Global Cement News

This week Donal O'Riain, the Irish chief executive of Ecocem, cried out for an 80% tax on cement producers in Ireland. His reason? In his words, Irish producers are making profits from an over-allocation in the European Union (EU) Emissions Trading Scheme (ETS) despite demand dropping in the Irish industry. The tax was his suggestion to address this 'anomaly' and give the Irish Exchequer a boost.

The timing of his comments are interesting given that the EU ETS entered its third phase at the start of 2013. Towards the end of 2012 environmental campaign group Sandbag questioned in a report whether the scheme was actually helping the environment or not. As Sandbag pointed out generally, not just for the cement industry, carbon prices in the scheme had remained low due to an excess supply in the market. Due to the oversupply, prices were so low that the EU ETS has ceased to function.

The European Commission conceded this failing of the EU ETS in November 2012 by announcing that it was taking steps to address the supply-demand imbalance of emission allowances in the scheme. Firstly 'back-loading' action volumes, revising the auction time profile and delay of the auctioning of 900 million allowances, came into effect from 1 January 2013. Secondly the Commission launched a debate on broad structural measures with a report on the carbon market.

Any emissions trading scheme can distort the market in unexpected ways. With regards to the cement industry, if O'Riain is correct, then parts of the Irish cement industry are making profit on carbon credits despite demand falling. Or, to put it as O'Riain did, the EU ETS may be subsidising environmentally-unfriendly plants at the expensive of more environmentally sensitive ones. Such as Ecocem we must presume. What would be really interesting here is to find out whether other European cement producing countries are also benefitting from over-allocation as demand falls, specifically in Portugal, Spain, Italy and Greece.

Another distortion is that in the EU ETS, offsets generated from developing countries can be surrendered by companies in competing sectors in the EU, giving, in effect, a subsidy to competitors outside the EU. For example, as ETS schemes spread then staying outside of such regulation could prove profitable for cement exporters.

Koen Coppenholle the chief executive of CEMBUREAU, the European Cement Association, tackled this in his response to the European Commission's report, "It is essential that any further reduction of CO₂ emissions above the targets agreed should remain conditional upon the conclusion of an international agreement between all major greenhouse gas emitting countries. This should be undertaken with a view to establish a global crediting scheme, characterised by a comparable methodology to measure greenhouse gas emission reductions and equivalent monitoring and reduction efforts." Hence the interest in regional Chinese ETS schemes such as the emissions trading schemes that were launched in Beijing, Shanghai and Guangdong in 2012. China currently plans to introduce its own national scheme in 2015.

Despite the bureaucrats' efforts to improve emissions trading schemes, Petroleum Review summed up their effect in June 2012, "Carbon trading appears to have pulled off the noteworthy achievement of uniting oil and gas producers and environmentalists in their appraisal of its shortcomings." We could add cement producers to that list.

Australia: Ross Harper has been appointed the Executive General Manager of the Cement division of Boral following a restructuring initiative. The new role includes his previous responsibilities as Operations Manager because Boral's cement business is set to decrease in size following the divestments of Boral's Asian Construction Materials businesses along with the planned closure of clinker manufacturing at the Waurn Ponds cement plant. Harper replaces Divisional Managing Director Mike Beardsell who will leave the organisation by the end of January 2013.

Previously National Operations Manager, Boral Cement, Harper joined Boral in January 2006. He has over 30 years experience with industrial process industries including the energy, pulp and paper and building material sectors. He held the role of General Manager, Golden Bay Cement with Fletcher Building before joining Boral as General Manager NSW, Blue Circle Southern Cement. Ross holds a Doctorate in Chemistry from Victoria University of Wellington, New Zealand.

Ukraine: The supervisory board of HeidelbergCement Ukraine (Dnipropetrovsk region) has dismissed acting board chairman David von Lingen and appointed Silvio Tide as the company's board chairman. Tide was elected to chair the board for three years until 2016. Previously he was a HeidelbergCement manager in Northern Russia.

Von Lingen took up the office of acting board chairman on 1 January 2013 in a position to last until 28 February 2013. Previously he had been a board member and the chief financial officer at the company.

HeidelbergCement began operations on the Ukrainian market in 2001. The company produces cement at two plants, one in Kryvyi Rih, Dnipropetrovsk region south-west of Kieve region and the other in Amvrosiyivka, Donetsk region in eastern Ukraine.

Spain: The board of directors at Spanish construction group FCC will propose in the following days the appointment of Juan Bejar CEO to replace Baldomero Falcones who occupied the position for five years, according to Spanish business newspaper Expansion.

At present Bejar is a chairman at FCC's subsidiary Cementos Portland Valderrivas and Globalvia, in which FCC is a partner of Bankia. He was also a chairman at Citigroup Infrastructure Management and CEO at Ferrovial Infraestructuras and Cintra.

The new CEO will take his position in a moment when FCC is focused on a restructuring process, aimed at meeting the fall of the traditional business, the difficulties of the cement subsidiary and Austrian unit Alpine as well as the need to repay Euro1.6bn debt.

Australia: Boral, Australia's largest building materials supplier, has said that it will cut 1000 jobs from its global operations this fiscal year as part of a restructuring initiative intended to improve competitiveness. The changes are hoped to save US$95m annually with estimated savings of US$39m in 2013.

CEO and managing director Mike Kane described the company as 'burdened' with excessive overhead costs. "While this may be less obvious during the good times, it becomes critically exposed when times are tough," he said. The restructuring follows a 100 day review of the business which Kane conducted.

The majority of job losses are in Australia, where 885 positions will be axed. This includes the 90 roles Boral said that it would cut in December 2012 as it announced plans to suspend the production of clinker at its Waurn Ponds plant in eastern Australia. 15 jobs will be cut in the US.

In June 2012 the company reported having 14,740 employees, with around 8730 in Australia. A further reduction of 1420 employees will also take place due to Boral's previously announced divestment of assets in Asia and Australia.

Executive changes in Boral's cement division as part of the restructuring include the departure of Mike Beardsell, Divisional Managing Director, by the end of January 2013. He will be replaced by Ross Harper, who is currently in the role of Operations Manager, will increase his responsibilities to become Executive General Manager of the Cement division.