Global Cement Newsletter

Issue: GCW625 / 13 September 2023

Headlines


The big US news this week has been that Summit Materials and Argos USA are planning to merge their operations. The new organisation will operate six integrated cement plants with a production capacity of 8.4Mt/yr, based on Global Cement Directory 2023 data. The companies say that this will make them the fourth biggest cement producer in the country, at 11.8Mt/yr, based on grinding capacity, and the largest domestically-owned operator. Additionally, the combined entity will also hold just under 5Bnt of aggregate reserves, 224 ready-mixed concrete (RMX) plants and 32 asphalt plants.

The deal is expected to close in the first half of 2024 subject to the usual regulatory clearances and shareholder approval. At this point Argos should own approximately 31% of the new company and Summit Materials’ shareholders will be the majority owner. Although, if we remember anything from the Lafarge-Holcim merger from nearly a decade ago, it is that if the share prices between the two companies diverge too much in the next six months then that proportion may change. In simple terms that split for Argos USA is in the region of where one might expect it to be given that Argos USA made 39% of the combined revenue for both itself and Summit Materials in 2022 and 28% of the combined earnings.

The two companies complement each other well for the purposes of forming a new heavy building materials concern. Summit Materials reported revenue of US$2.41bn in 2022, with 30% deriving from its aggregates businesses, another 30% coming from RMX and about 20% from paving. Cement generated US$341m, or 14%, of total revenue. By contrast Argos USA reported revenue of US$1.57bn in 2022 from a business just concerning cement and concrete. Geographically, Summit Materials’ integrated plants are in the Midwest, in Iowa and Missouri respectively, and its cement terminals follow the Mississippi River from Minneapolis to New Orleans. Notably, it made the point in the merger announcement that the deal would reduce the seasonality of its cement business. Argos USA’s plants and terminals are mostly spaced out in the Southern states with its plants in Alabama, Florida, South Carolina and West Virginia.

It goes against recent trends for a US-based company to be increasing its share in the domestic cement market, although it has resorted to teaming up with a Colombia-based one to do so. Usually it is foreign-headquarted companies making moves in the US. For example, Ireland-based CRH is in the final stages of switching its primary listing to the New York Stock Exchange. Its head Albert Manifold described the US construction market as going through a “golden age” earlier in the year whilst trying to sell the stock market move at the company’s annual general meeting. Meanwhile, there have been various smaller acquisitions such as Peru-based UNACEMs’ agreement to buy the Tehachapi cement plant in California from Martin Marietta Materials in August 2023.

Given the ongoing importance of the North American market for the international cement producers it is not surprising that merger and acquisition activity has been taking place. Each of the four largest US-based cement producers performed well in the first six months of 2023, increasing both revenue and earnings significantly. However, the picture is mixed. The Portland Cement Association (PCA) forecast at the start of 2023 that cement consumption would decline in the second half of 2023 due to a worsening general economic outlook. The downturn was estimated to be brief though as interest rates were expected to dip and infrastructure spending to rise in 2024. Half-year data from the United States Geological Survey (USGS) supported this view as shipments reached an estimated 51.0Mt, a slight decrease from the same period in 2022. The cement companies have made money so far in 2023 partly by raising their prices. Yet, some segments of the residential homebuilding market have also driven demand despite the general economic picture.

One last thing to consider is how much thought was given to the carbon risk of forming a new heavy building materials company in a developed economy in the 2020s. Sustainability receives a mention in Summit Materials’ investor presentation in the form of current achievements such as switching to blended cements or reducing fossil fuel usage but there is no suggestion that any serious investment to curtail process emissions is expected any time soon. However, one could make the case that the enlarged company might benefit from synergistic effects if it were forced to spend more on CO2 emission reduction. This proposed merger concerns two existing organisations teaming up rather than new equity entering the arena. In this context it will be worth noting whether the next cement industry merger or acquisition in the US or Europe will involve existing companies or new entrants.


Spain: The Spanish cement association (Oficemen) has elected Alan Svaiter as its president. He will take charge of various cross-sectoral initiatives aimed at helping the local cement industry to meet present and future challenges. These include recovering its higher activity levels and advancing its net zero strategy. He succeeds Cemex’s director general of strategic planning, Europe, Middle East, Africa and Asia, José Manuel Cascajero, in the role.

Svaiter has held the position of chief executive officer (CEO) of Votorantim Cimentos España since January 2018. Prior to that, he worked in Brazil as Votorantim Cimentos’ supply chain director from 2014 and the CEO of its ready-mix concrete subsidiary Engemix from 2010. Earlier, he held management roles at logistics groups VarigLog and Vale.


Finland: Finnsementti has appointed Tommy Ranta as its Operations & Commercial Director.

Ranta has been employed by CRH and its subsidiaries since 2007. He originally started working for Finnsementti in 2007 as an Operating Engineer. He later worked for Jura Cement in Switzerland and then returned to Finnsementti from 2012 in a variety roles, including plant manager of the Parainen cement plant, before eventually becoming the company’s Production Director. He holds an undergraduate degree in economics and a master’s degree in science, economics and business adminsitrtion from Åbo Akademi University in Turku.


Zimbabwe: Khayah Cement has appointed Arnold Zivanayi Chikazhe as its Company Secretary and Legal Advisor. He has acted as the company secretary of the company since May 2022, according to the Sunday News newspaper.

Chikazhe is a registered legal practitioner with over 15 years experience in various sectors, including retail, energy, mining, manufacturing, insurance, construction, health, public and non-governmental organisations both in Zimbabwe and the US. He holds legal qualifications from the University of Texas and the University of South Africa.


US: Fortera has appointed Kas Farsad as its Chief Strategy Officer.

Farsad was the lead inventor of Fortera’s reactive calcium carbonate cement when he worked as the R&D Manager for Calera Corporation in the late 2000s. He worked for PAX Scientific in the 2010s amongst other roles before returning to the renamed Fortera in 2019 as Director, Strategic Development.

He holds a bachelor’s degree in Materials Science and Engineering from University of Michigan Ann Arbor, a master’s degree in Materials Science from San Jose State University and a master of business administration (MBA) from UC Berkeley Haas School of Business.


Argentina: Holcim Argentina has awarded a contract to 360Energy to supply 30,000MWh/yr of electricity from its solar power plants. La Voz del Interior newspaper has reported that 360Energy will supply the energy from its 200MW network via the Renewable Energy Term Market (MATER). This will cover 75% of Holcim Argentina’s power consumption, corresponding to the production of 2.7Mt of cement. This will eliminate 68,600t/yr of CO2.

Holcim Argentina chief executive officer Christian Dedeu said “I am very happy because we are taking a new step in our commitment to zero emissions in Holcim's operations, and we will continue working every day to build progress for people and the planet.”


India: Shree Cement is reportedly planning to raise US$84.4m through the sale of bonds. Reuters has reported that the bonds will mature in five years from their date of issue.


US: Terra CO2 plans to build its first commercial-scale supplementary cementitious materials (SCM) plant in Texas. The plant will have a production capacity of 240,000t/yr. Asher Materials secured an exclusive market license to operate the plant. Terra CO2’s SCM can replace up to 40% of cement content in concrete. Asher Materials will produce the materials from silicate rock from existing local aggregates operations.

Terra CO2 chief science officer DJ Lake said "From start to finish, we've designed a system to create large-scale impact in the real world. Our game-changing production process converts affordable, abundant and local raw materials to cementitious material that meets rigorous performance standards.” Lake continued “True sustainability will come from deep innovations in materials and technology and not from incremental improvements to the existing cement supply chain."


Nigeria: Dangote Cement plans to raise its alternative fuel (AF) substitution rate across its Nigerian operations to 25%. The Punch newspaper has reported that the producer consumed 34,800t of AF during the first half of 2023.

Obajana cement plant head of sustainability Eseosa Ighile said “We are working towards installing AF feeding systems in all our operation lines by 2024.”


Belarus: Belarusian Cement Plant produced 940,000t of cement during the first half of 2023. The figure corresponds to a year-on-year rise of 3.1%. The Respublika newspaper has reported that the company more than doubled its exports of cement to 719,000t – 76% of its production. Russia was the main destination for the producer’s cement exports. Belarusian Cement Plant recorded a capacity utilisation rate of 94% throughout the six-month period.


US: Holcim US has rebranded its businesses in Boston, Massachusetts, to unite them under the Holcim name. Resources News has reported that Lafarge Cement, which operates the Charlestown cement terminal, as well as building materials producer Aggregate Industries, will rebrand as Holcim US.

Holcim US’ Northeast and Great Lakes regional senior vice president and general manager Domenico D'Aqui said "With the integration of local legacy operations into Holcim, the Boston area will see expanded benefits of construction projects made from innovative materials, such as ECOPact reduced-CO2 concrete, that not only build needed infrastructure but also meet ambitious sustainability targets."


Japan: Cement plants consumed 70Mt-worth (50%) of total limestone shipments in Japan during the 2023 financial year, which ended on 31 March 2023. Nikkei Industry Summary News has reported that limestone is the only mineral resource for which Japan is self-sufficient. However, it reported that the country’s cement sector is exposed to effects from the global coal market. Producers expect that the rising price of coal from China may diminish their earnings due to increased costs.


Germany: IKN and KIMA Process Control are planning to work together on optimising energy recuperation and reducing the carbon footprint in clinker production by integrating machine learning software. The collaboration is intended to combine the expertise of KIMA Process in process automation and IKN as a process expert and equipment supplier for clinker production. The synergy should lead to more streamlined and efficient operations and highly reliable top-quality equipment.

In a statement the companies said, “We are excited about the potential of this collaboration to reshape the landscape of clinker production control and setting new benchmarks in the cement industry.”


Uganda: A joint venture of Sunbird Quarry Moroto and China-based West International Holding Cement has begun building its upcoming Moroto cement plant. New Vision News has reported that the plant will cost US$1.2bn and produce cement from locally sourced limestone. The Uganda government said that the plant will generate jobs and help to lower the local price of cement.


Norway: The Ministry of Petroleum and Energy has signed a new agreement with Heidelberg Materials Sement Norge, confirming funding of up to US$14.1m for the producer’s construction of a full-scale carbon capture system at its Brevik cement plant. Under the agreement, Heidelberg Materials Sement Norge will absorb extra costs that have arisen, and retain a larger share of any return on the project. Costs rose due to the Covid-19 pandemic, the Russian invasion of Ukraine and international supply chain pressures.

Nordic Daily News has reported that Heidelberg Materials Northern Europe director Giv Brantenberg said "We are in the process of completing the world's first full-scale plant for carbon capture in the cement industry, and have had great support from the Norwegian authorities throughout the project's many phases. Today's agreement reflects the good cooperation with the Norwegian government, and we look forward to completing this unique facility.”


India: Heidelberg Materials subsidiary Zuari Cement has commissioned a 20t/hr alternative fuel (AF) production line at its 7.1Mt/yr Yerraguntla cement plant. The line includes an UNTHA XR3000C shredder. This will support continuous operations and turn waste to AF in a single step, according to Zuari Cement.

HeidelbergCement India technical director Vimal Jain said “We are passionate about driving environmental progress throughout our business, and the use of AF is one way to do that. But this waste-to-energy feedstock comes at a cost, which is why co-processing makes so much sense. When designing this plant, we needed to ensure versatility to allow for changing market conditions, and an investment in technology that makes commercial sense and is built to last.”


Philippines: Holcim plans for its subsidiary Holderfin to make a tender offer for all remaining shares in Holcim Philippines by 28 September 2023. Altogether, minority shareholders control a 5.1% stake in the producer. The Manila Bulletin newspaper has reported that Holderfin ended its previous tranche of tenders for Holcim Philippines shares on 30 August 2023.


Egypt: Suez Cement says that it has ‘merged its legacy’ with that of parent company Heidelberg Materials by adopting the latter’s name. Specifically, the replacement of ‘cement’ with ‘materials’ is intended to underline its pioneering role in the path to carbon neutrality and digitalisation, according to the company.

Chief executive officer Mohamed Hegazy said “We have always been and will continue to be a company that is much more than cement. We are progressive minds with the ambition to drive transformation. We push the boundaries to strengthen innovation and deepen partnerships with our customers and other stakeholders.”


Saudi Arabia: Meyar Company has bought the Malham cement products plant in Riyadh for US$880,000. Local press has reported that the company will use the facility to target the cement products market in the city of Riyadh. A ready-mix concrete batching plant is also located at the site.


Europe: The EU has awarded a Euro49.9m grant under its Alternative Fuel Infrastructure Facility (AFIF) to Taiwan Cement subsidiary Atlante. The cement group said that Atlante will use the funds to building a fast and ultra-fast electric vehicle charging network in Europe.


US: Çimsa and Sabancı Holding subsidiary Çimsa Americas plans to invest US$82m in the construction of a new 600,000t/yr grey cement grinding plant in the US. Daily Sabah News has reported that the company expects to complete the plant’s construction by the end of 2025.

Çimsa Americas already operates a 300,000t/yr white cement grinding plant in the US.


Nepal/India: Chaudhary Group has signed a memorandum of understanding (MoU) for a strategic partnership with India-based conglomerate Adani Group. According to the MoU, Adani Group will support the Nepal-based cement producer in its distribution of cement into neighbouring states of India.

The Kathmandu Post newspaper has reported that Chaudhary Group’s managing director Varun Chaudhary said "This collaborative effort stands as a pivotal milestone, underlining our commitment to augmenting economic cooperation and trade relations between the two nations.” He added “Through this strategic collaboration, we aspire to fortify the harmonious rapport that characterises the Nepal-India relationship, while actively contributing to the growth and development of the adjoining states."


Australia: Adbri has awarded ABx Group a contract to supply 90,000 – 120,000t of bauxite to its Birkenhead, South Australia, cement plant over a five-year period from early 2024. Business News has reported a ‘conservative’ estimated value for the contract of US$5.4m. ABx Group will supply bauxite from its DL130 mining project. The project commands 13.7Mt-worth of bauxite reserves across three deposits. Mining is due to begin in October 2023. The parties have agreed an undisclosed price for the first shipment of bauxite under the contract.

ABx Group managing director and CEO Mark Cooksey said "This represents a significant milestone for ABx and endorses the suitability of our bauxite for the broader cement industry. It enables both parties to plan for ongoing supply with confidence. Importantly, regular mining operations to supply Adbri will increase ABx's ability to secure additional customers, for which there are active discussions."


Australia: Germany-based Flender has opened a new production and services centre in Sydney, New South Wales. Its product offering will include Flender’s gearboxes and couplings range for industrial applications, including cement plants.

CEO Andreas Evertz said “For both our wind [turbine drives] and industrial business we see enormous growth potential on the continent. To reach the goals of the Paris climate agreement we must not only ramp up renewable energy capacities, but also transform our industries towards sustainability. This includes recycling and establishing a circular economy. Our workshops are perfectly equipped for servicing and refurbishing the existing installed base, not only for our own fleet but all gearbox types in the market.”


US: Texas-based Solidia Technologies has patented a synthetic pozzolan that may be used as a supplementary cementitious material (SCM) in cement production. The product is based on previously low-value materials, including minimally processed oil shales and clay minerals. Solidia Technologies produces the material by various methods, including firing the materials to yield a mix of crystalline components and activatable amorphous phase material. Alternatively, production may also involve the aqueous decomposition of manmade silicates in the presence of CO2.


Australia: Cockburn Cement has mounted a successful appeal against a US$187,000 fine for odourous emissions from its Munster cement plant in Western Australia in 2019. Business News Western Australia has reported that the company had been found guilty of six charges related to emissions violations. In its latest judgment, the court revised the company’s fine to US$159,000. It also granted the company leave to further appeal.


US: Cementos Argos, the cement company controlled by Colombia-based Grupo Argos, has entered into a definitive agreement with Summit Materials, under which they will combine their operations in the US. The platform will have a diversified portfolio and a nationwide geographic presence in complementary markets and high-growth urban areas. It will be present in 30 states.

Summit Materials currently operates across aggregate, cement, concrete, and other businesses in the building materials industry, with assets that include 217 aggregate mines, two cement plants along the Mississippi River and approximately 84 concrete plants.

Argos North America has four integrated cement plants, two grinding stations, 140 ready-mix concrete plants, and a distribution network of eight maritime ports and 10 inland terminals.

The agreement will see Cementos Argos receive approximately US$1.2bn and 54.7 million common shares in Summit Materials. This will make it the largest shareholder in Summit Materials, with a 31% stake. The combination will create a company with combined revenues in excess of US$4bn with approximately US$1bn in earnings before interest, tax, depreciation and amortisation (EBITDA). It will be the fourth-largest cement making portfolio in the US, with a capacity of 11.6Mt/yr. It will also be among the largest aggregates and concrete producers. The two companies expect the combination to unlock estimated annual synergies of at least US$100m, with significant realisation within two years.

Juan Esteban Calle, the chief executive officer (CEO) of Cementos Argos, stated, "This combination reaffirms our commitment to growth in the US market while realising and optimising our intention to list the US business on the New York Stock Exchange as the most efficient way to unlock the fundamental value of Cementos Argos' assets and businesses in that country. Being an active player in a publicly-traded leading building materials platform, with a significant component of aggregates and cement on the world's most attractive market, is a pivotal step in the value generation strategy we launched months ago with the SPRINT program for the benefit of all our shareholders. Cementos Argos' participation in Summit Materials will continue to provide our shareholders with significant exposure to the US market."

Anne Noonan, President and CEO of Summit Materials, said, “Our combination with Argos USA marks a significant milestone as we execute against and accelerate our materials-led portfolio strategy. The transaction will extend our geographic reach into high growth markets, creating a leading cement position nationwide, and bring together two talent-rich organisations to innovate and deliver value-added solutions for our customers."

The transaction is expected to close in the first half of 2024, subject to required regulatory approvals and customary closing conditions.


Brazil: Data from SNIC, the Brazilian Cement Association, shows that cement sales increased by 1% year-on-year in August 2023 to reach 6Mt. From January to August 2023 however, Brazilian cement sales were once again lower year-on-year, falling by 1% to 41.7Mt.

Across Brazil, construction material sales have been impacted by lower disposable income due to inflation, high interest rates and high household debt. However, the New Growth Acceleration Program, a government initiative launched in August 2023, could be a boon for cement sector. It foresees spending of US$280bn between 2023 and 2026. For highways alone, 269 restoration and construction projects are planned and duplication of roads across the country, an investment that could open up opportunities for the use of more economical road solutions, such as rigid concrete pavement.

“The implementation of infrastructure projects with an emphasis on logistics, sanitation and housing could reverse the negative performance of the cement industry recorded until August 2023. Our expectation is that the positive seasonality in sales in the sector will be confirmed in the second half of the year,” said Paulo Camillo Penna, President of SNIC.


US: Data released by the United States Geological Survey (USGS) shows that total shipments of Portland and blended cement, including imports, in the US and Puerto Rico came to an estimated 10.5Mt in June 2023, a slight decrease compared to June 2022. Of the total volume of blended cement reported in June 2023, 4.7Mt (95%) was estimated to be portland-limestone cement (PLC).

For the first six months of 2023, shipments reached an estimated 51.0Mt, a slight decrease from those for the same period in 2022. The leading producing states in June 2023 were, in descending order: Texas; Missouri; California; Michigan; and Florida. These states accounted for 40% of cement produced. The leading cement-consuming states, again in descending order, were: Texas; California; Florida; Ohio; and Illinois. They jointly received 37% of all June 2023 shipments.


Pakistan: The Central Development Working Party (CDWP) has cleared four development projects worth US$528m that are likely to lead to increased cement demand. This includes the Coal Rail Connectivity Project to connect significant coal reserves in the Thar Coal Mines with the existing rail network, including last mile connectivity to the Port of Qasim, according to the Nation newspaper. The project, part of the government’s Pakistan Vision 2025 policy, has been designed to provide reliable and efficient railway infrastructure to ‘break the geographical barriers’ of accessing domestic coal for industrial use, including cement production, which is currently reliant on more expensive imported fuels.

Separately, funding has been approved for a road project to connect the N50 and N70 national highways, to serve as the main route to connect the Central Cities of Northern Balochistan to Southern Punjab. This is expected to raise cement demand in these areas.

 


India: The National Green Tribunal (NGT) has asked the Ministry of Environment, Forests and Climate Change to take necessary actions against what it says is illegal mining carried our without valid environmental clearance in the buffer zone of the Ranthambore Tiger Reserve in Rajasthan.

The call followed an application by Devidas Khatri regarding alleged illegal mining by ACC Cement (now an Adani group company) without environmental clearance and without permission to do so within 10km of the national park and wildlife sanctuary, according to the Times of India newspaper. It was also submitted by Rohit Kumar Tuteja, counsel for the petitioner, that the company continued illegal mining for more than five years, but no action was taken by the Rajasthan State Pollution Control Board.


Spain: A cross-industry group of companies has launched All4Zero, a platform to speed up development of renewable fuels and the CO2 capture in Spain. Representatives from steel-maker ArcelorMittal, oil producer Repsol and cement producer Holcim launched the platform on 6 September 2023 in Madrid, describing All4Zero as "a unique industrial technological innovation hub in Spain, of a private, multi-sector and non-profit nature, which will promote disruptive technologies in the field of renewable fuels, circular materials, CO2 capture and conversion or renewable hydrogen, among others.” All partners share the common objective of net zero operations by 2050.

All4Zero will focus on the scale-up of early-stage technologies developed by private companies, universities, research centres and start-ups, and will allow them to validate their technological developments in real industrial environments, thus bridging the gap between ideas and implementation. Participants will be able to participate in technical conferences and carry out concept tests in the facilities provided by the industrial partners.


Morocco: Data from the Association Professionnelle des Cimentiers du Maroc (APCM) shows that the country produced 1.15Mt of cement in August 2023, 7.6% more than in August 2023. However, during the first eight months of 2023, the country produced 8.1Mt of cement, 0.8% less than the 8.2Mt made during the same period of 2022.


US: Dragon Products Company, a subsidiary of Giant Cement, has announced that it will close its plant located in Thomaston, Maine. The facility, which has been operational for almost 100 years, and has been under Dragon's ownership since 2006, will undergo a gradual shutdown, beginning in December 2023.

Dragon said that the closure had been prompted by the persistent escalation of operating and logistical costs, exerting a negative impact on the Thomaston plant's viability. "Despite our best efforts to adapt and navigate through these challenging circumstances, we have determined that these actions are necessary for the long-term sustainability of our business,” explained Roberto Polit, Vice President of Operations. Phased lay-offs are scheduled to commence in December 2023, with the process anticipated to conclude by the beginning of 2025.

"We extend our sincere gratitude to all employees who have contributed significantly to our plant in Thomaston," added Polit. "Their hard work, dedication, and commitment have been invaluable to our operations. We are also grateful for the support and understanding shown by the local community throughout the years."


Chile: Utility firm Colbun has begun construction of a 9.9MW captive solar photovoltaic plant for Cementos Polpaico’s Cerro Blanco cement plant in the Santiago Metropolitan Region. Colbun and Polpaico Soluciones hailed it as the largest solar self-consumption project in Chile.

The Cerro Blanco solar farm will occupy 12 hectares in the Tiltil commune. It will consist of 15,000 bifacial solar modules mounted on trackers for optimal power generation, with a production output estimated at approximately 21.5GWh/yr.

Colbun’s energy services unit Colbun Soluciones by Efizity will build and operate the solar farm. The companies expect the self-consumption system to commence operation during the first half of 2024. It will complement Polpaico’s existing supply of renewable power, which it has received from Colbun under a long-term agreement since 2018.


South Korea: The Ministry of Trade, Industry and Energy (MOTIE) launched the Carbon Neutrality Grand Consortium on 5 September 2023. It aims to roll-out its US$31m CO2 neutrality technology development project, launched earlier in 2023, across all industry sectors, including cement production. The government will assist companies by investing more than 80% of the total project budget into demonstration projects by 2030.
The Carbon Neutrality Grand Consortium is split into four sub-consortiums: steel; petrochemicals; semiconductors/displays; and cement. Unusually, the results will be made available to companies that are not participating in projects of their own, in order to accelerate the exchange and spread of carbon neutrality technologies and successful outcomes across all sectors.

MOTIE’s Vice Minister Youngjin Jang stated that carbon neutrality within South Korean industry depended on the development of an innovative technologies that enable ground-breaking carbon reductions without disrupting productivity, while also pursuing solidarity and cooperation with other firms to spread the breakthrough technology across the entire industrial ecosystem.