Global Cement Newsletter

Issue: GCW587 / 14 December 2022

Headlines


Further consolidation of the Indian cement sector looked closer this week with the news that Dalmia Bharat’s cement subsidiary has agreed to buy the remaining cement plants from Jaiprakash Associates. The US$685m deal covers cement and power plants in Madhya Pradesh, Uttar Pradesh and Chhattisgarh. It includes clinker production capacity of 6.7Mt/yr, cement capacity of 9.4Mt/yr and 280MW of captive power capacity.

Chart 1: Map of Dalmia Bharat’s cement plants in November 2022 with region of proposed new plants highlighted in orange. Source: Adapted from Dalmia Bharat investor presentation.

Chart 1: Map of Dalmia Bharat’s cement plants in November 2022 with region of proposed new plants highlighted in orange. Source: Adapted from Dalmia Bharat investor presentation.

The acquisition gives Dalmia Bharat the opportunity to draw level with Shree Cement in terms of cement production capacity. If the deal completes, then both cement companies will hold a capacity of around 46Mt/yr. This puts them behind UltraTech Cement and Adani Group nationally. In terms of the cost, the proposed acquisition works out at around US$73/t of cement capacity, although this doesn’t take into account the additional captive power generation capacity. This compares to US$119/t for UltraTech Cement’s purchase of Jaiprakash Associates plants in 2017 and US$97/t for Adani Group’s purchase of Holcim’s Indian-based business in September 2022.

Dalmia Bharat’s rationale for its move this week was that it wants to grow in the Central Region of the country and work towards a capacity target of 75Mt/yr by the 2027 financial year and at least 110Mt/yr by the 2031 one. It backed this up in an investors’ presentation by saying that cement consumption was around 170kg/capita locally and that the region represented about 15% of national demand at 54Mt/yr. This roughly checks out with regional integrated/clinker production capacity distribution analysis that Global Cement Weekly carried out in June 2022. Only the East region was lower, but this didn’t take into account grinding plants or new projects.

Completion of the agreement is planned by December 2023 and is subject to the usual regulatory approvals. However, readers may recall the difficulties UltraTech Cement had in the mid-2010s when it attempted to buy two plants from the subsidiary of Jaypee Group. Problems stemming from an amendment to the Mines and Minerals (Development and Regulation) (MMDR) Act caused the original proposal to be rejected by the Bombay High Court in early 2016. UltraTech Cement bounced back though with a deal to buy far more plants instead. This deal completed successfully in mid-2017.

Jaypee Group’s debts have also caused problems along the way. Indeed, this is the reason why it has finally decided to leave the cement business altogether. In early December 2022 it reported its latest default on interest payments towards some of its loans. Overall its outstanding debt was US$3.39bn. Due in part to this, there have been plenty of stories in the local press over the last decade on whoever was reputedly buying the Jaypee Group’s cements assets. In October 2022, for example, Adani Group was reportedly in advanced talks to buy Jaypee Group’s remaining cement business until it denied it publicly. One deal that did reach fruition was Dalmia Bharat’s purchase of Bokaro Jaypee Cement back in 2014 from a joint-venture majority controlled by Jaypee Group. That agreement gave it full control of the 2.1Mt/yr Bokaro grinding plant in Jharkhand. Looking at the current proposed acquisition, one commentator from HDFC Securities in the local business press noted that detail on the transaction is lacking, such as what will happen to existing limestone reserves. Another pointed out that the deal was probably 30 – 40% below the replacement cost because the plants were old, lack of interest from potential buyers and due to the “likely need for additional CAPEX to run operations.”

If the Dalmia Bharat - Jaiprakash Associates deal completes then it marks the end of an era for the Indian cement industry as one of the big players bows out of the sector. It shows once more that, despite the mounting fuel and raw material costs in 2022, companies are still seeing big opportunities. In its December 2022 report, the ratings agency ICRA found that cement sales volumes grew by 11% year-on-year to 187Mt in the first half of the 2023 financial year. The acquisition might also, hopefully, put an end to the endless speculation about who Jaypee Group might be selling its cement plants to! Although, of course, the question then becomes who else might be considering divesting cement assets.


US: The Portland Cement Association (PCA) has elected Filiberto Ruiz as its next chair. He is the current vice-chair of the association and is the president and chief executive officer (CEO) of Votorantim Cimentos North America. He will succeed Ron Henley, the president of GCC of America, in the post.

Massimo Toso has been elected as the vice chair. He is the PCA’s Climate and Sustainability Council co-chair and is the president and CEO of Buzzi Unicem USA. David Loomes, the president of Continental Cement Company, has also joined the PCA board. He succeeds Tom Beck, the executive vice president of Summit Materials, who has stepped down from the board.


Zimbabwe: Fossils Mines has appointed Innocent Zulu Chikwata as the acting chief executive officer (CEO) of Lafarge Zimbabwe. Willcort Dzuda has become the acting chief finance officer (CFO), according to the Business Times newspaper. The appointments follow the departure of Geoffrey Ndugwa and Amry El Moufay, as CEO and CFO respectively, following the acquisition of a majority stake in the cement producer by Fossils Mines in December 2022.

Chikwata worked previously as the sales manager and then the commercial director of Lafarge Zimbabwe since joining the company in 2017. He holds over 15 years of experience in the construction materials and consumer packaged goods sectors. Dzuda is a chartered accountant and registered public auditor. He holds 25 years of experience in auditing, consultancy and financial management.


Russia: Holcim has agreed to sell its Russian business to its local management. When the transaction is completed, the business will continue to operate under different branding. Holcim says that it remains committed to supporting Holcim Russia’s employees and ensuring an orderly transfer for its customers. DGAP Corporate News has reported that Holcim deconsolidated the subsidiary in March 2022, following Russia’s invasion of Ukraine.

Holcim said “Holcim’s Board of Directors expresses its heartfelt concern about the tragic human suffering in the region, and is fully committed to supporting affected people, families and communities. The Board of Directors thanks all Holcim colleagues who are mobilising around the world alongside local NGOs to provide shelter, essential goods and medical supplies, as well as volunteering their time.”


Oman: The Capital Market Authority (CMA) has replaced the board of directors of Raysut Cement and appointed a temporary one following a financial audit. The CMA said the new board would, “deal with the reasons that led the company to conditions that prompted such action.” It will restructure the company to ensure the stability of its financial position. In late November 2022 the CMA questioned the validity of the company’s third quarter results in 2022 when it detected ‘material misrepresentation.’ Additionally, the cement producer’s chief executive officer and chief financial officer resigned in August 2022 and November 2022 respectively.

The new board is headed by Hamdan Ahmed Al Shaqsi. It also includes Majid Sultan Al Tauqi, Dr. Ali Amer Al Ghaithi, Ahmed Saud Al Zakwani and Mubeen Jalil Yasin Khan. The new board members will each hold their posts for three years.


Sweden: The Land and Environmental Court has granted Cementa a four-year permit to continue mining operations in Slite on Gotland. The latest temporary permit was set to expire at the end of 2022. Both the Environmental Protection Agency (Naturvårdsverket) and the county administrative board of Gotland recommended rejecting Cementa’s application earlier in 2022. Prior to this the central government extended the cement company’s mining licence by one year from late 2021.

The subsidiary of Germany-based Heidelberg Materials said that it viewed the latest four-year permit as a ‘bridge’ until it is able to secure a long-term permit. It is aiming to submit an application for a 30-year permit in 2023.


Morocco: Ciments du Maroc has officially started its 0.7Mt/yr Nador grinding plant in Oulad Settout. The new unit will be supplied with clinker from the integrated Ait Baha plant in Souss-Massa. It is intended to support the development of the north and east regions of the country. The project had a cost of around Euro84m.

Robert Dölger, the German ambassador, Zouhair Magour, the honorary consul of Germany, René Aldach, the chief financial officer of Heidelberg Materials, Hakan Gürdal, the head of Heidelberg Materials’ Africa-East Mediterranean Region, the president of the Oulad Settout region and various directors of Ciments du Maroc attended a ceremony marking the event on 9 December 2022.

The subsidiary of Heidelberg Materials operates three integrated plants, four grinding plants, four aggregate quarries and 21 ready-mix concrete plants in the country.


Nigeria: Dangote Cement’s shareholders have authorised a buyback of up to 10% of the company’s issued shares.

Chair Aliko Dangote said “Over the past decade, Dangote Cement has recorded exponential growth across all areas. Group cement volumes are now at almost 30Mt/yr, our production capacity has tripled to 51.6Mt/yr and we export cement from five countries across Africa.”


Saudi Arabia: Beumer Group has appointed V-Line Middle East to provide services for its customers in Saudi Arabia. Beumer Group said that the new partnership will help it to strengthen its focus on sales in the region.

Beumer Group’s director of sales André Tissen said “Our partnership will bring us closer to customers and strengthen our customer service in key industries. Through V-Line Middle East, we can offer our customers in Saudi Arabia access to a network of local specialised suppliers, augmenting our range of services.”


Austria: Lafarge Zement plans to invest Euro8m in the establishment of the Recycling Centre Mannersdorf at its 1.2Mt/yr Mannersdorf cement plant in Lower Austria. Niederösterreichische Nachrichten News has reported that the facility will process demolition waste into alternative raw materials for use in the cement producer’s operations.

Plant manager Helmut Reiterer said “The Recycling Centre Mannersdorf is of great importance for the construction industry. It enables people to build in a much more environmentally friendly way, increases the recycling rate and strengthens the domestic circular economy.”


India: The Federation of Indian Chambers of Commerce & Industry (FICCI) has named Adani Group subsidiary Ambuja Cements the winner in the Women Empowerment category of its Corporate Social Responsibility Awards 2020 – 2021. During the period under consideration, the producer’s initiatives supported 2970 self-help groups and trained 31,000 women. It employed 9000 women in its operations.

Ambuja Cements says that it aims to help women in their role as breadwinners, changemakers and leaders in their communities.


India: Dalmia Cement (Bharat) has concluded a contract for the acquisition of cement and other assets from Jaypee Group for US$684m. Mint News has reported that the deal will bring Dalmia Cement (Bharat) into control of an additional 9.4Mt/yr of cement production capacity, including 6.7Mt/yr of clinker production capacity, as well as 280MW-worth of fossil fuel-fired power capacity. All cement and grinding plants included under the deal belonged to Jaypee Group subsidiaries Jaiprakash Associates and Jaiprakash Power Ventures and are situated in Chhattisgarh, Madhya Pradesh and Uttar Pradesh.


Egypt: France-based Vicat’s stake in Sinai Cement has risen to 67% from 51%. The group purchased US$5.65m-worth of additional shares in the producer from separate investors on 13 December 2022. Reuters News has reported that shareholder Arab Industrial Investment sold its 6.6% stake for US$2.29m.


India: Adani Cement has announced the launch of a dedicated waste processing subsidiary called Geoclean. Geoclean will process waste for recycling and use as alternative fuel (AF) in its cement production and alternative raw materials in its production of other building materials. Geoclean inherits the projects and all 14 waste management plants of its predecessor company Geocycle India. The Orissa Diary newspaper has reported that Geoclean aims to help Adani Cement to co-process 3.7Mt of AF over the five-year period up to the end of 2027. This would raise its subsidiaries ACC and Ambuja Cements’ AF substitution rate to 30%, from 6% in 2021.

Adani Cement CEO Ajay Kapur said "We are committed to building a sustainable future by adopting clean and green technologies in our overall business. We have always believed in environmental conservation, and are committed to making the optimum contribution towards co-processing waste responsibly for a sustainable future. Adani Cement will continue its endeavours to promote sustainability and build a cleaner and greener planet."


UK: Germany-based Heidelberg Materials has signed a deal for the acquisition of Mick George Group, the leading concrete recycling company in the East Midlands and East of England. Mick George Group’s 40 sites span bulk excavation, earthmoving and demolition services and demolition waste removal and management, as well as ready-mix concrete and aggregates distribution.

Heidelberg Materials Western and Southern Europe director Jon Morrish said “With the acquisition of Mick George, we are clearly moving towards establishing a truly circular materials and services offer in our UK business. I warmly welcome all 1000 Mick George employees to Heidelberg Materials and look forward to further developing the business together.”

Heidelberg Materials aims to offer circular alternatives for half of its products by 2050.


Colombia: Cemex has announced the launch of the Tunjuelo Circularity Centre at its former Tunjuelo quarry near Bogotá. Having rebuilt parts of the 50m-deep quarry with demolition waste, Cemex will now work on its ecological restoration, while continuing to receive excavation waste for reconstruction of the ground. It will meanwhile divert demolition waste deliveries for recycling in aggregate production. In Bogotá, Cemex has launched an initiative for urban construction partnerships in collaboration with local authorities. It will also collect municipal solid waste (MSW) there for use in its cement production and collect its used plastic cement bags for recycling in building materials production.

Cemex’s Colombia and Peru president Alejandro Ramírez said "This is a pioneering model for Cemex in the construction materials industry globally, which we aim to position as a benchmark for circularity within the sustainable development of large cities in Colombia and the world. A piece of land that supplied materials for Bogotá's development for decades has received construction and demolition waste for its redevelopment and was transformed into a green area to the south of the city, an epicenter of the circular economy and an opportunity for urban development for the capital city of Colombia." 



Kenya: Savannah Cement has hired China-based Sinoma International Engineering for construction of its upcoming 2.92Mt/yr Kitui clinker plant in Eastern Province. The plant will additionally have a 900,000t/yr grinding unit, a 35MW fossil fuel-fired captive power plant and a 13MW waste heat recovery (WHR) system. Savannah Cement chair Benson Ndeta said that the plant will convert to 100% solar and WHR-powered production by the end of 2029.

Sinoma International Engineering plans to commence the project immediately, and to complete it in late 2024.


China: Chongqing Sifang New Materials says that it has resumed cement production at all sites following the end of the latest round of Covid-19 lockdown restrictions. The producer says that it brought capacity back online in a progressive manner.


India: Jaypee Power Ventures' board of directors met on 12 December 2022 to discuss the possible sale of the company's Nigrie grinding plant in Madhya Pradesh. Press Trust of India News has reported that parent company Jaiprakash Jaypee Group's audit committee recommended the sale under proposed measures to reduce the group's debt. The producer had been in talks with Adani Group about the possible sale of its cement business, along with other non-core assets, for US$606m in October 2022.

Jaypee Power Ventures operates 4Mt/yr-worth of cement capacity, 40% of Jaypee Group's total 10Mt/yr.


China: Anhui Conch Cement's carbon capture systems went on display at the Macao International Environment Forum and Exhibition in Macao Special Administrative Region on 9 December 2022. Anhui Conch Cement previously installed amine-based carbon capture systems at some of its cement plants, beginning with the Baimashan cement plant in Wuhu, Anhui Province. The producer said that it hopes to introduce its advanced equipment to the international community and to collaborate with other cement companies for the accelerated development of green technologies.

The Macao International Environment Forum and Exhibition addresses China's Dual Carbon Goal of peak national CO2 emissions before 2030 and carbon neutrality by 2060.


China: A team at Southeast University has developed an alternative concrete that contains 8% cement. It uses coral reef limestone fragments and biodebris with an upper particle size of 53mm as fine aggregate. The researchers concluded that the material proved suitable for use in precast concrete paving slab production.


Mexico: Cemex says that it has received validation from the Science-Based Targets Initiative (SBTi) for its 2050 Net Zero Roadmap. The roadmap sets out strategies, including carbon capture, for ‘aggressive CO2 reductions’ across Cemex’s entire value chain, in order to achieve carbon neutral cement production by 2050. The group’s current carbon capture projects portfolio has the potential to reduce its CO2 emissions by 3Mt/yr.

Cemex CEO Fernando González said “The construction industry is essential to the development and wellbeing of society, and its transition to carbon neutrality is achievable. The SBTi’s validation of our decarbonisation target attests to this, as well as the strength of our commitment.”


US: Cement companies produced 58.5Mt of clinker during the first nine months of 2022, in line with nine-month 2021 volumes, according to the United States Geological Service (USGS). The USGS’s Cement in September 2022 report recorded export volumes of 314,000t of cement in the nine-month period up to September 2022, down by 4.2% year-on-year. Meanwhile, delivery figures showed a growth in domestic cement shipments of 4.1% year-on-year to 83.2Mt.


Romania: Finance magazine Capital has named Holcim Romania as its Leader of the Sustainable Transition in the Construction Industry 2022 in recognition of the company’s CO2 reduction initiatives.

Holcim Romania’s sustainability director Edmund Piess said “We are happy to receive recognition for our effort to build responsibly and sustainably. The Holcim Group has committed to the net-zero emissions target; to achieve this ambitious target, we place sustainability at the heart of our strategy.” Piess concluded “We are aware of the impact of industry and the increase in consumption on climate change, which is why we have launched our ECOncept business model to build sustainably and responsibly.”

Holcim Romania’s ECOncept model comprises ECO Solutions, including 40% reduced-CO2 ECOPlanet cement, ECO Services and ECO Score impact evaluations.


Chile: Cement shipments fell by 14% year-on-year during the first nine months of 2022, to 3.2Mt from 3.7Mt. The La Tercera newspaper has reported that a construction slowdown impacted on the cement sales of all three of Chile’s cement producers. Cbb’s despatches fell by 18%, Cementos Melón’s by 15% and Cemento Polpaico’s by 9.5%. At the same time, the producers’ expenses rose due to increased costs across transportation, raw materials, fuels, labour, administration and finance. Meanwhile, imported cement from Asia reportedly presents a cheaper alternative for customers.


New Zealand: The Global Cement and Concrete Association has welcomed Fletcher Building’s concrete division as its first member from Oceania. Scoop News has reported that the concrete’s division’s business spans the entire concrete value chain, including 26 limestone and aggregates quarries and 80 ready-mix concrete batching plants. Its cement subsidiary Golden Bay Cement operates the 0.9Mt/yr Portland cement plant in Whangārei, New Zealand.

Fletcher Building concrete division CEO Nick Traber said "Fletcher Building firmly believes we can play a significant part in a carbon zero and circular future. Our Golden Bay EcoSure cement is one of the lowest-carbon cements in the world already, with 13 - 22% less embodied carbon than imported products. We believe having access to the global research and knowledge from the GCCA will help us improve this further and continue to lead Australasia in best practice decarbonisation of the built environment."