Global Cement News

Weston is off. The 'will-they, won't they' of the New Zealand cement industry took a more decisive turn this week with the announcement that Holcim New Zealand intends to import cement instead.

Once Holcim's existing cement plant at Westport winds down there will be no more indigenous cement production on New Zealand's South Island. Golden Bay Cement on North Island will be left as the nation's sole cement producer. Instead Holcim now plans to build US$80m on an import terminal and related infrastructure.

Given a previous price tag of US$400m for the Weston project, switching to an import strategy makes sense for Holcim which has had a hard time of late with a poor first quarter following a tough year in 2012. Despite the benefits that the construction sector in New Zealand has seen with the rebuilding following the 2011 Christchurch earthquake, Holcim is thinking of its wider strategy. Although, as one of the largest multinational cement producers, Holcim has a wide supply chain for clinker, Australia reported poor sales in 2012 and it would be an obvious hub to keep New Zealand topped up with sufficient product.

Last week's doubts about the Indian cement market – when Holcim announced major business restructuring in India – may also have an effect as Vicat too has reported problems in the country this week. The question to ask when Holcim releases its half-year results in mid-August 2013 is how much excess capacity does the company have?

Coincidentally, importing cement is one issue that has come up in the UK Competition Commission's on-going investigation into the UK cement industry. An Irish cement importer has alleged that unnamed European cement producers have blocked his attempts to import cement to Ireland. The UK Competition Commission will continue its investigation until late 2013. Whilst we are not suggesting that the New Zealand cement industry has any problems of this kind, as the market adjusts to a higher level of imports it will encounter new challenges.

Saudi Arabia: Tabuk Cement Company has announced the resignation of its director general Isa bin Baissy. He will work at the cement producer until 9 September 2013. His successor, Ali bin Mhmiaa Asmari, has worked with the company since 1996 as head of quarries, then director of the cement plant and deputy general manager.

Half-year results from some of the major global cement producers are starting to present a detour from the usual European doom-and-gloom and optimism for the BRIC economies (Brazil, Russia, India, China and South Africa) of recent years.

Yes, Europe is dragging balance sheets down (particularly certain countries), but some indicators are starting to stabilise following a good second quarter. Very possibly the cost cutting programmes of the multinational cement producers are starting to kick in. Alternatively, perhaps these cement markets have finally bottomed out.

Lafarge has suffered a bad six months with cement sales down by 6%. However, its sales decline in Western Europe has slowed down with the worst news now coming from Central & Eastern Europe. Cemex has reported a better second quarter in 2013 with overall sales up by 4%. It too can show softened declines in its European territories. Italcementi and its subsidiary Ciments Français both saw revenues falling in the half year but either at a reduced rate or with a slowdown in the rate that earnings before interest, taxes, depreciation and amortisation (EBITDA) are declining.

Only HeidelbergCement's results have resisted any direct signs of an improvement in Europe. Overall revenue has remained stable for the half year with its profit up year-on-year. In Europe its revenue reduction has worsened to 4.7% for the half year. However it did observe a 'significant' improvement in cement sales in the UK.

Meanwhile, one of the cement industry's more reliable markets in recent years – India – is showing signs for concern.

As our news roundup this week reports, the country's largest standalone cement producer, UltraTech, had its profits drop year-on-year by 13.5% to US$111m for the most recent quarter and its net sales actually dropped slightly. Holcim has also been active in India with the announcement that it is simplifying its corporate structure to cut costs. In addition Lafarge reported that its market growth in India was 'subdued', considerably down from the 24% growth in cement sales seen in that country in the first half of 2012.

The news from UltraTech and Lafarge suggest that the rate of growth of the Indian cement industry is slowing. The unanswered question from Holcim's activity in India is whether they are doing it to counteract European losses or to counteract a loss of profitability in India.

Holcim's half-year results will make interesting reading when they are released in mid-August 2013 and may help to decide whether the worst is over in Europe.

India: JK Cement has appointed Shri Jagendra Swarup as an additional director on the board of the company until its next annual general meeting.

Sri Lankan cement demand fell in the first half of 2013. Yet this doesn't seem to be stopping the cement industry's slow recovery following the civil war that ended in 2009.

As reported by Sri Lankan media around the launch of Holcim Lanka's 2012 Sustainability Report, the local cement industry has seen volumes fall by 7% but this is expected to improve in the second half. Tokyo Cement, a grinding plant operator, confirmed a similar drop in the first quarter of 2013.

Despite the talk of downturn so far in 2013, Tokyo Cement has announced plans for a 1Mt/yr cement plant costing US$50m complete with its own captive biomass power plant. In addition, plans have emerged of a joint venture involving Pakistan's D.G. Khan Cement to build a grinding plant at Hambantota in the south of the island. Costing US$15m, the plant is intended to process exports to South Africa and Kenya.

The explicit intention to produce clinker in Pakistan and then grind it in Sri Lanka before export to a third destination makes an interesting notion. The Pakistan cement producer may benefit from being able to export cement from Sri Lanka with the added security of knowing that the grinding plant is located in a growing market itself. A helpful strategy given Pakistan's cement production overcapacity.

The Hambantota project is also noteworthy because another Pakistan-based company, Thatta Cement, announced in April 2013 that it had signed an agreement with the Sri Lanka Ports Authority to a build a grinding and bagging plant at Hambantota. Also in 2013 the Nepali entrepreneur Binod Chaudhary submitted a US$75m plan for a cement plant in the north of the island.

Of course all of this appears miniscule in comparison to the level of investment Semen Indonesia has chalked up to spend between now and 2016: up to a whopping US$2bn.

Elsewhere in the news this week the price of extending a US Environmental Protection Agency (EPA) deadline has revealed itself to be US$1.5m. Lafarge North America has succeeded in pushing back pollution controls at its Ravena plant by over a year in exchange for interim limits and an investment in air pollution projects in the local community. It's not a fine but the announcement follows other pollution-related payments at cement plants run by Holcim and Ash Grove. Let's hope that any new plants in Sri Lanka avoid these kind of payments.