Global Cement Newsletter

Issue: GCW579 / 19 October 2022

Headlines


Doing deals with terrorists has a price: US$778m. The US Department of Justice (DOJ) revealed this week that it had fined Lafarge for its conduct in Syria between 2013 and 2014. In addition Lafarge and its subsidiary Lafarge Cement Syria (LCS) have pleaded guilty to one count of conspiring to provide material support to designated foreign terrorist organisations in Syria. It is uncertain how exactly the fine will be paid but it is worth noting that successor company Holcim reported net sales of nearly US$27bn in 2021. The fine represents nearly 2% of this.

A reasonable amount of new detail can be found on the DOJ website. LCS was essentially dealing with the Islamic State of Iraq and al-Sham (ISIS) and the al-Nusrah Front (ANF) as they would a local government in relation to the running of the Jalabiyeh cement plant. As a reminder, both of these groups were defined as terrorist organisations by the US government at the time. The relationship apparently started as monthly payments to local armed groups, including ISIS and ANF, to allow movement through checkpoints. This later progressed to a de-facto tax based on cement sales. However, it became worse when LCS started asking ISIS to block or tax imports of cement from Turkey-based competitors into northern Syria as part of a revenue-sharing agreement. Effectively LCS was fixing the price of cement in a war zone by collaborating with terrorists. In the end LCS, the intermediaries and the terrorist groups made around US$80m whilst they were working together.

Holcim’s interpretation of the ruling was keen to point out that the conduct in Syria was recognised by the DOJ as not involving Holcim in any way. The DOJ did agree that Lafarge’s executives didn't disclose their activities in Syria to its successor company Holcim either before or after the merger in 2015. However, it pointed out that Holcim had not carried out due diligence of LCS’s operations in Syria. It added that, “Lafarge, LCS and the successor company also did not self-report the conduct or fully cooperate in the investigation.”

Despite this, other information that Holcim also highlighted was that the US authorities were now happy that effective compliance and risk management controls were in place to prevent anything similar happening again. Crucially, it said that the DOJ didn’t think that an independent compliance monitor was required. It pointed out that none of the conduct involved Lafarge’s operations or employees in the US and that none of the Lafarge executives were working for Holcim or any associated company. Finally, the group wanted to report that the DOJ found that none of the former Lafarge executives involved shared any of the “methods, goals or ideologies” of the terrorist groups operating in area at the time.

The immediate reaction from all of this is what happens to the ongoing legal case in France, also about Lafarge’s conduct in Syria? In mid-May 2022 the Court of Appeals confirmed a charge of complicity in crimes against humanity against Lafarge. The company then reportedly started the appeal process at the Supreme Court. Other charges, including financing terrorism, endangering life and violating an embargo, were lodged earlier in the legal process. The US is generally seen as being the leading prosecutor of international corporate crime but if the French legal system also issued a fine to Lafarge on the same scale things could become difficult for Holcim. The other complication for the French legal case is that the national intelligence services allegedly used Lafarge’s links with the Syrian terror groups to acquire information but they did not warn the company that it was committing a crime.

Holcim is a different company from what it was when LafargeHolcim formed in 2015. It is being run by a new chief executive officer who came in from another company well after the merger and is diversifying away from the trio of cement, concrete and aggregates with the addition of a fourth business area of light building materials. Alongside this the group has been selling off businesses in the developing world and focusing on Europe and North America. Yet it is still being defined by the criminal actions of a company it absorbed seven years ago and the behaviour of staff long gone. Those actions have been investigated and punishment delivered. More may be coming.


India: Shree Cement has appointed Neeraj Akhoury as its designated managing director. Hari Mohan Bangur has also been appointed as chair and Prashant Bangur as Vice Chair. All these personnel changes are subject to approval by the members of the company. In addition, Gopal Bangur has resigned as chair and will become Chairman Emeritus.

Akhoury holds nearly 30 years of professional experience in the cement and steel sectors. He began his career in 1993 at Tata Steel, working for both the cement and steel divisions. He joined Lafarge India in 1999 and worked as member of the Executive Committee responsible for corporate affairs followed by sales. In 2011, he moved to Nigeria as the head of Lafarge AshakaCem. Later, he was appointed as Strategy & Business Development Director for the Middle East & Africa at Lafarge’s headquarters in Paris. He became the head of LafargeHolcim Bangladesh in 2015 and then was appointed as the head of ACC in 2017 and Ambuja Cement in 2020.

Akhoury is a graduate in economics from Allahabad University and holds a Master of Business Administration (MBA) from the University of Liverpool. He has also studied one-year General Management Program at XLRI Jamshedpur and is an alumunus of Harvard Business School.


Australia: AdBri says that Nick Miller will be leaving the role as its chief executive officer (CEO) and managing director. Mark Irwin has been appointed as interim CEO with immediate effect. Recruitment for a permanent CEO will start soon. In a trading update, the company said that its earnings were being negatively affected by rising costs, particularly energy and diesel costs, and poor weather.

Miller originally became the CEO of AdBri in 2019 and was later appointed its board of directors as managing director in late 2021.


Australia: Boral has appointed Belinda Shaw as its chief financial officer (CFO). She succeeds Jared Gashel, who has held the position of Acting CFO since April 2022.

Shaw holds over 25 years of professional experience, including more than 10 years of senior executive finance experience across multiple industries. She was appointed as Acting CFO of Sydney Airport, after three years at the company. Her previous roles included Deputy CFO, General Manager Finance, General Manager Investor Relations & Financial Control, and Head of Finance Transformation & Strategy. Prior to her time at Sydney Airport, Shaw worked at General Electric Company where she held roles including CFO ANZ & PNG, CFO Global Mining, and CFO Global Locomotive. She holds a Bachelor of Commerce from the University of South Australia and is a Fellow Certified Practicing Accountant (FCPA).


Syria/US: A US court has found Lafarge Cement Syria guilty of conspiring to provide material support to the terrorist organisations al-Nusrah Front (ANF) and ISIS in Northern Syria during 2013 and 2014. Lafarge Cement Syria and its parent company, France-based Lafarge, agreed in 2011 to pay the terrorists for Lafarge Cement Syria employees' 'protection' and the continuation of the Jalabiyeh cement plant's operations, as well as to gain an economic advantage over other Syrian competitors. During the duration of the agreement, Lafarge Cement Syria recorded US$70.3m in sales. Coalition forces fighting against ANF and ISIS damaged the plant in an airstrike 'to reduce the facility's military usefulness' on 16 October 2019.

The court ordered Lafarge Cement Syria to pay criminal fines and forfeiture totaling US$778m.


India: ACC recorded consolidated sales of US$1.56bn in the first nine months of 2022, up by 8.3% year-on-year from US$1.44bn in the first nine months of 2021. The producer's cement sales were US$1.44bn, up by 7.2% from US$1.35bn. A 24% cost increase, to US$1.49bn from US$1.2bn, caused ACC's profit for the period to fall to US$64.8m, down by 66% from US$191m in the first nine months of 2021.

ACC said that its power and fuel costs rose by 51% to US$443m, its freight costs rose by 8.5% to US$376m and its raw materials costs rose by 24% to US$243m.

Looking forward to the fourth quarter of 2022, chief executive offcier Sridhar Balakrishnan said “The post-monsoon quarter will see the traditional rebound for the sector. Recent cooling off in energy costs will impact us positively."


US: Bulk material handling equipment supplier MDG America says that it delivered four chain bucket elevators for Drake Cement's upgrade of its Paulden cement plant in Arizona. Drake Cement installed a new vertical mill grinding plant for cement, granulated blast furnace slag (GBFS) and raw materials grinding at the 0.7Mt/yr integrated plant. The supplier says that two of the elevators will work in a pair, conveying material from a feeder belt, while a third will convey it to the new mill. The fourth elevator will then collect the material for further grinding and metal discharge.

Drake cement secured approval to mine pozzolan for use in the Paulden's plants cement production at Bill Williams Mountain earlier in October 2022. As part of minimising the future mine's impacts, Drake Cement has offered to help the US Forestry Service to thin local woodland as part of local anti-fire management efforts.


India: Prism Cement, part of Prism Johnson, has signed supply agreements with three cement producers in Bihar and Uttar Pradesh. Mayflex Cement Industries, RLJ Infracement and Rockhill Hi-Tech Cement will supply the cement producer and distributor with cement from their respective grinding plants, which have a total capacity of 820,000t/yr. Prism Cement said that the agreements will help it to improve local availability in the strategic markets of Bihar and Uttar Pradesh. Bihar contributed 19% of Prism Johnson's cement sales by volume in the 2022 financial year, and Uttar Pradesh 55%.

Mayflex Cement Industries reportedly commissioned its new 300,000t/yr Faizabad grinding plant in Uttar Pradesh earlier in 2022.


South Korea: SK Ecoplant is at the centre of an initiative in partnership with the city administration of Seoul to co-process 52,000t/yr of incineration ash and 110,000t/yr of sewage sludge from the city in local cement production. AJU News has reported that the waste management company expects to supply the raw materials to make 150,000t/yr of cement production under the initiative.

Seoul generates 113,000t/yr of incineration ash and 200,000t/yr of sewage sludge. Currently, recycled incineration ash is used in concrete block and paving slab production, which have a limited strength when using the material.


Brazil: Haver & Boecker Niagara has upgraded its plant in Pedro Leopoldo. The expansion allows the company to increase its screen media and parts production capacity by 15%. It can now move its rubber production in-house, allowing for an increased production capacity of its Ty-Dura screen media and premium rubber liners by 60% and improved quality control. The upgrade has also enabled the company to expand its research and development laboratory and testing centre. The company produces products for screening and pelletising for the cement, aggregate and mining sectors.


India: Dalmia Cement (Bharat) and Sagar Cements have submitted acquisition offers to Andhra Cements' administrator and committee of creditors. The Business Standard newspaper reported that the company owes its lenders total debts of US$118m and is valued at between US$42.5m and US$48.6m.


India: HeidelbergCement India recorded consolidated sales of US$61.5m during the second quarter of its 2023 financial year, down by 11% year-on-year from US$69.2m in the second quarter of the 2022 financial year. The Heidelberg Materials subsidiary's net profit in the quarter fell by 88% over the year, to US$852,000 from US$7.24m in the 2022 financial year's second quarter. The second quarter of the 2023 financial year brought a 0.3% year-on-year drop in the producer's operating expenses, to US$55.7m from US$55.9m.


Spain: Cementos Portland Valderrivas plans to make Euro6m-worth of investments in its Alcalá de Guadaira cement plant in Seville. The funds will go towards the construction of a refuse-derived fuel (RDF) line to help reduce the plant's petcoke consumption, as well as the renewal of the plant's mining licence for its quarry.


India: Udaipur Cement Works plans to raise US$42.6m through the sale of bonds, Reuters News has reported. The producer says that the bonds will mature in March 2025.


Pakistan: Lucky Cement bought back more of its own shares on 17 October 2022. The total value of the purchase was US$408,000.

Lucky Cement previously bought back US$212,000-worth of shares earlier in October 2022, under the same resolution of it board from 20 September 2022.


France: Heidelberg Materials' subsidiary Ciments Calcia has laid the foundation stone for its construction of a Euro285m CO2 emissions-reducing upgrade to its Airvault cement plant in Nouvelle-Aquitaine. Ciments Calcia first published its plans for the installation of a new 4000t/day production line to replace both existing lines at the Airvault plant in 2021, with commissioning scheduled for mid-2024.

Germany-based ThyssenKrupp secured the order to supply a 1200t/hr double-shaft hammer crusher, a longitudinal blending bed, a 370t/hr Quadropol QMR² 45/23 vertical roller mill, a 10,000t raw materials tangential blending silo, a single-string, five-stage Dopol cyclone preheater with integral calciner for alternative fuels (with the possibility of conversion to oxyfuel), a Polytrack clinker cooler, a solid recovered fuel preparation line and dedusting systems for the project.


India: During the second quarter of the 2023 financial year, Shree Cement recorded standalone sales of US$459m, up by 18% year-on-year from US$389m in the second quarter of the 2022 financial year. The figure represents a quarter-on-quarter drop of 10% from US$510m during the first quarter of the present financial year. The producer reported cost increases as a percentage of revenues to 33% for fuel and power, 7.6% for raw materials and 1.6% for inventory costs during the quarter. It said that this resulted in a 67% year-on-year drop in its standalone net profit to US$22.9m, from US$70.2m in the second quarter of the 2022 financial year.


India: Adani Group's flagship company, Adani Enterprises, has clarified that it is 'not evaluating' the possibility of acquiring Jaypee Group's cement business. Bloomberg has previously reported that Adani Enterprises was in 'advanced talks' to acquire the 10Mt/yr-capacity business for US$606m.


India: Birla Corporation won bidding for Madhya Pradesh's Marki Barka coal mines on 15 October 2022. The producer said that the asset will provide fuel security and cost optimisation for its cement operations.


New Zealand: Fletcher Building subsidiary Golden Bay Cement has co-processed 80,000t of waste in production of its EcoSure reduced-CO2 general-purpose cement at its Golden Bay, Whangarei, cement plant. The plant has achieved a coal substitution rate of 50%. It has processed various waste streams, including 3 million used tyres. EcoSure cement generates CO2 emissions of 699kg/t of product, 20% less than its imported alternatives, according to Golden Bay Cement. Fletcher building CEO Nick Traber said that this figure is 'simply our starting point.' The company's next target is to achieve a 30% CO2 reduction by 2030.

Traber said "We needed to think outside the box, or rather the cement bag to be more precise. The challenge was around what enhancements we could make to our manufacturing processes at our Golden Bay cement works in order to improve the plant's sustainability. We quickly realised that consuming used tyres and wood waste as alternative fuels was a win-win. When we started with the idea in 2015, we were aiming to replace 15% of coal with end-of-life tyres. Fast forward to 2022, and our rate of coal substitution is now at 50%, which has obviously delivered further reductions in carbon emissions, as well as helping to offset increased coal costs."


Nigeria: The government of Kogi State ordered Dangote Cement to shut down its Obajana cement plant within 48 hours on 13 October 2022. Kogi State Governor Yahaya Bello also ordered the release of impounded Dangote Cement trucks across the state.

Bello thanked Kogi residents for their “resoluteness in the ownership impasse between Dangote Group and the state government.” He added, "While the state government recognises the right of the citizens to peaceful protest, as we witnessed across the state yesterday, we urge people to remain civil and law abiding and to give room for constitutionalism. Breakdown of law and order will not be in the interest of anyone."

Lorry drivers blocked the Abuja - Lokoja road in protest against the closure on 14 October 2022, according to the Advocate newspaper. Meanwhile, a gang has raided the plant, destroying property and shot firearms at the 27 employees who remained on site.


US: Titan America has successfully implemented machine learning monitoring and adjustment software systems at its cement plants at Pennsuco in Florida and Roanoke in Virginia. The producer says that the increased automation will enhance the plants' efficiency, reliability and product quality.

President and chief executive officer Bill Zarkalis said "I'm incredibly proud to mark the end-to-end digital transformation of our cement plants. A systematic process of test and learn that started several years ago has reached an important milestone.”


Philippines: The Tariff Commission (TC) has ordered that new duties be applied to imported Vietnamese cement for a five-year period up to 2027. The Department of Trade and Industry concluded a dumping investigation into Vietnamese cement exports to the Philippines in mid-October 2022, according to the Manila Bulletin newspaper. It found that imports of ordinary Portland cement (OPC) and blended cement from Vietnam were not injurious to the domestic cement sector at present. However, it also found the threat of material injury to be 'imminent.' This is due to Vietnam's 'substantial' cement overcapacity, which may enable it to rapidly increase its exports. The conclusion provided the basis for the TC's latest order.

Any new duty will replace provisional 2.7 - 32% duties introduced in December 2021. Previously, strong competition reportedly prevented the measures from causing price rises. Commentators now predict that the TC's proposed measures will result in a rise in prices.


Brazil: Cement producers sold 47.7Mt of cement in the first nine months of 2022, down by 3% year-on-year from the same period in 2021. The Brazilian National Cement Industry Association (SNIC) has forecast a 2% year-on-year decline in full-year cement sales to 63.7Mt in 2022. The association foresees global finance-related challenges and high energy and raw materials costs during the fourth quarter of 2022. Annual cement sales previously grew by 23% to 65Mt in 2021 from 53Mt in 2019.

SNIC president Paulo Camillo Penna said “Our expectation for 2022 was to maintain the gains of this three-year period, but, unfortunately, due to high interest rates, indebtedness and cost pressure, we were not able to.”


Philippines: Republic Cement is supporting efforts to remove plastic pollution from the sea by co-processing the waste in its cement production. The Business Mirror newspaper has reported that the cement producer has partnered with plastic waste collector Pure Oceans to take delivery of shipments cleaned up from off the coasts of Batangas and Davao.

Republic Cement chief executive officer Roman Menz said "Republic Cement is proud to partner with organisations such as Pure Oceans. Their deep commitment towards safeguarding the environment, while making significant contributions to the Philippine plastic waste crisis, is an inspiration for us to continue doing what we do in order to make a tangible impact on our communities, towards building a greener and stronger republic."

Through its partnerships with local fishing communities, Pure Oceans diverted 1.93m bags of plastic waste over the three years prior to the start of October 2022.


Denmark: Nordic Investment Bank (NIB) has granted a 150m loan to FLSmidth to support technological developments for the growth of sustainability in the cement and mining sectors. The supplier said that the loan tracks three core sustainability indicators: FLSmidth's ratio of partners with SBTi-certified science-based targets, FLSmidth’s own Scope 1 and 2 CO2 emissions and its products' Scope 3 impacts.

Chief financial officer Roland Andersen said “With our MissionZero pledge, we are fully committed to developing technologies and solutions that will enable the mining and cement industries to move towards zero emissions by 2030. As sustainability is an integral part of everything we do, it is only natural for us to also link our financing to our sustainability ambitions. This is a first step in this direction, and we are very pleased with the long-term commitment provided by NIB."


UK: Wright Engineering has installed new inlet sealings on a kiln at Lhoist's Whitwell lime plant in Derbyshire. The new configuration increases the distance between the kiln's leaf segments and inlet to 400mm. The supplier says that the increased distance from the flow of incoming material will alleviate spillage issues in the kiln.


Pakistan: Lucky Cement has informed the Pakistan Stock Exchange of its purchase of US$212,000-worth of its shares. The producer's board of directors passed a resolution for the buyback on 20 September 2022.


India: The state government of Karnataka has approved the allotment of 6 hectares of land to Everest Industries. Reuters News has reported that the company plans to build a cement boards plant. The plant will produce either conventional cement boards or the company's Rapicon reinforced aerated concrete and gypsum wallboard sandwich panels.


India: Imerys has inaugurated a 30,000t/yr calcium aluminate binder plant at Atchatapuram in Andhra Pradesh. The Hindu newspaper has reported that the plant will supply refractory production and construction uses. Imerys plans to expand the plant's capacity to 50,000t/yr by 2030, in order to serve rising demand deriving from India's growing cement sector. This will make it Imerys' largest plant in the country.


Australia/China: A Charles Sturt University team has found that the use of clay in soft soil foundation stabilisation can eliminate 40% of cement used in this type of construction. Australian Associated Press News has reported that China-based Kunming University of Science and Technology also supported the research.