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Cementos Argos assesses US$1bn of LafargeHolcim assets 01 October 2014
Colombia/Brazil: Colombia's Cementos Argos, part of Grupo Argos, is reportedly assessing assets worth US$1bn that Lafarge and Holcim will be forced to sell in Brazil as part of their planned merger.
Argos, which is working closely with Banco Itau BBA in terms of potential Lafarge-Holcim acquisition deals in Brazil, aims to grow organically and via acquisitions across the Americas. The firm wants to have a presence in markets where there is potential for cement consumption per capita to grow. Cementos Argos already operates nine cement plants in Colombia, three in the United States and one in Honduras.
Eagle Materials promotes Richard Beckwitt to board of directors
Written by Global Cement staff
01 October 2014
US: Eagle Materials has appointed Richard Beckwitt to its board of directors. Beckwitt is President of Lennar Corporation, where he has worked for eight years. Prior to his work with Lennar, Beckwitt held various executive officer positions at DR Horton, including President. He also worked in the Mergers and Acquisitions and Corporate Finance Departments at Lehman Brothers.
"Rick brings a wealth of experience in the homebuilding business to the Eagle Board along with superb operational and financial talents," said Eagle's Chairman Larry Hirsch. "We are confident that Rick will provide valuable input as Eagle continues on its dynamic growth path."
All the coal board’s men…
Written by Global Cement staff
01 October 2014
Energy costs for cement producers in India are set for volatility following the Supreme Court's decision this week to cancel the vast majority of allocated coal blocks. After ruling that the allocation process by the Indian government was illegal and arbitrary the court stopped 214 out of 218 coal blocks. The affected operators working on the blocks have six months until 31 March 2015 to wind down production. At this point the government intends to auction off the blocks.
The background to this decision lies in the so-called coal allocation scam or 'Coalgate.' Over 80% of coal in India is produced by the state owned company Coal India. Since 1993 though the Indian government has been allocating coal blocks or leases to mine coal for captive use by industries such as cement, steel and power generation.
However, the allocation process was accused of lacking transparency compared to an open bidding process. The Comptroller and Auditor General of India estimated the loss to the government was an incredible US$30bn. The allocation process received further scrutiny as Indian coal imports rose leading to accusations of inefficiency on the Coal India side and corruption on the coal block side. Meanwhile, major power cuts such as those in the summer of 2012 focused both domestic and industrial users' minds on the state of the country's coal industry.
Following the power cuts in 2012, an inter-ministerial panel recommended the de-allocation of two coal blocks held by five companies, including Gujarat Ambuja Cement, Grasim Industries and Lafarge India.
India's coal imports started to increase rapidly around 2009 with an annual growth rate of around 5% and a demand growth of 25% from 2009 – 2014. The majority of its imported coal comes from Indonesia, Australia and South Africa. In 2012 its coal imports were over 150Mt.
With Indian cement producers facing production overcapacity and falling profit margins in recent years, any disruption to input costs such as power is bad news. The growing import rates point to an increasing supply-demand mismatch. A more open process for the allocation of India's vast coal reserves should be good news for industrial users in the medium to long term. However, in the meantime they may face a jolt.
Lafarge’s closed Syria cement plant comes under attack 26 September 2014
Syria: On 25 September 2014 Islamic State militants seized and set fire to Lafarge's cement plant in northern Syria.
"While advancing on the Kurdish town of Ain al-Arab near the Turkish border, the militants seized the Lafarge cement plant and burnt down part of it," said Rami Abdel Rahman of the Syrian Observatory for Human Rights.
The plant had been closed recently 'as security could not be guaranteed in the area.' Islamic State jihadists had taken over a major city in that part of northern Syria, sparking tens of thousands of mainly Kurdish refugees to flee into nearby Turkey. Once guarded by the Syrian army, responsibility for the plant's security was turned over to the main Syrian Kurdish Democratic Union Party (PYD) in August 2013.
India: On 24 September 2014 India's Supreme Court cancelled all but four of the 218 coal blocks that have been allocated since 1993.
"We are relieved that the uncertainty is over, but now where do the cement and power plants attached to these mines get coal from?" asked Sushil Maroo, a director of Essar Energy and CEO of Essar Power. "What happens to the expenses already incurred? The government needs to give clarity on the modus operandi." The company stands to lose three coal blocks.
"This move will have an extremely negative impact on cement, steel and power companies as an issue that is almost 21 years old is now being addressed," said Issac George, CFO at GVK Power & Infrastructure. "A lot of investments have gone into these blocks, which will now be impacted. Most companies will have no option but to bid in the new round of auctions as one cannot depend on imported coal."
Coal-based projects represent about 59% of India's total installed power generation capacity. Apart from the cancellation, operational mines will have to pay a penalty of US$4.79 for every tonne of coal extracted since they started.
Coal India is set to take over the mines. In 2013 - 2014 Coal India produced 462Mt of coal, missing a target of 482Mt. The coal ministry anticipates that local supplies will fall by as much as 185Mt short of the country's projected demand of 950Mt in 2016 - 2017. The gap could widen if the cancelled mines fail to produce the projected volumes of coal.