company mostly used imported coal in 2018 and this experience has been mirrored by VICEM, according to the Viet Nam News newspaper. The situation has been blamed on a sharp rise in local demand due to new cement plants and no new coal mines.


Paraguay: Cartes Group has been fined US$79,500 for cutting down trees near San Lazaro, Concepción where it is planning to build a new cement plant. It will also have to pay US$1.8m towards gaining environmental certificates for the project, according to the ABC Color newspaper. Cartes Group purchased Calera Risso, the company planning to build the new unit, in late 2018.

Environmental studies at the site have also noted caves that should be protected including the Risso Cavern, where a fossil of a giant sloth was found in 2012. The Paraguayan Federation of Speleology has asked the the Ministry of Environmetnal and Sustainablity (MADES) to safeguard the site that also holds microfossils dating back 550m years.

The Cementos Concepción plant project was announced in early 2019. It intends to build a 1Mt/yr cement plant by 2021 with an investment of US$180m.


Malaysia: The Cement and Concrete Association of Malaysia has defended a reported 40% rise in the price of cement due to unsustainable mounting input costs. It said that over the last few years the cement industry had suffered from an increase in cost of electricity, packing materials, imported fuels, raw materials and equipment, according to the Star newspaper. It added that jobs in the sector would be at risk if it did not pass on its costs adequately.

Business representatives have complained about the sudden hike in cement prices. Penang Master Builders and Building Materials Dealers Association adviser Datuk Lim Kai Seng described the sudden increase as ‘unfair.’ Finance Minister Lim Guan Eng also described the situation as unprecedented. He said he would refer the matter to the Domestic Trade, Consumerism and Cooperatives Affairs Minister Datuk Seri Saifuddin Nation Ismail.


Bolivia: The Bolivian parliament has approved draft legislation prioritising the use of locally produced cement by local government and state-owned companies for infrastructure projects and road construction. The law will support the opening of two new cement plants at Potosí and Oruro in late 2019, according to El Potosi. The new rules further extend a decree announced in March 2019.


China: Cosco Shipping Bulk, part of Cosco Group, has signed a strategic deal with Conch Logistics, the logistics subsidiary of Anhui Conch. The agreement will see the two companies jointly develop in the cement logistics sector, according to Asia Shipping Media. In December 2018 Anhui Conch ordered four 12,500DWT bulk carriers from the Jiangdong Shipyard with delivery scheduled in 2020. Cosco Shipping Bulk operates the largest bulker fleet in the world with total capacity of over 33MDWT.


Bangladesh: The Chattogram Customs Authority has seized 30 containers of cement imported under false declaration by Pran Dairy at Chattogram Port. Sources quoted by the Daily Sun newspaper said that the company has attempted to avoid paying the correct import tariffs by falsely declaring the consignment as high-density polyethylene (HDPE) for the UAE. However, when custom officials examined the shipment they found Saudi Arabian-branded cement instead.

A total of 10,200 sacks of 50kg bags of cement were found. The duty payable on HDPE is 32% compared to 91% for cement. The importer was attempting to avoid paying import tariffs of over US$350,000.


Russia/Ukraine: Dyckerhoff cement plants in Russia and Ukraine have gained OHSAS 18001 or ISO 45001 certification in occupational safety. The OHSAS 18001 and ISO 45001 standards provide for a safe and healthy workplace environment and set forth guidelines for continually identifying and controlling health and safety risks, reducing accidents and improving overall performance.


US: Cemex has announced that it is supplying concrete, including a specialised self-consolidating mix, along with thousands of tonnes of aggregates for the replacement of the Sixth Street Viaduct Bridge in Los Angeles, California. The original 915m-long bridge, which has served as a backdrop in numerous films, was built in 1932 and is in need of replacement.

Cemex will supply 34,400m3 of ready-mix concrete. This will include 4800m3 of Evolution, Cemex’s range of self-consolidating concrete product that, in this instance, was tailored to fit the bridge’s design and the requirements of the client, CalTrans. Cemex will also supply a fibre-reinforced concrete solution for the bridge deck and structure itself. The US$482m structure, funded by a mixture of state and Federal funds, is expected to open in late 2020.


Malaysia: YTL Cement has increased its shareholding in Lafarge Malaysia to 76.98% following the conclusion of a mandatory general offer (MGO). In a bourse filing, Maybank Investment Bank said the MGO had been concluded at the close of business on 14 June 2019, with YTL Cement acquiring an additional 220.72 million shares, or 25.98% of Lafarge Malaysia, for US$198m.

On 6 May 2019 YTL concluded its purchase of 51% of Lafarge Malaysia from Associated International Cement Ltd (AICL). It paid US$390m on that occasion.


Saudi Arabia: Saudi Cement’s revenue for the first quarter of 2019 rose 18% higher year-on-year to US$103.9m, driven by higher export sales volume of cement and clinker. It said that its prices had risen, but that the price rise was not as great as that achieved by some other producers. Its profit for the quarter was US$35.2m, a 7% fall year-on-year. However its profit was 6% higher compared to the fourth quarter of 2018.

Saudi Cement’s cement export volumes increased to 0.25Mt for the quarter, while clinker sales volumes (mainly exports) jumped to 0.41Mt. In contrast, local cement sales volumes declined by 16.5% year-on-year to 1.19Mt. Going forward, the company says it will continue to focus on exports in light of weak domestic demand.


Turkey: Batıçim Çimento, part of Bati Anadolu Group, is considering selling up to a 75% stake in its subsidiary Batısöke Çimento. A source quoted by Reuters says that financial services group Unlu&Co has been hired to handle the sale. A document seen by Reuters indicates that due diligence for any potential offers is scheduled to be completed by September 2019. Batisöke Çimento operates one integrated and one grinding plant in Turkey.

In 2018 Turkish conglomerate Sabancı Group mandated Unlu&Co to sell cement producers Kayseri Çimento, Nigde Çimento and Ladik Çimento.


US: Colombia’s Grupo Argos is in talks with US-based Summit Materials about a potential merger. Sources quoted by Reuters said that the Colombian company would like to combine Cementos Argos with Summit Materials to gain economies of scale.

Summit Materials owns Continental Cement, a cement producer that runs two integrated cement plants at Hannibal, Missouri and Davenport, Iowa. It operates cement terminals at Minneapolis in Minnesota, St Paul in Minnesota, LaCrosse in Wisconsin, Bettendorf in Iowa, West Des Moines in Iowa, St Louis in Missouri, Memphis in Tennessee, Convent in Louisiana and New Orleans in Louisiana. Summit Materials also owns a number of building material companies in the aggregates, ready-mixed concrete and asphalt industries.


Brazil: CSN Cimentos is planning to spend around US$390m on building a new 3Mt/yr cement plant in Paraná. Eduardo Bekin, president of the Paraná State Development Agency, said that the company already had the authorisation to conduct economic viability studies and should confirm the plant by late August 2019, according to the Valor Econômico newspaper. CSN is also considering building the plant in Sergipe state, where it operates a limestone mine. The final decision will depend on the best tax environment for the cement producer.


France: Cem'In'Eu plans to raise Euro55m by the end of 2019 to support building new cement grinding plants in Europe. It opened its first 0.25Mt/yr grinding plant at Tonneins, Lot et Garonne in 2018, according to Les Echos newspaper. Construction of a new plant at Portes-lès-Valence, Drôme is scheduled to start in mid-2019. Construction of a larger 0.5Mt/yr plant at Montreuil-Bellay, Maine-et-Loire is anticipated to start in September 2019 for a commissioning date of February 2021. This project will cost Euro35m. Other projects are planned for Chalon-sur-Saône, Saône et Loire and Ottmarsheim.

International projects include a plant at Ottmarsheim, Haut-Rhin in Switzerland and Thamesport in the UK. The former is expected to gather all the necessary permits by September 2019 with construction to follow by the end of the year. An additional project is being planned at the port of Gdynia in Poland.


Nigeria: Lafarge Africa has delayed publication of its annual results for 2018. It blamed the delay on ‘pending actions required for the resolution of key matters relating to the closure of its annual financial statement. It says it will release its audited financial statement by the end of June 2019. The subsidiary of LafargeHolcim reported a net loss of US$28.8m for the first nine months of 2019 compared to an income of US$2.61m in the same period in 2017, although it managed to grow its revenue on a year-on-year basis.


Trinidad & Tobago: The Caribbean Court of Justice (CCJ) is continuing to hear arguments about whether Rock Hard Cement should be exempt from higher taxes applicable to third party goods. Both the Caribbean Community (CARICOM) Council for Trade and Economic Development (COTED) and the World Customs Organisation (WCO) previously ruled that Rock Hard Cement imports from Turkey and Portugal were correctly classified as ‘other hydraulic cement,’ according to Barbados Today. However, lawyers on behalf of Trinidad and Tobago and Trinidad Cement have dismissed this classification of the imports, insisting that the classification of the World Customs Organization (WCO) and COTED were ‘unsafe, unreliable and incorrect.’ As such the imports should be classified as ‘building cement grey’ and liable to a tariff of 15% instead of 5%. The case continues.


US: Trabits Group and Brookhaven National Laboratory have been selected to present joint research papers at two scientific geothermal forums on the self-repair ability of the FlexCem Lightweight Variable Density well cement product. The first presentation will be at the September 2019 meeting of the Geothermal Resources Council (GRC), which will be held in Palm Springs, California, US. The second presentation will be at the World Geothermal Congress (WGC), which will be held in Reykjavik, Iceland in April 2020.

FlexCem well cement was developed by Trabits Group following completion of a research grant from the Department of Energy Geothermal Technologies Office (GTO). It is a composite cement using Type I/II cement clinker and Ferrierite zeolite, interground in proprietary ratios.


Austria: Mondi has launched ‘myMondi’ a web-based platform. It says it is the first all-in-one digital customer platform available in the paper sack industry worldwide. The sales product is intended to enable customers to view live product and stock information, place orders and track order status.


Germany/Portugal: Talleres Alquezar has been using two BHS mixers in a modular plant to produce a total volume of 400,000m3 of hydro dam concrete in Portugal since 2017. Two DKX 4.5 type twin-shaft batch mixers, each with a capacity of 4.5m3, have been integrated into the plant. Germany’s BHS says that using twin-shaft batch mixers has shown that can be utilised successfully to produce this kind of specialised concrete.

Three hydro dams are being built on the Tâmega River that are expected to generate 1760GWh for the Iberian market once they have been commissioned as part of Spanish energy group Iberdrola’s large-scale hydroelectric project in Portugal. 242,000m3 of concrete is needed in Daivões for the dam wall alone, which is planned to be 78m high and 265m long. Spain’s Talleres Alquezar is the project partner for this hydro dam. Once built, the construction in Daivões is expected to dam up to 56,200,000m3 of water.