Global Cement News

Pakistan: Faisal Imran Hussain Malik has been appointed as a director on the board of Pioneer Cement in place of Asif Hussain Bukhari. In addition Shafiuddin Ghani Khan has been elected as chairman of the board with effect from 29 September 2012. The Lahore-based cement producer made the announcement in a letter to the Karachi Stock Exchange on 4 October 2012.

Eagle Materials has picked up two cement plants in the US from Lafarge with a combined capacity of 1.6Mt/yr for US$446m. The deal also included six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.

Following our column in August 2012 following an acquisition in India we decided to ask a similar question: how much are American cement plants worth?

Eagle's acquisition now increases its presence in the Midwest and South Central regions of the US, giving it a rough line of plants across the country nearly connecting Lake Michigan to the Gulf of Mexico. As shown in our industry report on the US between 2005 and 2011 cement consumption fell in both the states the plants are located in. Missouri's consumption fell by 45% from 2.82Mt to 1.56Mt, just above the US national average. By contrast Oklahoma's consumption only fell by 11%, from 1.6Mt to 1.43Mt, the fourth smallest decline in the country.

However, Eagle has demonstrated financial health in contrast to the US sector as a whole, reporting a 21% rise in total revenue in the quarter to 30 June 2012 and a 60% rise in operating earnings year-on-year in the quarter to 31 March 2012. The combined operations at the two plants generated about US$178m in revenue during the year ending in June 2012. By contrast Eagle Materials' revenue totalled US$529m during the same period. The plants' additional capacity will increase Eagle's total by about 60%.

Lafarge are still thinking big though, with the proviso that Eagle will supply certain Lafarge operations with cement for four to five years, as well as an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. According to its 2011 annual report North America comprised 11% of Lafarge's cement sales. Lafarge's sales in the US remained flat in 2011. In that year the company's capacity was 12.8Mt with a 12% market share. This picture has started to change in 2012 with a reduced loss in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter followed by volume and sales increases of above 10% in the second quarter.

Back in June 2011 Cementos Argos picked up two plants from Lafarge in Roberta, Alabama and Harlyville, South Carolina for US$760m with a combined capacity of 2.7Mt/yr. As with the Eagle deal the sale included a number of peripheral assets including a clinker mill, cement mixer lorries and a marine port.

Cementos Argos recently put the world average at US$250m/t when publicising the expansion of its Rioclaro plant. The European Cement Association reports the figure at being above US$200m/t on its website. In August 2012, at the time of the potential CRH acquisition in India, the cost of Indian cement production capacity was placed at US$110/t-US$120/t.

Perhaps the question we should ask is how much is a US cement plant worth when it used to belong to Lafarge. Both the Cementos Argos sale and the Eagle deal worked out at US$280/t including all the ancillaries. The actual question we should ask is why has Lafarge chosen these specific plants to sell to a competitor in the US market?

Germany: Loesche has announced that Andreas Huster has joined Loesche Automatisierungstechnik GmbH (LAG) in Luenen as its sales director. He joined Loesche in July 2012.

Huster is 37 years old, married and was formerly responsible for distribution, sales and marketing of automation technology at Miebach group in Dortmund. At Loesche Huster will take over the responsibility for all clients and develop new market potential for LAG. Huster will also support projects for Loesche GmbH in Duesseldorf and their subsidiaries worldwide.

France: Carlos Espina has been appointed as director of research and development for the Lafarge Group, with effect from 1 October 2012. Espina was previously the chief executive officer at ArcelorMittal Méditerranée, a position he had held since July 2009.

He began his career in the UK as a researcher at AEA Technology. In 1995 he joined the research and development (R&D) Centre of Aceralia Corporación Siderúrgica as manager of the product applications engineering department, before becoming vice president of intellectual property, knowledge management and artificial intelligence upon the merger with Arcelor in 2002. Within the Arcelor Mittal Group, he successively held the positions of vice-president in charge of R&D, Europe, and vice-president in charge of R&D, automotive.

Carlos Espina will be based at Lafarge's Research Centre near Lyons, with more than 250 researchers of 12 different nationalities. He holds a degree from Oviedo College of Mines in Spain.

Today's report that cement producers from Taiwan are preparing for new Chinese NOx regulations is yet another reaction to several 'seismic' shifts of government-led change rocking the industry in China. These have included the closure of old, inefficient capacity and significant implementation of waste-heat recovery (WHR) systems. Last week's launch of the Guangdong Emissions Trading Scheme (GETS) is one more.

As reported by Reuters Point Carbon, GETS involves four cement plants from the start and it is the largest of seven such provincial schemes. It is as big and bold as the manufacturing hub that it covers. It includes over 800 manufacturing sites and will regulate the emissions from 42% of all power consumed in Guangdong and 63% of all its industrial emissions. It will be the fifth biggest ETS in the world after those in the EU, Australia, California and South Korea.

While GETS is large, the rate that it will be implemented will be more restrained. There will be three years of testing (2012-2015), an 'improvement period' (2016- 2020) and a proper market from 2020. The scheme's progress will be watched closely - its success or failure could determine the shape of emissions trading schemes (ETS) across China and the rest of Asia.

While the aims of ETS are laudable, they have met with 'mixed' reviews in other parts of the world. In Australia in 2011, there were dire warnings of the potential for job-losses and carbon-leakage, with China itself identified as a probable destination for both.

In Europe there is now a strong claim that the EU-ETS has been ineffective, with carbon prices slumping to under Euro10/credit (~US$13/credit), less than a quarter of projected levels for 2012. In the midst of the downturn Ireland's CRH 'earned' millions of Euros in unused credits. Security has also been a problem for the EU-ETS.

Even GETS, less than a month old, has drawn criticism. Unnamed commentators have suggested that the higher-than-expected prices, US$9.50/credit, (only slightly lower than in Europe), already look like the result of collusion in the market.

With all of these concerns, the immediate demand from the cement producers, China Resources Cement, Sinoma, Taipai and Yangchun Hailuo, looks a little strange. However, local media reports that there are advantages to be gained by buying early. All of the four producers have to buy credits for cement plant projects they are currently working on. They are gambling on the fact that carbon prices can only rise - something that is not expected by analysts.

In addition the producers can gain valuable experience of the scheme before it has to be used 'in anger,' which may give them an operational advantage over others. They also know that, unlike in other parts of the world, the government will not backtrack on its decision. Recent NOx regulations, closure of older capacity and implementation of WHR have all been imposed (or are being imposed) from above. They know that it is better to jump into the deep end than to be pushed.