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China rides out
Written by David Perilli, Global Cement
19 November 2014
Startling news from Hebei, China this week. The northerly province intends to move out its excess capacity in heavy industries, including cement, to other countries by 2023. 5Mt of cement production capacity is planned for transfer by 2017 and 30Mt is planned for transfer by 2023. The larger figure is about the same as the cement production capacity of France or Germany!
Hebei isn't the biggest cement-producing province in China but it has received attention as the authorities have cut down on 'out-dated' production capacity. The region was targeted in a programme to cut emissions from heavy industry due to its proximity to Beijing and that city's smog issues.
The Ministry of Industry and Information Technology (MIIT) set a target of 60Mt/yr in cement production capacity to be cut by 2017. The region was also the site of massive cement plant demolitions in late 2013 and early 2014. 18 cement plants were demolished in December 2013 followed by 17 cement plants in February 2014 alongside the destruction of connected grinding and storage capacity. Overall an incredible 74 cement plants in the area surrounding Shijiazhuang alone were targeted for demolition by March 2014.
Following this massive spate of capacity elimination, the public announcement to actively move abroad marks a stark change to China's general cement industry strategy so far. The country's equipment suppliers like Sinoma have been taking business from European rivals like FLSmidth or KHD for some time now especially in developing markets.
In 2013, FLSmidth reported a cement market order intake of US$575m and KHD reported an order intake of US$216m. In comparison Sinoma's cement equipment and engineering services reported order intake of US$5.59bn. In its annual report for 2013 FLSmidth estimated that the global market for new kiln capacity was 50Mt. At a capacity construction price of US$150/t this suggests that Sinoma took orders for nearly three quarters of the world's required capacity for new cement kilns in 2013. Order intake covers more than just building cement plants, so this quick calculation presents only a rough impression of what's going on.
More recently Chinese cement producers have started building their own cement plants or funding them outside of China. In October 2014 State Development and Investment Corp and Anhui Conch Cement Company announced plans to fund a plant in Indonesia. In September 2014 ground breaking was held for a Chinese-funded plant in Kyrgyzstan. In June 2014, Huaxin Cement invested in Cambodia Cement. This was its second overseas investment following a project in Tajikistan in 2011.
With China's government still attempting to avoid a hard economic landing as its growth slows, moving industrial overcapacity overseas makes sense. International and national players must be worried about the potential scale of this transition. On the plus side, however, those notorious inscrutable Chinese production figures in the cement industry will be far easier to analyse in plants outside of China facing international competition. Today Hebei, tomorrow the world!
HAVER & BOECKER wins Lafarge Global Supplier Award 2014 18 November 2014
France: Lafarge has held its first global supplier competition, which had a total of seven categories, in a ceremony at its headquarters in Paris. With its ADAMS® technology for filling powder-type products into watertight PE bags, HAVER & BOECKER was able to win in the category of 'sustainability.' The jury's reasoning was that the technology showed 'an ability to operate in a sustainable manner, including the deployment of appropriate corrective actions.'
"Suppliers play an important role in our operations, delivering value year after year and pushing the boundaries in terms of innovation and cost competitiveness," said Thierry Metro, senior vice president of Energy and Strategic Sourcing at Lafarge. "The Global Supplier Awards represents a victory for our suppliers, for Lafarge and for our customers."
PPC profit falls by 9% due to lower local sales 18 November 2014
South Africa: PPC has announced that its full-year profit declined by 9% as its Africa expansion plan failed to offset declining sales in the domestic market. Net income was US$76.7m in the year through November 2014, compared with US$84.1m a year earlier. Sales grew by 9% year-on-year to US$8.13bn. Cement sales volumes grew by 2% year-on-year. "Performance was hampered by industrial action on the platinum belt, which had an adverse impact on trading conditions in South Africa," said PPC.
Holcim expects to pick buyers for assets in January 2015 18 November 2014
Switzerland: Holcim has said that it expects to have selected buyers for the assets that it must divest to push through its merger with Lafarge by the end of January 2015. Holcim's CFO Thomas Aebischer said that the company had received more than 60 non-binding bids by 20 October 2014.
HeidelbergCement closes Ukrainian plant because of separatists 18 November 2014
Ukraine: HeidelbergCement has shut down one of its cement plants in eastern Ukraine because separatists in the region want to impose their own agenda on the production process, according to a HeidelbergCement spokesman.
The plant was not occupied, but the separatists reportedly have their own ideas of how to produce cement. The spokesman added that HeidelbergCement would not engage in talks with the separatists. The 500 employees at the site are currently busy cleaning the facility, but if no solution is arrived at, their jobs will be threatened.
The plant has 2Mt/yr of cement production capacity. HeidelbergCement generates a turnover of Euro150m from its three Ukrainian sites, or 1% of its total revenues. However, in 2014 its turnover has fallen by 30% due to the conflict. Earlier in 2014 CEO Bernd Scheifele voiced his concerns about the developments in the region. Due to the political escalation interest rates exploded and loans vanished, putting the company's local production in danger.