Global Cement Newsletter

Issue: GCW466 / 29 July 2020

Headlines


Consolidation of the Chinese cement industry looks set to take a major step forward this week. China National Building Material Company (CNBM) announced that it is restructuring its cement production assets and companies under one subsidiary, Tianshan Cement. The move is significant since CNBM is the world’s largest cement producer, with a production capacity of over 500Mt/yr. That’s more than the total output of any single country except China. It’s also between a quarter and a third of national capacity domestically.

Little information has been revealed except that it concerns most of CNBM’s cement producing subsidiaries. Namely: China United Cement, South Cement, North Cement, Southwest Cement and Sinoma Cement. Note that this leaves out Ningxia Building Materials and Qilianshan Holdings, although some commentators have suggested that they may be merged in later on. It was announced to stock markets as a proposal with a ‘letter of intent of cooperation’ exchanged between CNBM and Tianshan Cement. CNBM will remain the controlling shareholder of Tianshan Cement after the restructuring. However, the assets concerned - the cement companies are still being discussed and considered. The aim of the reorganisation is to ‘facilitate resolving industry competition’ among the subsidiaries of CNBM.

The move is expected to significantly increase operational efficiency at the cement companies as they start to act in a more coordinated manner. It also fits the government-requested drive for the industry as a whole to consolidate and follow supply-side reform initiatives by, hopefully, eliminating old production assets and other measures. Indeed as CNBM’s president Peng Shou said in the company’s report for 2019, “Production overcapacity of the industry has not been fundamentally resolved. The task of cutting production overcapacity was arduous, and the supply-side structural reform remains the major task.” The company says it is committed to building a three-pillar development platform of cement, new materials and engineering services.

How much more operational efficiency the world’s largest cement producer will need to do this is a key question. In 2019 the sales revenue from its cement business rose by 12% year-on-year to US$18.7bn and its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 19% to US$5bn. Growth at this level is novel to western-based multinational cement producers! So the implication might be that CNBM is hoping to turbo-charge its financial performance before (or if) the serious government-forced supply side cuts occur or a general economic slowdown happens so that it can return to ‘normal’ Chinese performance afterwards.

The Chinese Cement Association presented a good overview of the history of CNBM that you can read here. The quick version is that it’s the embodiment of the Chinese government’s desire to build and merge its cement industry since 2005. The latest restructuring with Tianshan Cement is the latest chapter in this 15 year story. What the reorganisation means internationally is ‘probably not much’ in the short term. Better coordination between CNBM’s cement companies could have implications in the longer term if they acted together on an international strategy, such as a strategy on exports for example, or if group-wide suppliers were agreed upon.

That’s all on China but finally if readers were not able to join us for Global Cement Live last week on 23 July 2020, we recommend watching the playback of Arif Bashir, Director (Technical/Operations) of DG Khan Cement Nishat Group Pakistan. He gave a great overview of Pakistan’s cement industry and the challenges it is facing and overcoming. Be sure to tune in for this week’s guest speaker, Regina Krammer from Loesche who will be discussing how the coronavirus crisis will change communications in the sector.

To register for Global Cement Live visit: www.globalcement.com/live


US: Mexico-based Elementia has appointed Tim Kuebler as the leader of Elementia USA. He was already the chief executive officer (CEO) of the company’s cement business in the US and the enlarged role includes responsibility for Allura, the group’s local fibre cement business. Kuebler became the CEO of Elementia’s US-based cement business, Giant Cement, in late 2017. Prior to this he spent most of his 35-year career working at first for Lehigh Cement and then Titan America in locations across the US.


China: Song Shoushun has resigned as the chairman of China National Materials International Engineering (CNBM Engineering). He has left the position for personal reasons. The company is part of CNBM Group and it provides engineering services and equipment to the international cement, housing, industrial equipment and light industry sectors.


India: Aditya Birla subsidiary UltraTech Cement has recorded a net profit of US$122m in the three months to 30 June 2020, the first quarter of the 2021 fiscal year – down by 28% year-on-year from US$169m in the corresponding period of the 2020 fiscal year. Sales were US$975m, down by 33% from US$1.45bn.

The company said, “UltraTech has emerged stronger and well-prepared in the wake of the on-going Covid-19 pandemic. The total lockdown period from late-March 2020 to 1 May 2020 has been a huge challenge for all manufacturing industries. UltraTech has managed the crisis with a sharp focus on operational efficiencies. In the available 68 operating days during the quarter, the company kept a tight control on costs and cash flow and achieved an effective capacity utilisation of 60% across its network of 54 plants around the country.”

UltraTech said that it had already noted “better-than-expected pick-up in cement consumption in rural markets,” which it attributed to “measured steps towards economic recovery” by national and state governments.


Italy: Caltagirone Group subsidiary Cementir has recorded first-half revenues of Euro570m in the first half of 2020, down by 3.6% year-on-year from Euro591.9m in the first half of 2019. Net profit was Euro21.9m, down by 27% from Euro29.9m. The company sold 4.6Mt of cement, up by 6.3% from 4.3Mt, which it said was “mainly attributable to good performance in Turkey.”

Operating costs fell by 3.9% to Euro475m from Euro494m, which the company attributed to “cost containment measures implemented to deal with the impact of the pandemic.” The company said that, in spite of the contraction during lockdown periods in various markets, it was generally able to offset this with “a significant recovery in sales,” as in China, where increased infrastructure investments raised demand above pre-coronavirus outbreak levels following the return to cement production on 27 March 2020. The company reduced its debt by 30% to Euro281m from Euro399.

Cementir said, “With the current industrial perimeter, we expect to reach full-year consolidated revenues of approximately Euro1.2bn in 2020. Net financial debt is expected to be around Euro180m, including capital expenditure of around Euro60m. No substantial changes in the workforce are expected.”


Thailand: Siam Cement Group’s (SCG) sales revenue from its cement business fell by 6% year-on-year to US$2.82bn in the first half of 2020. However, its earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 5% to US$405m. The cement division of the group said that sales were hit by coronavirus-related lockdown measures. However, earnings benefitted from efficiency improvements and lower energy prices. Overall both sales revenue and earnings fell for the group across all business division in the reporting period.


Mexico: Grupo Cementos de Chihuahua’s (GCC) net sales rose by 5% year-on-year to US$424m in the first half of 2020 from US$404m in the same period in 2019. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 16.4% to US$127m from US$109m. Its US cement and ready-mix concrete (RMC) sales volumes increased by 3.6% and 17.2% respectively. However, Mexican cement and RMC sales volumes fell by 7.2% and 23.7% respectively. Although most of GCC’s sales came from the US, it said that Mexican sales were affected by negative currency affects and the local coronavirus-related lockdown.

"Increased concrete and cement volumes in the US demonstrate the construction industry's tailwinds and resiliency on the back of improved weather conditions. EBITDA growth, free cash flow generation and margin expansion reflected the successful execution of a comprehensive plan to reduce costs and expenses,” said Enrique Escalante, GCC's chief executive officer (CEO). He added that since the company was seeing market conditions ‘deteriorate’ and high levels of uncertainty that the company expected ‘additional challenges in the quarters ahead.’ As such it hoped for, ‘further economic stimuli from the governments, including a sizable infrastructure bill.’


China: China National Building Materials (CNBM) has shared plans for a restructuring. Under the new arrangement, its subsidiary Tianshan Cement will take control of China United Cement, North Cement, Sinoma Cement, South Cement, Southwest Cement and CNBM Investment. The reorganisation awaits internal negotiations and finalisation and regulatory approval.


Egypt: Solomon Baumgartner Aviles, the chief executive officer (CEO) of Lafarge Egypt, says that cement demand fell by 6.5% year-on-year in the first half of 2020. In an interview with the Daily News Egypt newspaper he said that coronavirus has “strongly impacted the building materials sector” with the biggest effect on the individual construction market as people decided to save their money instead. He added that a government decision to halt licences for building, expanding, upgrading, amending, or supporting construction work for private housing in larger cities had also compounded the problem. Despite this he praised the government for supporting infrastructure projects, which are operating at full capacity.

Aviles also outlined how Lafarge Egypt has developed an integrated plan on Health, Cost and Cash to tackle the coronavirus crisis. So far it has donated over 80,000 masks and gloves, made 200L of antibacterial gel available, and supported public hospitals by refurbishing 460 ventilators.


Rwanda: Cimerwa says it has received approval to list its shares on the Rwanda Stock Exchange. The move is part of the strategy by the government to sell its stake in the cement producer, according to the New Times newspaper. The government and its related shareholders own a 49% stake in the subsidiary of South Africa-based PPC.

Company chairman Regis Rugemanshuro said that the company had decided to continue with its plans despite the coronavirus pandemic. The announcement has been made while Cimerwa is supplying cement to a large government tender to build new schools. The cement producer added that, “Supply to this project is progressing smoothly with the company’s production currently being robust at close to design capacity.”


Chad: Idriss Déby, the president of Chad, has asked the Société Nationale de Ciment du Tchad (SONACIM) to restart production following reports of cement shortages and price rises. He made the announcement following a meeting with representatives of the local industry, according to the Journal du Tchad. SONACIM’s plant at Baore has reportedly been not operating recently due to long-running issues since its opening in 2012.


Egypt: Austria-based Mondi Group subsidiary Mondi Paper Bags has announced its acquisition of two cement bag plants, the Helwan Cement bag plant and InterCement bag plant, with a combined capacity of 60m – 80m bags/yr. As a result, Mondi Paper Bags will now meet the bagging needs of both cement producers.

Chief executive officer (CEO) Claudio Fedalto said, “These collaborations will offer Helwan and InterCement access to our latest innovations, industry expertise and our strong plant network and customer service in the Middle East. Thanks to Mondi’s vertical integration, our partners will further benefit from our high quality kraft paper.”

Helwan Cement owner Suez Cement managing director Jose Maria Magrina said, “We are delighted to continue our relationship with a reputable and reliable global paper bags supplier like Mondi, while we can focus on our core operations, the production of grey cement and ready-mix.” InterCement subsidiary Amreyah Cement legal and administration director Paulo Dall’Aqua added, “Building sustainable partnerships is InterCement’s tagline, and it is exactly what this deal represents.”


Singapore: Jurong Port has ordered three Siwertell ship unloaders from Bruks Siwertell to handle cement imports. The port’s cement terminal already has three Siwertell ship unloaders that have been used for over 20 years. Two of these will be replaced as part of the upgrade project.

The three new ST 490-M screw-type rail-travelling unloaders will each discharge cement, fly ash and cement slag from vessels up to 50,000dwt at a continuous rated capacity of 800t/hr. Two of the new unloaders are scheduled for delivery in May 2022 and the third by the end of 2022. All will be fully assembled prior to delivery and transported by heavy-lift ship. Final commissioning and performance tests will be carried out in Jurong Port.


US: Komatsu plans to rebrand its underground hard rock equipment, surface wheel loaders and new line of blasthole drills to reflect the company’s focus on growth in these areas. The company will retain its iconic P&H and Joy brands for the products longest associated with those names: P&H for its electric rope shovels, hybrid shovels, draglines and 320XPC blasthole drill; Joy for longwall systems, and room and pillar equipment.

“Building on the growth of our mining portfolio, we’re excited to unite more products under the Komatsu brand, while respecting the history and value of the P&H and Joy brands,” said Jeffrey Dawes, president and chief executive officer (CEO) of Komatsu Mining. “As we approach Komatsu’s 100th anniversary, it’s a great moment to expand the brand in mining and celebrate the growth of these product lines.”


Mexico: Cemex recorded a net income of US$5.61m in the first half of 2020, down by 97% year-on-year from US$218m in the first half of 2019. Net sales fell by 8% to US$6.00bn from US$6.49bn and consolidated cement volumes fell by 5% to 29.2Mt from 30.7Mt. The company increased its US sales by 7% to 1.97Mt from 1.85Mt and cement volumes by 6%, while prices increased by 1%.

Chief executive officer (CEO) Fernando González said, “Despite the unprecedented conditions in which we are operating due to the pandemic, I am pleased with our second quarter performance and our quick reaction to implement cost containment measures across all geographies. In the second quarter of 2020 we saw a rapid V-shaped volume recovery in our core products from trough levels in April, reaching slightly below pre-Covid-19 outbreak volumes in June. Importantly, our health initiatives have helped protect our employees, customers, suppliers and communities, and allowed us and our customers to continue operating in most markets.


India: The India Cements recorded a profit of US$2.27m in the three months to 30 June 2020, down by 77% year-on-year from US$9.66m in the corresponding quarter of 2019. Its sales fell by 48% to US$102m from US$197m, due to the effects of the coronavirus lockdown during the quarter. It noted that direct cement sales to consumers (non-trade sales) rose to 67% from 52%, and said that it would extend its successful “cash and carry” business model developed for non-trade sales during the partial coronavirus lockdown to all cement sales. The India Cements predicts a rise in cement demand in Andhra Pradesh and Telangana of 75% to 3.5Mt in the second half of 2020 from 2.0Mt in the first half.


Peru: Cementos Pacasmayo recorded a loss of US$13.0m in the six months to the 30 June 2020, compared to a US$9.16m profit in the first half of 2019. The company experienced a 64% drop in sales to US$32.5m from US$91.6m. It said the decline resulted from decreased demand due to the coronavirus lockdown.


Sri Lanka: Tokyo Cement has supported its partner the Sri Lanka Navy in completing an underwater statue park. The Sunday Observer newspaper has reported that the 1200m2 park in Trincomalee Bay, Eastern Province, lies at a depth of 18m and unfolds a historical storyline. Tokyo Cement supplied its Tokyo Super blended hydraulic fly ash cement to the project.

Project leader Piyal De Silva said, “Our Coral Conservation Programme (CCP) partner Tokyo Cement will carry out monitoring and maintenance activities and will provide material and technical support to set up a coral nursery for replanting corals within the Underwater Marine Sanctuary (UMS). The marine park will gradually become the home to coral colonies native to the Trincomalee Bay area. With the corals, it will attract young fish, which will ultimately lead to the formation of fish communities.” Tokyo Cement has been involved in coral reef restoration around Sri Lanka since 2010.


Pakistan: The Competition Commission of Pakistan (CCP) has launched an investigation into alleged collusion between cement companies that may have been the cause of a localised cement price spike in northern Pakistan. On 25 July 2020 the Pakistan Bureau of Statistics (PBS) recorded cement price rises of up to 8.9% in Punjab and Khyber Pakthunkhwa compared to a month earlier, according to the Profit newspaper. Officials had predicted a nationwide price drop after the government abandoned the Federal Excise Duty (FED) on cement in June 2020. Prices have decreased by a small margin in the southern regions of Balochistan and Sindh.

The Ministry of Industries and Production previously asked producers to lower cement costs in May 2020 in order to boost construction in the interest of the post-coronavirus lockdown economic recovery.


Qatar: The Industrial Production Index has recorded a 30% year-on-year decline in cement production in May 2020, caused by a reduction in demand due to the coronavirus lockdown. Production nonetheless grew by 6% month-month in May 2020.


Nigeria: Dangote Cement recorded a net profit of US$422m in the first half of 2020, up by 5.8% year-on-year from US$308m in the first half of 2019. Net sales were US$1.23bn, up by 2% from US$1.21bn. Nigerian sales made up 70% of the total at US$861m, up by 1.2% from US$850m.

The company said, “Most Covid-19 lockdown measures started at the end of March 2020 and peaked in April 2020. The response by the authorities varied in nature from specific temporary restrictions in some countries to a complete temporary lockdown for non-essential businesses. Our operations in South Africa, Congo and Ghana were shut down due to full or partial lockdown in most of April 2020. By early May 2020, lockdown had eased, and all our businesses were operational.”

Regarding its Nigerian operations, it said, “Lagos, Abuja and Ogun states locked down from 31 March 2020 to 4 May 2020. As a result, April 2020 volumes were heavily impacted and 28% lower than in April 2019. Other states joined with complete or partial lockdown during the month.” It estimated that a recession would strike the economy before 31 December 2020, compounded by the Covid-19 outbreak and a first-half global oil price slump.


India: Ambuja Cement’s net profit in the first half of 2020 was US$22.1m, up by 1.5% year-on-year from US$21.7m in the first half of 2019. Revenues decreased by 15% to US$127m from US$149m. The company sold 9.95Mt of cement over the period, down by 18% from 12.2Mt.

Managing director and chief executive officer (CEO) Neeraj Akhoury said, “Volumes were impacted during the second quarter of 2020 as a result of Covid-19 lockdown. Cement demand is expected to rebound, presupposing a normal monsoon and various policy support measures to enhance rural and agricultural incomes. Continued infrastructure, development and affordable housing investment are expected to boost demand growth in the mid-term. The health of our employees and partners is accorded the highest priority.”


China: Dongwu Cement has predicted a net profit of US$1.71m in the first half of 2020, down by 62% year-on-year from US$4.56m in the first half of 2019. Company chairman Liu Dong said the expected decrease was “primarily attributable to a decline in sales volume and sales price of the group’s products resulting from the outbreak of the coronavirus pandemic during the period.”


Russia: Siberian Cement Holding Company (SibCem) subsidiary Iskitimcement produced 454,000t of cement in the first half of 2020, up by 7.8% year-on-year from 421,000t in the first half of 2019. Cement shipments over the period were 447,000t, up by 7% from 418,000t.

Iskitimcement said that its CEM-I Ordinary Portland Cement (OPC) was its most in-demand product, constituting 53% of total production at 243,000t. Its new CEM-II Portland slag cement, launched on 28 April 2020, achieved production volumes of 4000t (1%). It said that the coronavirus outbreak caused a slowdown in June 2020, resulting in a 7% year-on-year drop in demand compared with June 2019. Managing director Vladimir Skakun said, “The general weakening of economic activity, the fall in oil prices and the exchange rate of the national currency and a decrease in the incomes of Russians are causing concern.”

The company completed the installation of a closed-circuit dynamic separator and bag filter produced by Germany-based Christian Pfeiffer into the Iskitimcement plant’s grinding unit 6 in June 2020. To date, the equipment has produced 114,000t of ultra-fine cement towards an annual target of 480,000t.


South Africa: PPC says that pent-up cement demand post-coronavirus lockdown has enabled year-on-year sales growth “in double digits” for the company in June 2020. Sales volumes also rose, by a single-digit figure. PPC said, “This recovery is mostly driven by the absence of imports, which has given an opportunity for local producers like PPC South Africa to grow.”

In May 2020 PPC recorded sales between 30% and 35% lower than in May 2019.


UK: An independent report by Mott Macdonald has found that Breedon Group’s Hope Cement plant in Derbyshire contributes Euro67m/yr to the local economy, up by 15% from Euro58m/yr at the time of the previous report in July 2017. The 1.5Mt/yr integrated cement plant employs 270 people, 202 of them directly, corresponding to 1.8% of total employment in the national park in which it is situated. Its economic contribution to the park’s total economic output of Euro956m is 7%.

Breedon Group said that the 90-year-old plant “Has a long tradition of actively engaging with the local community through its many social and communal activities. These include access for local residents to the Hope Works estate and the Earles Sports and Social Club as well as on-site open days and tours and a range of local business and community partnerships.” Manager Ed Hope said, “It is gratifying to see the healthy increase in our contribution to the local economy over the past few years. We’re very proud of the part we play in the lives and employment of people in the Peak District National Park.”


Zambia: Sinoma Mpande Limestone has donated 1000 bags of cement for use in the construction of a new secondary school in Chongwe, Lusaka Province. The People’s Daily newspaper has reported that the community is responsible for a 25% contribution in addition to World Bank funding for the project. District Commissioner Robster Mwanza said that it was “hard pushed to meet this requirement” and that the cement would “go a long way” in helping.


Denmark: FLSmidth has predicted a 55% year-on-year decline in earnings before interest, taxation and amortisation (EBITA) in the first half of 2020 to Euro48.2m from Euro107m. Sales are Euro1.12bn, down by 15% from Euro1.33bn, and order intake was Euro1.33bn, down by 7% from1.42bn. Net debt is expected to have declined by 15% to Euro309m from Euro363m.

The company said, “Across all regions, the mining industry and especially the cement industry have been negatively affected by the pandemic. Even in the regions with easing of lockdowns and mobility restrictions, it is yet unclear how our customers’ spending patterns will advance. Visibility remains low and our guidance remains suspended.”


Philippines: Eagle Cement has shared plans for the installation of a fifth mill at its 7.1Mt/yr integrated cement plant in San Ildefonso, Bulacan Province at a cost of US$30m. Business World News has reported that the upgrade will raise the plant’s capacity to 8.6Mt/yr. President and chief executive officer John Paul Ang said, “Our strong financial position will allow us to weather this health crisis battering the economy without giving up major components of our expansion plans.”

Eagle Cement said that it “ramped up production” following the national coronavirus lockdown in June 2020 in order “to support the government’s push for accomplishing critical infrastructure projects.” It is currently working towards the launch of an online customer portal for placing and tracking cement orders.


Qatar: Qatar National Cement Company recorded a profit of US$27.5m in the first six months of 2020, down by 32% year-on-year from US$18.8m over the corresponding period of 2019. Sales were US$79.8m, down by 23% from US$104m. The company attributed the decrease to a decline in demand due to the coronavirus outbreak.


US: Switzerland-based LafargeHolcim has announced the start of sales via its local subsidiaries of its ECOPact range of 30 - 100% reduced CO2 concretes. Chief executive officer (CEO) Jan Jenisch said, “I am proud to introduce ECOPact, the industry’s broadest range of green concrete for high-performing, sustainable and circular construction.”

The company says that, where regulatory conditions allow, ECOPact products integrate upcycled construction and demolition materials, further closing the resource loop. ECOPact concretes will enter the Canadian, Latin American and UK markets in mid-late 2020. “With the roll-out of this Green Concrete, we are accelerating the transition to more sustainable building materials for greener construction,” added Jenisch.


Mexico: Cement has announced the launch of a range of carbon neutral concretes called Vertua. By offsetting, Cemex has eliminated Vertua’s remaining carbon footprint following a 70% reduction in embodied emissions compared to Ordinary Portland Cement (OPC) through use of a geopolymer cement mixture. The concretes will become available on different markets globally in 2020 and 2021.