Global Cement Newsletter

Issue: GCW505 / 12 May 2021

Headlines


Burkina Faso: Germany-based Gebr Pfeiffer is supplying a MVR 6000 C-6 type vertical roller mill for Cim Metal Group’s upgrade to its Cimasso cement grinding plant in Bobo Dioulasso. The mill, with an installed gear power of 6800kW, will be used on the plant’s second production line. The vertical mill can be used for different cement types between 4000cm²/g and 5000cm²/g according to Blaine and produces more than 400t/hr with its six active grinding rollers. The mill will be equipped with a SLS VC type classifier. The order also includes the delivery of a replacement gearbox. The upgrade project is being managed by Germany-based Intercem Engineering with Gebr Pfeiffer supplying the mill and the process design. The supplier says that this will be the first MVR mill to be installed in the country.


Reporting from Egypt this week suggests that the government may be finally taking action to aid the country’s beleaguered cement sector. Sources quoted by Reuters indicate that a production cut of at least 14% has been proposed. One of the cement industry sources broke it down into a 10.5% baseline reduction with a further 3.7% reduction per production line at a cement plant with an additional cut of 0.7% per year of operation. The Ministry of Trade and Industry has declined to comment on the story.

Graph 1: Cement production and capacity utilisation in Egypt. Source: Cement Division of the Building Materials Chamber of the Federation of Egyptian Industries.

Graph 1: Cement production and capacity utilisation in Egypt. Source: Cement Division of the Building Materials Chamber of the Federation of Egyptian Industries.

Graph 1 above shows the key problem facing the sector: cement production has fallen each year since 2016. Added to this, local capacity utilisation took a knock when the 13Mt/yr government/army-run El-Arish Cement plant at Beni Suef opened in 2018. Before it opened the natural utilisation rate was around 80%. By 2020 it had sunk to 60%.

The coronavirus pandemic was another problem that the building materials market didn’t need and the last time this column covered Egypt (GCW 475), HeidelbergCement was restructuring its local subsidiaries in the country. Most producers were holding on for better days in the future but hoping for some form of government intervention such as production limits or an export subsidy programme. Meanwhile, analysts have been waiting for divestments. However, the prospect of the situation becoming worse was also present, in the guise of the Egyptian Cement Group’s new integrated 2Mt/yr plant, scheduled to open at Sohag later in 2021. Since then there’s not been much of a change until now.

Some very rough calculations by Global Cement suggest that the alleged government measures could have created an artificial utilisation rate of 78% in 2020 before the age of the plants was taken into account. For example, the El-Arish Cement plant with its six production lines would potentially see its production cut by around 33% and capped at 8.7Mt/yr. In theory a measure like this could better share out the market between the smaller producers or those with less market share. However, how this would play out with actual plant running costs or existing market share is unknown, although, as mentioned above, some of the multinational producers have been publicly calling out for these kinds of controls.

Playing around with the proposed caps could potentially create some absurd situations. For example, if a single line plant had been running for over 120 years (!) then it wouldn’t be allowed to produce any cement at all. It is lucky then that the earliest plant in the country opened in 1911 and it’s likely long gone. It’s a silly example, but the point is, if production limits do come in, there are likely to be winners and losers. The question for the local producers then is whether a system like this would be better than the current situation.


South Africa: Duan Classen, the Operations Executive of Sephaku Cement, has been appointed as its acting chief executive officer (CEO) following the admission of Pieter Fourie to hospital. The cement producer said that Fourie, its current CEO, had been receiving medical care after suffering a stroke and was responding well to treatment.

Classen has been a member of the executive management in charge of operations since the construction of Sephaku Cement’s plants. He holds a bachelor degree in Metallurgical Engineering from the University of Pretoria, and has previously participated in the Young Managers Development Programme at INSEAD in France and a Management Development Programme at Duke University in the US. Classen completed his graduate engineer training at De Beers before joining Blue Circle Cement in 1997, where he was involved in Blue Circle Cement's integration into Lafarge in 1998. He subsequently worked for PPC before being appointed to DCSA in early 2008.


Egypt: The Egyptian government has reportedly proposed that cement companies cap production by at least 14%. Multiple sources quoted by Reuters reveal that a formula was discussed in April 2021 proposing that cement plants cut production by a base amount of 10.5%. An additional cut of 3.7% would then be made for each production line a plant has and another 0.65% for each year they have been in operation. However, it is unclear how the age of a plant or production line would be determined. The Ministry of Trade and Industry has not commented on the story.

The measures have been suggested in order to help the sector cope with falling consumption and production overcapacity. Cement sales fell by 5% year-on-year to 41.7Mt in 2020 from 43.8Mt in 2019. However, two of the cement executives quoted said that the proposed cuts seemed unfair on multinational companies like their own that had older plants.

 


Kenya: The Competition Authority of Kenya has granted China-based Zou Fengqi and Oman-based Raysut Cement exemption from regulatory approval on a recent application in line with competition guidelines. The Business Daily newspaper has reported that the application stated that Zou Fengqi plans to acquire a 60% stake in Raysut Cement’s business in East Africa.

Raysut Cement operates grinding plants in Mogadishu, Somalia and Somaliland.


China: Sinoma International Engineering has signed a deal worth US$300m to build a new integrated cement plant for Guangxi Jinxiang Cement. The contract includes two 6000t/day clinker production lines, from raw material crushing to packaging, and a 6Mt/yr aggregate line. The project is located in Dashan Village near Shilong Town, Xiangzhou County in Guangxi region. It is expected to be completed by mid-2022.


Pakistan: Lucky Cement and China-based China Sinoma Energy Conservation have signed a deal to upgrade the waste heat recovery (WHR) units on both production lines at the integrated Pezu cement plant. When the project is completed it will increase the output to 14MW from 10MW at present. No value for the order has been disclosed. Sinoma supplied the plant’s original WHR units in 2017.


Ghana: Dzata Cement, a 1.2Mt/yr bagging plant based in Tema, plans to start commercial production by June 2021. The unit cost US$100m and includes a two line bagging and packaging equipment supplied by Germany-based Haver & Boecker, according to the Ghana News Agency. It will use imported cement. Proposed later phases at the site will see an upgrade in bagging operations to 2.4Mt/yr and the eventual installation of two 3Mt/yr vertical roller mills. As a safeguard against surges of cement imports the government has also introduced new export and import legislation requiring licenses for imports from outside the Economic Community of West African States (ECOWAS) region.

The plant’s founder Ibrahim Mahama is the brother of former Ghanian president John Dramani Mahama. In November 2020 the Ghana News Agency reported that Kofi Amoabeng, the former chief executive officer of UT Bank, said that loans made to companies including Dzata Cement had contributed to the bank being declared insolvent in 2017.


US: Titan America, part of Greece-based Titan Group, has launched ProAsh and EcoTherm. Both products are made from ash reclaimed from landfill and can be used in both cement and concrete production. Titan America subsidiary Separation Technologies produces the materials at its Brunner Island reclaimed ash drying and electrostatic separation plant in Pennsylvania.

President and chief executive officer Bill Zarkalis said, “This breakthrough achievement represents Titan America’s commitment to the reduction of CO2 through innovation as we plan to deploy this technology across the construction material sector.” He added “By harnessing the power of this technology, Separation Technologies is utilising a revolutionary beneficiation process that is capable of converting reclaimed ash from ash basins in an efficient manner. The result is a high-grade, low carbon construction product.”


US: Colombia-based Grupo Argos subsidiary Cementos Argos has agreed to sell its 24 ready-mix concrete plants in Dallas, Texas, to SRM Concrete. The Diario Financiero newspaper has reported the value of the deal as US$180m. Cementos Argos called the sale an ‘important milestone’ in the fulfilment of its non-strategic asset divestment plan.


Germany: HeidelbergCement has launched the Quarry Life Award, a competition for proposed biodiversity-supporting quarry restoration projects. The company says that it is looking for projects which consider quarries’ impacts throughout their entire lifecycle. It is offering a Euro30,000 prize for the winning proposal.

Chief executive officer Dominik von Achten said, “The time for action is now - The World Economic Forum 2021 Global Risk Report has put biodiversity loss among the five most concerning global risks, both in terms of likelihood and impact. With the competition, HeidelbergCement wants to contribute to the global restoration agenda and work towards a net positive in biodiversity. Our sites can provide valuable habitats for a variety of animal and plant species during and after extraction.”


Colombia: Grupo Argos subsidiary Cementos Argos increased its consolidated net sales by 6% year-on-year to US$618m in the first quarter of 2021 from US$582m in the first quarter of 2020. Cement sales over the period rose by 19% to 4.1Mt from 3.5Mt. The company’s earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 30% to US$119m from US$91.5m. Its net profit was US$14.7m, compared to US$1.07m in the first quarter of 2021.

The company recorded increased cement volumes in all regions during the quarter. The sharpest regional increase was of 21%, to 1.4Mt from 1.2Mt in the Caribbean and Central America Region. In Colombia, volumes increased by 19% to 1.2Mt from 1.0Mt and net sales increased by 15% to US$161m from US$139m.

Chief executive officer Juan Esteban Calle said, “We are mindful of the social and economic challenges that Colombia is facing after more than 4m people fell below the poverty line as a consequence of the economic impact of the pandemic. We consider ourselves part of the solution and will continue working to build a better country with our optimism intact.”

The company also updated its climate change strategy in line with its target of carbon neutral concrete by 2050.


Indonesia: SCG Packaging, part of Thailand-based Siam City Group, has entered into a share purchase agreement to acquire a 75% stake in Intan Group, a corrugated container producer. The purchase is intended to strengthen SCG Packaging’s downstream paper-based packaging business in the country. It awaits approval from the relevant authorities and the transaction is expected to close in mid-2021.


New Zealand: The New Zealand Ministry of Finance plans to launch a commission to investigate high building materials prices. The New Zealand Herald newspaper has reported that finance minister Grant Robertson said that New Zealanders pay too much for building materials. Robertson indicated that any probe would look into cement, among other building materials. The Productivity Commission previously estimated that average national building materials prices are 20 – 30% higher in New Zealand than in Australia.


India: Aditya Birla subsidiary UltraTech Cement’s net sales rose by 6% year-on-year to US$6.04bn in its 2021 financial year from US$5.70bn in the same period in 2020. Its cement sales volumes increased by 5% to 80.2Mt. The company’s profit before interest, depreciation and tax grew by 24% to US$1.68bn from US$1.35bn. It attributed the result to ‘prudent’ working capital management and control on cash flows aided by its overheads control programme.

The producer forecast an increase in cement consumption from pent-up urban construction demand in the 2022 financial year.


Pakistan: The All Pakistan Cement Manufacturers Association (APCMA) says that the country’s installed cement production capacity will reach 99Mt/yr within the next few years, with most of the planned work to be completed by mid-2023. The Dawn newspaper has reported that producers are launching new cement plant projects and expanding existing plants with a total new capacity of 18Mt/yr. Upon completion, the current projects will increase domestic cement production capacity by 43% to 99Mt/yr from 69Mt/yr. 94Mt/yr of the new capacity is situated in Northern Pakistan and 5.0Mt/yr in Southern Pakistan.

APCMA says that the reason behind the new expansion cycle is estimated annual sales growth of 10 – 15% from 2021.


Lithuania: Germany-based Schwenk Zement has sought to increase its stake in 50% subsidiary Akmenes Cement to 97%. The company is also seeking the acquisition of a 75% stake in limestone supplier Kalcitas. The producer took over Mexico-based Cemex’s stake in Akmenes Cement in 2019.


Italy: Buzzi Unicem’s first-quarter consolidated net sales fell by 1% year-on-year to Euro683m in the first quarter of 2021 from Euro689m in the first quarter of 2020. Cement sales volumes were 6.2Mt, up by 3% from 6.0Mt. Adverse weather caused slight sales declines in Europe and North America. The company called full-year growth prospects for 2021 ‘encouraging.’


Germany: ThyssenKrupp Industrial Solutions has launched GooVi, a digitised vibrating screen with an ‘intelligent’ control system. The supplier says that the screen offers increased efficiency, reduced weight and height. It combines the control system with a new patented drive technology. The product’s name plays on the title of the Beach Boys’ 1967 hit song Good Vibrations.

Head of product line screens and feeders Achim Schönfelder said, “With the GooVi, all vibration modes (circular, linear and elliptical) can be realised in one machine, allowing flexible adaptation to changing job requirements and material properties. In addition, the low height of the GooVi facilitates simple installation in existing plants.”


Poland: The Polish Cement Association (SPC) has forecast a 2% year-on-year drop in cement sales to 18.5Mt in 2021. President Krzysztof Kieres attributed the fall to growing imports and reduced construction due to a cold start to the year. He predicts that sales will rise again, by 4% to 19.3Mt, in 2022.

The SPC has warned that the industry faces large costs in meeting the European Green Deal’s required 40% CO2 emissions reduction by 2030 and achieving carbon neutrality by 2050. In particular, the local industry noted that the rising European Union (EU) CO2 price has caused a direct increase in electricity prices. It has called on the government and the EU to compensate it for this rise.

Imports of cement also present a key challenge. In 2020, imports of Belarusian cement increased by 80% to 440,000t and imports of Ukrainian cement increased by 50% to 32,000t. The association expressed strong support for the European Carbon Border Adjustment Mechanism (CBAM) as a means of protecting the industry against imports both from neighbouring countries outside the EU and via polluting shipping from cement exporters further afield such as Turkey.


North Korea: The North Korea government says that it will supply 10,000t/yr of cement to every city and county in the country. The new target will help to fulfil the aims of the January 2021 Five Year Plan, under which the state aims to build 10,000 apartments/year in Pyongyang and 5000 apartments/year in Komdok. The 38 North project has reported that in order to realise this vision, it plans to establish 8.0Mt/yr of new capacity via upgrades and new projects by January 2026.

In March 2021 a North Korean delegation visited a Chinese cement plant to learn about modern cement production.


Brazil: Federal police in Pernambuco have launched an investigation into the alleged involvement of organised crime in João Santos Group, the owner of Cimento Nassau. 53 search warrants have been issued in four Brazilian states with the involvement of over 240 police officers, according to the Valor Econômico newspaper. The police are looking into allegations of asset diversions and tax evasion up to a value of around US$1.6bn.


Italy: Taiwan-based Taiwan cement has agreed to acquire Engie’s 60% stake in battery and hydrogen power systems supplier Engie EPS. The aggregate value of the deal is Euro132m. The producer expects to close the deal in mid-late 2021, whereupon it will launch an all-cash mandatory tender offer for the company’s remaining shares. Taiwan Cement said that the transaction would provide the cornerstone for its strategic global blueprint in the future.


China: Malaysia-based YTL Corporation has has sold its 100% stake in Zhejiang Hangzhou Dama Cement. The company acquired the producer in 2007. It operates a cement plant located in the Lin’an district of Zhejiang Province. Executive chair Francis Yeoh said that it chose the time to sell based on the high current valuation of the subsidiary.

Managing director Datuk Seri Michael Yeoh Sock Siong said that the disposal was aligned with the group’s focus on becoming a regional cement industry leader in Southeast Asia. He said "Dama was our first substantial foray into China’s cement industry. The vital insight and knowledge that we have gained will be used in our plans to expand our operations within Southeast Asia."


Germany: HeidelbergCement’s consolidated net sales rose by 1% year-on-year to Euro3.96bn in the first quarter of 2021. Its result from current operations before depreciation and amortisation (RCOBD) rose by 33% to Euro538m from Euro405m in the same period in 2020. Group cement and clinker sales volumes rose by 2% to 28.4Mt from 27.7Mt. Cement volumes rose by 11% in Western and Southern Europe to 6.8Mt from 6.1Mt, by 5% in Asia-Pacific to 8.8Mt from 8.4Mt and by 1% in Africa-Eastern Mediterranean Basin to 5.2Mt. Volumes fell by 5% in North America and by 4% in Northern and Eastern Europe-Central Asia to 3.1Mt and 4.4Mt respectively.

Dominik von Achten said, “HeidelbergCement has made an excellent start to 2021. In all group areas, we have once again been able to significantly increase our results and margins compared with an already strong first quarter in 2020. This is a seamless continuation of our very good development in recent quarters.”


Vietnam: Siam City Cement subsidiary Insee Vietnam has ordered an Autopac 3000 truck loading system from Germany-based Beumer. The supplier said that the fully automated system palletises and loads cement at a rate of 3000 bags/hr.

Chief executive officer Philippe Richart said, “As we are continually implementing a fully automated dispatch process in Insee Vietnam, we will continue to look to invest in new technologies that Beumer are providing in this area.”


India: Nirma Group subsidiary Nuvoco Vistas plans to launch a US$677m initial public offering (IPO). The Economic Times newspaper has reported that the IPO consists of a US$190m – US$203m fresh issue and a US$474m offer for sale. The company’s targeted valuation after listing is US$4.74bn, in line with the value of Switzerland-based LafargeHolcim subsidiary ACC.

Nuvoco Vistas first acquired its cement assets from Lafarge India in 2017.


North America: UK-based Carbon Clean has signed a memorandum of understanding with US-based onsite hydrogen provider BayoTech. Under the agreement, the carbon capture and storage (CCS) specialist will install a CCS system at a BayoTech hydrogen plant in North America, which is expected to be operational by the end of 2022.

The two companies have agreed on a roadmap for the technology integration of a carbon capture process on their hydrogen generating units. The demonstration facility will include a BayoTech H2-1000 generating unit and Carbon Clean’s carbon capture technology. This partnership is intended to enable process optimisation to decrease the cost for small scale hydrogen and CO2 production.

Carbon Clean was announced in April 2021 as the technology provider for a CO2 capture demonstration project by Taiheiyo Cement in Japan. It is also working on projects with Cemex USA and LafargeHolcim España.