Global Cement News

"We believe that Nigeria has arrived as a cement manufacturing country," said Joseph Makoju, Chairman of the Cement Manufacturing Association of Nigeria (CMAN), to mark yet another 'moment' when Nigeria's ability to produce cement has overtaken its demand.

One of Makoju's reasons for Nigeria's 'arrival' was the fact that the Nigerian government hasn't issued any import licenses since the start of 2012.

As Global Cement Weekly #46 noted in April 2012 this is strange given that domestic consumption is up to 18Mt/yr: a figure 4Mt below modest estimates of national capacity which start at 22Mt/yr. According to Global Cement monthly price reviews the cost per bag has risen by 20% since 2010 despite presidential orders to keep it down. However much cement Nigeria seems to produce the price still keeps on rising.

The prices aren't the only figures that are rising year-on-year. Dangote, Nigeria's leading-producer, reported an increase in operating profit of 14% to US$745m in 2011 from US$654m in 2010. Lafarge WAPCO, the country's second largest producer, reported an increased operating profit of 41.7% to US$74.1m from US$52.3m.

Prices continue to rise but this could be due to cartel-like behaviour. President Goodluck Jonathan seemed to suggest as much in 2011 when he ordered prices down. Then again Nigeria's poor transport infrastructure and distribution chains could be to blame for rising prices instead. CMAN has announced plans to promote the use of concrete road construction with the government and Dangote announced plans in August 2012 to widen its distribution by opening more 'mega-depots' and signing on new distributors.

It's unclear exactly how much cement the Nigerian market actually wants. Its per capita consumption is 110kg, compared to 280kg in South Africa and over 600kg in Egypt. This is way down the consumption/GDP curve compared to Europe and North America. Its population has reportedly risen by 30m from 2006 to 2012. This implies massive total demand and demand potential.

So - past massive transport infrastructure projects, improved distribution and possible price inflation - how does Nigeria keep momentum? Ironically, given Nigeria's protectionist stance against imports, one of the measures CMAN is exploring is how to export cement to other countries. Recent news reports about local producers in Namibia and South Africa fighting foreign imports suggest that other African countries are starting to 'arrive' too. Even building the roads may not be enough to keep Nigeria's cement express-train on track.

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.