Global Cement Newsletter

Issue: GCW421 / 04 September 2019

Headlines


Escenario global del Cemento a 2019 y los principales desafíos estratégicos que enfrentara la Industria del cemento en los próximos anos, Yassine Touahri, On Field Investment Research

Forgive the poor image quality but our magazine editor Peter Edwards spotted this provocative graphic (above) at the Federación Interamericana del Cemento (FICEM) technical congress that is taking place in the Dominican Republic this week. It came from a presentation given by Yassine Touahri from On Field Investment Research. The reason this slide raises eyebrows is because it seems to inversely link CO2 emission regulations with cement grinding capacity growth.

One would expect integrated or clinker production capacity addition to decline in the face of various carbon taxes because the majority of emissions in cement production are process emissions. Yet this graphic suggests that it goes further by affecting the supply of clinker in these regions. If correct then it supports the argument that introducing carbon taxes forces related capacity investment to go elsewhere. In other words, if governments try to control industrial CO2 emissions, then the market will follow the path of least resistance. The world has a clinker production capacity surplus and the countries with no CO2 regulations are scooping it up.

The counter argument is that capacity growth and CO2 legislation is unrelated. The regions with flat or falling grinding capacity additions are the places were this trend is occurring anyway for other reasons. These areas have built their houses and infrastructure and so one would expect no or low capacity growth. In this environment it is easier to introduce CO2 laws because, rightly or wrongly, it is perceived to be less important to the overall economy. Meanwhile, outside of these zones national economies are growing: they want to build things and new grinding plants to take advantage of a global glut of clinker are helping them to do this.

Other issues with this graphic are the widely different reasons for low cement grinding capacity growth in the areas with CO2 legislation. Europe, for example, has endured the European Union (EU) Emissions Trading Scheme (ETS) for over a decade and it has seen growth in the slag-cement grinding model in some countries in recent years. General trends have also seen a considerable drop in production capacity in Southern Mediterranean countries as their export markets decline. China is actively trying to manage a reduction in production capacity following a period of unparalleled growth. CO2 legislation is one potential means to do this.

The next step here would be to model the effect of a carbon tax on a developing market, which is genuinely growing its cement consumption, compared to a more mature one. This might help to answer whether economic development can be untangled from carbon emissions. CO2 regulations are undoubtedly distorting cement markets though. Touahri is right when he says that, “CO2 management will be the key challenge for the cement industry in the 21st century.” Once it is given a value then it changes the nature of the business.

There will be a full review of the FICEM technical congress 2019 in a future issue of Global Cement Magazine


Philippines: The Department of Trade and Industry (DTI) has introduced a customs duty on imported cement of US$4.81/t. The Manila Times reports that the measure is subject to annual review and will be in place for three years, decreasing by US$0.48/yr.

The government previously imposed a provisional tariff of US$4.02/t, in spite of protests from Vietnam that any executive action would be in contravention of World Trade Organisation rules. Philippine law allows for the imposition of such measures where an appointed advisory body has determined that increased imports ‘threaten to substantially cause injury to the domestic industry.’

The advisory body in question is the Tariff Commission, who in August 2019 recommended a tariff of US$5.68/t. Secretary of Trade and Industry Ramón López stated that the figure aims to address the threat with minimal impact on buyers. Cement prices in the country hit a low in early January 2019 of US$98.6/t, rising to US$108.25/t after the imposition of the provisional tariff.

Vietnamese producers will be the hardest hit by the price hike, with 75% of the Philippines’ imported cement originating in Vietnam. Asian Review reports that a further 18% comes from neighbouring China and 8% from Thailand.


Oman: Raysut Cement is planning the construction of a 1Mt/yr grinding plant in the port town of Duqm. The project has a cost of US$30m, with work set to begin on 19 September 2019. Oman Cement has been building a 1.8Mt/yr integrated cement production plant at Duqm since December 2018. The new grinding plant is Raysut Cement’s first development project since it received US$50.7m in funding from the Omani Bank Nizwa.


Saudi Arabia: Najran Cement has appointed Mohammed Bin Manaa Bin Sultan Aballa as its new chairman. He will be supported by Salah Bin Yassin Bin Khalil Allaf as the deputy chairman. Abdul Salam Bin Abdullah Bin Abdulaziz Alduraibi has also been appointed as a managing director at the cement producer.


Argentina: Loma Negra has converted its 0.2Mt/yr San Juan integrated cement plant to grinding and bagging only. 14 people have resultantly lost their jobs, five of whom have accepted relocation to the company’s Catamarca plant. Catamarca is the largest of Loma Negra’s seven production facilities in Argentina, with a cement production capacity of 1.8Mt/yr.


Kenya: Rai Group must pay a guarantee of US$62.6m to forestall the sale of Athi River Mining (ARM) Cement. The Kenyan financial services company, owned by Jaswant Rai, is backing a claim by Pradeep Paunrana against PricewaterhouseCoopers over its administration of the sale of the publically-owned ARM Cement. Paunrana, erstwhile majority shareholder and managing director of ARM Cement, is contesting the cement company’s sale in May 2019 to Nairobi Cement, a subsidiary of Devki Group, for US$48.2m including a deposit of US$9.62m. Paunrana argues that the sale was unfair because ARM Cement was misvalued, having missed opportunities to sell its fertiliser and mineral production businesses due to pressures from potential buyers. Business Daily has reported that Paunrana previously submitted an unsuccessful bid in consortium with Rai Group to buy back the company for US$62.6m, also May 2019.


Madagascar: LafargeHolcim has lobbied for cement homologisation norms to targeting importers. Chief Executive Officer François de Lesquen said that the company does not fear competition but wants a level playing field.

LafargeHolcim owns 90% and 66% respectively of Madagascar’s Ibity and Mahajanga cement plants, representing the entirety of domestic cement production. Holcim Madagascar yesterday launched its Orimbato 42.5 cement for heavy load-bearing concretes.


China: Research conducted by the North-West Institute of Eco-Environment and Resources has ascertained detailed data on carbon dioxide (CO2) and mercury (Hg) output at a cement plant in Lanzhou using local spruces.

VerticalNews has reported of distance-dependent variations of Hg concentration in needles close to the cement plant, with the highest concentrations observed in needle samples from the site nearest to the plant. Hg in tree rings increased gradually for all sites by year, reaching a concentration of 65.8ng/g in the last growing period at 0m from the plant.

The study fuels hopes of accurate quantification of historical accumulation of air pollutants, including heavy metals, as well as contributing to our understanding of biochemical Hg cycling in forest ecosystems.


Iraq: Pakistan’s Attock Cement has begun commercial operation of its Basra grinding plant. The 0.9Mt/yr unit was commissioned in April 2019.


Haiti: Jamaica’s Caribbean Cement has begun exporting clinker to Haiti. The Jamaica Observer reports that the first shipment of 7500t of clinker was of surplus material from the company’s 1.3Mt/yr Rockfort Plant. The plant has received US$162m in capital expenditure since 30 June 2015.


Spain: Following its 2018 appeal against a Euro445m fine for misreporting losses, granted on condition of the company paying the court Euro300m in line with its obtaining specified mortgages and land sales, Cemex continues to release its holdings on the Iberian peninsula.

Cinco Días has reported that Cemex’s Spain operations closed its sale to Turkey’s Çimsa of its White Cement division in the first quarter of 2019 for 180 million. In 2018, the Spanish subsidiary of Cemex divested itself of five pieces of property at a profit of Euro17,000. Its Azuara production line in Saragossa Province generated capital gains of Euro462,000.

In the first half of 2019, Cemex reported earnings before interest, taxes, depreciation and amortisation (EBITDA) in Europe of Euro185m, up by 21% from US$168m in the same period of 2018.

Cemex’s Spanish presence began in 1992, when it acquired the country’s two largest cement companies, and it was hit by the downturn of 2008. La Nueva España reports that Cemex has applied for concessions from the Port of Gijón for storage of a dissembled biomass fuel hopper which had been awaiting shipment to Cemex’s Tilbury plant when the recession struck, grounding it in the the port, where it has remained ever since. Autoridad Portuaria de Gijón, the administrative body responsible, is currently considering Cemex’s application.


UK: A study by the University of Dundee has dispelled the myths of substantial performance differences between concretes made with cement containing dry or wet-stored fly ash, with comparable reinforcement corrosion between the two.

Vertical News has reported that the research, whose backers included the Department for Environment, Food & Rural Affairs and Heathrow Airport Holdings, was aimed at “quantifying moisture effects, which indicate agglomeration of fly ash and a tendency for this to increase with free lime content, storage period and temperature.”

Researchers tested five moistened fly ashes and samples from two power station stockpiles, and further investigated different material and storage variables, comparing the concretes at 75mm slump and 28 day strength. Air permeability and water absorption of moistened fly ash proved greater with high free lime (up to 0.9%) and lower with low free lime (to under 0.1%). What benefits there were improved with longer storage. The moistening of low-free-lime fly ash generally yielded similar, or slightly higher, carbonation and chlorine diffusion. The moisture caused little change in high-free-lime ash’s carbonation, while increasing chloride diffusion. Furthermore, high storage temperature equated to greater carbonation.

In spite of these intriguing chemical differences, the study concluded, "these didn't seem to have a noticeable effect on concrete resistance.”


India: Ramco Cement is set to complete its expansion works, aimed at raising total production capacity to 20Mt/yr from 12.5Mt/yr, by the end of 2020.

Ramco’s capacity utilisation in the three months to 30 June 2019 was 90%, 23% above the national average of 67%. ProjectsToday reports that the company is investing US$467m in developments, including a US$347m grinding plant in Arunachal Pradesh.

The company reported net profits of US$26.7m in the quarter to 30 June 2019, up by 53.6% from US$17.3m in the same period of 2018, against a backdrop of a struggling domestic market, with national cement sales in July down by 2.8% to 3.6Mt from 3.5Mt a year ago.


China: DongWu Cement’s net profit over the six months to 30 June 2019 was US$4.83bn, up by 20.6% from US$4.00bn over the same period of 2018. Its cement segment reported a net profit of US$5.37bn, up by 9.1% from US$4.92bn in the corresponding period of 2018.

In its financial statement, DongWu noted a year-on-year growth in China’s total cement output of 6.8% to 1.05Bnt in the first half of 2019, with prices also increasing by 4.1% to US$60.9/t, though growth rates have slowed.

Infrastructure developments have driven swelling demand, while compressed supply has brought the centrally organised economy’s cement reserves to a medium-low level.


Uzbekistan: Uzbekistan’s cement imports totalled US$105.6m over the six months to 30 June 2019, up by 32.3% from 2018.

Chinese investment in Uzbek domestic cement production saw two cement plants of 1.2Mt/yr and 2.4Mt/yr capacity enter development in 2018. Huaxin Cement’s Zafarabad plant is expected to become operational in December 2019, with Gansu Hengya Cement’s Kattakurgan plant also due to enter operation in the coming months.


Malaysia: YTL’s net profit in the quarter ended 30 June 2019 was US$0.58m, compared to a net loss of US$15.1m in the same quarter of 2018, as its cement section’s profits before tax grew to US$3.02m, up by 20.0% compared to the same period of 2018, as it benefitted from the higher profit share of its associates.


Ivory Coast: LafargeHolcim has constructed a depot in Bouaké, the second city of Ivory Coast, for storage of cement produced at its facility in the capital of Abidjan.

In a press release sent to the Agence Ivoirienne de Presse, LafargeHolcim explained that the aim of the development is to bring consumers and its supply closer together. It hopes thereby to maximise the national presence of it 2Mt/yr cement plant.


Russia: Eurocement has invested US$2.26m in upgrades to its Pikalevsky cement plant in the Leningrad region.

Eurocement has reported that tests have proven a 27% decrease in the water separation rate and an increase in the rate of curing of Pikalevsky’s cement following the upgrade. Strength indicators showed a 20% improvement in performance to 25MPa after three days, and over 60MPa after 28 days. Setting start time also increased to 175 minutes. Eurocement’s solution for particle size distribution in clinker after grinding has caused a notable boost in durability indicators.

Representatives of KHD, Aumund and Siemens aided in the installation and instruction of plant employees in the use of the new grinding technologies.


UK: Aggregate Industries has released a range of admixture-driven waterproofing solutions, blended with a custom mixes of BASF’s MasterLife WP 799, called WatertightTM concrete.

Aggregate industries has described the high performance integrated waterproofing systems as ‘insensitive to weather, groundwater and sprinkler systems.’


US: Nano Graphene has launched a concrete admixture. OG Concrete Admix improves concrete’s water resistance by a factor of four and more than doubles the strength, while significantly reducing cracking.

In GrapheneCA’s promotional material, it mentions a lowered carbon footprint amongst the benefits of its admixture for concrete producers, with less cement being required in the production of concrete using OG Concrete Admix.


Malaysia: Cahya Mata Sarawak (CMS)’s cement division has reported a net profit of US$19.5m in the six months to 30 June 2019, down by 37.1% from US$31.0m in the same period of 2018. The company’s total first half revenue rose by 8.9% to US$194m from US$178m in 2018.

In its financial statement, CMS blamed the cement profit slump on rising clinker import prices and the cost of fuel for its coal-fired cement plants. CEO Datuk Isaac Lugun has expressed hope for the group’s longer-term prospects due to its competitive power pricing and strong global presence.


Vietnam: Vietnam’s August 2019 cement output has been estimated at 7.9Mt, up by 8.7% from August 2018. This would give an eight-month figure of 63.1Mt, up by 7.6% year-on-year. Data from government’s General Statistics Office placed the country’s 2018 output at 90.2Mt, a figure likely to be exceeded by early December 2019.

In the first half of 2019, Vietnam exported 31.3% of its cement, supplying 68% of China’s imports of cement and clinker over that period. Global Cement has previously reported that Vietnamese companies were seven of the top ten importers of cement to the Philippines from 2013 to 2018.


South Africa: PPC has reported an increase in it earnings before interest, tax, and depreciation (EBITDA) of 5 - 10% for the four-month period to 30 July 2019 compared to a year ago.

Against a backdrop of subdued domestic demand and competitive pricing by importers (whose imports increased 22.0% year-on-year to 0.64Mt in the first half of 2019), the group has held gross debt at a similar level to that reported in March 2019, implementing its US$4.56/t saving initiative and a focus on its most profitable market segments, with sales reduced by 10-15% in the four months to 30 July 2019 compared with 2018.

PPC’s financial report states that South African cement producers have engaged the relevant authorities for a cement standards check.


Pakistan: Fauji Cement has installed a 12.5MW solar power plant at its Jhang Bahtar plant, near Islamabad. Business Recorder reports that Fauji’s is the world’s largest solar power station devoted to a cement plant, with 37,905 panels delivering an estimated annual total of 19,750MWh of energy.

Fauji has additionally installed two waste heat recovery plants of 12 and 9MW and two large reservoirs for water recycling and rainwater harvesting. Fauji is leading Pakistans’s Clean and Green initiative, having planted 25,000 trees and donated a further 40,000 plants to local government and nearby villages.


US: LafargeHolcim’s plans for a solar power station for its Hagerstown cement plant have stalled, after Washington County denied its contractor Greenbacker Renewable Energy Corp the expected tax break for the project.

A break from personal property tax levied on equipment, of the sort granted to other solar energy projects, would have resulted in taxes of approximately US$1.6m instead of US$2.9m over its 25 years in effect, CommsMEA has reported. The County’s decision hinged on debates over the number of long-term jobs created by the project. Greenbacker previously argued that the long-term job security of LafargeHolcim’s 108 Hagerstown employees was embellished by the move towards improved sustainability and the stabilisation of energy costs.

The motion, proposed by Commissioner Randy Wagner, failed for lack of a second. This followed after a commissioner recused himself from proceedings because, as a financial advisor, he stood to benefit from the project through the investments of his clients.


Nigeria: A laden Dangote Cement lorry suffered a brake failure and ran head-on into a bus in Ikorodu, Lagos State on 27 August 2019, killing the bus driver, a trainee bus driver and one passenger. All 69 other passengers were injured.

The Punch has reported that the Dangote vehicle was carrying 45t, significantly over its rated capacity. The company has commenced an investigation of the incident.


Zimbabwe: A blast at Lafarge Cement Zimbabwe’s Sternblick quarry on 15 August 2019 has killed one person and injured another.

Agence Ecofin has reported that two women were at home on Pangoula Farm, Harare, when debris from the quarry entered through the roof, striking 36-year-old Shupikai Chatsina, who lost her life instantly, on the head. She leaves behind a husband and five children. The second woman, Ms Chatsina’s aunt, is recovering in hospital.

LafargeHolcim’s contractor Afri Mining did not follow established blasting procedures. The disaster is under police investigation.