Global Cement Newsletter

Issue: GCW428 / 23 October 2019

Headlines


Interesting news from Holcim Mexico this week with the announcement that it is planning to invest US$40m towards building a 0.7Mt/yr grinding plant in the state of Yucátan. The unit will be supplied with clinker from Holcim Mexico’s Macuspana and Orizaba integrated cement plants. This follows the news in August 2018 that Elementia’s cement company, Cementos Fortaleza, had started to build a new 0.25Mt/yr grinding plant at Merida in Yucatan. That project has a budget of US$30m.

These two projects offer a contrast to comments made by the head of Cemex Mexico, Ricardo Naya Barba, who was lamenting the state of the market to local press at the start of the month. He said that sales volumes of cement, concrete and aggregates had fallen by 12 – 15% in the first seven months of 2019. He blamed the decline partly on falling national infrastructure investment. This marked a slight improvement on Cemex’s Mexican results for the first of 2019 where sales, sales volumes and earnings were all down. At this time as well as slowing infrastructure projects the situation was also attributed to a residential sector hit by the slower-than anticipated start of the new programs.

Elementia’s Mexican cement business, Cementos Fortaleza, reported a similar picture in the second quarter of 2019. Its net sales fell by 6% year-on-year to US65.4m from US$69.7m. This was attributed to a market contraction affecting all of Elementia’s businesses in the country, as well as the redefinition of its core products for the Building Systems business unit. Earnings fell also and this was further attributed to mounting energy and freight costs. Cementos Moctezuma faced many of the same issues. Its cement sales fell by 13% to US$147m in the second quarter of 2019. It is expecting a similar picture for the remainder of the year.

Data from the National Institute of Statistics and Geography (INEGI) shows that the value of cement sales in Mexico fell by 7% year-on-year to US$1.21bn in the first quarter of 2019 from US$1.30bn in the same period in 2018. Cement sales volumes fell by 8.2% to 10.9Mt from 11.9Mt. This was the lowest figure since 2014.

The one larger Mexican cement producer that doesn’t seem to have been overly troubled so far in 2019 is Grupo Cementos de Chihuahua (GCC). Earlier in the year the company was considered to be the Mexican cement producer most at risk from potential US tariffs due to higher reliance on exports than its competitors. Yet Mexico’s National Chamber of Cement (CANACEM) publicly said that that it didn’t consider US tariffs a significant barrier to the local industry. GCC reported growing net sales and cement sales volumes in the second quarter of 2019 due to industrial warehouse construction, mining projects and middle-income housing at the northern cities.

Two new grinding plants in a particular region of Mexico don’t necessarily reflect the state of the country’s industry as a whole. Yucatan may suit the grinding model due to a lack of raw materials or strong shipping links. The region may also be defying the gloomy national state of affairs in the construction sector. Alternatively, producers may be chasing low-cost and low-risk expansion plans in a tough market. The grinding model wins out over the clinker producing one in this scenario. In the wider picture in August 2019 Cemento Cruz Azul ordered two petcoke grinding mills from Germany’s Loesche and Austria’s Unitherm Cemcon said it had been awarded the supply of an MAS DT burner to an unnamed cement plant. These suggest that, although the sector may be having a bad year so far, things are expected to get better.


Zambia: The majority government-owned Zambia Consolidated Copper Mine (ZCCM) Investment Holdings has appointed Mabvuto Chipata its chair. ZCCM’s cement division faces the challenge of national overcapacity due to market saturation as it moves ahead with the US$600m construction of a 1.6Mt/yr integrated cement plant and 57MW power station in Masaiti, Copperbelt province. Thierry Charles, speaking on behalf of the Euronext minority shareholders, expressed relief at ‘the definitive turning of a page on several years of hazardous, inconsistent and disastrous investments.’


China: Anhui Conch cement made a net profit of US$3.36bn in the nine months to September 2019, up by 15% from US$2.92bn in the corresponding period of 2018. Sales over the period were US$15.7bn, having increased by 42% from US$11.0bn in the first nine months of 2018. The company explained the disparity between revenue and profit in terms of increased operating costs of 32% compared to 2018, “due to the expansion of product sales and trading business.”


Azerbaijan: Azerbaijan’s three cement works of an integrated capacity of 5Mt/yr produced 2.5Mt of cement in the nine months to 30 September 2019, down by 1.2% compared to 2.6Mt over the same term in 2018. Overall sales were low in the period, but exports picked up in the quarter to 30 September 2019, stimulating production levels of 0.9Mt, representing no change year-on-year.


Namibia: The International Organisation for Standardisation (ISO) has recognised Ohorongo Cement’s commitment to quality with ISO 9001:2015 and ISO 14001:2015 certification. The former follows technical auditing of the entire cement-making process to ensure ‘quality at the core of all processes,’ according to New Era, while the latter signifies the attainment of ‘the global standard for an effective environmental management system.’ The company commented that: “Ohorongo ensures that all operations and practices exhibit responsibility towards all stakeholders and the environment.”

Ohorongo Cement’s 69.8% owner Schwenk Namibia failed to sell to Singaporean-based International Cement Group (ICG) in September 2019.


China: Gansu Qilianshan Cement Group made a net profit of US$147m in the first nine months of 2019, representing an increase of 89% from its nine-month profit to 30 September 2018 of US$78m. Operating income recorded a comparatively slow growth of 21% to US$737m from US$610 in the corresponding 2018 reporting period. The company attributed its profitable results to tactical divestments.


Qatar: Qatar National Cement Company recorded a net profit of US$35.5m in the nine months to 30 September 2019, down by 41% compared to US$60.1m in the corresponding period of 2018. The depleted profit was ostensibly due to the company increasing its expenditure in expanding its export base to Africa and India.


Pakistan: Cement producers in Pakistan dispatched a total volume of 4.3Mt of cement in September 2019, 13% more than the 3.8Mt shifted in September 2018. Domestic consumption stood at 3.5Mt, representing a 13% increase from 3.1Mt in the same month of 2018. The country exported the remaining 0.8Mt, a 14% increase compared to the 0.7Mt exported in September 2018. The Pakistan Observer has suggested that dwindling demand and new legislation requiring sellers of goods over US$319 in value to have a Computerised National Identity Card (CNIC), something which the majority of cement producers do not hold, are placing a drag on growth.


Peru: Cement producers in Peru dispatched 0.94Mt of cement in September 2019, up by 7.4% on the September 2018 figure of 0.88Mt. Demand continues to outstrip domestic production, with a 6.5% increase to 1.0Mt from 0.97Mt in September 2019. Consumers imported a total of 50,000t, primarily from Vietnam.


Russia: Swiss-based LafargeHolcim has signed a cooperation agreement with the Russian Direct Investment Fund (RDIF) for the purposes of supporting market growth and attaining to international quality, sustainability and energy efficiency standards. Contify Investment News has reported that LafargeHolcim, whose total integrated capacity of 9.4Mt in Russia is spread across four plants, will receive equity co-investments for projects from the Russian sovereign wealth fund. Maxim Goncharov, CEO of LafargeHolcim Russia, said that the partnership facitates the company’s global expertise "in solving target issues related to the industry’s and society’s development,” such as the co-processing of waste as a substitute fuel.


Kazakhstan: China Gezhouba Group has inaugurated a 0.9Mt/yr clinker production plant in the Kyzylorda region. Central Asia News has reported that the plant will produce nine types of cement, with oil well cement its major product. This is aimed at diminishing the Kazakh oil industry’s dependence on cement imports. China Gezhouba Group chairman Li Ming said: “the alignment of China’s Belt and Road Initiative and Kazakhstan’s Bright Path economic policy brings great prospects for the China-Kazakhstan cement production capacity.”

The new cement plant is the first in the region and will employ 260 people.


India: Ultratech has reported a profit after tax in the three months to 30 September 2019 of US$81.8m, up by 62.6% from US$50.3m in the third quarter of 2018. The company made sales of US$1.34bn in the period, a year-on-year improvement of 4.4% from US$1.28 over the same three months of 2018. In spite of nationwide monsoon flooding, which was heaviest in Ultratech’s key operating areas of Eastern and Central India, and depressed demand, the company consolidated its 117Mt/yr capacity with the acquisition of Century Cement in September 2019. Ultratech’s reliance on renewable power grew to 10.5% from 8.4% in the previous three months to 30 June 2019, cutting energy costs by 9.0%. During the period, Ultratech carried out annual maintenance across its installed capacity, resulting in a relatively low capacity utilisation and raising variable costs by 3.0% in comparison to the previous quarter. The company said that it is ready to meet normalised cement demand going forward, with the government’s commitment to a thrust in infrastructure spending bolstering positive expectations. Ultratech, the World’s third biggest cement company, is the only one to have a capacity greater than 100Mt/yr in a single country outside of China.


India: LafargeHolcim subsidiary Ambuja Cement has grown its consolidated net profit by 35% year-on-year to US$73.4m in the three months to 30 September 2019 from US$55.9m in the corresponding period of 2018. Revenue grew by 1.5% to US$0.87bn from US$0.86bn. Ambuja managing director and CEO Bimlendra Jha spoke in positive terms of the growth in spite of falling volumes. Expenses fell amidst logistics improvements, as Ambuja continues to focus on product mix enrichment, alternative fuel substitution and the increased use of renewable energy.

Other Indian cement companies to weather stagnant third quarter sales with growing net profit were Shree Cement with 414% growth to US$43.6m and ACC with 45% growth to US$29.5m.


Saudi Arabia: Tabuk Cement has reported a profit after tax of US$1.34m in the nine months to 30 September 2019, compared to a US$5.12m loss in the corresponding period of 2018. Its sales grew 61% to US$15.6m from US$6.89m in the first three quarters of 2018. The company stated that a lack of sales quantity was offset by an improved average selling price.


Slovenia: Swiss-based LafargeHolcim’s Slovenian subsidiary Lafarge Slovenia has submitted an application for an environmental permit for its 0.5Mt/yr Cementarna Trbovlje grinding plant. Business News Europe has reported that the company hopes to resume grinding, storage and dispatch at the facility, which went out of operation after losing its environmental permit in late 2014. “The plant will no longer produce raw materials itself, but source them from elsewhere, along with other cement additives,” said operations manager Čeprav Delo.


Niger: Aliko Dangote, chairman of Dangote Cement, has cleared plans for the construction of a 1.6Mt/yr integrated cement plant in Keita, Niger. The project, which includes the construction of a 100MW coal-fired power station, has a budget of US$275bn and is expected to take 26 months.


Uzbekistan: The multinational cement enterprise Surkhoncementinvest has revealed plans for a 1.1Mt integrated cement plant in the Surkhandarya region. The Uzbekistan National News Agency has reported that the first stage of the project, which will total US$144m, has already been completed, with technology from Austria, Germany, China and Russia installed. The majority of cement produced at the plant will be for export overseas.


Mexico: Holcim Mexico has announced a forthcoming investment of US$40m in the construction of a 0.7Mt/yr grinding plant in the state of Yucátan. Jamie Hill Tinoco, general director of Holcim Mexico, said that the plant, which will receive clinker from Holcim Mexico’s Macuspana and Orizaba cement plants, signifies the company’s commitment to the state, enabling it to ‘optimise local solutions with greater benefits for customers and communities.’ The plant will be Holcim Mexico’s sole dedicated grinding unit in an integrated cement production apparatus totalling 11.8Mt/yr capacity.

Holcim has had a presence in Yucatán since 1992 through its Uman distribution centre.


Russia: Sibirskiy Cement subsidiary TimluyCement produced 0.3Mt of cement in the eight months to 31 August 2019, representing a year-on-year increase of 50% from 0.2Mt in 2018. The company explained this in terms of an 11% capacity increase in Buryatia and the opening of supply chains through Amur and Khabarovsk precipitating total exports of over 33,000t to the Far East.


Tajikistan: Tajik producers produced 3.1Mt of cement in the nine months to 30 September 2019, up by 9.7% from 2.8Mt in the corresponding period of 2018. Cement producers exported a total of 1.2Mt to a value of US$54.1m. Around 0.7Mt went to Uzbekistan and 0.4Mt to Afghanistan, with most of the remaining produce going to other neighbouring countries.


Paraguay: Industria Nacional del Cemento (INC) has signed an agreement with the Ministerio de Urbanismo, Vivienda y Hábitat (MUVH), the government body responsible for commissioning residential home construction, for preferential cement prices for companies to which the latter awards building contracts. INC president Ernesto Benítez Petters said “Cooperation with the MUVH will strengthen the consumption of cement produced in Paraguay by ensuring it a price and the provision of demand from this type of project.”


Malaysia: Following 12 months of graduated succession plan implementation, Cahya Mata Sarawak (CMS) is ready for the retirement of Group Executive Director Ahmad Alwee Alsree Datuk Syed. CMS chairman Tan Sri Abdul Rashid Bin Abdul Manaf accepted Datuk Syed’s retirement with an outpour of thanks for his ‘immeasurable contributions over 15 years of loyal and faithful service.’ All of Datuk Syed’s roles have now passed to successors within the company, with Isaac Lugun Dato taking over as group managing director.


Argentina: Holcim Argentina opened a technical training centre on 17 October 2019 at its 1.2Mt/yr Campana grinding plant. The Holcim Technical Academy will provide specialist training to managers and supervisors from Holcim’s Campana, Córdoba, Jujuy and Mendoza plants, with courses on quality, processes, maintenance and quarries.


Nigeria: Cement Company of Northern Nigeria (CCNN) has made a donation of 3000 bags of cement, equalling US$22,100 in value, to impoverished communities in Sokoto State’s Wamakko Local Government Area. CCNN corporate affairs manager Alhaji Sada Suleiman said that the donation, which is to help repair mosques, graveyards, public wells and Islamic schools, was part of the company’s corporate responsibility.


Cambodia: Thai-based Thai Boon Rong Cement is conducting pilot testing at its newly constructed 1.3Mt/yr integrated cement plant in La’ang, Kampot province, with a view to it entering production in November 2019. Asia News Network has reported that the cement plant, located in the Thai Boon Rong Special Economic Zone, will be the fourth in Kampot, bringing the province’s total production capacity to 6.4Mt/yr. Fellow producer Chip Mong Insee, whose plant in Kampot, owned jointly with Siam City Cement, produces 1.5Mt/yr of cement, released a statement expressing hope that the new plant will help to “slash imports by a great amount, which means that we can be nearly 100% self-reliant.”

Including the fifth plant in Battambang, Cambodia’s cement production capacity will stand at 8.2Mt/yr as of the November 2019 inauguration of the new plant by Prime Minister Hun Sen. The figure confronts a rapidly growing domestic demand which is 7.7Mt/yr and shows no signs of slowing. Figures from Chip Mong Insee estimate that national cement demand in 2020 may be as high as 9.0Mt/yr.


Saudi Arabia: Yamama Cement achieved a US$12.2m third quarter net profit in 2019. This compares with losses of US$12.3m in the corresponding three months of 2018. The company reported a 73% leap in revenues year-on-year to US$49.7m from US$28.7m.


China: China Tianrui Group Cement has secured a new agreement with Ruiping Shilong for the supply of its clinker. The company announced that under the new arrangement, valid until 31 December 2021, it will buy clinker at a rate possibly exceeding the US$74m/yr cap stipulated in the 1 April 2019 agreement which covered the same period.


Argentina: Loma’s new line at its L’Amali plant in Olavarría Province, involving a kiln, two vertical mills and a bagging and palletising unit, will create 120 jobs, 80 of which will go to plant staff. The company had previously estimated that 220 people would work on the line. In a statement, it emphasised the importance of maximising gender parity in its recruitment process.

Loma Negra estimated that the upgrade will enlarge the plant’s capacity by 40% to 2.4Mt/yr from 1.7Mt/yr. The declaration follows the announced relocation of 45 staff members with the closure of the 1.5Mt/yr integrated Olavarría cement plant, also in Olavarría province.


Syria: Two Coalition F15s performed a targeted precision airstrike on a Lafarge Syria cement terminal near Kobane on the Turkish-Syrian border. Myles Caggins, Operation Inherent Resolve spokesperson, told Sputnik that the operation succeeded in its aims of “destroying an ammunition cache and reducing the facility’s future military usefulness.” The facility had been used by Coalition and Kurdish forces, and was destroyed following the removal of all personnel and ‘essential tactical equipment’ as part of the US’s withdrawal from northern Syria.