Global Cement Newsletter

Issue: GCW427 / 16 October 2019

Headlines


SNIC, the Brazilian national cement industry union, was being cautious this week but signs of improvement were there. Its cement sales data showed a 3% year-on-year rise to 40.5Mt for the first nine months of 2019 from 39.4Mt in the same period in 2018. SNIC President Paulo Camillo Penna was keen to pour cold water over the figures with a reminder that the truck driver’s strike and an economic slowdown in 2018 had unnaturally depressed industry sales. He didn’t want to ruin the party too much though. Comments followed about a National Confederation of Industry (CNI) survey forecasting growth for the next six months and market research supporting growing residential construction.

 GCW427 Graph 1

Graph 1: Cement sales in Brazil for Q1 – 3, 2014 – 2019. Source: SNIC.

As Graph 1 above shows the local industry has been through the wringer in recent years. Cement sales peaked in 2014 before the national economy was hit by falling commodity and oil prices that contributed to a recession as well as the Petrobras political crisis. At the start of 2017 Camillo Penna described the situation as the worst in the industry’s history. From the peak to the trough cement sales plummeted by 27%.

Camillo Penna’s caution now may have something to do with his previous prediction that the industry was going to recover from the second half of 2018. The sales may not have perked up but merger and acquisition activity did, with the European multinationals Buzzi Unicem and Vicat buying stakes in BCPAR (Grupo Ricardo Brennand) and Cimento Planalto (Ciplan) respectively. So far in 2019 it has been quietly optimistic but not without the odd hiccup. There have been a few new plant project announcements from Brennand Group, Votorantim and CSN Cimentos. Yet, InterCement converted its integrated Pedro Leopoldo plant in Minas Gerais to a terminal. Cimento Tupi reportedly ran into trouble with its investors when it tried to merge with its parent company following defaulting on loan payments in 2018. Notably, the country’s two cement associations also released a Cement Technology Roadmap to 2050 in April 2019. It plans to reduce specific CO2 emissions by over 30% from 2014 to 375kg CO2/t of cement in 2050 amongst other ambitions.

On the corporate side, Votorantim’s domestic sales rose by 3% year-on-year to US$771m in the first half of 2019 from US$745m in the same period in 2018. It attributed the growth to improved prices. Other news of note included the acquisition of a mortar plant in Belém, Pará state and plans to upgrade its clinker grinding unit at Pecém in Ceará. InterCement’s cement and clinker sales volumes rose by 6.8% to 4.04Mt from 3.78Mt. It declared that this was way ahead of the industry average of 1.5%. Sales revenue fell slightly, possibly due to high production overcapacity and competition on prices. Earnings were also reported as having improved in the second quarter partly due to a ‘significant’ reduction in its cost structure.

On the supplier side, refractory manufacturer RHI Magnesita reported that its margin recovery was ‘going quite well’ in Brazil during the first half of 2019. Stefan Borgas, RHI Magnesita’s chief executive officer (CEO) forecast that the margin in that country would help drive its business in the second half of 2019 and that the business was returning to the global average. RHI Magnesita also announced a Euro57.1m upgrade to its plant at Contagem, Belo Horizonte in Minas Gerais this week, including building a new regional headquarters for its South American business.

Everything seems to be coming together slowly for Brazil’s cement industry. Yet Camillo Penna and SNIC are right to be careful for another reason. The United Nations (UN) and various analysts are warning about the growing risk of global recession in 2020 based on indicators like the US yield curve. This could be especially devastating for an economy like Brazil’s that is heavily dependent on commodity markets. History may not repeat itself but the strength of that recovery may be tested sooner than anyone would like.


UAE: The board of Sharjah Cement and Industrial Development elected Othman Mohammed Sharif Abdullah as its new chairman at a meeting on 12 October 2019. Mubasher has reported that the company, which is based in the UAE, and also listed in Kuwait, also appointed Salah Abdulla Al Noman to its board.


China: Shanshui Cement ended the nine months to September 2019 with a net profit of US$352m, up by 46.6% year-on-year from US$221m in the corresponding period of 2018. Revenue increased by 28.5% to US$2.3bn from US$1.8bn.


Russia: Siberian Cement has reported a 4% year-on-year rise in its cement volumes in the nine months to 30 September 2019 to 2.6Mt from 2.5Mt in the corresponding three quarters of 2018. Of its three production lines, output fell at its Krasnoyarsk Cement and Volna plants by 9% and 14% respectively. 324,000t of cement was produced at its Timlyuisk cement plant over the period, a 21% increase on the 2018 figure of 268,000t.


Russia: Mordovcement, the Mordvinian-based subsidiary of Eurocement, shipped a total of 2.3Mt of cement by rail in the nine months to 30 September 2019, representing an increase of 31%. In July 2019, the company says it set a Russian record for number of carriages filled with cement in a single shipment, with 210 carriages. Russian Railways recognised the company’s high shipping volumes with a formal expression of thanks for “ensuring high rates of growth in freight traffic” at a Russian Railways Company Day celebration ceremony.


South Africa: Research carried out by Beton-Lab on the instigation off PPC has revealed a widespread flouting of cement quality regulations, with the majority of samples overweight or underweight and of inconsistent quality. Beton-Lab tested 14 products from 10 different producers. Cape Times has suggested that the results are due to the addition of fly ash and slag to finished cement as a common practice amongst producers.

In August 2019, PPC and other South African producers lobbied the government International Trade Administration Commission for a tightening of cement standards in response to a perceived compromise on quality by importers, whose 4.6% stake in the market grew by 293% year-on-year in July 2019.


Brazil: RHI Magnesita is planning a Euro57.1m upgrade to its Contagem complex in Minas Gerais, to include a new plant and 15,000m2 of office space. Francisco Carrara, president of RHI Magnesita South America, emphasised the importance of the Brazilian cement sector to the company, with operations in the country “representing 75% of Magnesita’s activities on the continent.”


Panama: 0.87Mt of domestically produced cement was sold in Panama in the six months to 31 July 2019, corresponding to a drop in production of 12.8% compared to the same period of 2018. Figures released by the treasury office showed total cement imports at a high of 85,600t; 10% of domestic consumption.


Kenya: The new owners of Athi River Mining Cement entered the company’s 0.7Mt/yr integrated Kaloleni cement plant on 14 October 2019. The Standard has reported that Narendra Raval, chairman of Devki Group, which also owns National Cement, was held up for some time at the entrance, because security guards had not received orders to let him in. Raval spoke to employees, promising that all 1100 would keep their jobs following completion of the takeover, whereupon all salaries would be harmonised with those of their National Cement colleagues.


Oman: Al Tasnim Cement Products has opened a 425m3/hr ready-mix concrete plant in Duqm’s Special Economic Zone. Arab Finance has reported that four batching plants will supply cement to the facility; one on-site and three elsewhere in Duqm.


Mauritius: Private Infrastructure Development Group (PIDG)’s subsidiary GuarantCo has filed an insolvency petition against Dalmia Bharat Cement’s subsidiary Calcom Cement India for the alleged non-payment of US$27.5m. The Financial Express has reported that GuarantCo was the guarantor for various loans which Calcom obtained from Indian banks in 2007. A Dalmia spokesperson has stated that the procedures are intended “to put pressure on Calcom Cement,” which “has not committed any default in making payments to GuarantCo.”


Switzerland: Holcim Switzerland has ratified a new collective labour agreement (CCL) with two unions. Finanznachrichten has reported that under the new arrangement the company’s 570 employees will be able to receive two weeks’ paid paternity leave. Lena Frank, head of personnel negotiations, stated that “the compatibility between work and family is central to equality. The new regulation is therefore an important step forward.”


India: Dalmia Bharat Cement will invest US$492m in projects to expand its cement production capacity by 8Mt/yr to 34Mt/yr from 26Mt/yr. The sum includes a consolidated investment of US$422m in brownfield developments in Eastern India to increase integrated capacity at its Rajgangpur plant in Odisha by 3.0Mt/yr, and at its Kasba plant in West Bengal by 2.7Mt/yr, to 6.6Mt/yr and 4.0Mt/yr respectively. The expansion is scheduled for completion by March 2020.


Croatia: Holcim Croatia has purchased Readymix Croatia for an undisclosed sum. The subsidiary of LafargeHolcim said that the acquisition would allow it to invest in a fourth quarry in the local market located at Vranje near Lupoglav, Istria. Its aggregates business started operating in 2006 in Ocura in Varaždin County, then in 2007 in Plovanija and in 2008 in Šumber in Istria County. The building materials company operates one integrated cement plant in the country at Koromančnoa and two ready-mixed concrete plants.


UK: GyroMetric Systems has signed an agreement to install digital monitoring equipment on a 11kV raw mill drive at Tarmac’s Tunstead cement plant in Derbyshire. Measured digital parameters will include dynamic torque across the coupling, radial displacement of the shaft (and therefore misalignment), and torsional vibrations of the drive system. The data will also provide information on the condition of the gearbox. GyroMetric Systems is controlled by Remote Monitored Systems. No value for the order has been disclosed.


Brazil: Paulo Camillo Penna, the president of SNIC, the Brazilian national cement industry union, has expressed caution about growing cement sales so far in 2019. Data from SNIC shows that cement sales grew by 3% year-on-year to 40.5Mt in the first nine months of 2019 from 39.4Mt in the same period in 2018. Growth was driven by central and southern regions of the country, particularly in São Paulo. Exports grew by 22% to 90,000t from 74,000t. However, Paulo Camillo said that apparent growth in 2019 was partly due to a truckers strike in May 2018 that overly depressed the year’s sales. Despite this, he added that a survey of the construction industry released by the National Confederation of Industry (CNI) was showing slow but steady improvement.


US: Cemex USA’s Miami and Brooksville South cement plants in Florida have been awarded Energy Star certification for 2019 by the Environmental Protection Agency (EPA) for work on energy efficiency and sustainability. The current year’s recognition marks nine consecutive years of Energy Star certification for the Miami plant and the Brooksville South plant has achieved the certification seven out of the last eight years.

“Cemex is committed to delivering world-class products and services to its clients across the US and the globe while maintaining the highest sustainability standards in our industry,” said Cemex USA president Jaime Muguiro.
To earn the recognition, operations at each plant followed energy-efficiency principles established by the EPA’s Energy Star guidelines and implemented energy conservation technologies along with energy-reduction projects. The recognised facilities were among the top 25% of similar US facilities for energy conservation and met the Energy Star Plant Energy Performance Indicators.


US: Thomas, Bennett & Hunter (TBH) has had a site plan to build a new ready-mixed concrete (RMX) plant in Hagerstown, Maryland approved by the Washington County Planning Commission. The concrete producer is moving its operations in the town to a new site, according to the Herald-Mail newspaper. It is hoped that the new RMX plant will be commissioned by the end of 2020.


Argentina: Loma Negra plans to close its Olavarría integrated cement plant. The unit has 45 employees who will be relocated elsewhere in the business, according to the Buenos Aires Económico newspaper. In recent years the plant has been operating solely as a grinding and bagging unit. The cost of upgrading the plant and the relative distance of its raw materials were factors in the decision to close it. The Olavarría cement plant was the first to be built in the country.

In September 2019 the subsidiary of Brazil’s interCement said it was converting its San Juan integrated cement plant to grinding and bagging only. Earlier in the year it came close to closing its Barker plant as it was unable to reach an agreement with the local union over staff redundancies. Alongside this it is building a new production line at its L'Amalí cement plant.


Argentina: Data from the Association of Portland Cement Manufacturers (AFCP) shows that cement consumption fell by 6% year-on-year to 8.5Mt in the first nine months of 2019 from 9Mt in the same period in 2018. Local despatches dropped by 5% to 8.5Mt to 8.9Mt, although exports rose slightly.


US: Lehigh Hanson has started construction work on a US$600m upgrade to its Mitchell cement plant. The groundbreaking ceremony follows approval of an air permit by the Indiana Department of Environmental Management (IDEM) in July 2019, according to WBIW radio. The subsidiary of Germany’s HeidelbergCement is building a new production line to replace the existing three lines at the site. Start-up for the line is scheduled for the third quarter of 2022.


Germany: Data from the German Cement Works Association (VDZ) shows that cement consumption rose slightly to 29Mt in 2018. Imports were 1.5Mt and exports rose by 1.5% year-on-year to 6.3Mt. The association says that this shows the industry is in a stable phase that is expected to continue in 2019 and 2020.

"There has been an upward trend in the German cement market for four years now, thanks in particular to the positive development in the apartment block sector," said VDZ president Christian Knell. He added that annual growth in consumption had slowed but that this was ‘hardly surprising’ given the ‘tight’ capacities along the construction value chain.


Germany/Switzerland: LafargeHolcim has dropped a bid for BASF Construction Chemicals due to pricing issues, according to sources quoted by Bloomberg. The heavy building materials producer was also concerned about the length of the sale process and issues concerning integrating it into the group.


Russia: Sibirsky Cement has issued details of upgrade work at its Topkinsky Cement plant. Cement grinding mill No. 9 was upgraded with replacement housing and updated mill equipment. Minor overhauls have also been made on mills 1 and 2 including work on the gearbox. Restorative work has also been conducted on the rotary kilns 1, 4 and 5 and on all packaging lines.


South Africa: The National Regulator for Compulsory Specifications (NRCS) has confiscated cement supplied by Rainbow Power Cement due to non-compliance with the requirements of the compulsory specification on cement. The NRCS has issued a directive against the sale and supply of such products.

“Rainbow Power Cement does not have the authority to manufacture and supply cement in South Africa as it had failed to meet minimum safety requirements in line with the NRCS Act. This has therefore led to withdrawal of the Letter of Authority as previously issued by the NRCS,” said the regulator in a statement. It added that sub-standard cement can negatively affect the sustainability of buildings and structures leading to higher maintenance costs and even structural failures.

The NRCS said that non-compliant cement was initially identified and confiscated in Gauteng province but that there were signs that the cement had also been distributed in other provinces.

Rainbow Power Cement said that it is moving to a new certifying body, the South African Bureau of Standards (SABS). It acknowledged that it is unable to sell any cement until this process is completed.


UK: The Global Cement and Concrete Association (GCCA) has launched ‘Innovandi,’ a research network between industry and scientific institutions. The network intends to research the areas of process technology, including the impact of co-processing, efficiency of clinker production and implementation of CCUS/ technologies, and products. This will include the impact of clinker substitutes and alternative binders in concrete, low carbon concrete technology and improve the understanding of CO2 reduction through re-carbonation.

“Our industry is fully committed to taking action to reduce CO2 emissions. As such, Innovandi is an industry led initiative and will bring together the best minds from all corners of the cement and concrete world, academia and business. Together we will truly collaborate on a global scale and use our expertise to find new ways of working and developing effective innovations,” said Benjamin Sporton, the chief executive officer (CEO) of the GCCA.

24 companies from the cement and concrete industry, including cement and concrete manufacturers, admixture specialists and equipment suppliers, have committed to the initiative, with scientific institutions and additional companies set to join as its work begins work. These include Buzzi Unicem, Cementir Holding, Cementos Argos, Cementos Molins, Cementos Pacasmayo, Cemento Progresso, Cemex, CNBM, Chryso, CRH, Dalmia Cement, FLSmidth, Grupo Cementos de Chihuahua (GCC), GCP Applied Technologies, Mapei, HeidelbergCement, LafargeHolcim, Nesher Israel Enterprises, SCG Cement, Titan Cement, Refratechnik Cement, Sika Technology, Subote New Materials and Votorantim.

As part of the new initiative, the GCCA also intends to establish an annual Innovandi global conference to promote collaboration on innovation and research in the sector.