Global Cement News

Nigeria: Nigeria's biggest listed company, Dangote Cement opened its new US$1bn cement plant in Ibese, Ogun State, on 9 February 2012, increasing its production capacity in Africa's most populous nation by more than 40%. The new plant will produce 6Mt/yr of cement, taking Dangote's total Nigerian production capacity to 20.25Mt/yr.

"We are working towards making the company one of the eight biggest producers of cement in the world," said Dangote's billionaire owner Aliko Dangote at the plant opening. "With the commissioning of the Ibese plant, Nigeria has been transformed from major importer of cement to self sufficient in production and export."

Dangote said that the new plant would generate around 7000 direct and indirect jobs for local people and spoke about his '20:2020' vision. He forecast that by 2014 his company would be active across 14 African countries, with its production capacity hitting 60Mt/yr.

Giving further details, Dangote added that within the next two years the company would complete upgrades at its Obajana plant in Kogi state, taking its capacity to a massive 15Mt/yr from 10.25Mt/yr at present. If realised, the expansions would make Obajana the largest in the world by installed capacity.

The ceremony was attended by the Nigerian President, Goodluck Jonathan, who cut a symbolic ribbon to officially open the plant for production. He spoke of security challenges in Nigeria, saying that Nigerians were 'tired' of (Boko Haram) bombings and needed more positive developments, like the opening of the Ibese plant.

"This story about commissioning is what Nigerians want to hear," said the President. "We have security challenges in the country. We have challenges in terms of infrastructure but we are totally committed individually and collectively to getting the country out of this situation. Our children want a better Nigeria than this."

The President also spoke about plans for major highway construction and redevelopment projects in Nigeria, many of which will likely source cement from the new plant.

His comments were echoed by the Govenor of Ogun State, Ibikunle Amosun, who said that ongoing industrialisation would be severely hindered without the easy and safe transportation of people and goods. Amosun commended Dangote for 'creating the enabling environment for this kind of gigantic project to materialise.'

Japan: Taiheiyo Cement Corp. has released interim results for the first nine months of its current fiscal year, which ended on 31 December 2011. The results showed a group revenue of US$7.0bn, slightly up on the first nine months of the previous fiscal year.

Its operating profit was reported as US$242m, more than double the US$111m seen in the previous fiscal year. Its pretax profit was US$134m and its net profit for the period was US$14.2m, a turnaround from a US$72.1m loss made in 2010.

Taiheiyo forecast that the whole of the 2012 fiscal year (ending 31 March 2012), would see a revenue of US$9.3bn, an operating profit of US$350m and a net profit US$146m.

Taiheiyo's results come after a decision by Morgan Stanley MUFJ Securities to increase its rating for the Japanese cement sector to 'attractive,' the highest ranking on its three-tier scale. Shares in major companies such as Taiheiyo and Sumitomo Osaka Cement jumped sharply with the new rating.

Analysts at the brokerage said that profits at cement firms will rise in line with their ongoing efforts to cut costs. It also said that higher prices, an increasingly balanced supply and demand relationship and rising demand related to earthquake reconstruction efforts will also support profits in the cement industry.

The analysts also said that investors have undervalued shares of Sumitomo Osaka Cement and Taiheiyo Cement despite expectations that their earnings will improve in the 2012 fiscal year.

The news that China is considering more stringent NOx emission regulations for cement plants is encouraging – and not just for the environment. Other cement industries, such as those in western Europe, have been subject to the most stringent environmental regulations on the planet for many decades now. Elsewhere, the US cement industry is currently locked in battle with the Environmental Protection Agency over stringent new emissions targets. Now it looks like China, with a cement capacity of ~2000Mt/yr and the highest share of CO2 emissions in the world, might be accelerating its progress down the 'green' route.

The new Chinese NOx regulations could reportedly see a third wiped off the cement industry's massive net profits by 2015 and cause 'huge pressure' for the industry according to the Chinese Vice Minister of Environment Protection. With most industries in China currently operating outside meaningful environmental limits, the move towards lower emissions in China is likely to be unpleasantly costly. Indeed China has already said that it is committed to closing the least efficient 33% of its cement capacity by 2015.

If new regulations go ahead and are effectively enforced, they will prompt Chinese producers to act locally while they close or improve their plants, diverting attention away from exports and expansion overseas. In the short to medium term, this will dampen the competitiveness of the Chinese industry and allow neighbouring countries some respite against Chinese exports. The move to clean up China's cement industry (and industries in general) will also require environmental know-how, something that established European and US-based companies are well placed to provide.

Another notable story this week comes from the US, where a concrete producer has recently been given the go-ahead to set up a captive cement plant. Ozinga Bros. Inc. says that if and when concrete demand returns to the US, it wants to be able to secure its own cement supplies. In the last boom it had to import cement from the Far East to fulfil its contracts, with crippling transport costs. Company owner Martin Ozinga IV described the plans as 'a survival move' – perhaps going against the grain is the only way for the company to survive.

China: China's environment ministry is planning to launch stricter rules regarding nitrogen oxide emissions from cement plants, according to local press. An industry expert said that the policy change could wipe out a third of the industry's total net profits.

The report illustrates the challenges faced by the government to balance pressures for strong economic growth with public demands to lessen pollutants caused by industries that currently operate with few environmental restrictions. China had previously said that it planned to cut the cement industry's overall nitrogen oxide emissions, a key cause of acid rain and photochemical smog, by 10% by 2015.

Chinese Vice Minister of Environment Protection, Zhang Lijun, during a visit to the Anhui Conch Cement Company in January 2012, told accompanying officials and executives that the ministry plans to introduce stricter rules.

Kong Xiangzhong, the president of China's cement industry association, said that the ministry is considering tightening nitrogen oxide emission standards to 400mg/m³ from the current 800mg/m³. "It will translate into huge pressure for the cement industry," Kong was quoted as saying.

China's cement industry, polluting but profitable, has thrived during China's infrastructure spending spree. Anhui Conch, for instance, announced that its 2011 net profit is expected to be at least 80% higher than in 2010. China is the world's largest cement producer, with some 3000 plants producing 2Bt/yr. Beijing announced earlier that it wants to shut at least a third of the country's least efficient cement plants by 2015.

US: Ozinga Bros. Inc., a concrete producer, has been given the go-ahead to build a new US$250m cement plant in Chicago, Illinois. The Illinois Environmental Protection Agency issued a permit for the project in December 2011. A comment period has now passed with no known objections. Ozinga has 27 concrete plants in the Chicago area.

It is forecast that the new plant would provide around 300 construction jobs until it is completed in 2015. It would then be commissioned to a capacity of 1Mt/yr. The company has lined up a 50-acre site near Lake Calumet for the project, which was formerly a Cargill grain facility. Development officials are enthusiastically welcoming Ozinga's proposal as Chicago has suffered a massive loss of manufacturing over recent decades. No new industrial plant has been built within the city limits since the 1980s.

The proposal by a concrete producer to set up a new cement plant, which was first mooted in summer 2011, is surprising given the current financial and environmental regulatory climate. Ozinga says that it wants to be able to ensure a reliable supply of cement for its concrete, despite an estimated 60% drop in its revenue since 2007.

Ozinga is looking to keep pace with vertical integration by other concrete and cement producers, which it sees as a potential threat to its own cement supply. Commonly cement producers are looking to buy-up smaller concrete producers in order to increase efficiencies and their bottom lines. This move would see an unusual reversal of these roles. In previous economic booms, Ozinga has seen its cement supply dry up due to competition with larger producers. On occasion it has been forced to source cement from as far afield as Thailand and South Korea, increasing its transport costs to unsustainable levels. It fears that it may be left with the same problem again when demand for concrete returns in the US.

However, despite the enthusiasm from many quarters within Chicago, the Ozinga plant is far from a done deal. Expected to employ about 80 full-time employees, it could yet be subjected to an incentive-spiked bidding war between the job-hungry states of Illinois and Indiana. Ozinga executives have met with Govenor Mitch Daniels and other officials in Indiana, where Ozinga already has seven ready-mix plants, but neither state has yet offered project-specific incentives.

"We're happy to work with the group and show them the advantages Indiana has to offer," said Jim Staton, regional director in Crown Point at the Indiana Economic Development Corp. "We do that with every company." Ted Stalnos, president of the Calumet Area Industrial Commission, which has backed the project, said, "We would be very disappointed if Ozinga suddenly decided to go in that direction."

"This is like a survival move for us," said Martin Ozinga IV, the fourth generation at the 84-year-old firm. "If the economy comes back at some time, the country is going to be short (of cement) again." Ozinga added that he did not expect financing the project to be a problem, with banks already interested in the plan.