Global Cement Newsletter

Issue: GCW464 / 15 July 2020

Headlines


Data is starting to emerge from South American countries for the first half of 2020 and it’s not necessarily what one might expect. Countries had different trends in play before the coronavirus pandemic established itself and then governments acted in their own ways with mixed results. Here’s a brief summary of the situation in the key territories.

Graph 1: Cement sales in selected South American countries in first half of year, 2018 – 2020. Source: Local cement associations and national statistics offices. Note: Colombian data is for January – May for each year.

Graph 1: Cement sales in selected South American countries in first half of year, 2018 – 2020. Source: Local cement associations and national statistics offices. Note: Colombian data is for January – May for each year.

Brazil’s cement sector looked set to become the big loser as global events seemed poised to dent the recovery of cement sales since a low in 2018. This didn’t happen. The Brazilian national cement industry union’s (SNIC) preliminary data for the first six months of 2020 shows that sales grew by 3.7% year-on-year to 26.9Mt. This is above the growth rate of 3% originally expected. Indeed, the monthly year-on-year growth rate in June 2020 was 24.5%. SNIC is not wrong in describing this kind of pace as being ‘Chinese.’ All this growth has been attributed to the home improvement market as people used their lockdown time to renovate their homes, renovations and maintenance in commercial buildings during lockdown and growing work on real estate projects. The government’s decision to implement weak lockdown measures clearly helped the sector but this may have cost lives in the process.

SNIC’s president Paulo Camillo Penna pointed out that producing and selling cement could co-exist with fighting coronavirus. However, trends such as a slowing real estate sector, less large construction projects and mounting input costs are all seen as potential risks in the second half of 2020. What SNIC didn’t link to the wider fortunes of the local cement industry was the economic consequences of coronavirus. The World Bank, for example, has forecast an 8% fall in gross domestic product in Brazil in 2020 due to its coronavirus, “mitigation measures, plunging investment and soft global commodity prices.”

Peru, in contrast to Brazil, implemented a strong lockdown early in March 2020. Unfortunately, it didn’t seem to work as well as hoped possibly due to informal and structural issues such as reliance on markets, the informal economy and residential overcrowding. This means that production and sales of cement are significantly down without any public health benefit. Both production and despatches fell by about 40% to around 2.9Mt in the first half of 2020 with close to total stoppages in April 2020. In terms of coronavirus, Peru is at the time of writing in the top 10 worldwide for both total cases and deaths, behind only Brazil in South America. It should be pointed out though that Peru’s testing rate is reportedly high for the region and this may be making its response look dire in the short term. All of this is particularly sad from an industrial perspective given that Peru was one of the continent’s strongest performers prior to 2020. One consolation though is that the economy is expected to recover more quickly compared to its neighbours.

Argentina started 2020 with a downward trend in its local market. Cement sales had been falling since 2017, roughly following a recession in the wider economy. Throw in a strong lockdown and sales more than halved at its peak in April 2020. So far this has led to a drop of 31% to 3.83Mt for the first half of 2020 compared to 5.51Mt in the same period in 2019. Unfortunately, a recent spike in cases in Buenos Aires has led to renewed lockdowns in the capital. Due to this unwelcome development and the general economic situation Fitch Ratings has forecast an overall decline in cement sales volumes of 25% for 2020 as a whole.

Finally, Colombia’s cement production fell by 24% year-on-year to 3.90Mt in the first five months of 2020 from 5.14Mt in the same period in 2019. April 2020 was the worst month affected. The country’s lockdown ended on 13 April 2020 for infrastructure projects and on 27 April 2020 for cement production and residential and commercial construction. On 5 May 2020 Cementos Argos said that domestic demand was at 50% of pre-lockdown levels. Data from DANE, the Colombian statistics authority, shows that local sales fell by around a third year-on-year to 0.71Mt in May 2020 from 1.06Mt in May 2019.

Most of the countries examined above follow the pattern of reduced cement production and sales in relation to the severity of the lockdown imposed and the resulting intensity of the coronavirus outbreak. Stronger lockdowns suppressed cement production and sales in the region of 20 – 40% in the first half of the year as governments shut down totally and then released industry and commerce incrementally. The exception is Peru, which has suffered the worst of both worlds: a severe lockdown and a severe health crisis. Local trends have continued around this, like the recovery in Brazil in the construction industry and the general recession in Argentina.

SNIC’s president has said that making and selling cement needn’t be exclusive with public health measures. He’s right but Brazil’s surging case load is an outlier compared with most of its continental neighbours and the rest of the world. Cement sectors in countries with growing economies like Peru and Colombia are expected to bounce back quicker than those with stagnant ones like Argentina. The risk for Brazil is what its government health strategy will do to the construction sector in the second half of 2020.


Saudi Arabia: Southern Province Cement has appointed Aqeel Futis Kadasa as its chief executive officer (CEO) following the resignation of Safar Mohammad Dhufayer. Kadasa holds a degree in chemical engineering from King Fahd University of Petroleum & Minerals and has over 25 years of working experience. He started his work at Yamama Cement, then worked in the Saudi Electricity Company in the Department of Engineering Services and later joined Southern Province Cement in 1997.


Saudi Arabia: Yanbu Cement has appointed Fahd Bin Soliman Al Rajhi as its chairman. Mohammed bin Abdullah Al-Khuraiji was appointed vice-president of the board of directors and Sharif Bin Abdul Karim Al-Itani was appointed as the secretary.


US: Rockwell Automation has appointed Patricia Contreras as Vice President of Global Public Affairs. In this new role, she will oversee the company’s national and state government affairs activities, external communications, media relations, corporate responsibility and environmental, social and governance reporting functions as well as the community relations and contributions group. Most recently, Contreras served as Director of Global Community Relations and Contributions. She has worked for the company for 10 years and holds a degree in finance from the Lubar School of Business at the University of Wisconsin-Milwaukee.


Germany: HeidelbergCement has estimated sales of Euro4.32bn in the second quarter of 2020, down by 13% year-on-year from Euro4.97bn in the corresponding quarter of 2019. The figure is 11% higher than the average market expectation of Euro3.91bn.

The company said, “With the COPE action plan, the company has already launched a comprehensive bundle of measures in February 2020 that focuses on cost savings and maintaining liquidity. These measures took effect especially in the second quarter of 2020 and made a significant contribution to the fact that cost savings largely offset the burden on earnings caused by the Covid-19-related decline in revenue.”


US: LafargeHolcim subsidiary LafargeHolcim US has adopted Environmental Product Declarations (EPD) to designate products’ Global Warming Potential (GWP) for easy consumer use, with third-party verification from ASTM International or the National Ready Mixed Concrete Association (NRMCA). Aggregates and construction materials chief executive officer (CEO) Jay Moreau said, “The growth in sustainable construction is driving demand for low-carbon building products that can transparently demonstrate a decrease in our environmental footprint. These new EPDs also push us to continue innovating as we consider the next generation of building materials.”


Russia: Siberian Cement has reported a 4% year-on-year rise in total cement production across its five integrated cement plants to 2.2Mt in the first half of 2020 from 2.1Mt in the same period in 2019. Angarskcement increased production by 9% to 289,000t from 265,000t, Iskitimcement by 8% to 454,000t from 420,000, Krasnoyarsk Cement by 2% to 295,000t from 289,000t and Topkinsky Cement by 1% to 1.0Mt from 990,000t, while Timlyuycement kept production level at 165,000t. The group shipped 101,000m3 of concrete over the period, down by 21% due to the impacts of the coronavirus lockdown on demand.

Vice president Gennady Rasskazov said, “The first half of 2020 turned out to be a difficult period. In April 2020, which traditionally opens the high construction season in Siberia, construction collapsed and demand fell by 20% from April 2019 levels. We closed this gap on a half-year basis due to increased sales after construction resumed. However, the situation remains difficult, it is almost impossible to predict its development.”


Ireland/UK: Quinn Building Products has said that rigid social distancing and sanitation practices introduced in response to the coronavirus in March 2020 have become the ‘new normal’ for its 800 employees across nine sites. The measures include: 22-person-capacity socially distanced team meeting areas, overflow break and lunch marquees; 24/7 cleaning services from AAA Pristine Clean; and socially distanced floor marking and directional signage.

The company said, “Our dedicated teams have done an outstanding job on designing and implementing these changes and their work has allowed us to reopen all of our production facilities in past weeks. We are also working with all our customers, contractors and suppliers to ensure we can safely service customer needs.”


France: The government has given a 90% guarantee for a Euro200m loan taken by process technologies and automation specialist Fives from six banks. The company said that the loan, “allows Fives to secure its required liquidity in a time when the Covid-19 crisis has slowed down the business activity in many of its markets. It will also contribute to finance the group’s technological and commercial developments to prepare the future and confirm its positioning as a key player in the industry of the future.”


South Africa: Cement plants were working at roughly 50% of the capacity utilisation level in June 2020 compared to that in June 2019 following the restart of production due to the relaxing of the coronavirus lockdown to Level 3 from Level 4 on 1 June 2020. The Sunday Tribune newspaper has reported that a construction slowdown is behind the decision to scale down production.

PPC head of inland business Bheki Mthembu said, “Demand is less than the supply. Most of our cement goes to retailers and then local builders, but we still cater to larger companies when bulk deals are required. The lack of large-scale construction projects has left the industry heavily dependent on residential construction. Government needs to support us through infrastructure maintenance and other projects. We were already in survival mode; Covid-19 has almost been the final nail in the coffin.”


Rwanda: Milbridge Group subsidiary Prime Cement has said that its upcoming 0.6Mt/yr Prime Cement grinding plant in Musanze, Northern Province will enter production in August 2020. KT Press News has reported that the US$66.6m plant will create 600 jobs. Plant manager Eric Rutabana said, “We hope that with our coming to the market, the cement prices will be reviewed downward. Sincerely speaking, the existing price is beyond purchasing power on the local market.”


UK: Mexico-based Cemex has confirmed its decision to mothball the 0.8Mt/yr integrated South Ferriby, Lincolnshire cement plant following a consultation period with employee and union representatives. The company estimates that the majority of redundancies of the plant’s 110 staff will happen in July 2020.

It said, “Cemex customers will be supplied from the company’s existing cement network. Cemex’s supply chain plan and commercial management will ensure that customer service will be maintained at all times. Cemex remains committed to the UK and will continue to have a strong national presence.”


Brazil: Norway-based Norsk Hydro and the Federal University of Para (UFPA) have announced their collaboration on the development of a low-carbon cement from bauxite residue from Norsk Hydro subsidiary Alunorte’s bauxite mining and alumina refining operations in the state of Pará. Electronic News has reported that the research partnership hopes to develop a new cement for commercial production and sale by 2030. This will use an estimated 500,000t/yr of waste bauxite residue.

Norsk Hydro bauxite and alumina research and development senior manager Erik Araujo said, “Hydro seeks to be a benchmark in sustainability in the aluminium industry. The research is an opportunity to promote intersectional advances in our environmental management, with a reduction in carbon emissions for the cement industry.


Germany: HeidelbergCement has reported the successful resurfacing of a section of Federal Motorway 5 (BAB 5) between Karlsruhe and Frankfurt using a concrete made from low-alkali cement produced at its 1.4Mt/yr-capacity Schelklingen, Baden-Württemberg integrated cement plant. The company used over 3600t of cement to produce the 12,000m3 of concrete required for the 3.2km stretch of road. Traffic infrastructure product manager Klaus Felsch said, “The cement’s low alkali content significantly reduces the risk of an alkali-silica reaction and maximizes the durability of the concrete.”


Mozambique: Dugong Cimentos says that construction of its new 1.8Mt/yr integrated cement plant in Matutuíne District, Maputo Province, is 90% complete. The Noticias newspaper has reported that the plant cost US$330m and was paid for by private Chinese investors. It will permanently employ 500 people, including 400 Mozambicans, when operational. The plant will consume 400,000t/yr of coal and produce cement as well as clinker for grinding at other Mozambique plants that currently import it.


India: The Cement Manufacturers Association (CMA) has contacted the Department for the Promotion of Industry and Internal Trade to urge its reconsideration of an expected decision that the CMA says will disrupt the mining sector, upon which eight key industries including cement depend. Indo-Asian News Service has reported that the government department may be considering the deletion of a provision of the Mines and Minerals Development and Regulation (Amendment) Act that gives a captive lease to reconnaissance permit (RP) and prospecting licence (PL) holders to begin mining for minerals discovered in the licenced area. The CMA has argued that introducing any additional stage between explorations and extraction “would not go well with the spirit of ‘ease of doing business.’” It added, “The industry would like development policies to be predictable and consistent to usher in fresh investments as well as to protect the efforts and hardships that go into establishing an industrial setup.”


Pakistan: DG Khan Cement has secured a contract for the supply of cement to a customer in the Philippines. The cement producer exported 0.27Mt of cement and 0.71Mt of clinker in its financial year to 30 June 2019. Government Advisor for Commerce, Textile, Industry and Production Abdul Razak Dawood called the addition of a Philippine client to the company’s order list a “breakthrough” saying, “Once market reach extends then market share will increase. Increasing geographical diversification is an important part of our strategic trade policy.”


India: Ambuja Cement has modernised its logistics operations by digitising its supply chain to “improve visibility, deliver quality customer service and optimise cost.” The Economic Times newspaper has reported that the company has integrated all aspects of raw material, fuel and equipment supply and product deliveries on a single online platform in order to “enhance overall efficiency and productivity.” Company director Martin Kriegner said additionally that the digitisation will aid in, “fuel mix optimisation and strategic sourcing, helping to mitigate rising input costs.”

Ambuja Cement’s 3.0Mt/yr greenfield expansion to its integrated 1.5Mt/yr Marwar Munda, Rajasthan plant is scheduled for commission by 1 January 2021. The company has a master supply agreement with ACC aimed at maximising the consistency of cement supply to the Rajasthan market once the new 4.5Mt/yr plant becomes operational.


Nepal: Ashden Environment and the United Nations Science, Technology and Innovation Forum have awarded Build Up Nepal their respective highest awards for its low-cement disaster-resistant concrete blocks. The Nepal Time newspaper has reported that the blocks contain a mix of 10% cement, 40% clay and 50% sand, all sourced from near Build Up Nepal’s Mitra Marg, Patang plant. The company has supplied its unique building materials to projects in 300 different communities, including the construction of 4500 homes. It says that the blocks, reinforced with iron rods, have a greater earthquake resistance than concrete.

Build Up Nepal said, “Interlocking brick is a highly suitable construction technology in Nepal, reducing the cost of construction as well as the carbon footprint of building a house. With this technology Nepal's houses can be stronger, more affordable and its air cleaner.”


Brazil: The National Cement Industry Union (SNIC) has estimated a 3.7% year-on-year increase in total cement sales to 26.9Mt in the first half of 2020 from 25.9Mt in the corresponding six months of 2019. Export sales rose by 56% to 84,000t from 54,000t. Sales increased by 7.7% month-on-month in June 2020, however SNIC president Paulo Camillo Penna expressed worries about demand going forward into the second half of 2020.

“The cement industry is responsible for more than 70,000 jobs, generates an income US$4.94bn and an annual net collection of US$562m. We are very sensitive to the macroeconomic scenario and government stimuli. For this reason, the cement industry is anxiously awaiting the launch of the new government housing project, ’Casa Verde Amarela,’ which is expected to leverage the real estate and renovation market more strongly, and restarting works on 100,000 housing units,” said Penna.


Peru: Domestic cement sales were 500,000t in June 2020, down by 59% year-on-year from 984,000t in June 2019. La República newspaper has reported that sales were nonetheless at their highest since the start of the coronavirus lockdown, up by 45% month-on-month from 343,000t in May 2020 and by 4100% from 12,000t in April 2020. Phase two of post-lockdown economic reactivation began in 2020, with the start of works related to public investment and public-private partnerships.


France: UK-based Carbon8 Systems has announced plans for the commercial implementation of its carbon capture and use (CCU) system at Vicat’s Montalieu integrated cement plant in France. It follows successful demonstration projects at cement plants in the UK and Canada.

The company’s CO2ntainer product will be deployed directly onsite at the plant and integrated into Vicat's existing industrial processes. It will capture CO2 directly from the plant's flue gas emissions and use this as part of its Accelerated Carbonisation Technology (ACT) process. This accelerates the carbonation of cement bypass dust into lightweight aggregates. In its first phase of operation it will process and convert up to 12,000t of cement bypass dust.


Colombia: Cementos Argos says that 70% of its total cement orders between 1 January 2020 and 9 July 2020 were placed online via its Argos One automated booking, order management and delivery monitoring platform. The platform handled 81% of orders of cement in the Dominican Republic, 39% in the US, 34% in Honduras and 19% in Panama. The company said, “Argos One has become even more relevant in the current context and will continue to evolve in function to continue its purpose of providing extraordinary solutions to clients.”


Mexico: Two workers died after falling in a crane basket from a height of 35m at Cooperativa La Cruz Azul’s integrated Oaxaca cement plant in El Barrio de Soledad Municipality. Noticias Financieras newspaper has reported that the victims died on impact and that the causes are under investigation.


China: Henan Province has announced a planned rise in water and energy tariffs for cement producers that fail to meet current emissions standards and clean transportation requirements. Reuters News has reported that companies subject to the measures will pay US$0.07 – US$0.14/m3 more for water and up to US$0.01/kWh more for electricity. Henan enacted ‘ultra-low’ emissions limits of 10Mg/Nm3 of dust, 50Mg/Nm3 of NOx and 100Mg/Nm3 of SO2 in 2018. Cement plants in the province produce 105Mt/yr of cement.


Myanmar: Young Investment Group Industry Company Limited (YIGICL) has entered into a joint venture with China-based China Gezhouba Group Cement (CGGC) and China Gezhouba Group Overseas Investment (CGGOI) with the aim of establishing an integrated cement plant in Mandalay, Mandalay region. The joint venture, which is held 30:70 by YIGICIL and the Chinese partners respectively, will also set up a limestone mine.


India: The Bureau of Indian Standards has granted a licence to Counto Microfine Products (CMP), a joint venture of Ambuja Cements and medical company Alcon Group, for the production of micro-fine Ordinary Portland Cement (OPC) and ground granulated blast furnace slag (GGBFS) cement. The Times of India newspaper has reported that CMP operates a grinding plant in the state of Goa.


Pakistan: Lucky Cement is using its trucks to deliver food to those eligible for disaster relief under the government’s Ehsaas emergency ration scheme. Pakistan Press International has reported that since the beginning of the coronavirus crisis Lucky Cement has made food 8000 deliveries to affected people in rural Khyber Pakthunkhwa and Sindh. The company said, “We are further expanding our muscle to support more deserving families across Pakistan.”


Canada: LafargeHolcim subsidiary Lafarge Canada has dismissed an employee after a thorough investigation into a piece of racist graffiti ended in discovery of the guilty party. Canada Newswire has reported that the harmful drawing, which occurred at the company’s 1.0Mt/yr integrated St Constant plant in Quebec, has been removed. Lafarge Canada said, “To increase employee awareness and strengthen everyone's role in creating a positive work environment, we have communicated with all of our employees on all of our sites and encourage them to speak up if they see, hear or feel any concerns whatever.”