Global Cement News

It's been a cold and rainy 'summer' so far in 2013 in the UK. So much so that crowds at the Glastonbury Music Festival watching the Rolling Stones this weekend were lucky they didn't get drenched during 'Jumpin' Jack Flash.' However, cement producers around the world are increasingly tackling the opposite problem as they concentrate on water conservation measures.

As we see this week, the Cement Manufacturers' Association of the Philippines (CeMAP) has started advocating the use of rainwater for cement production. According to figures put out by CeMAP, an average dry-process cement plant uses 100-200L of water per tonne of clinker produced. The Philippines uses around 3.2BnL/yr of water for its cement production capacity of 21Mt/yr, which operated at an 85% capacity utilisation rate in 2012. A simple calculation reveals a water usage rate of 179L/t of cement produced in the Philippines. Though close to the top of CeMAP's dry-process water use range, it is actually less than some of the multinational cement producers (see below).

Water conservation among multinational cement producers has become increasingly high-profile in recent years. In January 2013 Cemex announced that it had developed a methodology to standardise water measurement and management across all of the company's operations. This followed a three year partnership between Cemex and the International Union for Conservation of Nature (IUCN). In its 2012 Sustainability Report Cemex reported that 12% of its cement operations were in water-scarce or water-stressed locations. Its water consumption for cement was 305L/t. This compares to Holcim's water consumption for cement of 260L/t in 2012.

Other multinational cement producers have put into place similar measures. Lafarge started to assess its 'water risk' in 2011. It found that 25% of its cement production sites were located in areas of water scarcity or high water scarcity, based on 2025 projections of annual renewable water supplies per person. A follow-up with the WWF Water Risk Filter (WRF) continued the assessment, identifying 15 Lafarge cement sites as being located in 'high-risk' basins, with 10 particular sites identified in Pakistan, India, Algeria, Mexico, Jordan, China, South Africa, Iraq and Uganda.

It is worth noting here that most of these countries are currently growth areas for cement demand and so producers with plans to expand in these regions need to tread a careful line. Cement makers that use vast amounts of water in water-scarce regions will be less desirable neighbours for local populations than those that use less water. This, like consumer and regulatory pressures in developed markets, could turn into a major driving factor for improved environmental performance in developing regions. Investing in water conservation measures therefore appears to make sense socially, environmentally and (ultimately) economically.

Switzerland: Xavier Dedullen has been appointed Head of the newly-created Legal and Compliance function at international cement producer Holcim, as well as Group General Counsel. As Corporate Functional Manager, he became a member of Holcim Senior Management, effective 28 June 2013. He reports directly to the Group CEO. As Chief Legal and Compliance Officer and Group General Counsel, Xavier Dedullen assumes responsibility for all legal and compliance matters.

Chile: Cementos Bío Bío has appointed Iñaki Otegui as its new CEO, effective 1 August 2013. Otegui replaces Jorge Matus, who has resigned after 39 years with the company.

A recent BBC television documentary explained the rise of low-cost airlines in the UK in the early 1990s. With news of an independent cement grinding plant in western France doing the rounds this week, we ask could the same revolution happen in the cement industry?

Back in the early 1990s following deregulation in the European aviation industry, smaller airlines took the opportunity to try a different model to the larger national carriers. Taking cost-cutting ideas from the US-based Southwest Airlines (deregulation had occurred earlier in the US) new companies like Ryanair and EasyJet burst into the short haul market, seizing market share and changing people's attitudes to air travel. For example, low to medium income males going on a 'British Gentlemen' stag (bachelor) party to a European destination such as Ayia Napa or Riga would have been unthinkable before the mid-1990s.

Flying passengers around Europe and producing cement are clearly radically different businesses. However, Kercim Cements' objective to produce 600,000t of cement and take a 10% share of the local market near Saint-Nazaire in Loire-Atlantique department of France stands out. With the European cement industry in decline and endless stories about cement exporting nations flooding developing markets, taking a grinding-led business model suddenly sounds considerably more competitive.

In addition, an independent company importing clinker from non-EU countries might also benefit from not being subject to quota allocations of CO₂. This issue was raised from a different angle earlier in 2013, when Irish company Ecocem complained about large cement producers making profits from the EU Emissions Trading Scheme (ETS) despite reduced production.

Thinking around grinding as the model for an industry step-change, one of the presenters at the Global CemTrader conference in May 2013 was Moisés Nunez of Cemengal. He spoke about 'Plug&Grind', his company's low-cost modular grinding plant technology. Essentially, the Spanish company can fit a grinding station into 15 shipping containers and assemble the grinding unit wherever the client can transport it to. Once again, this sounds perfect for a global cement industry that is making too much clinker.

As this column has reported previously, Africa is the ideal target for a low-cost grinding-led business model given its overall high level of demand for cement. Any cement business near the coast has been under intense competition from imports. So much so, that former PPC (Portland Pretoria Cement) head Paul Stuiver stated that any African facility built within 200km of a port was at risk. Could French and other EU-based coastal cement plants also be at risk? With the cost of production and transport on the rise, the low-cost grinding model may even work in Europe. The beauty of the Cemengal system is that it is mobile so that it can follow market opportunity.

As the Economist recently pointed out in a review of the global cement industry, it is an industry dominated by a small number of companies. High cost of entry, high transport costs by road and other factors mean that this is unlikely to change anytime soon. Yet, exports by sea provide some level of increased competition. Both of the grinding projects mentioned above rely on this fact. Let's wait and see what happens.

Ireland: Donald A McGovern, Jr will join the board of CRH as a non-executive director effective from 1 July 2013.

McGovern, a US national aged 62 years, is currently Vice Chairman for Global Assurance at PricewaterhouseCoopers (PwC), a position he has held since July 2008. McGovern will retire from PwC on 30 June 2013, following a 39 year career with the firm, during which time he directed the US firm's services for a number of large public company clients. He is a member of the American Institute of Certified Public Accountants and holds a Master's Degree in Business.