Global Cement News

Striking news from Libya this week with the announcement that an investor with international backing wants to buy the majority stake in the Libyan Cement Company.

Libya holdings owner Ahmed Ben Halim is in the process of buying out the Austrian Group Asamer that originally bought a majority share for US$145m back in 2008. Most of the remaining share was owned by the Economic and Social Development Fund. Taking over the company now seems bold from a European perspective or Ahmed Ben Halim got a very good price. No financial information regarding the deal has been made public.

Libya has remained politically unstable since the civil war in 2011. According to the Libyan Herald, following the war a strike at the Libyan Cement Company's plants for lost wages stopped production. Since then two of the three cement plants the company runs in east Libya near Benghazi have remained shut due to their proximity to fighting with the Ansar Al-Sharia militia. Before the civil war in 2011 the Libyan Cement Company had a combined cement production capacity of 6Mt/yr almost half the USGS estimated production for the entire country in that year.

The Libyan Cement Company's plants are all located in the east of the country under the nominal control of the Council of Deputies based in Tobruk. Its two plants in Benghazi have remained shut due to their proximity to fighting with the Ansar Al-Sharia militia. A third plant near Derna has also had security issues. Halim told the Financial Times that he was not 'crazy' to be investing at this time. "We have a long-term strategic plan" he said, "that Libya's going to rebuild its infrastructure. And a key element of this is cement." If he can hold out until the rebuilding starts then he may just be right.

Meanwhile across the border in Egypt, Minister of Supply Khaled Hanafy announced this week that cement prices had remained 'stable' for the fifth month in row. Some commentators placed improved energy supply security at the heart of this situation allowing producers to build up inventory. However, given the situation in Libya, it is worth considering what will happen once Libyan demand for cement does pick up both in competition for energy supplies like coal and a keener export market.

Finally, our editorial director Dr Robert McCaffrey was at the IEEE-IAS/PCA Cement Conference in Toronto, Canada this week. Here's his snapshot of PCA economist Ed Sullivan's forecast for future US cement supply and demand.

Ed Sullivan's forecast for future US cement supply and demand, at IEEE in Toronto. pic.twitter.com/RUoT7uHGtg

— Robert McCaffrey (@DrRobMcCaffrey) April 28, 2015

The UK London Underground has 'mind the gap' as its well-known warning phrase to prevent passengers falling between the platform and the trains when boarding. The favourable supply gap Ed Sullivan is talking about in US will be one cement producers will definitely not want to miss.

Ireland: CRH has said that its Group Finance Director - Maeve Carton - will become the company's new Group Transformation Director. The position is a new strategic group function within the company and Carton's new role will start in January 2016.

As Group Transformation Director, she will identify and implement the optimum financial and business model for the group in the years ahead. She will report to, and work closely with CRH's Group CEO Albert Manifold, and will continue to contribute directly to the board as an executive director.

The building materials group said that a search to appoint a new finance director for the group will start shortly. It is hoped that this process will be completed by the end of the year. Carton will continue as finance director until her replacement has been appointed, which will ensure an "effective transition process".

Poland: Lafarge has appointed Jacek Patyk as new director of the Malogoszcz cement plant. He will replace Miroslaw Majchrowicz, who will be in charge of Lafarge's cement plant in Beocin, Serbia

Cameroon announced this week that it intends to ban imported cement to aid the sales from the new Dangote owned cement plant in the country. Readers should note that Dangote is a Nigerian-based company. Protective legislation such as this should come as no surprise given the rise of Nigeria's own cement industry and similar initiatives in that country. The difference here, however, is that the Cameroonian government is protecting investment by a foreign company rather than propping up any home grown concerns.

The new Dangote-run cement plant in Douala will start with a cement production capacity of 0.95Mt/yr with the intention to rise to 1.5Mt/yr in 2016. A meet-and-greet by company officials with local press in early April 2015 revealed that the company intends to snatch 30% of the local cement market in 2015 with prices primed to just undercut the other major producer.

What then of the country's two other integrated cement plants? Both have foreign ownership. Cimenteries du Cameroun, with a 1Mt/yr plant, is a subsidiary of France-based Lafarge. Ciments de L'Afrique, with a 0.5Mt/yr plant, is a Moroccan firm. Add the new 1.5Mt/yr Dangote cement plant and domestic production in Cameroon is anticipated to exceed local demand.

When this happens how will the Cameroonian government view the two non-Dangote producers who may well be importing clinker and other products into the country for their operations? If the experience of Nigeria is a model then a 'self-sufficiency' battle may ensue in the media. Alongside this the price of cement may well stay fairly stable despite any alleged 'gluts'. This week, for example, the Cement Producers Association of Nigeria has lobbied the President-elect of Nigeria, Muhammadu Buhari, to cut the price of cement by half. The hypocrisy during the Nigerian spat over imports was that Nigeria wanted (and has become) a cement exporter.

At the time this column asked how that could work if imports at the time were so much more competitive that they had to be banned at home. Then as now deals seem to mark the way. At that time, in early 2013, Liberia relaxed its tariffs on cement just as Dangote was building a new plant there. Now, in Cameroon, once again Dangote appears to be negotiating some form of preferential treatment.

At the root of these issues, Cameroon's citizens and industry want to build and develop their country. Cheaper cement will enable them to do this by pushing up per capita cement consumption. Protecting their domestic industry or those that have invested in the country may not necessarily lead to cheaper cement.

This week saw the announcement that Cemex and Holcim are both upping their stakes in Nicaragua to increase production. The companies have stated that they expect cement demand to grow significantly in the near future.

Holcim has started work on a US$10m project to increase production by 30% to 400,000t/yr at its Nagarote grinding plant. A second expansion phase will see production raised another 30%. Cemex, for its part, is building a US$55m, 440,000t/yr grinding plant in Ciudad Sandino. Completion is expected by 2017.

These new developments will make significant additions to Nicaragua's cement industry. Currently, it consists of one Cemex-owned 600,000t/yr integrated plant and one Holcim-owned 300,000t/yr grinding plant.

Nicargua has the dubious honour of being Central America's least developed economy and one of the poorest among all of the Americas. In recent years, however, its economy has grown dramatically, with significant expansion in the construction and mining sectors, indicating that Holcim and Cemex are right to bet on Nicargua. Indeed, late in 2014 president of the High Council of Private Enterprise, José Adán Aguerri said that the country had a significant cement shortage and was currently importing from Mexico and Colombia to meet its needs.

Driving cement demand in Nicaragua is the residential housing sector boosted by the growing population, much-needed infrastructure projects and the country's most controversial project, the Nicaragua Grand Canal. The canal will be, according to local media, a 'commercial waterway that will reshape commercial shipping, reap a windfall for investors and haul one of the hemisphere's poorest nations out of poverty.' Heavily backed by Chinese investors, it is deeply unpopular with industry experts and locals alike. There have been lots of questions as to whether there is enough demand for the canal, while its construction will divert scant resources, particularly water, away from agriculture, the country's main industry. The project will, however, contribute significantly to cement demand until its completion, which is expected in 2019.

So is Nicaragua the place to be? Its near-future economic and construction sector outlooks certainly look strong, but the cement industry relies heavily on long-term infrastructure plans, which are sorely lacking. Additionally, none of Nicaragua's neighbouring countries have noteworthy cement deficits. This means that export market opportunities from Nicaragua are in short supply. Nicaragua's future depends overwhelmingly on its leaders' long term-planning abilities...