Global Cement News

India: Heidelberg and major Indian cement companies including UltraTech and Reliance Cements have shown interest as joint venture partners in state-run Rashtriya Ispat Nigam's (RINL) proposed USD204m cement plant at Vizag, in Andhra Pradesh.

"We are looking for a partner to set up a 3Mt/yr plant at Vizag. Heidelberg, Ultratech and Reliance Cements have shown interests to be our joint venture partner," RINL Chairman and Managing Director A P Choudhary said. Zuari Cements, Bhavya Cements, JP Cements and Binani Cements have also shown interests in the joint venture.

"The finalisation of the partner will not take more than 2-3 months from now. We will be able to establish the joint venture before the end of the current fiscal year," Choudhary said.

Asked how much of a stake the steel-maker would offer to its partner, Choudhary said that no decision has been taken yet. However RINL is willing to give up to 74% to the partner since cement making is not its core business. The proposed venture will use fly ash and slag generated from RINL's Vizag plant, where the capacity will shortly be increased from 3Mt/yr to 6.4Mt/yr.

Around USD204m in investment will be required to set up the cement plant, Choudhary said, adding that the cost would be borne by the two firms according to the shareholding pattern. Production at the plant is likely to commence two years from the start of construction.

France: Lafarge has released its financial results for the third quarter of 2011, which reveal an increasing reliance on emerging markets. Its sales were up by 1% in the third quarter to Euro4.21bn and were up by 6% in like-for-like sales. Its current operating income was down by 9% to Euro750m, a 7% drop like-for-like. The group's net income was down by 10% to Euro336m.

For the first nine months of 2011, its sales are up by 2% compared to 2010 (up by 4% like-for-like) and its current operating income was down by 12% to Euro1.64bn. Its net income fell by 22% to Euro596m.

Sales in Lafarge's cement sector increased by 1% in the quarter (up by 5% like-for-like) and increased by 2% for the year-to-date (up by 3% like-for-like), reflecting volume improvements in emerging markets partially offset by the negative impact of foreign exchange. Its cement volumes increased by 6% in the quarter (up by 5% like-for-like) and by 7% for the year-to-date (up by 5% like-for-like), with growth driven by emerging markets. Pricing moved marginally higher in the third quarter versus 2010 while slightly down on a year-to-date basis. Despite the group's cost reduction programme, higher cost inflation and foreign exchange weighed on results and margins.

The group achieved Euro50m of structural cost savings in the third quarter and Euro150m for the year-to-date, on pace with its Euro200m full-year target. Lafarge also announced a new cost savings programme of Euro500m for 2012. The group made the strategic decision to divest its gypsum activities in the early part of the quarter. In total, Lafarge has secured over Euro2bn of divestment proceeds for 2011 for debt reduction.

Bruno Lafont, Chairman and Chief Executive Officer of Lafarge, said, "In the current economic environment, the group continues to be proactive and already secured over Euro2bn of divestments as part of its actions to reduce debt. These efforts will continue and today the Group is announcing a new Euro500m cost reduction programme. These measures, including price actions in response to a high cost environment, are part of ongoing steps to strengthen profitability, reduce debt and maintain strong liquidity."

"Looking ahead, the fundamentals of our business are strong. The group, fully focused on its core businesses, foresees sustainable cash-generating growth led by high quality positions, a unique exposure to emerging markets and the advantages created by innovative products and solutions."

Overall, Lafarge continues to see cement demand moving higher and maintains its estimate of market growth of 2-5% in 2011 compared to 2010. Emerging markets continue to be the main driver of demand and growth and Lafarge benefits from its well balanced geographic spread of high quality assets.

Philippines: Cement producers in the Philippines have asked the Department of Trade and Industry (DTI) to impose mandatory standards on the raw materials used to ensure that quality standards are being followed. These standards would also effect producers of finished products that make significant use of cement. DTI Undersecretary for consumer welfare, Zenaida C Maglaya, made the announcement following a recent meeting of Cement Manufacturers Association of the Philippines (CeMAP).

According to Maglaya, CeMAP would like raw materials such as fly ash and aggregates to be placed under mandatory standards following complaints from contractors working on infrastructure projects. CeMAP said it will take years to find out the impact of poor quality fly ash. "We are asking CeMAP to submit their study because this is a technical issue," Maglaya said.

Maglaya explained that the standards for raw materials for cement are voluntary under the Philippine law. Being voluntary, Maglaya said, the responsibility lies on the end manufacturer although this can still be raised before the DTI. The move to standardise raw materials of cement and end-products using cement has followed a crackdown by the Department of Public Works and Highways against contractors of government infrastructure projects.

South Africa: The South African Competition Commission has reached a settlement agreement with AfriSam, which has admitted that it took part in a cement cartel.

AfriSam has agreed to pay a penalty of USD16m representing 3% of its 2010 cement annual turnover in the Southern African Customs Union (comprising South Africa, Botswana, Lesotho, Swaziland and Namibia). This settlement is a reflection of AfriSam's material cooperation with the Commission in uncovering and providing further information on its conduct.

"This settlement is a reflection of AfriSam's material co-operation with the commission in uncovering and providing further information on the conduct," the commission commented on 1 November 2011.

This agreement follows the Commission's investigation of price fixing and market allocation against four main domestic producers Pretoria Portland Cement Company Limited (PPC), Lafarge Industries South Africa (Lafarge), AfriSam Consortium Ltd and Natal Portland Cement Cimpor (NPC-Cimpor). Previously, PPC applied for leniency and confirmed the existence of a cartel among the four cement producers. In terms of the settlement, AfriSam admits that it entered into agreements and arrangements with PPC, Lafarge and NPC to divide markets and indirectly fix the price of cement. The case against Lafarge and NPC continues.

"To facilitate this process we conducted a systematic and comprehensive review of some of the company's business practices from a competition law perspective," Stephan Olivier, AfriSam CEO stated. "We are, of course, saddened and embarrassed by what has happened. I say categorically that the AfriSam of today is an honourable and ethical company, fully committed to rigorous compliance with competition law."

Saudi Arabia: Saudi Aramco has said that it continues to supply all of the fuel contracted by Saudi Yanbu Cement Co, to accusations from the cement producer about a lack of fuel.

As reported in Global Cement Weekly #16 Yanbu Cement was forced to delay the launch of a production line that was scheduled to open by the end of September 2011. Yanbu Cement has now announced in a stock market statement that Aramco had not responded to its requests for additional fuel.

"Saudi Aramco confirms it is currently supplying Yanbu Cement with all the allocated volumes of fuel oil as per the signed agreement," Aramco said in a statement. "Yanbu Cement Co should have secured the needed fuel ahead of a commitment to expand and build the fifth production line. The fact that no agreement was concluded in advance absolves Aramco from responsibility that may result from any fuel shortage," Aramco added.

However other cement companies have also reported that shortages of subsidised fuel is threatening growth. Safar Dhufayer, the chief executive of Southern Province Cement Co (SPCC), raised the issue at the Reuters Middle East Investment Summit in Riyadh. He said that his firm, the Gulf country's biggest cement producer by market value, may delay the launch of a new line that is expected to raise its production capacity due to the fuel shortage.

"Our new line under construction should be commissioned by the end of 2011, but if there is not enough fuel we will not run it and that will create more pressure from rising demand which we cannot meet," Dhufayer said. "We only receive 80% of the fuel we need."

Demand for cement in the largest Arab economy is seen at 48Mt in 2011, increasing to up to 52Mt by 2013, while supply is 55Mt/yr in 2011 and plans for growth are uncertain, Dhufayer said. Cement companies in Saudi Arabia have a competitive advantage over global rivals as they benefit from subsidised fuel, supplied by government-owned Saudi Aramco.

Cement firms in Saudi Arabia, which is spending over USD400bn on infrastructure projects and is planning to build 500,000 new homes, faced a cement shortage in the market in 2008 that led to a ban on exports. The ban is still in effect.