Global Cement Newsletter

Issue: GCW656 / 24 April 2024

Headlines


Changes are underway in South Asia’s second largest cement sector, with two legal developments that affect the industry set in motion in the past week. At a national level, the Competition Commission of Pakistan recommended that the government require cement producers to include production and expiry dates on the labels of bagged cement. Meanwhile, in Pakistan’s largest province, Punjab, a new law tightened procedures around the establishment and expansion of cement plants. At the same time, the country’s cement producers began to publish their financial results for the first nine months of the 2024 financial year (FY2024).

During the nine-month period up to 31 March 2024, the Pakistani cement industry sold 34.5Mt of cement, up by 3% year-on-year. Producers have responded to the growth with capacity expansions, including the launch of the new 1.3Mt/yr Line 3 of Attock Cement’s Hub cement plant in Balochistan on 17 April 2023. China-based contractor Hefei Cement Research & Design executed the project, including installation of a Loesche LM 56.3+3 CS vertical roller mill, giving the Hub plant a new, expanded capacity of 3Mt/yr.

Pressure has eased on the operating costs of Pakistani cement production, as inflation slowed and the country received a new government in March 2024, following political unrest in 2022 and 2023. Coal prices also settled back to 2019 levels, after prolonged agitation. Pakistan Today News reported the value of future coal supply contracts as US$93/t for June 2024, down by 2% over six months from US$95/t for January 2024.

Nonetheless, cost optimisation remained a ‘strong focus’ in the growth strategy of Fauji Cement, which switched to using local and Afghan coal at its plants during the past nine months. Its reliance on captive power rose to 60% of consumption, thanks to its commissioning of new waste heat recovery and solar power capacity. During the first nine months of FY2024, the company’s year-on-year sales growth of 14% narrowly offset cost growth of 13%, leaving it with net profit growth of 1%.

Looking more closely, the latest sales data from the All Pakistan Cement Manufacturers Association (APCMA) shows a stark divergence within cement producers’ markets. While exports recorded 68% year-on-year growth to 5.1Mt, domestic sales fell, by 4% to 29.4Mt. The association further breaks down Pakistani cement sales data into South Pakistan (Balochistan and Sindh) and North Pakistan (all other regions). Domestic sales dropped most sharply in South Pakistan, by 6% to 5.16Mt. In the North, they dropped by 3% to 24.2Mt. Part of the reason was a high base of comparison, following flooding-related reconstruction work nationally during the 2023 financial year. Meanwhile, the government finished rolling out track-and-trace on all cement despatches during the opening months of the current financial year, and commenced the implementation of axle load requirements for cement trucks. APCMA flagged both policies as potentially disruptive to its members’ domestic deliveries, amid a strong infrastructure project pipeline.

Pakistani producers suffer from overcapacity, but have established themselves as an important force in the global export market. They continue to locate new markets, including the UK in January 2024. Lucky Cement was among leading exporters overall, with a large share of its orders originating from Africa.

On 17 April 2024, the government of Punjab province set up a committee to assess new proposed cement projects, with the ultimate goal of conserving water. Falling water tables are considered a significant economic threat in agricultural Punjab. Besides completing an inspection by the new committee, proposed projects must also secure clearance from six different provincial government departments and the local government. While acknowledging the necessity of the cement industry, the government insisted that it will take legal action against any cement plant that exceeds water allowances.

Pakistan’s cement plants have grown in anticipation of a local market boom. Without this strong core of sales, underutilisation will remain troublesome, especially in North Pakistan where exposure is highest. At the same time, APCMA has given expression to the perceived lack of support affecting production and distribution. For an industry with expansionist aims, new restrictions on its growth and operations can feel like an existential menace.


India: Anandakrishnan Balasubramaniyan has resigned as managing director of Hemadri Cements due to ‘personal reasons and health conditions.’ Balasubramaniyan additionally resigned his seat on the company’s board of directors.

Hemadri Cements appointed Anandakrishnan Balasubramaniyan as additional director and managing director in August 2022.


Pakistan: Fauji Cement raised its sales by 14% year-on-year to US$213m in the first nine months of the 2024 financial year. Throughout the period, which ended on 31 March 2024, Fauji Cement recorded a cost of sales of US$148m, up by 13% from nine-month 2023 financial year levels. Its profit was US$25.3m, up by 1% from US$25m in the corresponding period of the previous financial year.


Australia: Cement Australia has received a US$34.4m federal grant for a kiln upgrade to its Railton cement plant in Tasmania. The upgrade will allow the plant to raise its alternative fuels substitution rate. The project is funded by the government’s Powering the Regions initiative, with total investments valued at US$215m.

Australian Minister for Climate Change and Energy Chris Bowen said “This US$215m investment in Australia’s hard-to-abate manufacturing and mining facilities is about securing the future of high-quality, low-emissions products made right here. Northern Tasmania, Central Queensland and Western Australia have been industrial powerhouses for generations, and the government is ensuring that continues. As global markets change rapidly, we’re supporting Australian industry to not only survive but thrive with our world-class products that support regional jobs across the country.”


Australia: The Australian federal government has granted Adbri US$32.5m for a new front-end engineering and design study at its Birkenhead cement plant. The study will assess the possible installation of a new vertical roller mill and post-production blending system at the plant. InDaily News has reported that the proposed upgrade will increase the plant’s production capacity and help to expand its range of reduced-CO2 cements. The funding falls under the government’s US$260m Critical Inputs to Clean Energy programme, which aims to help decarbonise the Australian economy by 2050.

CEO Mark Irwin said “With the Commonwealth’s support we have the potential to further accelerate the decarbonisation of our operations and products.”


UK: Breedon Group's sales dropped by 5% year-on-year in the first quarter of 2024, according to a trading update from the company. It attributed this to macroeconomic uncertainty and unfavourable weather conditions in the UK. Sales volumes of its materials ‘softened,’ but prices remained ‘resilient,’ partly offsetting the decline. The quarter brought three new acquisitions, including the company’s first in the US. Two scheduled cement kiln shutdowns took place within budget and on schedule.

CEO Rob Wood said "We have laid good foundations for the remainder of the year: progressing pricing, pursuing efficiencies, completing two bolt-on acquisitions and launching our third platform by entering the US market. Although the economic landscape remains uncertain, I am confident our discipline and focus, coupled with our strong customer relationships, will see us deliver against our unchanged expectations for 2024."


Saudi Arabia: India-based software company Mastek has secured a contract for the comprehensive digitisation of production lines at Yanbu Cement’s plant in Yanbu. Capital Market News has reported that the planned optimisation will help to raise the efficiency of the plant. Yanbu Cement previously embarked on a programme of ‘digital and cloud transformation’ with Mastek in 2022. The partners say that their collaboration aligns with Saudi Arabia's Vision 2030 and Smart Industry 4.0 decarbonisation initiatives.


Germany: Holcim Deutschland has broken ground on the construction of a new kiln line and CO2 processing unit at its Lägerdorf cement plant in Schleswig-Holstein. The line will feature an OxyFuel kiln, supplied by ThyssenKrupp. ThyssenKrupp’s OxyFuel technology will assist in the capture of 1.2Mt/yr (nearly 100%) of CO2 from the plant. The partners described the upcoming upgraded Lägerdorf plant as one of the world's first carbon-neutral cement plants.

Holcim Deutschland CEO Thorsten Hahn said "We're laying the groundwork for a sustainable world through cement. Cement is essential for our cities, factories, homes, bridges and beyond. As we transition towards renewable energy, we must also construct the foundations and structures for wind turbines and railway tracks. With our climate-neutral cement plant, we ensure that this vital building material remains accessible without further harm to the atmosphere."

ThyssenKrupp Decarbon Technologies’ chief strategy officer Cetin Nazikkol said “It’s vital to switch to climate-friendly processes. By enriching CO2 by means of the pure OxyFuel technology we’ve developed, we help our customers capture almost all of the CO2 arising in the production process and so reuse it in a sustainable manner. Given that global cement production is more than 4Bnt/yr, we see enormous growth potential for our innovative technology.”


UK: Heidelberg Materials UK has opened a new circular materials hub at its Appleford depot in Oxfordshire. The site will recycle construction waste for use in low-CO2 building materials. The move advances the company’s strategy to conserve natural materials and support the circular economy.

Recycling managing director James Whitelaw said “Recycling, reusing and reducing the use of primary raw materials is crucial to reaching net zero. Our network of recycling hubs will allow us to provide the most sustainable products to our customers through circularity and innovation to enable building more with less.”


Switzerland: The Global Cement and Concrete Association (GCCA) is holding its Innovandi Global Cement and Concrete Research Network (GCCRN) Spring Week at the École polytechnique fédérale de Lausanne (EPFL) campus on 22 – 26 April 2024. 450 delegates from over 40 academic institutions will attend the event, featuring workshops, idea exchanges and progress reviews focused on the decarbonisation of cement and concrete by 2050. Topics include the use of AI, alternative materials and processes, concrete recycling, renewables, kiln electrification and carbon capture.

GCCRN industrial chair and Cemex global research development vice president and Davide Zampini said “If we are to reach our goal of net zero concrete by 2050, then we cannot do so alone. We need to explore as well as harness solutions and collaboration well beyond our industry. That’s why Spring Week is so important.”

GCCRN scientific chair Karen Scrivener said “Everyone here at EPFL is proud to be hosting this year’s Spring Week, anticipated as our largest gathering yet, marking a significant milestone in our journey toward net zero research.”


Kenya: Savannah Cement’s creditors voted in favour of administrator Peter Kahi’s debt reduction plan for the company on 16 April 2024. Kahi’s plan involves leasing out the site of the company’s Kitui plant, while also seeking a buyer for it.

Business Daily has reported that the Office of the Attorney General has declared Kahi's reappointment as administrator of Savannah Cement on 24 January 2024 as invalid.


Qatar: Qatar National Cement Company’s net profit was US$14.1m in the first quarter of 2024, Mist News has reported. This represents a decline of 20% year-on-year from same period in 2023.


India: Star Cement has launched a new clinker line at its Lumshnong, Meghalaya, cement plant. Capital Market News has reported that the line has a capacity of 3.3Mt/yr.


India: Adani Group has enlarged its stake in Ambuja Cements from 67% to 70%. The Telegraph newspaper has reported that the group converted warrants into shares in the producer. As a result, it will invest an additional US$1bn in funding for Ambuja Cements, having previously infused funding worth US$2.4bn.

Ambuja Cements director and CEO Ajay Kapur said “This infusion of funds provides Ambuja flexibility for fast-track growth, capital management initiatives and best-in-class balance sheet strength.”


North Korea: Cheonnaeri Cement has successfully concluded testing of a new calciner at its Cheonnaeri cement plant in South Hamgyong. Korean News has reported that the equipment has expanded the capacity of the plant, which was formerly 1Mt/yr. The company completed the work in three months.


India: UltraTech Cement has concluded an agreement to acquire The India Cements’ 1.1Mt/yr Parli grinding unit in Maharashtra for US$37.8m. The plant will subsequently figure in a US$60.5m growth drive by the group, aimed at adding 3Mt/yr in new cement capacity in Maharashtra. Current on-going expansions and acquisitions are set to raise the Aditya Birla subsidiary’s capacity to 198Mt/yr.


Indonesia: Siam Cement Group (SCG) subsidiary PT Semen Jawa used 24,000t of alternative raw materials in its cement production during the first quarter of 2024. These circular materials included bottom ash, fly ash and slag. This corresponds to 3% of its total raw material usage. Meanwhile, the producer co-processed 15,000t of alternative fuel (AF) during the quarter, representing a 20% AF substitution rate.

SCG Indonesia director Warit Jintanawan said that the developments "Not only enhance production efficiency, but also significantly reduces our carbon footprint. This is a testament to SCG's commitment to supporting Indonesia's climate goals, aiming to reduce greenhouse gas emissions by 32%, aligned with Enhanced National Determined Contributions."


Taiwan: Taiwan Transport and Storage unveiled its first electric truck, manufactured by Volvo Trucks, at a ceremony in Taipei. The unit will transport cement for Taiwan Cement, marking the first use of electric vehicles for construction material transport in Taiwan, according to the Taipei Times.

The electric truck unit will help to reduce aggregate carbon emissions by 32%, according to TTS chairman Koo Kung-yi. "We believe that Taiwanese companies can effectively reduce Category III CO₂ emissions through the use of electric commercial vehicles," Kung-yi said.


Germany: Schenck Process has announced its rebranding to Qlar effective 13 May 2024, as part of its focus on climate-neutral and circular economy solutions. The company will maintain its expertise in weighing, feeding, conveying, milling, and grinding, whilst serving industries including cement and steel.

CEO Dr Jörg Ulrich said "With the rebranding to Qlar, we are linking ourselves to the circular economy, focusing even more on digitalisation and green transformation."

The rebrand will not affect the Schenck Process Food and Performance Materials division in the US, which remains under Coperion's ownership.


Poland: Polish cement producers are set to build carbon capture installations, supported by government policies. After a decline in production from nearly 19Mt in 2022 to about 16.5Mt in 2023, the industry is facing an increase in cheaper imports from outside the EU, particularly Ukraine, and CO₂ emission fees that account for 30% of the cost of 1t of cement, according to the Dziennik Gazeta Prawna newspaper. The EU has also introduced a carbon border adjustment mechanism (CBAM) for imports.

Despite these challenges, the Kujawy cement plant in Bielawy, owned by Holcim, is launching the large-scale implementation of carbon capture and storage (CCS) technology.

Holcim Polska's president, Maciej Sypek, said "The construction of carbon capture installations in our plants will cost between €320m and €400m. We received a €264m grant from the European Commission's Innovation Fund." According to Sypek, the project is currently in the design phase, with construction expected to start in 2025 and operations beginning in early 2028.

The implementation of CCS at the Kujawy plant could potentially lead to an industry-wide adoption of the technology, costing between US$3.7bn and US$4.9bn, according to the newspaper. Holcim Polska plans to liquefy the CO₂ and transport it by rail to a terminal in Gdańsk, where it will be shipped to the North Sea for underground storage. Cement producers are urging the Polish government to appoint a commissioner for CCS infrastructure and to enact legislative changes to support the construction of such installations. They also believe that rapid modernisation of the energy sector needs to occur to support the energy-intensive process of gas capture.


Pakistan: On 18 April 2024, the Sustainable Development Policy Institute (SDPI) and the Policy Research Institute for Equitable Development (PRIED) launched two studies focusing on the decarbonisation of Pakistan's cement sector. The initiative focuses on collaboration and technology sharing to reduce the industry's carbon footprint.

Professor Muhammad Fahim Khokhar from the National University of Science and Technology (NUST) said "The global CO₂ emissions released from the cement sector are 37.4Gt, which is rising at 1.1% per year."

The study by PRIED and NUST showed a 30% increase in cement sector CO₂ emissions in 2020 relative to 1990-2000, reaching 49.6Mt/yr. The study proposed strategies for cement sector decarbonisation, such as alternative fuels, clinker substitution, renewable energy, process electrification, energy efficiency and carbon capture technologies.

According to researcher Saleha Qureshi, the major challenge for decarbonisation is that cement industries in Pakistan rely on over 65% coal in the calcination process. Other challenges identified were lack of regulatory and policy support, absence of performance-based standards, high transition cost and limited incentive available for the transition.


Mexico: Mexico's major cement producers predict modest growth in 2024 as some government infrastructure projects conclude and budget reductions take effect. These companies, including Cemex, Grupo Cementos and Holcim, have benefited from large-scale projects under President López Obrador but now face a tempered outlook.

General construction activity in Mexico grew in 2023, with a 15.6% increase driven by civil works, increasing the construction industry's GDP to US$94bn. However, with the completion of projects like the Mayan Train and anticipated budget cuts, growth expectations have cooled.

The National Cement Chamber forecasts a 2% rise in cement consumption in 2024, reaching 46.4Mt. Cement producers are adjusting strategies, with Cemex focusing on European markets and Holcim investing in plant expansions in Mexico, including a US$55m investment in its Macuspana plant in Tabasco.


China: Beijing-based China National Building Material (CNBM) anticipates its first-quarter losses to increase by more than 50% to US$180m, up from US$72.6m in 2023. The company attributes the increased losses to lower selling prices for its key products, worsening performance of associates, and higher currency losses, despite a decrease in cost of sales. Following a meeting with CNBM, Citi analysts reported a 10% year-on-year fall in demand for the cement sector in the first quarter of 2024, with a forecasted full-year decline of 3%-5%.


Pakistan: Fauji Cement Company (FCC) and DG Khan Cement Company (DGKC) are expected to reveal mixed financial results for the third quarter of the 2024 financial year. FCCL expects a decline in earnings due to increased depreciation expenses from a new cement line, forecasting a quarterly revenue of US$69.7m, down by 3% year-on-year. In contrast, DGKC anticipates improved earnings of US$2.6m, an 84% increase in earnings from the previous quarter, helped by lower repair, fuel and power costs. DGKC's expected revenue stands at US$47.8m, marking a 27% drop. Both companies have noted a sequential decline in local cement dispatches, indicating ongoing market challenges.


Global: The Global Cement and Concrete Association (GCCA) has received nearly 100 applications from worldwide tech start-ups for its Innovandi Open Challenge, which targets the decarbonisation of cement and concrete. This year's challenge is centred on carbon capture, utilisation and storage (CCUS) technologies.

Thomas Guillot, GCCA’s Chief Executive, said "There are already more than 100 CCUS cement industry pilots, projects and announcements in the pipeline across the world – with the world’s first commercial scale carbon capture and storage plant set to complete later this year. Innovation will help our industry to deploy this technology further and faster."

Claude Loréa, GCCA’s Cement, Innovation and ESG Director, said "It’s really encouraging to see nearly 100 applications for our Innovandi Open Challenge and from all parts of the world. As well as the US, UK and India, we’ve received applications from China, Greece and Australia for the first time. It demonstrates the high level of interest in working with our industry to make cement and concrete net zero. We’re looking forward to assessing all the applications, in detail."

The association, alongside over 50 experts from member companies, will now review and shortlist the most deployable technologies, offering shortlisted start-ups access to key industry resources and networks.


Pakistan: The Punjab government has decided to amend the Local Government Act 2022 to remove discrepancies and has called for proposals from all relevant departments. It aims to ensure that all necessary clearances are obtained before approving the establishment of new cement plants, according to Pakistan Official News. Due to water shortages, expansions or new establishments of cement plants must undergo a feasibility study. Committee members will personally inspect sites for the approval of these plants and the Irrigation Department will pursue legal action against any cement plants exceeding prescribed water usage limits.


Cyprus/Canada: Eureka Shipping has announced the construction of a new cement carrier for operation in the Great Lakes, designed to replace two older vessels whilst maintaining the same cargo capacity. The vessel will discharge cargo at rates of up to 1000t/hr.

The carrier is currently under construction by the Holland Shipyard Group in the Netherlands and is scheduled for delivery in 2025. Until then, the MV Sunnanvik will service its trade routes in the region from April 2024.