Global Cement News

The small cement industry of Mozambique, in south west Africa must be an interesting place to make cement. On one side the country's producers, like their more vocal South African counterparts, have been fighting off cheap imports from Iran, Pakistan, China et al. On the other side of the coin though, Mozambique has growing domestic demand and is within striking distance of growing markets further into Africa, like Malawi and the Democratic Republic of Congo (DRC).

With the announcement this week that there will be not one but two new integrated cement plants in the country, bringing over 2Mt/yr of new capacity, everything should be set fair for the coming years then, shouldn't it? Domestic production will rise, the price of local cement will fall as a result, competition from imports will drop off and money will be made from new exports.

Except that might not happen. Before the announcement of these two plants, (one of which does not state a capacity), there was around 5.5Mt/yr of grinding and integrated capacity either currently active in Mozambique or due to come onstream in 2015. With the new projects this rises to over 7.5Mt/yr.

The desirable chain of events described above starts to break down due to the fact that domestic demand in Mozambique, while rising, is not currently anywhere near as high as domestic supply. The United States Geological Survey estimated that the country produced just 1.2Mt/yr in 2012. Data for 2013 and 2014, though unavailable, is highly unlikely to show a three-fold increase. Indeed Insitec, a minority shareholder in Cimentos de Moçambique, predicted in 2014 that demand for that year would rise to just 1.5Mt, before hitting the dizzying heights of 1.8Mt in 2018 – And that's still three years away!

So what are the options? Option 1: Some or all of the planned and mooted cement plants will fail to come to fruition. Option 2: Some or all of the plants will be built but will operate at reduced capacity and/or on a campaign basis. Option 3: The Mozambican cement industry becomes a regional powerhouse and starts to export to its neighbours.

Option 1 is certainly possible. Limak Group, one of the parties linked to the new projects, is a Turkish cement producer that is inexperienced outside of Turkey. There has also been a lack of information on the progress of projects by Austral Cimentos ('coming on stream in 2015'), Star Cement and Consolidated Building Materials, although a lack of progress reports does not necessarily imply 'no progress.'

Option 2 is more likely, as some producers already operate on a campaign basis. InterCement's plant at Nacala, formerly an integrated plant, currently operates only as a grinding station. Option 3 is also possible, with Malawi particularly lacking in cement production facilities.
In reality a combination of all three 'Options' is the most likely outcome. However, this will lead to Mozambique becoming yet another player in an increasingly busy African cement market. The desire for self-sufficiency in cement production, a common goal for the region's governments, can easily lead to over-estimates of local demand growth, with resultant over-capacity. Of course the expectation that all African countries can get rid of this extra cement capacity via exports will ultimately backfire.

In southern Africa we already have South Africa exporting. Angola declared 'cement self-sufficiency' in October 2014 and banned imports at the start of 2015. Zambia, Botswana, Zimbabwe and DRC all have large-scale Dangote and/or PCC projects near completion or in production that will greatly reduce their need for imports. Meanwhile, further north, Nigeria is already a gigantic producer and significant cement exporter. Cameroon has recently banned imports and Ghana is thinking of doing the same. Over in the east of Africa, Ethiopia's (and the rest of that region's) rapidly-developing situation was covered in this column just two weeks ago.

Finally, in the north of Africa, Algeria has declared its intention to be self-sufficient in cement by 2016. This news must have 'gone down like a lead balloon' in Italy, Spain and Greece, which have been reliant on north African markets after the bottoms fell out of their own economies. In the north east, Egypt has different problems at present, also described previously. It needs fuel not cement!

So where does this all lead for regional cement dynamics in Africa? Well perhaps the situation in India points the way. There, as in Africa, local and regional producers with the desire to expand grew from their local bases and eventually overlapped. Against a backdrop of lower-than-expected demand, the country now has overcapacity. This has resulted in smaller producers being acquired and leaving the market.

Could this eventually happen in Africa? Only time will tell. However one thing is certain: It's just not possible for every country to export to every other country!

Belgium: Daniel Gauthier, CEO of Western Europe-Africa and member of the managing board of HeidelbergCement, has been elected as president of CEMBUREAU for a two-year term after having completed his mandate of vice president over the last two years. He takes over from Peter Hoddinott, executive vice president of performance and member of the executive committee at Lafarge. In addition, Gonçalo Salazar Leite, CEO of Secil, has been elected as vice president of CEMBUREAU for a two-year term.

"The industry must now build upon the accomplishments of 'The Concrete Initiative," said Gauthier. The initiative was launched one year ago. "Concrete is essential to Europe's future, providing the buildings and infrastructure that society needs, as well as growth and jobs. The circular economy, competitiveness and climate change will also remain at the forefront of CEMBUREAU's activities."

"With the election of Gauthier, CEMBUREAU and the priorities of the european cement sector are in excellent hands," said Hoddinott. "He will advance and reinforce the agendas of putting the cement industry forward as a solution provider, where concrete can fulfill both the aspirations of the end users of construction and act as a partner in fulfilling the needs of policymakers."

"I take this opportunity to thank Peter Hoddinott for his commitment to the Association over the last two years," said Koen Coppenholle, CEMBUREAU chief executive. "We are now at a turning point. After a protracted period of negative growth, Europe is getting back on its feet. Indeed, our 2014 activity report shows some glimmers of hope for our sector."

Compared to 2013, 2014 cement production in the CEMBUREAU member countries saw a very moderate recovery, rising by 0.3% year-on-year to 235.5Mt after the drops recorded in 2013 and 2012 (1.4% and 8.2% respectively) and having fallen by 27% since 2007. Developments in cement demand were in line with the upturn in the general economic and construction environment, particularly over the second half of the year, reflecting somewhat improved sentiment and activity, despite tight budgetary conditions in many member states. Global cement production has been estimated at 4.3Bnt in 2014, translating into a 6.7% increase compared to the 4Bt recorded in 2013. The CEMBUREAU member countries accounted for 5.5% of global production, with China representing 56.5%, compared to 58.3% in 2013. Without taking into account China, global cement production increased year-on-year by 11.3%.

This week brought the news that, following testing by the Food Safety and Standards Authority of India (FSSAI), some 27,402t or US$49.8m of Nestlé's Maggi noodles had to be recalled from the market due to allegedly high levels of lead. But what do you do with 27,402t of noodles deemed unsafe for human consumption?

The solution was incineration. Five cement plants will take 40 days, which started on 9 June 2015, to consume all of the noodles as an alternative fuel. "This was the most environment-friendly solution to destroy the recalled noodles," said Luca Fichera, executive vice president of Nestlé's supply chain in India.

India's fuel supply is notoriously unreliable. Coal is the dominant fuel used for cement and power production in India, however, supplies have been inconstant in terms of both quality and quantity for some time now. To shore up the coal supply, the government cancelled, reallocated and auctioned 214 of the 218 coal blocks in India, starting in September 2014. According to local media, Coal India, which still operates most of the blocks, is now expected to increase its coal production capacity by as much as 60Mt in 2015, following 7% production growth in the 2014 - 2015 financial year. However, there is still a major coal shortage in the country and recent reports by India's coal ministry suggest that the new coal linkages will increase coal costs. The new coal linkage process will see sales go via an auction system instead of a static price. Coal costs for cement producers are expected to rise by as much as 25% as a result.

Given India's long-standing fuel supply problems, its cement producers may wish to learn from the use of Nestlé's Maggi noodles as alternative fuels in cement plants. Instead of viewing the coal shortage as a challenge, it might instead be considered an opportunity to increase alternative fuel use, reducing costs and moving to more environmentally-friendly cement production. In addition to the standard industrial, municipal and household waste, among others, India might look to use some of the large quantities of waste biomass that must surely be produced from its agricultural sector. Like the game, 'Hungry, hungry hippos,' India's cement plants could consume a wide variety of nearby wastes in place of coal.

Just one week after Dangote started trial production at its new Mugher cement plant in Ethiopia it announced that it would be doubling capacity at the site. Upgrade work is slated to begin before the end of 2015, according to Nigerian media.

The move shows how much potential Ethiopia is seen to have for the cement industry. With a population of around 90m, it had a cement production capacity of 9.7Mt/yr before the new 2.5Mt/yr Dangote plant comes on line, according to Global Cement Directory 2015 figures. Including the new Dangote plant and even at 100% capacity utilisation this would place cement consumption in the country at 135kg/capita. This is a low figure internationally and hence the continued interest in new capacity. Subsequently, a large number of projects have been rumoured and mooted in Ethiopia over the years. However, many of these publicised projects then fail to make it to construction.

Mebrahtu Meles, the Minister of Industry, said that there were 18 companies engaged in cement production at the 7th Africa Cement Trade Summit that took place in Addis Ababa in April 2015. Meles placed the installed production capacity at 11.2Mt/yr (including the Dangote plant) with the expectation that this will increase to 17.15Mt. However, these cement plants are only producing 5.47Mt/yr, giving the country a capacity utilisation rate of below 50%. This too is low by international standards (60% or more). Cement consumption was placed at just 62kg/capita in 2014.

At the same event, the Ministry of Industry revealed that it was working on a national Cement Industry Development Strategy from 2015 to 2025. The strategy will tackle local industry issues such as unavailability of locally-produced packaging materials, poor transport links, high costs of production and a limited market. Key targets include stimulating cement demand to 12.22Mt/yr by 2020 by moving to concrete road construction and raising capacity utilisation rate to 75% by 2017 and to 80% to 2025.

Despite the publicity Dangote isn't the only player creating new capacity in Ethiopia. Habesha Cement is set to open its 1.4Mt/yr cement plant near to Addis Ababa in 2016. Habesha also has an international angle, given that South African cement producer PPC purchased the majority stake in Habesha Cement in the autumn of 2014 following the project's difficult financial history.

The new Dangote plant predates the country's new cement industry strategy but the upgrade plans demonstrate confidence in both the market and the government's plans. To meet its targets though the country is going to need to increase both its capacity utilisation and build more production capacity. Although muted from previous pronouncements the current target relies on Habesha Cement building its plant and the capacity utilisation rate rising from 50% to at least 75%.

South African weekly newspaper, M&G Africa, has described how Africa faces an infrastructure 'apartheid' whereby 44 of the continent's 58 countries share just 25% of the continent's infrastructure. Building things in Africa costs more because of this infrastructure deficit and it hits cement capacity utilisation rates as well. Ethiopia is one of the region's richer countries in terms of gross domestic product (GDP) but the same issues apply. Hitting its targets for the cement industry may be hard.

US: FCT, the rotary kiln pyro-processing company, is pleased to announce that Adriano Greco has joined the team at FCT as Global Sales Director, based in the United States.

Mr Greco is known to many in the cement industry through his previous activities as Managing Director of Greco and as Sales Director for Gebr. Pfeiffer. FCT said that his experience and professionalism would be 'invaluable as FCT extends its reach to the markets across the globe.'

FCT already has operations in Australia, United States, Europe, Middle East and Canada and continues to expand with projects in every continent.