Global Cement Newsletter

Issue: GCW548 / 16 March 2022

Headlines


Cement producers in the north of Pakistan have started to increase their use of coal from Afghanistan in response to the ongoing volatility in energy markets. Research from a report by Darson Securities found that companies were already using up to 70% Afghan coal in their fuel mix with a further 20% being considered. Most of the northern producers are reported to have secured the cheaper Afghan coal for about two months of inventory, although Maple Leaf Cement was said to have four to five months of inventory. Meanwhile in the south of the country, producers were reported to be facing a tougher situation as Afghan coal costs more for them due to higher logistics charges and export orders were being reduced due to the low cost of clinker internationally. So they are focusing on the domestic market instead.

Graph 1: Cement despatches in Pakistan, 2015 – 2021. Source: All Pakistan Cement Manufacturers Association.

Graph 1: Cement despatches in Pakistan, 2015 – 2021. Source: All Pakistan Cement Manufacturers Association.

Data from the All Pakistan Cement Manufacturers Association (APCMA) shows that cement despatches have been steadily growing since the mid-2010s with a blip in 2020 caused by the start of the Covid-19 pandemic. The upward trend has been driven by local sales. Exports have generally grown at the same time, with more variance, but they are yet to regain the high of nearly 11Mt reported in 2009. On a rolling annual basis, local sales have remained steady since mid-2021 but exports have been slowly falling. In April 2021 they were 9.17Mt but by February 2022 they were 7.33Mt. For the February 2022 figures APCMA blamed this on the growing cost of production, rising international freight rates, mounting coal prices and a trade ban with India. On that last point for example, Pakistan-based producers exported 1.21Mt of cement to India in the 2017 – 2018 financial year before exports stopped after February 2019. Despite a brief respite in the spring of 2021 talks are still ongoing to resume trade with India.

On the corporate side the country’s largest cement producer by capacity, Lucky Cement, drew the same conclusion as the APCMA with its half-year results to 31 December 2021. Its local sales volumes were down a little but its exports were down a lot. It noted that the reason its local sales were falling but national industry local sales were up slightly was due to some competitor plants being non-operational in the previous year. However, the company managed to keep sales revenue and earnings increasing year-on-year by successfully combating growing input costs with price rises. Bestway Cement, the country’s other large producer, reported a tougher situation in the second half of 2021, with both local sales and export volumes down. This was attributed to a boom in construction activity in the second half of 2020 as Covid-19 lockdowns were eased. Demand for cement since then was said to be ‘sluggish’ due to inflation and high commodity prices. It also pinned its marked fall in exports on political and economic instability in Afghanistan. However, turnover and operating profit were both up due to higher selling prices.

Elsewhere in the sector news since the start of 2021, Pakistan’s exports to South Africa remained stymied in early 2020 due to a review of ongoing tariffs and the government decision to restrict infrastructure projects to only using locally produced cement. On the sustainability front the APCMA started to set out its decarbonisation strategy in November 2021. It may have a long way to go given that a think tank reported earlier in the year that the cement sector was the largest emitter of coal-related CO2 emissions in the country, even more than power generation. Alongside this plenty of capacity additions have been announced. Lucky Cement started commercial cement production at its 1.2Mt/yr integrated Samawah cement plant in March 2021. Various new cement plants and upgrades to existing plants have been proposed by Bestway Cement, Cherat Cement, Fauji Cement, Kohat Cement Company, Lucky Cement and Maple Leaf Cement. Finally of note to a sector troubled by energy prices, in September 2021 the Pakistan International Bulk Terminal said it was going to upgrade its coal handling capacity to around 17Mt/yr by 2024.

Last week’s Global Cement Weekly covered Turkey. The contrasts are interesting because both of these countries have high cement exports and have raised energy concerns recently. This leads to the question of whether other cement exporters may be vulnerable to the current situation. Pakistan isn’t the only country where the cement industry is facing the negative effects of growing energy costs. This week in the sector news, Spain-based Tudela Veguín has shut down the kiln at its La Robla plant down for 10 days due to high electricity prices, Thailand-based Siam Cement Group (SCG) announced it was reviewing its investment plans and the UK-based Mineral Products Association lobbied the government on the issue.

The shift to Afghan coal by Pakistan’s cement producers is rational given the current situation. No doubt fuel buyers all over the world are doing similar things. In January 2022 the International Monetary Fund (IMF) forecast that Pakistan’s gross domestic product would grow by around 4% for 2021, 2022 and 2023 but current geopolitical events may test these estimates. Over the last year domestic cement demand has remained strong but inflation, growing input costs and the impetus to further rise prices may change this. Meanwhile, lots of new production capacity is in the pipeline and, if or when it is built, it may add additional competition pressure. This may present a problem in Pakistan if capacity utilisation levels drop but input costs keep on going up.


China: Xiao Jiaxiang and Sui Yumin have resigned as vice-presidents from CNBM. Xiao Jiaxiang will continue to hold the post of executive director with the company. Both men also worked for subsidiary Xinjiang Tianshan Cement.


EU: European Union (EU) member state governments have agreed to establish a carbon border adjustment mechanism on imports of polluting goods, including cement, from outside of the EU. Besides preventing carbon leakage, the member states hope that the mechanism will encourage EU partners to establish carbon pricing policies and combat climate change within the framework of the European Emissions Trading System (ETS).


US: Monarch Cement’s net sales were US$212m in 2021, up by 12% year-on-year from US$189m in 2020. Its cement sales volumes increased by 12% year-on-year to 1.2Mt. Monarch Cement invested US$24m in new equipment in 2021, including 27 new ready-mix trucks, six new cement haul trucks, three loaders and two excavators. It plans to launch Portland limestone cement (PLC) products later in 2022.


US: The Environmental Protection Agency (EPA) has awarded its Energy Star certification to cement plants belonging to two Titan America subsidiaries. Titan Florida’s Pennsuco, Florida, cement plant has secured its 14th consecutive Energy Star, while Roanoke Cement’s Troutville, Virginia, cement has secured its 15th consecutive Energy Star.

Other cement plants to receive Energy Stars in 2022 included two Argos USA plants (Calera, Alabama, and Harleyville, South Carolina), two GCC plants (Pueblo, Colorado, and Rapid City, South Dakota), Buzzi Unicem’s Chattanooga, Tennessee, plant and three plants in Arizona: CalPortland’s Rillito plant, Drake Cement’s Paulden plant and Salt River Materials Group’s Clarkdale plant.


Congo: The government has reduced tolls on the transport of cement by road by 50%. The Journal de Brazza newspaper has reported that the government contacted Dangote Cement to encourage it to resume dispatches from its Ndingui cement plant.


Mexico: Holcim Mexico has launched ISO14044-compliant full-lifecycle Environmental Product Declarations (EPDs) for its ready-mix concrete range. The company says that the EPDs will help designers and builders to inform their materials selection processes. The Redacción newspaper has reported that data from five cement plants contributed to the declarations.

Concrete and aggregates director Manuel Sirtori congratulated the team for "demonstrating leadership by promoting transparency and reducing emissions in the construction industry."


Spain: A consortium consisting of Cemex España, energy suppliers Enagás and Redexis, renewable power and infrastructure company Acciona and 30 other partners has commissioned Europe’s first solar power-to-green hydrogen plant at the site of Cemex España’s Lloseta cement plant on Majorca. The EU contributed Euro10m to the approximately Euro50m project. Euro3.75 million came from the Balearic Islands Autonomous Community government and Euro2.5m from the Spanish Institute for Energy Diversification and Saving (IDAE) of the Ministry of the Ecological Transition. The project will generate 300t/yr of hydrogen, eradicating 20,700t/yr of CO2. The hydrogen will primarily fuel city buses in Palma, as well as air conditioning units in public and private buildings there.


China: Geely will include electric cement truck battery pack change facilities in its roll out of 5000 vehicle battery change stations across China. Carscoops News has reported that the stations will be able to remove vehicles’ 3.2t, 280kWh battery packs in five minutes and fully recharge them in an hour. Cement truck drivers will be able to access the service via a simple QR code scan.


Russia: Eurocement subsidiary Maltsovsky Portland Cement has reportedly commissioned a new diesel locomotive to deliver clay to its Maltsovsky cement plant in Bryansk Oblast. According to Russia-based media outlet Stroymedia, eight locomotives operate on the company’s 53km-long railway network during the construction season. Maltsovsky Portland Cement will reportedly replace sections of track and continue the renewal of its rolling stock during 2022.


India: The South India Cement Manufacturers’ Association (SICMA) has joined the Confederation of Indian Industry and the associations of other Telangana industries in lobbying the state government against its proposed Grid Support Charge levy on captive power plants operating in parallel to the state grid. The Hindu Business Line News has reported that power plant operators will pay a monthly levy of US$37,100/MW, potentially from 1 April 2022.

One cement company official said “Some of the most industry-friendly states such as Odisha, Karnataka and West Bengal do not levy such charges, while Tamil Nadu, Madhya Pradesh, and Gujarat levy a minimal rate of US$261 – 392/MW per month.”


India: The Securities and Exchange Board of India (SEBI) has fined Jaypee Infratech US$9140 for its failure to disclose its issue of a series of non-convertible debt securities. The company additionally failed to inform the BSE exchange of defaults in payment with respect to some of the series.


Spain: Tudela Veguín has shut the kiln down for 10 days at its La Robla integrated cement plant in Castile and León. It has blamed the high price of electricity for the stoppage, according to the Diaro de León newspaper. The company says it has sufficient stocks of cement to continue to supply customers during the shutdown. The plant has a production capacity of 1.2Mt/yr but it produces 0.3Mt/yr at present.


Japan: Taiheiyo Cement says a marine oil spill took place at its Kamiiso Plant in Hokkaido on 11 March 2022. The spill was reported after a ship had finished unloading at the plant’s pier. The cement producer has apologised for the incident and is conducting an investigation.


Russia: Holcim Russia says that it is continuing to work as normal and is “fully fulfilling its obligations” to its customers. In a statement on its website it said that its priorities were to, “...maintain the efficient operation of production sites, meet the needs of construction industry customers, and the well-being of the company's 1800 employees in Russia.”

Parent company Holcim, based in Switzerland, said that it was appalled by the human suffering in Ukraine and Eastern Europe. It added that its operations in Russia were continuing to run in full compliance of all regulations and that it would continue to supply the local market. However, it said that it had decided to suspend further capital investments in Russia and keep the situation under review.


Russia: Austria-based Mondi says it is continuing to operate a paper mill and three paper converting plants in Russia. All the units serve the local market. The company said that its operations in Russia represented around 12% of the group’s revenue by location of production in 2021 and, over the last three years, generated around 20% of the group’s underlying earnings before interest, taxation, depreciation and amortisation (EBITDA). Mondi has operated in Russia for over 22 years.

Mondi operates across more than 30 countries. It reported revenue of Euro7.7bn and underlying EBITDA of Euro1.5 billion in 2021. It produces paper and packaging products including bags for industrial products such as cement.


Saudi Arabia: Eastern Province Cement recorded a 2% year-on-year sales drop in 2021. Its net profit was US$54m, down by 7% year-on-year. Arab News has reported that the company recorded a lower income from investments and higher losses from asset write-offs compared to 2020 levels.


Pakistan: Cement plants in North Pakistan are using 70% Afghan coal in their fuel mix, and may increase the figure to 90%. Afghan coal costs US$170 – 200/t, in line with local Pakistani coal prices. The News International has reported that fossil fuel supply disruptions ensuing from the on-going war in Ukraine have increased global coal prices. Additionally, Indonesian coal is subject to a ban on exports, while bad rains have disturbed Australian coal production. On 14 March 2022, the price of South African coal exported from Richard Bay, Umhlathuze Municipality, was US$460/t, up by 95% month-on-month from US$236/t on 10 February 2022. South Africa has previously been a major source of coal for Northern Pakistani cement production. Cement producers in the region have on average 4 – 5 months’ supply of coal in inventory.


Mexican: Cooperativa La Cruz Azul has relocated back to its historic head office in Mexico City, according to the El Universal newspaper. The producer says that the move is another step forward in its restoration of normality and its institutional refoundation after ‘three decades of struggle.’


Philippines: The government’s Department of Environment and Natural Resources – Environmental Management Bureau has called on cement producers to maximise their use of waste plastic as a raw material in cement production. Philippines News Agency has reported that bureau director William Cuñado estimated that the measures would bring about a 40 – 60% drop in national plastic waste generation. He said that local government has a part to play in arranging the requisite municipal solid waste (MSW) practices.


India: A gas pipeline explosion at JP Cement’s Naubasta cement plant in Madhya Pradesh’s Rewa district reportedly injured three workers in February 2022. India Today News has reported that the incident resulted in the hospitalisation of all three workers. 15 – 20 local people subsequently attacked the plant on 11 March 2022, where they threw sticks and stones at staff and vandalised equipment. A spokesperson for the rioters accused the company of suppressing news of the pipeline disaster.


Pakistan: The Cabinet Committee on Legislative Business of the Punjab government has licenced the establishment of a new cement plant in the state. The News newspaper has reported that the committee also approved the expansion of two existing cement plants.


Indonesia: Entsorga has dispatched two Spider bridge cranes and two Pelican feeding and dosing systems for the construction of two new solid recovered fuel (SRF) storage, feeding and dosing systems at Indocement Tunggal Prakarsa’s 11.9Mt/yr Citeureup cement plant in Bogor Regency. The systems will have a total capacity of 50t/hr. An advanced supervision system will monitor and control their 24-hour operation. The Italy-based supplier says that both lines are highly automated and will reduce both CO2 emissions and fuel consumption.

CEO Francesco Galanzino “The systems will help the cement plant to maintain its 2030 sustainability commitments, in line with the policies of HeidelbergCement who is a real first mover in the path toward sustainability. Such project it is a very important step in a Country where environmental policies are in their early stage.”


Thailand: Siam Cement Group (SCG) says that it is reviewing its planned US$2.4bn investment programme for 2022 due to the changing conditions it faces following the Russian invasion of Ukraine and ensuing cost rises. The Bangkok Post newspaper has reported that the company has recorded a rise in raw materials and energy costs across its businesses.

President and chief executive officer Roongrote Rangsiyopash said "We will delay some new investment projects, especially greenfield investments, and consider increasing more investments under merger and acquisition plans to avoid possible impact on our long-term financial management." Rangsiyopash added "Prices of cement and building materials will also gradually increase."


Germany: SIEBTECHNIK TEMA has launched its Bulkinspector automatic gas pycnometer. The pycnometer can help cement producers to obtain precise measurements of bulk materials’ densities. The interior of its insulated system housing is covered with Peltier elements and can be heated or cooled as required to keep the temperature of the material constant for the measurement. The equipment calibrates automatically and provides reproducible measured data with low standard deviation.


Austria: Alpacem has held the groundbreaking ceremony for the construction of its new headquarters at Wietersdorf, Carinthia. The company will invest Euro6m to establish the new headquarters on the site of its Wietersdorf cement plant. It will contain 50 office work stations, with meeting rooms and socialising zones.

In 2021, Alpacem says that it supplied 2Mt of cement and 350,000m2 of ready-mix concrete to projects in the Alpine/Adriatic region.


Russia: Germany-based HeidelbergCement has suspended ‘all further investments’ in its operations in Russia following the country’s invasion of Ukraine. According to its website, the group supplies the Russian cement market from three local cement plants and two terminals. CEO Dominik von Achten said that a ‘large part’ of HeidelbergCement’s Russian production capacity is presently in winter shutdown.

Von Achten acknowledged the company’s responsibility towards its employees in the country, who he said have no part in the apparent Russian aggression and on-going war crimes in Ukraine. He said “We are in constant exchange with our local workforce to protect them and are closely monitoring the situation on a day-by-day basis.”


Oman: Raysut Cement has announced plans to issue a secured rated debt instrument to raise up to US$600m. Reuters News has reported the instrument will raise funds for the company’s growth initiatives and existing bilateral debt repayments. Raysut Cement plans to carry it out in two tranches.


Saudi Arabia: Al Kifah Ready-Mix & Blocks (KRB) has announced the upcoming launch of its ConGreen reduced-CO2 concrete products range at the Big 5 Saudi construction summit on 28 – 31 March 2022. ConGreen concretes replace clinker with lower-carbon materials such as pozzolan and use Canada-based Carbon Cure Technologies’ embedded recycled CO2 technology to reduce its carbon footprint by up to 30% compared to conventional ordinary Portland cement (OPC) concretes. In addition to this, KRB says that ConGreen concretes also provide improved workability and pumpability properties, as well as being highly durable, with high passing and finishability. They have very low rapid chloride permeability (RCP), water absorption and water permeability properties and low heat of hydration.

General Manager Nigel Harries said “We are committed to driving energy efficiency and addressing the global emission challenges. We aim to help build a better community and environment-friendly facilities by producing high-quality concrete, such as ConGreen, that has a reduced environmental impact and is characterised by its high performance, durability and sustainability, with a low carbon footprint as compared with standard concrete.”


UK: The Mineral Products Association (MPA) has urged the the UK government to reduce energy costs, maintain mineral products companies’ access to low-tax red diesel and to deliver on planned infrastructure investments. The association says that high costs already threaten its member’s competitiveness against EU-based rivals. The Ukraine crisis has caused energy costs to rise, while mineral products companies expect their rebate for red diesel to end on 1 April 2022. The MPA has asked the government to delay the end of the red diesel rebate. It also called for transparency on the delivery of the government’s infrastructure plans.

CEO Nigel Jackson said “The high ambitions the government has set out for the UK’s infrastructure and housing rely on our members’ ability to supply aggregates, asphalt, cement, concrete and other essential materials You can’t build with thin air – construction needs materials and producing materials requires long-term planning and investment, so our industry needs clarity on what’s in the pipeline for the next 10 or 20 years, not the next 10 months. There is a widely recognised maxim ‘if you can’t grow it, you have to dig it.’ Clearly, this is not as recognised by government given the exemptions and subsidies some other industries enjoy. We also provide high-skill, well-paid jobs in regions most in need of economic growth.” Jackson concluded “Our overriding aim is for our sector to deliver for the UK by having economic conditions that reduce uncertainty and boost confidence to encourage investment for growth.”