Global Cement News

As 2012 draws to a close the challenges posed by the Australian carbon tax to the Australian cement industry are starting to show. First, Holcim Australia announced it was to lay off 150 staff. Then Boral released the news that it was planning to cut 90 jobs at its Waurn Ponds cement plant.

Following years of debate the Gillard government introduced the Clean Energy Act in July 2012. Heavy polluters were initially charged US$23/t of CO₂ emitted, more than twice the cost of similar schemes in Europe where it is US$10/t. A key criticism of the scheme was that it would damage the Australian domestic cement industry with cheap imports. However the Australian government cushioned the move with compensation packages for major polluters, including cement producers, currently set to last five years.

Although the Australian cement industry hasn't totally collapsed, with the loss of 1800 jobs as the Australian Federal Opposition warned of in 2011, imports have been favoured in recent months. Boral's suspension of clinker production at Waurn Ponds will increase imports. The change will result in 25-30% of Boral's clinker being imported. It's worth noting that Boral pointed out in its press release that this was 'in-line' with the Australian industry.

Adelaide Brighton, the country's third biggest producer after Holcim and Boral, may not have laid anybody off but it has secured a 10-year supply of foreign clinker. On 5 December 2012 the building materials producer announced that it was going to a buy a 30% stake in Malaysian white clinker and white cement producer, Aalborg Portland Malaysia. In the accompanying press statement the company's chief financial officer explicitly blamed the carbon tax as one of the reasons for the acquisition.

Whether the job losses at Boral and Holcim can be totally blamed on the carbon tax remains to be seen. Boral's second-half profit for the year ending 30 June 2012 suffered a fall of 59% to US$35.7m. Holcim noted weaker demand outside of mining regions for the third quarter of 2012. By contrast, Adelaide Brighton reported steady gains in its half-year report for 2012 although cement sales only increased 'marginally'. Elsewhere in its report Adelaide Brighton stated that it would cope with the impact of the carbon tax by reducing reliance on domestic manufacturing. These can hardly be comforting words for the Australian cement industry.

US: On 7 December 2012, The Monarch Cement Company elected Steve Sloan to serve on the board effective immediately to fill the unexpired term of independent director Richard N Nixon, whose resignation was effective 31 October 2012.

Sloan, aged 51, moves to the board of the cement firm with 17 of years experience in the aggregate and ready-mixed concrete industry. He has served for many years as the President and CEO of Midwest Minerals, Inc, headquartered in Pittsburg, Kansas. His current responsibilities include oversight of the financial, production, sales and regulatory affairs of Midwest Minerals' ready-mixed concrete plant and 19 aggregate quarry operations.

Monarch said that Sloan has the experience and skills to provide exceptional insight and judgment relative to corporate governance, corporate strategy, budgeting, banking, financial reporting, administrative functions and risk management.

Sloan will be a non-employee member of the board and will participate in the board's compensation policy and practices for non-employee directors. His term as an independent Class I Director will expire at the Annual Meeting of Shareholders on 9 April 2014.

South Korea: French cement maker Lafarge is looking to sell its controlling stake in its South Korean subsidiary Lafarge Halla Cement Co, according to South Korean online media Edaily. The French company, which controls about 90% of its Seoul-based unit, expects to raise around US$651m in proceeds from the divestment, for which it has picked Lazard and HSBC's South Korean arm.

Lafarge, which has been offloading non-strategic assets in a drive to push its debt below US$13bn from US$16bn, has not commented on the report. The move follows the announcement in November 2012 that Lafarge and Anglo American would sell a portfolio of its UK operations to Mittal Investments for US$439m, and the sale of two of Lafarge's cement plants in North America to Eagle Materials for US$446m in September 2012.

US: The US Environmental Protection Agency (EPA) has sent final revisions to its Portland cement sector air toxics and criteria pollutant emissions rulemaking for White House Office of Management and Budget (OMB) pre-publication review, according to industry sources. This could indicate that the agency might meet a looming 20 December 2012 consent decree deadline for issuing the proposal.

Industry sources say that the rule, which will revise EPA's 2010 maximum achievable control technology (MACT) standards for air toxics emissions and a related new source performance standard to cut criteria pollutants, was received at OMB either on 4 or 5 December 2012, although an EPA spokeswoman declined to say whether the rule has been sent for OMB review. She only said that the agency was, "Working on the rule and (plans) to finalise by 20 December 2012."

The 20 December 2012 deadline stems from a settlement with the Portland Cement Association (PCA) and others in the industry to propose a revision to the rules, a response in part to industry petitions for reconsideration. Cement manufacturers claimed that the 2010 rules' particulate matter (PM) limits were not achievable, among other concerns.

In addition to addressing the reconsideration petitions and other aspects of the settlement, the rule will also respond to the US Court of Appeals for the District of Columbia Circuit's December 2011 ruling in PCA v EPA remanding the rule to the agency. The court found that EPA had failed to reconsider how a related incinerator air rule may potentially alter the cement rule's emission limits and that the agency failed to give 'sufficient notice' of its final standards for open clinker storage piles.

In the 22 June 2012 proposed revisions to the rule, the EPA proposed to weaken the particulate matter (PM) limit for existing kilns from 18.14g/t (0.04lb/t) of clinker to 31.75g/t (0.07lb/t) of clinker and the limit for new kilns from 4.5g/t (0.01lb/t) of clinker to 9.0g/t (0.02lb/t) of clinker. The EPA also proposed to extend the MACT's compliance deadline to 9 September 2015, saying, "We believe that this date would require compliance 'as expeditiously as practicable'" as required by the Clean Air Act.

Several environmental groups have argued that the revisions are unlawful, both exceeding the changes required by the DC Circuit's narrow ruling and watering down the cement standards for 'unknown reasons.' In comments made on 17 August 2012 regarding the proposed reconsideration the Natural Resources Defense Council, Earthjustice and other environmental groups said that the compliance delay is arbitrary and capricious given that EPA failed to adequately justify it. They added that the delay, "Will greatly exacerbate the harm that EPA already has caused and the suffering that ordinary Americans have had to endure," given that the EPA was supposed to update the cement MACT in 1997.

Update: The White House Office of Management and Budget (OMB) website shows that the OMB received the revised EPA MACT standards on 6 December 2012.

Egypt: Production at Misr Beni Suef's cement plants was stopped for the second time in two months on 6 December 2012 due to shortage in natural gas supply. The company has reported that the lack of fuel has led to a loss of approximately US$16.5m and that it may lead to the dismissal of some of its workforce if continued.

Misr Beni Suef's managing director Farouk Moustafa said that the company had sent a letter to the Egyptian President Mohamed Mursi seeking a solution to the gas supply cut but that no response had yet been received.