Global Cement Newsletter

Issue: GCW499 / 31 March 2021

Headlines


Financial results for 2020 from the major Chinese cement companies are now out, making it time for a recap. Firstly, information from the China Cement Association (CCA) is worth looking at. The country had a cement production capacity of 1.83Bnt/yr in 2020. For an idea of the current pace of industry growth, 26 new integrated production lines were built in 2020 with a clinker production capacity of just under 40Mt/yr.

This is as one might expect from the world’s biggest cement market. However, the CCA also revealed that the country has over 3400 domestic cement companies, of which two thirds are independent cement grinding companies. Most of these were reportedly created during the late 2000s as dry kilns started to predominate. The CCA is concerned with the quality of the cement some of these companies produce and the lack of order in this part of the market such as regional imbalances. This suggests that the government’s attempts to consolidate the cement industry as a whole had led to the independent companies heading down the supply chain. It also raises the possibility that the government-led consolidation drive may move to grinding next. One news story to remember here is that in February 2021 the CCA called for its industry to respect competition laws following a government investigation. Later in the month it emerged that eight cement companies in Shandong Province had been fined US$35m for price fixing in a sophisticated cartel whereby the perpetrators went as far arranging a formal price management committee to regulate the market.

The CCA described 2020 as a year of sudden decline, rapid recovery and stability. Coronavirus hit cement output in the first quarter of 2020 leading to unprecedented monthly year-on-year declines before it bounced right back in a classic ‘V’ shaped recovery pattern. Despite the pandemic and bad weather later in the year, annual output rose by 2% year-on-year to 2.37Bnt in 2020 from 2.32Bnt in 2019. This has carried on into 2021 with a 61% increase in January and February 2021 to 241Mt from 150Mt in the same period in 2020. That’s not surprising given that China was suffering from the pandemic in these months in 2020 but the growth also suggests that the industry may have gone past stability and is growing beyond simply compensating for lost ground.

Graph 1: Year-on-year change in cement output in China, January 2010 - February 2021. Source: National Bureau of Statistics of China. Note that accumulated data is issued for January and February each year so these months show a mean figure.

Graph 1: Year-on-year change in cement output in China, January 2010 - February 2021. Source: National Bureau of Statistics of China. Note that accumulated data is issued for January and February each year so these months show a mean figure.

Chart 2: Annual cement production growth by Province in 2020. Source: China Cement Association.

Chart 2: Annual cement production growth by Province in 2020. Source: China Cement Association.

Chart 2 above shows cement production in 2020 from a provincial perspective. Note the sharp decline, more than 10% year-on-year, in Hubei Province (shown in dark green). Its capital Wuhan is where the first documented outbreak of coronavirus took place followed by a severe lockdown. Zooming further out, China’s clinker imports grew by 47% year-on-year to 33.4Mt in 2020. This is the third consecutive year of import growth, according to the CCA. The leading sources were Vietnam (59%), Indonesia (10%), Thailand (10%) and Japan (8%). China has become the main export destination for South East Asian cement producers and Chinese imports are expected to continue growing in 2021.

Graph 2: Revenue of large Chinese cement producers in 2020 and 2019. Source: Company reports.

Graph 2: Revenue of large Chinese cement producers in 2020 and 2019. Source: Company reports.

Moving to the financial figures from the larger Chinese cement producers, CNBM and Anhui Conch remain the world’s two largest cement producing companies by revenue, beating multinational peers such as CRH, LafargeHolcim and HeidelbergCement. Anhui Conch appeared to be one of the winners in 2020 and Huaxin Cement appeared to be one of the losers. This is misleading from a cement perspective because Anhui Conch’s increased revenue actually arose from its businesses selling materials other than clinker and cement products. Its cement sales and cement trading revenue remained stable. On the other hand, Huaxin Cement was based, as it describes, in the epicentre of the epidemic and it then had to contend with flooding along the Yangtze River later in the year. Under these conditions, it is unsurprising that its revenue fell.

CNBM’s cement sales revenue fell by 3% year-on-year to US$19.5bn in 2020 with sales from its new materials and engineering compensating. Anhui Conch noted falling product prices in 2020 to varying degrees in most of the different regions of China except for the south. CNBM broadly agreed with this assessment in its financial results. Anhui Conch also reported that its export sales volumes and revenue fell by 51% and 45% year-on-year respectively due to the effects of coronavirus in overseas markets. The last point is interesting given that China increasingly appears in lists of major cement and clinker exporters to different countries. This seems to be more through the sheer size of the domestic sector rather than any concerted efforts at targeting exports.

One major story on CNBM over the last 15 months has been its drive to further consolidate its subsidiaries. In early March 2021 it said it was intending to increase its stake in Tianshan Cement to 88% from 46% and other related transactions. This followed the announcement of restructuring plans in mid-2020 whereby subsidiary Tianshan Cement would take control of China United Cement, North Cement, Sinoma Cement, South Cement, Southwest Cement and CNBM Investment. The move was expected to significantly increase operational efficiency of its constituent cement companies as they would be able to start acting in a more coordinated manner and address ‘fundamental’ issues with production overcapacity nationally.

In summary, the Chinese cement market appears to have more than compensated for the shocks it faced in 2020 with growth in January and February 2021 surpassing the depression in early 2020. Market consolidation is continuing, notably with CNBM’s efforts to better control the world’s largest cement producing company. Alongside this the CCA may be starting to suggest that rationalisation efforts previously focused on integrated plants should perhaps be now looking at the more independent grinding sector. The government continues to tighten regulations on new production capacity and is in the process of introducing new rules increasing the ratio of old lines that have to be shut down before new ones can be built. Finally, China introduced its interim national emissions trading scheme in February 2021, which has large implications for the cement sector in the future, even if the current price lags well behind Europe at present.


India: RK Group subsidiary Wonder Cement has appointed Kiran Patil as its managing director. He succeeds Jagdish Chandra Toshniwal, who has retired, according to the Free Press Journal newspaper. Patil will work at the company’s headquarters in Udaipur, Rajasthan. He previously worked as a mechanical engineer and, prior to joining Wonder Cement, he worked as the chief manufacturing officer for ACC in Mumbai. He has worked with Ultratech Cement, Lafarge India and Tata Steel.


China: CNBM’s revenue rose by 0.5% year-on-year to US$38.9bn in 2020 from US$38.7bn in 2019. Its profit for the year grew by 17% to US$3.30bn from US$2.81bn. However, its cement sales revenue fell by 3% to US$19.5bn from US$20.0bn and its concrete sales fell slightly to US$7.80bn. Cement-based earnings before interest, taxation, depreciation and amortisation (EBITDA) fell slightly to US$5.73bn and concrete-based EBITDA rose by 53% to US$794m. Both cement and concrete sales volumes grew slightly to 340Mt and 112Mm3 respectively. Overall group revenue rose due to sales by the group’s new materials and engineering divisions. The share of its overseas revenue fell to 2% in 2020 from 13% in 2019 due to declines in most regions with the exception of the Americas and Oceania.

“2020 was an extraordinary year, faced with severe and complicated domestic and international environment, especially the serious impact from Covid-19,” said Cao Jianglin, chairman of CNBM. He added, “The foundation of economic recovery in China is not yet solid, and the task of industry transformation and upgrading is arduous.” The company plans to continue implementing supply side structural supply reforms and work towards government CO2 emission peak targets and carbon neutrality plans.


India: Prism Cement has established a 12MW waste heat recovery (WHR) plant and 10MW solar power plant at its 6.1Mt/yr-capacity integrated Prism cement plant in Satna, Madhya Pradesh. The plant’s total WHR capacity now totals 22MW, with a total of 23MW solar power capacity. The measures are part of the producer’s sustainability initiatives, by which it aims to reduce its reliance on non-renewables.


France: Hoffmann Green Cement’s consolidated net revenue fell by 19% year-on-year to Euro504,000 in 2020 from Euro620,000 in 2019. Net loss was Euro6.12m, up by 41% from Euro4.34m. Loss in earnings before interest, taxation, depreciation and amortisation (EBITDA) more than doubled to Euro4.13m from Euro1.85m. During the year, the group began construction of its second cement plant, in Vendée, France.

Co-chairs Julien Blanchard and David Hoffman said, “We are happy with what we achieved at Hoffmann Green in 2020, in spite of the pandemic. We signed numerous technical and commercial collaboration contracts with key players in the construction sector such as Groupe GCC, KP1, Cemex and Eiffage Génie Civil, taking our order book to over 190,000t to date.” They reconfirmed the target of a 3% French cement market share by 2025/2026, adding, “The commercial dynamic continues at the beginning of 2021 with the signing of contracts with Ouest Réalisations for the construction of housing, and EdyCem to develop low carbon footprint concretes.”

Blanchard and Hoffmann called 2020 ‘the year of increasing production volumes,’ adding that the group expects on-going and future environmental legislation in all its regions to bolster demand.


US: The California Nevada Cement Association (CNCA) has published a plan for the Californian cement industry to meet its target of carbon neutrality by 2045. The plan consists of three pathways, namely: a reduction in process emissions including by alterations to clinker factor and type of additives; an increase in alternative fuel (AF) substitution; and a switch to renewable energy. The association said that the aims are achievable by close stakeholder coordination, constructive public policy engagement and a situational approach based on a flexible portfolio of pathways.


Switzerland: Police have cleared 150 squatters from the site of a planned expansions to LafargeHolcim subsidiary Holcim Schweiz’s Mormont quarry in Vaud. Reuters News has reported that officers made 34 arrests. The squatters claimed to be protesting in the interests of biodiversity protection and CO2 emissions reduction.


Australia: Calix has reported the completion of a pre-front-end engineering and design (FEED) study of its Leilac-2 carbon capture and storage (CCS) study. Germany-based HeidelbergCement, Mexico-based Cemex and Portugal-based Cimpor assessed the study. The milestone clears the technology for industrial scale implementation at HeidelbergCement’s Hannover integrated cement plant in Germany. The installation aims to capture 100,000t/yr of CO2 at an installation cost of Euro23m (+/-30%). The final investment decision will follow after the completion of FEED in early 2022.


Vietnam: Members of the Vietnam Cement Association (VICEM) produced 22.5Mt of cement in the first quarter of 2021, up by 2% year-on-year from 22.1Mt in the first quarter of 2020. The Việt Nam News newspaper reported that production in March 2021 was 8.3Mt, down by 4% from 8.0Mt in March 2020. Full-year production totalled 100Mt in 2020.


Mexico: Shareholders of the former Grupo Cementos de Chihuahua have approved a name change at an exceptional general meeting. The company will now trade as GCC.

Chief financial officer Luis Arias said, "We changed the name to GCC to better reflect our 2025 vision: to be the best cement company in North America with the proper balance of people, profit and the planet. It unifies our brand in multiple countries, mirrors the stock ticker and reflects how the market best knows us." He continued, "I wish to thank our shareholders for supporting and approving our new corporate name; we are now an organisation with a new name and renewed vision."


Egypt: Developer Mountain View has awarded a 300,000m3 concrete supply contract to Lafarge Egypt, part of Switzerland-based LafargeHolcim. Mountain View will use the concrete to build its Mountain View iCity in East Cairo. The investment in the project totals US$12.7m.

The producer has also signed a memorandum of understanding with the Egyptian National Research Centre to undertake initiatives aimed at enhancing construction.


Finland: Tana has celebrated the 50th anniversary of its founding in 1971. It marked the occasion by setting an ambitious growth target of Euro100m within the next ten years from Euro40.0m in 2020. It said that the ‘open-minded and innovative’ tradition which it has maintained over the past 50 years will continue in future. Tana is a producer of waste shredders.


Tajikistan: Mohir Cement has commenced operations following an official opening ceremony at its new 0.6Mt/yr integrated cement plant in Jalolidinni-Balkhi district. Local press has reported that the plant will produce M400 and M500 grades of Portland cement for export to Afghanistan and Uzbekistan.


Canada: Lafarge Canada, part of Switzerland-based LafargeHolcim, has made its first delivery of 2021 to Northern Ontario. The Lafarge ship Alpena made the journey across the Hudson Bay. Sales and logistics vice president Andrew Stewart thanked the US Coastguard for its icebreaking assistance.


Russia: SibCem subsidiary Angarskcement has replaced air ducts with local air blowers in its raw materials and clinker grinding units. The producer made the modification to the units’ three horizontal slurry tanks.

Managing director Dmitry Kireev said, “The programme to reduce the consumption of compressed air in the slurry section of the raw materials and clinker grinding facility will continue.” He added, “It is important for us to reduce the costs of energy resources consumed by slurry basins, since they directly affect the cost of the products manufactured by the plant.”


Spain: The Málaga government has approved adjustments to HeidelbergCement subsidiary FYM’s special plan for its La Araña cement plant. The La Opinión de Málaga newspaper has reported that the plan incorporates the findings of new environmental and landscape studies enabling an enlargement of the area of operations. The approval’s effect will depend on the outcome of an on-going court case by a local interest group against the plan.


Germany: ThyssenKrupp has launched an initiative to supply coronavirus testing kits for employees to self-test with. The supplier said that initiative supports the German federal government’s national testing strategy.

Chief human resources officer Oliver Burkhard said, “The health of our employees is our top priority. We want to offer our workforce the best possible protection – quickly, pragmatically and unbureaucratically. The free self-tests are an important part of our strategy for containing the coronavirus pandemic. The expansion of our company’s testing capacities shows that we are taking our social responsibility very seriously and doing everything we can to help.”


Hungary: Lafarge Hungary, part of LafargeHolcim, has awarded a contract to Germany-based Loesche subsidiary A TEC for the supply of an alternative fuel (AF) flash dryer for the 1.0Mt/yr kiln line at its Királyegyháza cement plant in Baranya county. The supplier says that the dryer will use residual hot gas from the chlorine bypass system in conjunction with a satellite burner for firing the material in the kiln. The project also includes the installation of a new AF receiving, handling, and dosing system for a second AF flow firing directly into the kiln burner. A TEC says that it will commission the project in the second quarter of 2021 after the end of the plant’s 2020/2021 winter shutdown.


Mexico: Cemex has presented a comprehensive analysis of it strategic vision, operational performance, corporate governance and value creation in 2020 in its integrated report for the year. During the year, the group developed and implemented over 50 new hygiene and safety protocols against the Covid-19 outbreak, achieved zero fatalities and lost-time injuries across 96% of its operations and led remote operations with its Cemex Go digital platform, which accounted for 61% of global sales in 2020. Cemex announced its Climate Action strategy in February 2020, defining a global target of a 35% reduction of CO2 emissions per tonne of cementitious product by 2030. It also established an ambition to deliver net-zero CO2 concrete to all its customers globally by 2050.

At 31 December 2020 it had already achieved a 35% emissions reduction across its European operations and became the first cement producer to set a 55% reduction target in line with the European Commission’s new goal for member states. The group co-processed 2.7Mt of waste for use as alternative fuel (AF) across 91% of its cement plants, replacing 1.6Mt of coal at a substitution rate of 25%. The producer classified 29% of its cement business’ power consumption as ‘clean,’ with 100% renewable power supply across cement, concrete, and aggregates operations in Poland and the UK. The year also saw the global introduction of Vertua low carbon and net-zero CO2 products. Vertua Ultra Zero is the first net-zero CO2 concrete.

Cemex continues to operate under its Operation Resilience medium-term plan. The plan aims to promote growth, sustainability, and financial resilience. The company has amended its bank debt under its facilities agreement, which incorporates green metrics, and strengthened its social impact strategy to reinforce community initiatives. Group activities positively impacted more than 23 million people on an accumulated basis, contributing to the achievement of the UN Sustainable Development Goals, according to the producer.

Chief executive officer Fernando Gonzalez said, “2020 was undoubtedly a very challenging year, with Covid-19 abruptly upending every aspect of our lives and disrupting every industry worldwide.” He added, “Sustainability remains one of our top priorities, and our Climate Action strategy makes us confident in our ability to achieve our targets and aspirations.”


US: The Portland Cement Association (PCA) has published a March 2021 Economic Update. The update calls attention to the danger that insufficient aid to state and local governments presents to construction. The American Rescue Plan Act 2021 affords US$350bn to these bodies, which consume roughly half of the cement produced in the US.

Senior regional economist Brian Schmidt said that state and local government coffers are running low due to reduced tax revenues because of the Covid-19 outbreak, especially in areas reliant on oil and tourism. Schmidt concluded that the total US$1.9tn stimulus package is likely sufficiently replenish state funds to maintain cement demand. He added that this will depend on significantly reduced Covid-19 case counts by the third quarter of 2021 in line with the Institute for Health Metrics and Evaluation’s baseline forecast.


Denmark: FLSmidth says that it has allocated performance shares to 160 executive managers and key staff under its Long-Term Incentive programme. The shares have a three-year vesting period and are subject to fulfilment of stretched targets. Applicable targets are earnings before interest, taxation and amortisation (EBITA) margin, total shareholder return and MissionZero emissions reduction programme performance. The supplier estimated the cost of the plan as Euro6.98m assuming full vesting.

The company said, “The primary purpose of the programme is to retain key staff and to align the interests of shareholders and the incentive programme participants by rewarding performance in accordance with the company’s strategy.”


Philippines: Republic Cement, a subsidiary of Ireland’s CRH, has won the Quarry Operations award at the 2021 Presidential Mineral Industry Environmental Awards in Quezon City for its work sustainably supplying limestone to its Bulacan and Batangas cement plants. The Batangas quarry also won the Safest Quarry award, while the Bulacan quarry won the Best Mining Forest Programme in the Non-metallic category. The company’s Iligan quarry won the Platinum Achievement for Quarry Operations award. President Lloyd Vicente received the prizes.


Germany: Events producer Easyfairs has announced the postponement of Solids Dortmund to 16 – 17 February 2022 from June 2021. The company said that all Solids Dortmund tickets and free codes for June 2022 remain valid for the new dates. It added that it plans to launch Solids on Tour, consisting of new Solids RegioDays in Chemnitz, Saxony, and Karlsruhe, Baden-Württemberg. It will also use virtual formats to help networking and business in bulk handling throughout 2021.


Dominican Republic: Domicem, a subsidiary of Italy’s Colacem, has begun work on a second line at its Sabana Grande de Palenque cement plant in San Cristóbal province. Ansa News has reported the cost of the project as US$120m. When commissioned in late 2022, the line will produce cement for export.


Nigeria: Dangote Cement has recorded sales of US$2.52bn in 2020, up by 16% year-on-year from US$2.18bn in 2019. Earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 21% to US$1.17bn from US$965m. Total cement sales volumes rose by 8% to 25.7Mt from 23.7Mt and Nigerian cement sales rose by 13% to 15.9Mt from 14.1Mt. Highlights for the year included the start of clinker exports from the Apapa terminal and the commissioning of the Onne cement terminal in Nigeria. The group also commissioned a gas power plant in Tanzania.

Chief executive officer Michel Puchercos said, “Despite the impact of the Covid-19 pandemic, 2020 was a record year for Dangote Cement across the board. Several firsts made 2020 a productive year such as our maiden clinker shipment, maiden bond issuance and successful buyback programme. We increased our capacity by 3Mt/yr in Nigeria, commissioned our two export terminals and commissioned our gas power plant in Tanzania. All this was achieved whilst we focused on protecting our people, customers, and communities from the impact of the pandemic.”


China: Shanshui Cement’s consolidated profit attributable to shareholders increased by 7% year-on-year to US$488m in 2020. Its operating revenues fell by 3% year-on-year to US$3.19bn. ET Net News has reported that the company will not distribute dividends.


India: Dalmia Bharat subsidiary Dalmia Cement has commenced commercial production of cement at the new 2.3Mt/yr production line of its Bengal Cement Works cement plant in Midnapore, West Bengal. The new line brings the plant’s total capacity to 4Mt/yr.

Chief operating officer Ujjwal Batria said, “To ensure that demand is met in a sustainable manner, we have deployed the latest machinery and technology at our Bengal Cement Works unit and will be aiming to produce 100% blended cement. This step is also in line with our commitment to become carbon negative by 2040.” He added, “Post the lockdown-led demand disruption, the cement sector has been continuously witnessing buoyancy across the country. This is largely led by revival in demand from the infrastructure and urban housing sectors, along with the demand from individual homebuilders and the government's rural housing schemes especially from east and central regions. Hence, the onset of commercial production at the Bengal Cement Works unit will enhance our ability to contribute towards nation building and Atmanirbhar Bharat, while also catering to the growing demand from the eastern and north-eastern states of the country.”


Guatemala: Mexico-based Cemex subsidiary Cemex Latam Holdings plans to install a new 1000t/day horizontal ball mill and support infrastructure including a dust collector and 3000t silo at its Puerto de San José grinding plant in Escuintia. Central America Data has reported the value of the work as US$16m.


Tajikistan: Tajik cement plants produced 4.2Mt of cement in 2020. Tajikistan Newsline has reported that cement exports for the year were 1.3Mt. Uzbekistan imported 764,000t, Afghanistan imported 505,000t and Kyrgyzstan imported 42,000t. The Tajikistan Ministry of Industry and New Technologies has predicted a 46% increase in cement exports to 1.9Mt/yr by 2023.


US: Coherent Market Insights (CMI) has forecast in a recent market report that the global cement grinding aids market will grow by 55% to US$5.02bn in 2027 from US$3.23bn in 2019. Factors driving market growth include increased cement industry concerns about energy consumption reduction and product fineness. A major driver is the Asia Pacific market, which accounted for 34% of value in 2019. In North America, US residential construction is forecast to continue its five-year increase. CMI predicted that projects in Saudi Arabia will also drive Middle Eastern market growth. It added that the Covid-19 outbreak has caused a drastic short-term decrease in demand.


UK: The Mineral Products Association (MPA) has announced the accession of a new affiliate member, the Cement Admixtures Association (CAA). The CAA represents admixture producers that supply construction and civil engineering in the UK. It was a founding signatory of Construction Industry Sustainable Construction Strategy in 2008.

MPA chief executive officer Nigel Jackson said, “We are delighted to have the CAA and its members as affiliates of the MPA. We look forward to increasingly close collaboration on our common objectives to improve the sustainability of key mineral products and promoting best practice in concrete and masonry construction.”