Global Cement Newsletter

Issue: GCW490 / 27 January 2021

Headlines


There have been two developments from ThyssenKrupp’s ongoing restructuring worth noting by the cement sector in recent weeks. The first is that the Germany-based engineering and steel producer has stopped trying to sell its cement plant division. The second is that Denmark-based FLSmidth is holding serious talks about buying its mining division.

ThyssenKrupp first announced plans for a major restructuring in mid-2019 with an anticipated reduction of 6000 jobs across the business. The sale of its elevator business for Euro17.2bn to private equity was announced in February 2020. Later in May 2020 it then revealed plans to divide its previous business areas into core, dual and multi track segments. Core - including Materials Services, Industrial Components (Forged Technologies and Bearings) and Automotive Technology – would be kept as before. Dual-track – including Steel and Marine – would either be kept as before or considered for consolidation. Multi-track - including cement plant engineering, mining and more – would be sold, added to a partnership or closed. By size, core reported sales of Euro16.1bn (53%) in the company’s 2019 - 2020 financial year, dual-track reported Euro8.8bn (29%) and multi-track reported Euro5.5bn (18%).

Volkmar Dinstuhl, formerly in charge of mergers and acquisitions, was put in charge of Multi-track. By October 2020 he was publicly admitting that the division was planning to “find a solution for all our businesses within the next two years” including cement plant engineering. In the same interview he described the Multi-track division as an internal private equity fund. However, the elevator business sale has been seen by several commentators as giving ThyssenKrupp more freedom around how to conduct its restructuring. Three months later and Handelsblatt, a German business newspaper, reported this week that ThyssenKrupp’s cement plant division may have avoided its multi-track fate. It cited internal communication to employees about what’s been happening with the sale. Principally, orders have picked up in the company’s new financial year, since October 2020, and although a sale has not been ruled out, it won’t be pursued until late 2021 at the earliest. This is potentially good news for the sector as a sign that the market may be improving and definitely good news for those employees working for the division.

As a competitor, FLSmidth would have been expected to be potentially interested in buying either ThyssenKrupp’s mining or cement plant division, or both. So, the only question was, when it made a point of saying publicly that it was in non-binding negotiations to buy mining, what about cement?

Looking at the numbers shows that FLSmidth’s mining division did better than its cement one in the first nine months of 2020 with order take up year-on-year and the mining industry described as being relatively resilient during the coronavirus crisis, with the majority of mines operational across regions. By contrast it pointed out that the cement market was still ‘severely’ impacted by the coronavirus pandemic and that future cement demand was dependent on general economic growth. Acquisition activity in mining certainly seems like the safer bet at the moment. Yet the temptation to neutralise a competitor may have been a strong one. With the mining deal still in progress and the cement sale possibly ended for now, we’ll just have to wait and see. Other buyers for both divisions are no doubt waiting in the wings should circumstances allow.

One final fun fact to consider is that the man put in charge of selling both of ThyssenKrupp’s mining and cement plant divisions, Volkmar Dinstuhl, just happens to be a World Chess Federation (FIDE) recognised International Master. Being good at chess doesn’t automatically confer skill at anything else. Just look at former world champion Gary Kasparov’s political ambitions in Russia for example. Yet, ThyssenKrupp’s elevator division sale has been seen as one of the largest leveraged European buyouts in recent years and has appeared to have bought it some time to mull its options over its cement plant division. With this in mind, any potential buyers for the rest of Multi-track may be wondering just how many moves ahead this seller is thinking.


North Macedonia: Konstantinos Derdemezis has resigned as president of Cementarnica Usje, a subsidiary of Greece-based Titan Group. No reason for the departure has been disclosed, according to See News. Yanni Paniaras has been appointed to cover the position until the company’s next shareholders meeting.


Mexico: Grupo Cementos de Chihuahua (GCC) recorded earnings before interest, depreciation, taxation and amortisation (EBITDA) of US$308m, up by 6% year-on-year from US$292m. Net sales rose by under 1% to US$939m from US$934m. US cement volumes rose by 5%, excluding oil well cement, and rose by 3% in Mexico. The company said that its cost-and-expense reduction plan saved it US$24.3m throughout the year. During the second quarter of 2020 it signed a long-term agreement to secure wind power to meet 50% of the energy needs of its Rapid City cement plant.

Chief executive officer Enrique Escalante said, “GCC wrapped up 2020 with strong operational and financial results despite the challenges created by the Covid-19 pandemic. These positive results show GCC’s adaptability, resilience and what we can do in challenging times. We experienced a mixed demand for our products in Mexico and the US and, with the exception of oil-well cement, both markets outperformed expectations. GCC generated top-line growth, EBITDA, a strong free cash flow and margin expansion, benefitting from the successful execution of a comprehensive plan to reduce costs and expenses. 2020 was also a year of significant progress in GCC’s efforts to implement sustainability best practices. As a result, we reached our first major milestone by reducing net CO2 emissions by 9% from the 2005 levels.” He added, “Looking ahead, GCC entered 2021 even stronger than last year; even though the situation is still fluid and challenging, we are optimistic and we will operate with the same rigorous approach to continue creating value for all of our stakeholders: our shareholders, customers, employees and the communities where we operate.”


India: The India Cement’s consolidated nine-month net sales for the period which ended on 31 December 2020 were US$416m, down by 24% year-on-year from US$550m, in the corresponding period of 2019. Its sales volumes of cement fell by 29% to 5.9Mt from 8.4Mt. However, its net profit more than doubled to US$21.5m from US$8.3m. The cement producer said that the construction industry started to recover from September 2020 following coronavirus-related lockdowns earlier in the year. Earnings and profits grew in the reporting period in part due to reduced production costs.


India: Dalmia Bharat subsidiary Dalmia Cement (Bharat) has shifted its recruitment procedures towards hiring more local people in Maharashtra, Bengal, Orissa due to labour shortages throughout the Covid-19 outbreak. The Economic Times newspaper has reported that local labour now makes up a majority of the workforce at multiple cement plants belonging to the company.

Dalmia Bharat group head of human resources Ajit Menon said, "In our Bengal plant, we have 90 - 95% local workers now versus 20 - 25% earlier, while in Orissa it is almost 100% local labour. Covid-19 has accelerated the intake of local workforce.” He added, “This has also given us the opportunity to give employment to people in the locations neighbouring our factories - many of whom are tribal people and are from underprivileged communities."


Spain: Mexico-based Cemex has supplied 30,000t of cement and 100,000m3 of concrete for an expansion of Teruel Airport Platform (PLATA) maintenance, repair and operations airport in Teruel, Aragon. The company said that the expansion consists of a 3km runway, terminals, an expanded parking platform and two new hangars, in addition to an industrial zone and other facilities. The airport's current expansion phase requires a further 40,000m3 of concrete.

Europe, Middle East, Africa, and Asia regional president Sergio Menéndez said, "Since the beginning of the Teruel Airport project more than a decade ago, Cemex has been present in its construction and continuous expansion. We are proud to have contributed to this infrastructure, becoming an engine of economic recovery.”


Tunisia: Carthage University, Ciments de Bizerte, the Tunisian Ministry of Higher Education and Scientific Research and the University of Algarve faculty of science and technology have concluded a study into the heavy metal content of CEM-I and CEM-II cement. The study found that both types of cement contain traces of arsenic, barium, boron, cadmium, chromium, copper, manganese, nickel, lead, strontium and zinc in equal measure, according to the Journal of Engineering.

Carthage University said, "Heavy metals in cement can originate from a variety of processes in production, including their initial presence in raw materials and fuel, incorporation into kiln refractory brick, metal erosion from the raw material grinding process and in additives such as gypsum, as well as cement kiln dust."


Kuwait: HeidelbergCement subsidiary Suez Cement has sold its 51% majority stake in Hilal Cement. Decypha News has reported the new owner of the stake as Silver Share Real Estate. Boodai Group retains 44% of the remainder of shares.


Ghana/Nigeria: LafargeHolcim subsidiary Lafarge Africa plans to sell its 35% subsidiary Continental Blue Investment (CBI) Ghana. CBI Ghana runs the Supacem brand from the Tema Free Zone near Accra. It reportedly started building a cement grinding plant at the site in 2017 for a cost of US$55m.


Brazil: Cimento Tupi has filed for so-called preventative bankruptcy to deal with its US$627m total debts, with the majority attributable to bondholders. The Valor Economico newspaper has reported that the cement producer has suffered due to a downturn in the sector since 2014 and currency depreciation.

The producer has an installed capacity of 2.5Mt/yr consisting of one integrated plant at Pedra do Sino in Minas Gerais and a grinding plant in Modi das Cruzes in São Paulo. In 2011 it began modernisation of its cement operations, for which it withdrew bank loans. Lenders launched legal action in April 2019 after the company defaulted on around US$30m of repayments to foreign investors.


India: UltraTech Cement has awarded Germany-based KHD Humboldt Wedag a contract relating to three new kiln lines, one new raw meal grinding plant with two KHD roller presses, and the upgrade of five existing clinker grinding plants with KHD roller presses. KHD said that the engineering and supply of equipment as well as supervisory services related to erection and commissioning, comprised a potential order volume of more than Euro30m. It added that UltraTech Cement and Humboldt Wedag India are currently negotiating with the aim of concluding a corresponding Engineering and Procurement (EP) contract package.


Canada: Lehigh Cement and the International CCS Knowledge Centre are conducting a feasibility study looking at carbon capture and storage (CCS) at the Edmonton cement plant in Alberta. The project aims to find out whether capturing 90 – 95% of the CO2 from the plant’s flue gas is viable. Completion of the study is scheduled for the autumn of 2021.

The Lehigh CCS Feasibility Study will consider an engineering design using carbon capture technology owned by Japan-based Mitsubishi Heavy Industries Engineering (MHIENG), part of MHI Group. The KM CDR process, which is being deployed at 13 commercial plants globally, will be examined for integration with Lehigh’s plant and output specifications, such as a flue gas pretreatment system and the carbon capture and compression process.

The aims of the study are to: deliver a Class 4 cost estimate; to work with a capture technology provider (MHI Group) to perform engineering design tailored to the Lehigh plant; to manage the process and engage third parties, as necessary; to complete a detailed business case; and to develop the budget for Front End Engineering Study (FEED). The project has received US$1.4m in funding from Emissions Reduction Alberta (ERA) through its Partnership Intake Program.


India: Aditya Birla subsidiary UltraTech Cement recorded a profit of US$506m in the nine-month period ending on 31 December 2020, up by 47% year-on-year from US$345m in the corresponding period of 2019. Sales fell by 4% to US$4.16bn from US$4.33bn. Third-quarter sales rose by 17% to US$1.68bn from US$1.43bn and third-quarter profit rose by 122% to US$217m from US$97m. The company said that it ended the period having reached 84% production at its newly acquired cement plants of 15Mt/yr total capacity. In the third quarter the board approved capital expenditure investments of US$747m aimed to increase cement production capacity by a further 13Mt/yr.

The company said, “Recovery from the Covid-19-led disruption of the economy has been rapid. This has been fuelled by quicker demand stabilisation, supply side restoration and greater cost efficiencies.” It added, “While UltraTech continues to closely monitor the impact of Covid-19 on its operations, its capital and financial resources remain entirely protected and its liquidity position is adequately covered. With strong rural growth, revival in manufacturing sentiment, buoyancy in the goods and services tax and tax collections, UltraTech expects demand to grow on the back of the government’s push on infrastructure projects. Given its pan-India presence, UltraTech is well-positioned to support the rising demand for cement in the country. As always, UltraTech remains committed to all its business associates and stakeholders.


India: Birla Corporation recorded a net profit of US$52.2m in the nine-month period which ended on 31 December 2020, up by 23% year-on-year from US$42.6m in the corresponding period of 2019. Sales fell by 10% to US$650m from US$724m, while earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 2% to US$141m from US$144m.


Iceland: Sementsverksmidjan has commissioned engineering company Efla to investigate a dust spill which occurred in early January 2021. The cement importer says that Efla will review its processes, assess impacts and advise on any measures to prevent the recurrence of such an accident.

The company said, “Following the accident, information has also emerged that the incident lasted longer than previously thought. This information has not been confirmed and is new to the company, but could mean that more cement has been released into the atmosphere than had previously been estimated. The cement factory takes this information seriously and will continue to work with Efla and the insurance company to fully analyse the matter.”


France: Fives has selected Wallix’s Wallix Inside software to improve the online security of its subsidiary Fives Cortx’s industrial data products. The supplier says that this will give cement plant users secure access to energy bills, cost optimisation, site maintenance and production line analytics.

Fives CortX chief executive officer David Zak said, “Fives provides flexible and tailored solutions to optimise industrial sites’ production and maintenance by capitalising on field data. Artificial Intelligence (AI) is at the core of our systems and cybersecurity at the forefront of our minds. Therefore, we ensure the security of flows and data by design. With the solution Wallix Inside, we incorporate the best technologies in our solutions to guarantee an increased level of security between connected machines and our Gateway Internet of Things (IOT), enabling our clients to fully enter Industry 4.0.”


US: The Portland Cement Association (PCA) has welcomed the new administration’s plan to re-enter the Paris Agreement to reduce global greenhouse gas emissions. President and chief executive officer Michael Ireland said, “Climate change is one of the greatest challenges of our time. The cement and concrete industry have an important role to play in decarbonising the manufacturing sector while providing the building materials necessary for a safe, resilient, and sustainable economy.”

The association’s government affairs senior vice president Sean O’Neill said “Federal policymakers will have a particularly important role to play. Some of the technologies needed to tackle industrial decarbonisation are still in the research and development phase. Governmental support is needed to accelerate both development and deployment. We also need to make sure that federal policies support industrial decarbonisation without undermining the competitiveness of US manufacturers.” He added, “Climate change is a global issue, and it will require global cooperation. The US cannot solve this problem alone.”


France: HeidelbergCement subsidiary Ciments Calcia has presented plans of a proposed Euro300m upgrade of its Airvault cement plant in Deux-Sèvres Department to the local community. The La Nouvelle République newspaper has reported that the company will replace the plant’s existing two production lines with a single one. It also plans to upgrade grinding and mixing equipment.

Local mayor Olivier Fouillet said, "In view of its economic, social and environmental character, this project is of public interest. It will help maintain an existing site that provides direct and indirect jobs and will further boost the economy of the territory. This project will also have the interest of meeting societal expectations on decarbonisation . It is thus an asset for the territory while being part of environmental policies to reduce the carbon footprint.” He added that the project will help the plant to meet the decarbonisation and competitiveness challenges of ‘today and tomorrow.’


Japan: Taiheiyo Cement plans to establish a facility for processing waste produced by natural disasters in Saitama Prefecture. The company says that the facility will sort waste for recycling and sort non-recyclable materials suitable for use as cement additives for further processing. The plans received approval at a talk with Kumagaya City and Saitama Prefecture administrators in mid-January 2021.

The company said, “We have been accepting waste and by-products for cement production and promoting recycling, and we are now also working to contribute to the early recovery of disaster areas.”


Germany: ThyssenKrupp has decided not to sell the cement division of its subsidiary ThyssenKrupp Industrial Solutions after failing to receive a ‘convincing’ offer. The Handelsblatt newspaper has reported that the group is still exploring options for individual subsidiaries under its restructuring programme. It reportedly aims to establish a looser group structure under which individual units enjoy a high degree of independence.

The Germany-based engineering company stared to try and sell the various division of its plant-building business in 2020. However, the source quoted by Handelsblatt also says that orders in ThyssenKrupp’s current financial year, since October 2020, have been recovering, with a several new projects. Separately, Denmark-based FLSmidth said in mid-January 2021 that it had entered into non-binding negotiations with ThyssenKrupp over the possible acquisition of its mining business.


Mexico: Grupo Cementos de Chihuahua (GCC) has joined other members of the UK-based Global Cement and Concrete Association(GCCA) in committing to carbon-neutral concrete production by 2050. The association launched the ambition in September 2020.

GCC chief executive officer Enrique Escalante said, “Sustainability is an important element of our long-term strategy. GCC is committed to implementing global best practices throughout the organisation while further strengthening the Company’s long-term profitability.”


Oman: Raysut Cement has held a groundbreaking ceremony for a new 9MW waste heat recovery (WHR) unit at its Salalah cement plant. The Times of Oman newspaper has reported that China-based Sinoma Overseas Development will undertake the engineering, procurement and construction work on the project.

The producer said that the installation “Will contribute significantly to our ambitious targets such as reducing power consumption by 25 - 30%, reducing CO2 emissions and above all reducing in water consumption by more than 50%.”


Canada: LafargeHolcim subsidiary Lafarge Canada, Svante and France-based Total have completed Phase 2 of the CO2MENT carbon capture and storage (CCS) project at Lafarge Canada’s Richmond cement plant. The completed phase consisted of construction and installation of the CO2MENT technology to capture and filter the flue gas. Lafarge Canada said that Phase 3, scheduled for construction over the next three years, will include the installation of a liquefaction unit, the development of an expansion project to further reduce emissions and a business case review for further expansion across the Lafarge network

Western Canada president and chief executive officer Brad Kohl said “This has been a turbulent year for business and people due to the Covid-19 pandemic with many large scale projects being put on hold, but the perseverance that the people working at the Richmond cement plant continue to show is evident in the success of Project CO2MENT.” He added “To continue leading change in the building materials industry means we are always looking to partner with like-minded thought leaders such as Svante and Total. This partnership is showcasing our drive towards a net-zero future, and we are seeing this vision become a reality right now with the completion of this phase.”


India: Residents of Haridaspur in Jajpur District, Odisha, launched a protest on 20 January 2020 outside Ramco Cement’s 0.9Mt/yr Haridaspur grinding plant. The New Indian Express has reported that the people allege that the company has fail to delivered promised local jobs. They also accuse it of failing to provide concrete roads, drinking water, healthcare and lighting. The company said that it has yet to receive a memorandum of the protestors’ request.

Ramco Cements commissioned the Haridaspur grinding plant in late 2020.


UK: Cemex will supply 40,000t of lining-sprayed concrete for the construction of the 13km central section of the Thames Tideway sewer project in Greater London. Engineering partners Ferrovial Construction and Laing O’Rourke will use the concrete for shafts and launch tunnels. The company produced the concrete at its Buxton, Derbyshire concrete plant. It says that it offers ultra-high strength, consistency and two-hour workability in line with the stringent requirements of the job. It also needs to be pumpable with a pipeline length of up to 400m. The producer will deliver up to 3000t/month of the concrete to Central London over ‘a few months.’

Europe, Middle East, Africa and Asia president Sergio Menendez said “The Thames Tideway Tunnel project is one of incredible scale which will solve serious capacity issues with London’s sewer system and have considerable benefits for the area’s wildlife and population, while also preventing pollution, creating jobs, a rejuvenated river economy and new areas of public space.” He added “This is a remarkable piece of engineering, and we’re proud to be working with world-class contractors to build this key infrastructure in the most sustainable and cost-effective way possible for one of the world’s greatest cities.”

The 25km ‘Super Sewer’ will conduct the city’s sewage to a new treatment facility at Abbey Mills in the Borough of Newham. The central section runs between 30m and 60m below the Thames past part of West London, Westminster and the City of London.


Spain: Cemex España has announced plans to invest Euro4m in upgrades to its Buñol, Valencia, Muel, Zaragoza, Raspeig, Alicante and Rubí, Barcelona mortar plants. The upgrades will increase production capacity, safety and efficiency and improve product quality. The company said that the promotion of its range of over 160 special mortars is a main focus of the investment.

Cemex Europe, Middle East, Africa and Asia regional president Sergio Menéndez said “We recognise the growing demand for innovative mortar solutions for new and existing buildings to reduce carbon emissions in our cities and support the EU Renewal Wave. Our wide range of mortars for dry silos, in bags and ready to use, is reinforced by expert solutions for paving streets, plastered walls, tunnel solutions, plasters and special sands.”

The group is also investing in upgrades to production and packaging systems in its mortar segment in Poland and the UK.