Global Cement News

US: Chairman and CEO Doug Oberhelman will retire from Caterpillar on 31 March 2017. The company’s board of directors has elected Jim Umpleby, currently a Caterpillar Group President with responsibility for Energy & Transportation, to succeed Oberhelman as CEO.

Umpleby, a 35-year veteran of the company, will join the Caterpillar Board of Directors and become CEO effective 1 January 2017. He joined Solar Turbines in San Diego, California in 1980. Solar, a wholly owned subsidiary of Caterpillar, is a manufacturer of industrial gas turbine systems. Early in his career, he held numerous positions of increasing responsibility in engineering, manufacturing, sales, marketing and customer services. Umpleby lived in Asia from 1984 to 1990 with assignments in Singapore and Kuala Lumpur, Malaysia. The Caterpillar Board of Directors elected Umpleby a Caterpillar Vice President and President of Solar Turbines in 2010. He was named Group President and a member of Caterpillar’s Executive Office, effective from January 2013.

Germany: The Supervisory Board of KHD Humboldt Wedag International has appointed Gerold Keune as chief executive officer. He replaces Johan Cnossen who resigned with immediate effect for personal reasons in March 2016.

The European Commission’s decision to investigate Duna-Dráva Cement’s (DDC) purchase of Cemex Croatia sticks out in a busy news week. There have been a few noteworthy news stories this week from the Indonesian government making preparations to fight overcapacity, LafargeHolcim retreating from Chile, Cemex restructuring its management in Colombia after investigations into a land deal and the announcement of merger plans between two of the larger refractory manufacturers. Yet the commission’s probe is a response to what may be in effect a ‘land grab’ by DDC. How on earth did HeidelbergCement and Schwenk, the joint-owners of DDC, think they were going to pass this one past the relevant competition bodies?!

As the commissions describes it, the “proposed transaction would combine Cemex Croatia, the largest producer in the area, and DDC, the largest importer.” So far, so bad. Then add the observation that Cemex Croatia and LafargeHolcim control all the cement terminals in ports along the Croatian coast. Cemex has three cement plants in the south of the country with no nearby competition. Giving the owners of DDC those assets ties up the market southern Croatia nicely. Understandably, the European Commission has concerns.

Croatia has five cement plants. LafargeHolcim runs a 0.45Mt/yr plant at Koromačno and Nasicecement run a 0.6Mt/yr plant at Nasice. Cemex’s three plants are all in the south near Split within about 10km of each other. When Global Cement visited in late 2014 Cemex Croatia told us that the plants were so close together that the company considered them as one plant. The sites also share one quarry for their raw materials. Only one of three plants, Sv Juraj the largest, has a bagging unit and Sv 10 Kolovoz was mothballed due to poor market demand. Together the plants have a cement production capacity of 1.92Mt/yr. This gives Cemex 65% of the market by production capacity.

Describing the three plants as one certainly makes sense for a company that might have been considering selling them. However, it is a fair comment given the close proximity of the plants to each other and the joint-capacity below that of some of the larger single site multi-kiln plants around the world. In this sense, the real questions for the European Commission will be how much of a dent to competition will it make to hand over the area’s main importer to the area’s main producer?

Graph 1: Cement consumption in Croatia, 2011 - 2015 (Mt). Source: Croatian Bureau of Statistics.

Looking at the national cement market since 2011 in Graph 1 using data from the Croatian Bureau of Statistics, sales volumes fell to a low in 2013 and have picked up since then, although not to the same levels. Prior to this cement sales halved from 2008 to 2013. Under these kinds of conditions Nexe Grupa, the owner of Nasicecement, filed with pre-bankruptcy settlements in 2013. HeidelbergCement expressed interest in the cement assets around this time, although nothing eventually happened. Imports of cement grew by 11% year-on-year to 312,000t in 2015 from 280,000t in 2014. This compares to a 1% increase to 2.36Mt in domestic cement sales in 2015.

As the commission suggests, combining the region’s biggest producer and its biggest importer seems like a recipe for reduced competition and inflated prices. This could be mitigated, in theory, if DDC decided to flood the region with imports from HeidelbergCement’s new assets from Italcementi once it completes its purchase of that company. Although a dominant player in a region undercutting its own prices seems far fetched. Theoreticals aside, it seems very unlikely that the European Commission will let the purchase go ahead without taking some sort of action.

Jamaica: Chris Dehring has resigned as chairman of Caribbean Cement with immediate effect. He was appointed chairman of Caribbean Cement in October 2014, months after joining the board of its parent company, Trinidad Cement, according to the Jamaica Observer. He has left the cement producer to commit to his next business venture in broadcasting. Previously, Dehring founded the Dehring, Bunting and Golding investment bank, and served as managing director of the 2007 ICC Cricket World Cup, chief marketing executive of the West Indies Cricket Board, manager at Citibank NA and chairman of LIME Caribbean/Cable & Wireless.

News from the Democratic Republic of the Congo (DRC) this week: Lucky Cement has nearly finished its new 1.2Mt/yr cement plant. The US$270m project is due to start commercial operation in October 2016, according to a report by Bloomberg. The news is fascinating because it marks the opening up of central sub-Saharan Africa to the cement industry and it puts the boots of Pakistan’s Lucky Cement on the African continent in a big way.

The Nyumba Ya Akiba plant is a 50:50 joint venture between Lucky Cement and a local conglomerate Groupe Rawji, with financing supplied from a group of international development agencies. Originally proposed in 2013 the plant is located in Kongo Central province in the far west of the country between Kinshasa and the port of Matadi near to the connecting main road and railway line. The kit for the plant was ordered from FLSmidth in 2014 for Euro68m, including crushers, pyro processing equipment and vertical mills for raw meal, coal and cement grinding. An overview from the International Finance Corporation also added that the plant intended to cut a deal to import South African coal via the railway from the coast. Limestone and clay will come from a captive quarry. Incidentally, FLSmidth reckoned in 2015 that the project was the first new cement plant in the country in 40 years.

From Lucky Cement’s perspective the project makes sense given the bad reaction it has had trying to import its cement into western and southern Africa. Local producers recoiled from cheap imports along the coast and then lobbied their governments to block them. So, putting down manufacturing roots in a target country with a local partner makes it that much harder to block additional imports. It may or may not be importing its own clinker from somewhere else to supplement local demand but it is definitely providing local jobs and supporting local development. Lucky Cement’s previous international adventure of this kind was the opening of a cement grinding plant in Iraq in 2014.

Naturally, like buses, one waits ages for a cement plant to be built and then two turn up at the same time. South Africa’s PPC is also building an integrated cement plant in the DRC at Kimpese, in the same province as Lucky Cement’s plant. PPC’s half year report to March 2016, released in September 2016, mentioned that its 1Mt/yr plant was 83% complete with all civic and structural work complete. Commissioning was intended for the end of 2016 with cement ready for sale in early 2017. It is being built by Sinoma. The cement producer already has a sales depot in Kinshasa and it exports 32.5N and 42.5N cement from South Africa to the territory. Given PPC’s falling revenues from cement in South Africa and growing revenue elsewhere in Africa the opening of this plant will be keenly awaited.

The local demographics may answer whether the DRC can support two new cement plants. The country’s cement consumption was just 24kg/capita with a gross domestic product (GDP) per capita of US$490 in 2015. These are some of the smallest figures in the world. A feasibility study ahead of the Nyumba Ya Akiba plant estimated that the country would have a demand of 1.8Mt/yr by 2015 compared to a local production capacity of under 1Mt/yr. Nature, and markets, abhor a vacuum. Lucky Cement and PPC are about to fill it.