Global Cement News

Serbia: Claudiu Soare has been appointed the chief executive officer of Holcim Serbia. Soare, aged 42, has been a member of the Holcim Romania team since 2000 and afterwards he became project manager at Holcim Services EMEA (Europe, the Middle East and Asia) in Madrid.

Soare started with Holcim in the ready mixed concrete and aggregates division (RMX & AGG) as a Project Manager in 2000. In 2007 he became technical manager RMX & AGG and in 2011 he moved to Holcim Services EMEA, a shared service centre based in Madrid, Spain. Soare holds a Master degree in Electro-Mechanical Engineering and a MBA.

Liu Ming of the National Development and Reform Commission (NDRC) once again stated the obvious this week: China is producing too much cement.

He made the same warning on overcapacity that has been made all year. Officials from the NDRC have recommended stricter controls on new capacity, faster mergers and acquisitions, elimination of out-dated capacity and faster industry upgrades. Unsurprisingly this is exactly the line that China's Ministry of Industry and Information Technology (MIIT) was hawking in its 12th Five-year Plan (2011-2015) for the country's building materials industry that it released back in 2011.

So what's actually happened since last time Liu Ming played Cassandra?

Back in July 2012, at the time of the half-year financial reports, it looked like Chinese cement producers were facing profit gaps of around 50%. Now it looks worse. Major producer China National Building Material Co (CNBM) has reported a drop in net profit of 40% to US$575m for the nine months to 30 September 2012. Anhui Conch has reported a drop in net profit of 57% to US$632m. China National Materials Co Ltd (Sinoma) has reported a 76% drop in net profit to US$48.8m for the same period. Jidong Cement reported a 83% drop in net profit to US$38.6m.

In 2010 Chinese cement production was 1.87Bt. In 2011 it was 2.06Bt, according to Chinese state-released statistics. From January to September 2012, the country produced 1.59Bt of cement, a year-on-year increase of 6.7%. For the full year of 2012 it is estimated that China will produce 2.8Bt/yr. However, according to the NDRC production growth have fallen to 6.7% in 2012 compared to 11.4% in 2011. Capacity is still rising whilst profits are plummeting.

At the start of 2012 the Chinese Vice Minister of Environment Protection, Zhang Lijun, announced that the ministry plans to introduce stricter rules on NOx emissions from cement plants. At the time it was reckoned that the move could wipe out a third of the industry's total net profits. Then in September 2012, industry reports suggested that the government was now going to set nitrogen oxide emissions to 300mg/m3, below the international standard of 400mg/m3. It was estimated that only about a third of producers would be able to afford the necessary upgraded equipment to meet the requirement. Then, also in September 2012, the Guangdong Emissions Trading Scheme (GETS) was launched, which might offer another way of restraining production.

In summary: profits are tumbling, production is probably slowing and new controls are as-yet unbinding. Yet, perhaps Liu Ming repeated his warning for one particular audience who can make a difference. On 8 November 2012 the Chinese Communist Party holds its 18th national congress to decide the new leadership. Producers like West China Cement are certainly hoping this shakes things up. It recently announced that it was waiting for new infrastructure projects to be approved to swallow up its growing surplus.

US: Vulcan Materials Company has announced four personnel changes as part its process to develop its new leadership team for the future. Danny R Shepherd, aged 61, has been appointed to the position of executive vice president and chief operating officer. He was formerly the executive vice president of construction materials.

Robert A Wason IV, aged 61 and senior vice president - general counsel, will retire from Vulcan at the end of October 2013. He will now assume the role of senior advisor to the executive management team until that time.

Michael R Mills, aged 52 currently senior vice president - east region, has been appointed to the position of senior vice president, general counsel. He will report to Donald M James, chairman and chief executive officer. Mills will also serve as the company's corporate compliance officer.

John R. McPherson, aged 44 and currently senior vice president - strategic planning and business development, has been appointed to the position of senior vice president - east region. He replaces Michael Mills and will report to Danny Shepherd in his new role as executive vice president and chief operating officer.

However bad the multinational cement financial reports get as they tighten their operations remember that it could be worse. For example, they could face the challenges the East African Portland Cement Company (EAPCC) has confronted over the last year. Reuters broke the news this week that EAPCC had widened its loss to US$9.96m due to poor sales, a major plant breakdown and labour unrest. All of this occurred in a construction economy demanding ever more cement.

EAPCC has seemed surrounded by controversy over the last year starting with a conflict of interest issue raised over a change in clinker supply in December 2011. This then led to the removal of the company's directors by the Kenyan government, which in turn led to a strike. In the chaos a worker was shot and wounded. On top of that the report reveals that there was a 'major' breakdown in one of the plant's kilns. It's a wonder that EAPCC didn't make a greater loss in the 2011-2012 year.

Demand for cement in Kenya and in the other countries in the east African region is growing. Data from the Kenya National Bureau of Statistics in December 2011 showed that cement consumption in Kenya rose by 12% in the nine months to September 2011. As reported last week in GCW72, ARM Cement (formerly known as Athi River Mining Ltd) reported a net profit of US$9.71m for the first nine months of 2012. This marks a 328% growth in profit compared to the same period in 2011 when it made US$2.26m. Meanwhile this week it was announced that Ethiopia is about to open its second cement plant in the town of Dire Dawa. More plants are on the way. Over in Tanzania, the Tanzania Investment Centre (TIC) announced that the country's cement deficit surpassed 1Mt since 2011.

As has happened elsewhere in Africa, notably in Nigeria and South Africa, local producers are pushing hard to restrict foreign imports as they grow their own capacity. In September 2012 the East Africa Cement Producers Association (EACPA) made warnings on the issue. The chairman of EACPA at the time was none other than the managing director of the EAPCC. In addition potential investors should take note that Kenya will hold its next general election in March 2013. Over 1000 people died in the protests following the 2007 election as well as the displacement of over 500,000 people.

Given this growth in protectionism, international producers who want to expand are being forced to seek riskier territories. Pakistan's Lucky Cement, a major importer of cement to Africa, is doing exactly this. It announced this week that it is entering into joint ventures in plants in DR Congo and Iraq. However these projects perform, Lucky Cement must be praying that they don't end up looking like the last year that EAPCC has endured.

Trinidad: Trinidad Cement, a subsidiary of TCL Group, has appointed Alejando Alberto Ramirez as a director. The appointment was effective from 12 October 2012. Ramirez succeeds Luis Miguel Cantu Pinto who retired from the board of directors on 5 October 2012. Ramirez was elected on 12 October 2012 at TCL's annual meeting to fill the vacancy.