Global Cement Newsletter

Issue: GCW458 / 03 June 2020

Headlines


Under the current circumstances it’s not surprising to see how much Indian cement production fell in April 2020. Like many other countries, its lockdown measures to combat the coronavirus outbreak suppressed industrial output. Yet seeing an 86% year-on-year fall in the world’s second largest producer is shocking. Cement production declined to 4.1Mt from 29.2Mt. Further data shows, as part of the Indian government’s eight core industries, that steel and cement production suffered the most. Coal, crude oil, natural gas, petroleum refinery products, fertilisers and electricity generation all fell by far less.

Graph 1: Change in Indian cement production year-on-year (%). Source: Office of the Economic Adviser.

Graph 1: Change in Indian cement production year-on-year (%). Source: Office of the Economic Adviser.

By comparison in China monthly cement output only fell around 30% at the peak of its outbreak. The difference is that China implemented a graduated lockdown nationally, with the toughest measures applied in Wuhan, the place the outbreak was first identified. As we reported in April 2020 demand for cement in Wuhan had fallen by around 80% at the time its lockdown ended. Production and demand are different, but India’s experience feels similar except that it’s on a national scale. The last time the country had a dip in cement production recently was in late 2016 when the government introduced its demonetisation measures and dented cement production growth rate (and national productivity) in the process.

UltraTech Cement, Orient Cement, Ambuja Cement, India Cement, Dalmia Bharat, JK Lakshmi Cement, Shree Cement and others all suspended operations to varying degrees in the first phase of the lockdown in late March 2020. Operations of industrial plants in rural areas was then cleared to restart in mid-April 2020, although subject to local permissions and social distancing rules, as the country’s lockdown zones took shape. All of this started to show in company results towards the end of March 2020 as sales started to be hit. The worst is yet to filter through to balance sheets.

March 2020 was a particularly bad time for the government to shut down cement plants because it is normally the month when annual construction work peaks. Cement production usually hits a high around the same time. The monsoon season then follows, reducing demand, giving producers a poor time to restart business. Credit ratings agency Care Ratings has forecast that capacity utilisation will drop to 45% in the 2020 – 2021 financial year. This follows a rate of 65 – 70% over the last six years with the exception of 2019- 2020, which was dragged down to 61% due to lockdown effects. On top of this labour issues are also expected to be a major issue to the sector returning to normality. The mass movement of workers back to their homes made world-wide news as India started its lockdown. Now they have to move back and Care Ratings thinks this is unlikely to complete until after the monsoon season, by September 2020. Hence, it doesn’t expect a partial recovery until the autumn, nor a full recovery until January 2021 at the earliest.

Not everybody is quite as gloomy though. HM Bangur, the managing director at Shree Cement recently told the Business Standard newspaper that he was expecting a rebound following the resumption of production in May 2020. He also reported a capacity utilisation rate of 60% at his company, higher than Care Rating’s prediction above, and he noted a difference between demand in rural areas and smaller cities (higher) compared to bigger cities (lower).

India is now pushing forward with plans to further unlock its containment measures to focus on the economy. However, daily reported news cases of coronavirus surpassed 8000 for the first time on Sunday 31 May 2020. How well its more relaxed lockdown rules will work won’t be seen for a few weeks. While this plays out we’ll end with quote from HM Bangur that will resonate with cement producers everywhere: “sales are imperative.”


Rwanda: Cimerwa has officially announced the appointment of Albert Sigei as its chief executive officer (CEO). He succeeded Bheki Mthembu, following the end of his term in office.

Sigei has 17 years’ experience in the building materials sector working for LafargeHolcim. His last role was in Malawi where he served as the local CEO, following postings in Kenya, Egypt and Nigeria. He holds a degree in mechanical engineering from University of Nairobi as well as professional qualifications in accounting and information technology management.

His first months in office have included coping with the coronavirus pandemic, remarketing Cimerwa’s product range under the SURE brand and working on the company’s listing on the Rwanda Stock Exchange.


UK: Breedon Group has appointed Donna Hunt as its first Group Head of Sustainability. In the newly-created role, she will be responsible for developing and implementing a sustainability strategy to shape the group's practices and performance, ultimately improving the sustainability of Breedon's operations, products and services.

Hunt holds over 20 years' experience having held several senior sustainability, environmental and stakeholder engagement positions across the energy, aerospace engineering and construction materials sectors. She has served on several cross-industry committees on sustainability-related topics and remains an active STEM (Science, technology, engineering, and mathematics) Industry Ambassador on behalf of the Mineral Products Qualifications Council (MPQC).


Ethiopia: Samuel Halala, the director of Ethiopian Chemical and Construction Inputs Industry Development, says that the Abay Cement plant is 60% complete and due to start operation in 2021. The 2.5Mt project is located near Degen in Amhara Region, according to New Business Ethiopia. It has an investment of around US$260m. Once completed it is expected to create 1500 jobs.

Halala added that the country’s 21 cement plants have a production capacity of 17Mt/yr but have a capacity utilisation rate of around 60%. Only 14 plants are currently active, producing 11.5Mt/yr.


Nepal: Udayapur Cement Industry has resumed clinker production after a closure period of over two months. The 800t/day cement plant was forced to close both production and sales due to government-mandated lockdown measures in response to the coronavirus pandemic, according to the Himalayan Times newspaper. It has now resumed operation using social distancing rules.


India: Switzerland-based ABB has reported its successful installation of electrification and automation systems at RCC’s upcoming 3.9Mt/yr integrated Mukutban plant in Yavatmal, Maharashtra. The plant will have a 40MW captive power plant and an 11MW heat recovery system. ABB has supplied MV and LV Switchgears with UMC100.3 intelligent motors, an ABB Ability System 800xA and an ABB Ability Expert Optimiser.


Azerbaijan: Cement producers produced 0.91Mt of cement in the first quarter of 2020, down by 8.7% year-on-year from 1Mt in the first quarter of 2019. Ready-mix concrete production rose by 9.9% to 0.46Mt from 0.51Mt, while the total value of construction materials produced fell by 4.5% year-on-year to US$120m from US$126m. The decline was attributed to a decrease in demand due to the coronavirus outbreak.


Trinidad & Tobago: Trinidad Cement has said that it is celebrating 365 days without a loss time injury (LTI). The company said, “Our strict safety protocols implemented throughout our operations are paying off… by saving lives.”


Mexico: Cemex has said that new rules proposed by the Secretariat of Energy affecting subsidies for renewable power users will ‘adversely impact business.’ Noticias Financieras News has reported that as of 1 January 2020 Cemex had contracted for the supply of 918MW of renewable energy, 802MW (87%) of it in Mexico.


World: Cemex has said that it is part of a group of companies jointly launching Restarting Together - an initiative aimed a reinvigorating the economy in the wake of the coronavirus crisis. It says that the initiative aims, “to find innovative projects that seek to expedite the return to normality after the confinement period.” It added, “This initiative also looks to identify projects to boost economic recovery in a sustainable way, aimed specially at improving employment, revitalising the ecosystem of small businesses, and creating networks and financial aid mechanisms for crisis situations.”

Restarting Together is welcoming innovative project proposals from the public until 30 June 2020. The criteria on which proposals will be assessed are their ‘social and economic impact, feasibility, rapid implementation time, and degree of sustainability and innovation.’


India: Nagarjuna Cement, a cement brand produced by NCL Industries, has signed the film star Varun Tej Konidela as its brand ambassador. The performer from Telugu language cinema will feature in a new song as well as in television commercials which will be launched by Nagarjuna Cement as part of its upcoming campaign that aims to connect with a broader demographic, according to the United News of India. Initiatives on radio, social media and other media channels will accompany the campaign.


Russia: Vostokcement has announced that it and its subsidiaries Spasskcement, Teploozerskcement and Yakutcement will resume the ordinary supply of building products to customers from 1 June 2020.

Vostokcement said, “The company’s offices carefully monitor the implementation of security measures in connection with the COVID-19 pandemic. The rooms are equipped with lamps for air disinfection, contactless thermometers have been purchased and information stands are installed. Employees are fully provided with personal protective equipment - medical masks and gloves, hand antiseptics and indoor disinfectants.”


Canada: The Cement Association of Canada (CAC) and Rediscover Concrete have issued a joint declaration to the federal government in which they urge it to absorb the costs of state infrastructure projects and put construction ‘at the core of the COVID-19 recovery plan.’

CAC president and chief executive officer (CEO) Michael McSweeney said, “A successful economic recovery will require a commitment to use time-sensitive infrastructure spending. We have a very short construction season in Canada and municipalities have lost much of their financial capacity to fund important infrastructure projects this year. We need the federal government to help municipalities get local community infrastructure projects going to boost economic activity and public confidence.”


Germany: Beumer Group says it is supporting logistics start-up Sparrow Networks with its Beam spin-off company. Sparrow Networks consists of a spare parts pool of interconnected cement industry players. Customers can access the inventory on Sparrow Networks’ digital marketplace. Beam is a Berlin-based start-up company builder, supported by Beumer Group, that focuses on logistics and technical challenges.


France: A car magazine chose Ciments Calcia’s 2Mt/yr Gargenville, île-de-France integrated cement plant as the backdrop for a photo shoot. The shoot featured models produced by Germany-based Audi, BMW, Daimler and Porsche. Ciments Calcia said that it was, “an opportunity for employees present to discover these exceptional machines. A good time was had by all.”


Russia: Eurocement has announced the completion of Phase 2 of an upgrade project at its 2.4Mt/yr integrated Pikalevsky Cement plant. Following the modernisation of the grinding unit in the first phase of the upgrade in August 2019 at a cost of US$2.14m, Phase 2 work consisted of an expansion to ‘the assortment of high-quality products,’ including ‘large-scale construction and installation, reconstruction of air supply and aspiration systems and power supply and repair of existing buildings and structures’ at a total cost of US$2.86m. Eurocement completed the upgrade without any downtime to the existing lines.

Pikalevsky Cement director general Andrei Vashchilov said, “We have tested the new cement. The activity of cement at the age of 28 days increased by an average of  10MPa, which allows for cost-optimised concrete production. The modernisation also enabled the improvement and stabilisation of another important indicator - water separation.


Oman: Oman Cement subsidiary Al Sahawah Cement has said that the deadline for bids for two tenders for engineering, procurement and construction (EPC) of its new Duqm integrated cement plant’s 5000t/day kiln lines and mill. The Oman Daily Observer newspaper has reported that Al Sahawah Cement will commission the grinding plant in September 2021, with full commissioning of the integrated plant to follow in March 2022. The company is also tendering for bids for a third EPC contract for the supply and installation of a 30MW waste heat recovery (WHR) power plant. The entire plant has a cost of US$212m.


Dominican Republic: Cement companies produced 5.6Mt of cement in 2019, up by 4% year-on-year from 5.4Mt in 2018. This corresponds to 82% utilisation of the Dominican domestic capacity of 6.9Mt/yr. The Dominican Association of Portland Cement Producers (ADOCEM) said that domestic cement consumption rose by 7.2% to 4.7Mt from 4.3Mt.


US: The United States Geological Survey (USGS) has reported that total US cement shipments in the first three months of 2020 were 20.9Mt, up by 7.9% year-on-year from 19.4Mt. Imported cement accounted for 2.98Mt (14%) of shipments over the period, up by 22% from 24.4Mt.

The USGS said, “Measures instituted to mitigate the spread of the COVID-19 pandemic may cause disruptions in the cement industry across the United States and around the world. However, no US cement plant closures or idlings were reported in March 2020.”


Chile: Cementos Bío-Bío has taken a loan worth US$37.6m from BCI-Itaú bank and Scotiabank. It took the measure ‘to ensure the company’s liquidity’ in response to the coronavirus outbreak. Cementos Bío-Bío said, “The Covid-19 pandemic brings risks due to its impact on the world and local economy. The company estimates that it will strongly affect construction, impacting cement dispatches.” It added, “The company maintains a comfortable cash position,” with liquidity of US$53.3m.


Egypt: The Ministry of Local Development has announced the start of a six-month period in which it will issue no construction licences for private buildings in Greater Cairo, governorate capitals and major cities from 27 May 2020. Egypt Today has reported that the suspension also affects licences for building modifications and extensions.

President Abdel Fatah al-Sisi has ordered that mega-infrastructure projects should continue, subject to additional protective measures against the COVID-19 outbreak. Al-Sisi postponed the inauguration ceremonies for the newly constructed New Administrative Capital and Grand Egyptian Museum.


India: HeidelbergCement has recorded a profit of US$8.77m in the three months to 31 March 2020, up by 8.9% year-on-year from US$8.06m over the corresponding period of the 2018 - 2019 fiscal year. Sales fell by 4.7% to US$67.5m from US$70.8m. HeidelbergCement India has attributed the profit to a decrease in operating expenditure of 8.6%, to US$50.7m from US$55.4m, according to Dion News Service.


Thailand: Siam Cement Group’s (SCG) planned sale of up to 30% of shares in its subsidiary SCG Packaging has received the approval of the Securities and Exchange Commission. SCG is awaiting better market conditions for the sale, after it postponed the initial public offering (IPO) in mid-March 2020 following the coronavirus outbreak. The company said, “Once the overall situation becomes clearer and more conducive, SCG will proceed with its IPO and the listing of its shares on the Stock Exchange of Thailand.”

SCG said that it is selling the shares to raise funds for ‘international and domestic business expansion.’


Russia: Gornozavodskcement has announced that its Akkermann brand cement conforms to the standard for sulphate-resistant CEM-I cement. The Siberian Research Institute of the Cement Industry issued the certificate of conformity to the cement, which contains a ‘unique formulation’ of 100% ordinary Portland cement with special sulphate resistance.

Gornozavodskcement quality director Irina Ilyina said, “The production of this special cement in Perm Territory, where several large transport and industrial facilities are under construction, will significantly reduce transport and procurement costs for builders, as well as improving the quality and durability of products.”


Germany: Lhoist has taken advantage of the alkaline soils around its Istein, Baden-Württemberg quarry in producing a range of six white wines, two red wines and a rosé under its Kalkweingut label. The grapes are grown on reclaimed sections of the quarry and harvested between August and October. The company says that the limestone ‘has a high nutritional value and retains the warmth of the Sun,’ which, in conjunction with the warm climate of South Baden, gives the wines a ‘Mediterranean’ expression.


Philippines: Gebr. Pfeiffer has received an order for a modular four-roller ready2grind 2500 vertical grinding unit to Big Boss Cement’s Porac, Pampanga plant. It says that the mill will have a production capacity of 70t/hr of cement, ground to a fineness of 4000cm2/g. The company will additionally supply a packing plant module for bag and bulk loading.

Gebr. Pfeiffer said that in spite of delays to the unit’s commissioning due to coronavirus lockdown, it “has experienced specialists on site and is therefore able to support the customer in this phase.”


Morocco: HeidelbergCement subsidiary Ciments du Maroc made sales of US$88.4m in the first quarter of 2020, down by 9.8% year-on-year from US$100m in the corresponding quarter of 2019. Cement volumes fell by 9.9%. Ciments du Maroc said that it increased its capital expenditure by 43% to US$1.51m from US$824,000.


Russia: Eurocement subsidiary Lipetskcement has announced that its CEM-II sulphate-resistant cement has been found to conform to the new Russian standard for its class of products. This enables its use in special types of construction, including hydraulic engineering, land reclamation, transport infrastructure and oil and gas wells.


Russia: Eurocement subsidiary Kavkazcement has announced its acquisition of a Hitachi excavator for use at its clay quarry. The reasons behind the choice of excavator were its high productivity and low operating costs.

Kavkazcement director general Oleg Lopatin said, “The hydraulic excavator will develop clay reserves in areas complicated by large slopes, increasing the economic efficiency of raw material extraction and ensuring the stability of the final product. Kavkazcement systematically modernises all stages of production, which allows us to guarantee high quality and reliability of product deliveries to key construction sites in the south of Russia.”


Spain: Following a partial easing of Spain’s coronavirus lockdown on 25 May 2020, LafargeHolcim España employees returning to the company’s Villaluenga de la Sagra cement plant in Toledo, Castile-La Mancha were surprised to discover that an Iberian lynx had moved in during the 2.4Mt/yr integrated plant’s 10-week suspension due to the coronavirus lockdown. Staff contacted the Castile-La Mancha Environmental Agency, which determined that the site was ‘not an ideal habitat’ for lynx due to the risk presented by vehicles inside and outside of the cement plant when operations resume. The Castile-La Mancha Environmental Agency has tweeted that it has released the one-year-old female cat at a secret location in the Montes de Toledo region, following a medical check-up and tagging.