Global Cement Newsletter

Issue: GCW434 / 04 December 2019

Headlines


The National Council for Cement and Building Materials (NCB) International Seminar is running this week in New Delhi and this gives us a good opportunity to take a snapshot at the world’s second largest cement industry.

Data from the Ministry of Commerce & Industry shows comfortable cement production growth of 4.4% year-on-year to 255Mt in the first nine months of 2019. As graph 1 shows there was higher production growth in 2018 but this followed a decline in 2017, due to partly to the government’s demonetisation policy. October 2019 confirms a trend of falling year-on-year growth from August 2019 onwards following a peak growth rate in mid-2017.

Graph 1: Indian cement production in the first nine months of the year, 2015 – 2019. Source: Indian Ministry of Commerce & Industry. 

Graph 1: Indian cement production in the first nine months of the year, 2015 – 2019. Source: Indian Ministry of Commerce & Industry.

Graph 2: Year-on-year change in monthly Indian cement production, 2017 – October 2019. Source: Indian Ministry of Commerce & Industry. 

Graph 2: Year-on-year change in monthly Indian cement production, 2017 – October 2019. Source: Indian Ministry of Commerce & Industry.

Analysts like ICRA have blamed the growth slowdown on the general election in mid-2019 and then the monsoon rains. By region in the six months from April to September 2019 it noted a slowdown in demand due to slowing government projects in northern, eastern and central areas. Labour concerns were reported in the north, centre and Gujarat in the west. Raw material shortages were picked up on such as water in Maharashtra and sand in the east and Andhra Pradesh. Positive growth was reported in Kerala, driven by post-flood reconstruction and low-cost housing schemes, and in Karnataka due to general construction activity. Broadly, UltraTech Cement, the country’s largest cement producer, in its November 2019 investor’s presentation, agreed with this assessment. It noted growth in the northern region and declines elsewhere. Like ICRA it too picked up on low cost housing declaring it to be a ‘key cement consumption driver.’

Away from the figures the main news stories have been continued consolidation such as the auction for Emami Cement and UltraTech Cement’s acquisition of Century Textiles and Industries. The sale of the former for plants in east and central regions has been linked to all the major local producers, including those owned by LafargeHolcim and HeidelbergCement. A report in the Hindu newspaper last week quoted a source placing UltraTech Cement and Nirma Group as the frontrunners with a valuation of around US$700m and an announcement at some point in December 2019. Despite UltraTech Cement’s market dominance nationally, its 17% production share in the east is low compared to its presence elsewhere. Nirma Group’s subsidiary Nuvoco Vistas is one of the smaller producers but, notably, it picked up Lafarge India’s assets in 2016.

Investment in new production capacity has continued with announcements from both JSW Cement and HeidelbergCement in recent weeks about expansion plans well into the mid-2020s. This follows planned projects from Dalmia Bharat Cement and Ramco Cement as well as orders from the JK Cement and Shree Cement. This ties into the capacity growth forecasts of around 120Mt over a similar timescale that the analysts were predicting in the middle of 2019. JM Financial, for example, pinned most of this growth on the south followed by the east and north. However, The India Cements said in November 2019 that it was delaying its expansion projects in Uttar Pradesh due to slowing government spending.

As is usual for a country with a low per capita cement consumption, on the national scale, one of the tensions in the Indian cement industry has been the balance between the capacity utilisation rate and the commissioning of new capacity. Its utilisation rate was below 60% in 2018 and a number of producers started reporting the negative effects of higher input and raw materials costs on their financial results. Knowing when to stop and start capacity growth is critical in this kind of environment. Specifically in India’s case curveballs such as government action on pollution and the country’s growing need for imports of coal as well as a burgeoning waste fuels sector are factors to keep an eye on. Finally, general trends such as UltraTech Cement’s focus on the Indian market, despite buying assets outside the country, are also compelling to watch as it chooses to concentrate on just one country. There are parallels here with other similarly-sized multinational that have also been focusing on core markets elsewhere in the globe.


India: Dalmia Bharat CEO and managing director Mahendra Singhi will continue to serve as president of the Cement Manufacturers’ Association (CMA), a role to which he was previously appointed in December 2018. Signhi said, “Indian cement is working on low carbon technology map and remaining fully sustainable. I look forward to making 2020 an even more prolific year.” The Indian Express has reported that the new CMA vice president will be LafargeHolcim subsidiary ACC CEO and managing director Neeraj Akhouri.


Ireland: CRH has appointed Shaun Kelly as a non-executive director and chairman of the Audit Committee.

Kelly, aged 60 years, a dual Irish and US citizen, was the Global Chief Operating Officer of KPMG International until September 2019, where he was responsible for the execution of the firm’s global strategy and for the delivery of various global initiatives. Over a 30-year career with KPMG, the majority of which was spent in the US, he held a variety of roles, including Partner in Charge, US Transaction Services (2001 - 2005), Vice Chair and Head of US Tax (2005 - 2010) and Vice Chair Operations and Chief Operating Officer Americas (2010 - 2015), before his appointment as Global Chief Operating Officer in 2015.

Kelly is a fellow of Chartered Accountants Ireland, a US Certified Public Accountant and graduated from University College Dublin with a Bachelor of Commerce and Diploma in Professional Accounting. He also holds an honorary doctorate from Queen’s University Belfast.


US: Lehigh Cement and Lehigh White Cement have agreed to an investment of US$12m for the installation of pollution control technology across their 11 active cement plants. US Fed News has reported that the upgrades can be expected to reduce net emissions of nitrous oxised (NOx) by 4550t/yr and sulphur dioxide (SO2) by 989t/yr. Lehigh Cement will additionally pay a US$1.3m civil penalty for past Clean Air Act violations.


India: UltraTech Cement has announced a planned expansion of its Bhogasamundram waste heat recovery (WHR) power plant to 36MW from 20MW. The plant serves its 5.6Mt/yr integrated Andhra Pradesh cement plant. The upgrade is part of an investment of US$14.0m which will also serve to expand the area of the cement plant by 326 hectares.


Pakistan: The Peshawar High Court has rejected a petition by local residents to prevent the construction of a US$245m cement plant in Haripur by the military Frontier Works Organisation. The Balochistan Times has reported that the project will entail the relocation of people from an area of 0.66km2 and the felling of ‘thousands of trees.’ The Supreme Court gave a preliminary hearing to the case on 2 December 2019, giving the Attorney General, Advocate General Khyber Pakhtunkhwa and Defence Ministry until 9 December 2019 to submit their replies.


Azerbaijan: Cement producers in Azerbaijan produced 2.8Mt in the 10-month period ending 31 October 2019, down by 3.4% from 2.9Mt in the corresponding period of 2018. Ready-mix concrete production swelled by 25% to 1.5Mt from 1.2Mt in 2018’s first 10 months. Trend has reported the total value of construction materials produced in Azerbaijan over the period at US$382m.


Belgium: A team of researchers from the University of Mons in Hainaut province has concluded a study in the use of amine-based solvents for carbon capture on between 20% and 60% CO2 flue gas with funding from HeidelbergCement and the European Cement Research Academy. Lab tests and industrial-scale simulations showed that the solvents lowered regeneration energy, equivalent work and operating costs of carbon capture across the CO2 concentration range of flue gases tested.


Japan: Taiheiyo Cement has installed an ash washing facility at a waste incineration plant in Kumagaya, Saitama prefecture for desalination and lowering of chloride content. After rinsing, the installation will supplement cement production at Taiheiyo Cement’s 1.8Mt/yr integrated Kumagaya plant with up to 69,400t/yr of ash. The total cost of investment was US$7.17m.


India: The government of the state of Odisha will invest US$1.25bn in infrastructure development, including construction of several industrial facilities. These will include a 1.0Mt/yr integrated plant owned by JSW Cement subsidiary Shiva Cement and a total of 4.0Mt/yr grinding capacity in new Shiva Cement and Shree Cement plants. The projects will source their cement from Odisha’s existing installed capacity of 7.3Mt/yr, consisting of 3.8Mt/yr integrated and 3.5Mt/yr grinding capacity at plants owned and operated by Dalmia Bharat’s OCC India, Toshali Cement, UltraTech Cement and Lafarge Holcim’s ACC Cement.


India: Czech Republic-based Wikov has announced the conclusion of an agreement with Premium Transmission with the aim of bringing its gearboxes to the Indian market. The agreement entails Premium Transmission assembling Wikov gearboxes to install in projects across the country.


UAE: Figures from Iran’s Qeshm Free Trade Zone show a deficiency in domestic cement production in the UAE, as 48,000t of cement have been shipped to the country in the six months ending 21 September 2019. Cement from across the Gulf helps serve the consistently growing needs of the country’s construction industry.


US: California-based Heliogen has developed concentrated solar-thermal plants (CSPs) with the ability to focus sunlight to generate temperatures over 1000°C by micro-adjusting mirrors using computer technology. It has now engaged Parsons Corporation to build arrays of its CSPs for installation in cement pre-calciners. Requiring 900°C heat, these represent the largest part of the industry’s CO2 output. The technology will firstly reduce this by replacing fossil fuels with a clean heat source, which moreover entirely bypasses the electrical grid. Heliogen CEO Bill Gross says that the installations will make carbon capture and storage (CCS) of the remaining CO2 emissions from the conversion of limestone to lime easier by removing other pollutants. Heliogen is now targeting 1500°C from its CSPs, which would enable them to supersede cement fuels in kilns.


Vietnam: The General Statistics Office has reported an estimated 9.6% year-on-year rise in cement production in November 2019 to 8.7Mt from 7.9Mt in November 2018. Vietnam News Brief Service has reported that, if December delivers on the previous month’s volumes, this would yield a production total for 2019 of 96.6Mt, up by 7.1% from 87.9Mt in 2018.


Zimbabwe: LafargeHolcim subsidiary Lafarge Cement Zimbabwe has announced a planned investment of US$15.0m in a dry mortar production line to diversify its product base. All Africa has reported that construction will begin in January 2020.

The company stated that it will conclude registration of a US$28.5m loan from the reserve bank of Zimbabwe before the end of 2019.


China: KHD has reported NOx emissions consistently below 50mg/Nm3 at Tianrui’s 2.0Mt/yr Weihui integrated cement plant in Henan province, where its Pyroredox gasifying reactor has been installed between the kiln inlet chamber and preheater calciner. The NOx reduction after several months of operation was 66%, while reagent usage fell by 78% compared to with the plant’s selective non-catalytic reducer without a Pyroredox fitted. No extra power or fuel was used and production was unaffected. The Pyroredox requires two to four weeks’ downtime for its installation and is now operational at multiple cement plants across China.


Panama: New technical regulations for cement composition and behavioural characteristics will enter force on 3 December 2019. All packaging must display the contents’ net weight, country of origin, cement type and production date. La Estrella has reported that the legislation gives enforcing power to the Ministry of Commerce and Industry’s Directorate General of Industrial Technology Standards (DGNTI), the Consumer Protection and Competition Defence Authority (ACODECO) and customs authorities.


UK: The board of Quinn Industrial Holdings (QIH) has voted to send official correspondence to Sean Quinn, expected to contain a request that he keep his distance from operations. Quinn visited the company’s 0.5Mt/yr Ballyconnell plant on 21 November 2019 and quarries earlier in the month. The Sunday Independent reported that Quinn, who left his position as a consultant to his former enterprise in 2016, may be asked to return his company cars - a Range Rover and Audi A6. Quinn has condemned attacks on staff, including the kidnap and torture of executive director Kevin Lunney on 17 September 2019, for which four men appeared in court charged with assault and false imprisonment on 26 November 2019.


Canada: HeidelbergCement’s Canadian subsidiary Lehigh Cement is trialling the cement industry’s first full carbon capture and storage (CCS) installation at its 1.4Mt/yr integrated Edmonton plant in Alberta in partnership with Canada’s International CCS Knowledge Centre. The installation will have a CO2 capture rate of between 90% and 95% and receive an investment of US$1.4m from the state government body Emissions Reduction Alberta (ERA). “We are part of HeidelbergCement’s vision of CO2-neutral concrete by 2050 and are committed to leading global change for CCS in our industry,” said Jeorg Nixdorf, Lehigh Hanson Canada regional president.


Morocco: HeidelbergCement has sold 3.6% of its 54.6% stake in Ciments du Maroc’s share capital. HeidelbergCement chairman Bernd Scheifele expressed the company’s commitment to retaining its majority stake in the total 5.6Mt/yr-capacity cement producer. Scheifele explained that the decision was ‘aimed at generating cash to speed up deleveraging,’ and that it was ‘well on track’ to reach its Euro1.5bn disposal target by the end of 2020.


Denmark: FLSmidth’s chief financial officer (CFO) Lars Vestergaard has agreed with the board of directors to resign from the company, effective immediately. FLSmidth has stated as the reason for the change a need for ‘a different set of competences to strengthen our organisation and execute long-term financial targets.’ It thanked Vestergaard for his commitment and dedication in helping FLSmidth achieve milestones in ‘creating a stronger and more focused organisation. FLSmidth Head of Group Reporting and Compliance Naja Barrisøe supersedes Vestergaard as interim CFO until the newly appointed CFO joins the company on or before 1 July 2020.


Bosnia Herzegovina: HeidelbergCement’s Bosnian concrete subsidiary TBG BH has entered into production at its new concrete plant in the southern city of Mostar, bringing its number of plants in active production to seven. Ehlimana Šehmehmedović, TBG BH director, said: “The opening of a concrete production facility in Mostar is part of our strategy to strengthen the supply of quality products to Mostar and Herzegovina.”


Spain: The European Union of Aggregates Producers has granted two Sustainable Development Awards to Brazil’s Votorantim Cimentos for its El Toril quarry restoration plan and cave conservation plan for the Cova Eirós mine, which provided raw materials for clinker produciton at its 0.7Mt/yr integrated Oural plant. Votorantim Cimentos has partnered with the University of Santiago de Compostela to facilitate archaeological study of Cova Eirós, where 50,000-year-old findings have been made. Meanwhile at El Toril, the pit will be filled, levelled and enhanced for fertility so that it may resume its previous use as arable land.


India: JSW Cement has revised its planned expansion to its 14Mt/yr total installed capacity to 39Mt/yr before 1 January 2023, an increase of 5Mt/yr compared to its initial target of 34Mt/yr by 2020. The figure includes JSW’s 54% subsidiary Shiva Cement’s new 1Mt/yr integrated and 1Mt/yr grinding plant, valued at a total of US$112m. Parth Jindal, JSW Cement managing director, said that the figure had been revised upward because Shiva Cement had become self-sufficient in clinker production, freeing the group’s east Indian cement production from ‘volatile import costs.’

Economic Times has reported that Shiva Cement is set to bring its limestone reserves to 100Mt with the acquisition of the Khatkurbahal mine. The company sources its granulated blast furnace slag from the Odisha steel industry. Production of JSW Cement’s flagship product, JSW Portland Slag Cement (PSC), releases CO2 at a rate of 325kg/Mt compared to between 760kg/Mt and 800kg/Mt for typical Ordinary Portland Cement (OPC).


Paraguay: Cement has been entering Paraguay at a rate of 6000t per month, up by 400% from 1000t per month upon the removal of restrictions on 19 November 2019, as importers move to fill the supply gap created by falling domestic production. ABC has reported that the construction sector requires 0.1m bag/day of cement, of which the state-owned Industria Nacional del Cemento (INC) is currently providing 20,000 and Intercement 30,000. ABC has named neighbouring Argentina as a source of Paraguay’s incoming cement.


Saudi Arabia: Najran Cement’s board of directors voted on 27 November in favour of the establishment of limited liability transport company. Due to market conditions, the new subsidiary will not be incorporated until 30 June 2020. Najran Cement did not confirm the size of the investment in its statement.


Zimbabwe: LafargeHolcim subsidiary Lafarge Cement Zimbabwe has complained of implied year-on-year inflation of 350% in September 2019 having possible knock-on effects on its business. Company secretary Flora Chinhaire blamed a 19% year-on-year drop in domestic consumption on ‘declining demand from homeowners due to escalating mortgage financing costs’ and the effects of foreign currency constraints on payments to suppliers for capital expenditure projects. All Africa has reported that power supply issues and unplanned stoppages caused a 1% decline in productivity at Lafarge Cement Zimbabwe’s 0.5Mt/yr integrated cement plant, where it operates a single wet production line.

The International Monetary Fund (IMF) has forecasted a 5.3% contraction in Zimbabwe’s gross domestic product (GDP) in 2019.


Russia: Vostokcement subsidiary Spasskcement received a ninth belt to serve as a back-up for conveying materials into one of its two kilns at its Spasskcement plant. The belt is 7.65m wide and was manufactured in Louyang, China.


Australia: NRW Holdings has acquired the mining and construction conglomerate BGC Contracting and engaged UBS to help find buyers for its various divisions. These include BGC Cement, which operates a grinding plant in Kwinana, Western Australia.


US: The construction company Cross River has partnered with Canada-based proprietary technology manufacturer Svante to deliver industrial carbon capture and storage (CCS) projects. BusinessWire has reported that Svante has already supplied its CCS pipelines to the 1Mt/yr CO2ment concrete plant in British Colombia, a joint operation between Swiss LafargeHolcim and French Total which uses captured CO2 to aerate its concrete.