Global Cement News

China: Xinjiang Tianshan Cement recorded a profit of US$19.5m during the first half of 2023, Reuters has reported. This corresponds to a 96% decline from first-half 2022 levels.

Mexico: Cemex Mexico subsitituted 36% of it cement fuel with alternative fuel (AF) in 2022. This exceeds the Mexican cement industry’s target for 2030, of 32%. Mexico Business News has reported that the producer used 1.05Mt of AF across its operations. This reduced its CO₂ emissions by 1.8Mt, and prevented 850,000t of methane emissions from being generated in landfill. Cemex Mexico’s Huichapan cement plant in Hidalgo set the company record for the year, with 207,000t of AF co-processed in its cement production. It produced 3.2Mt of cement for the Bajio, Central, Central-North, Laguna and Southeast Mexico markets.

Sustainability Manager Carlos Medina said "Last year’s results motivate us to intensify our efforts and uphold good practices that benefit communities and the environment. We will keep promoting environmentally friendly solutions in all our operations, as we are convinced that all social actors must collaborate to lay the foundations for a better future."

The Hungarian government recently enacted Emergency Decree 320/2023, taxing all CO₂ emissions from the country’s 40 or so largest industrial enterprises. The government used emergency powers to set up a new taxation scheme, which undercuts existing free allowances under the EU emissions trading scheme (ETS). The scheme additionally penalises the trade in ETS credits. Cement producers announced that the new regulations will make it impossible for them to keep operating.¹

With regard to Hungary’s six active cement plants, the scheme comprises:

1 – A Euro20/t tax on CO₂ emissions, effective retroactively from 1 January 2023, payable by any large enterprise that uses EU Emissions Trading Scheme (ETS) free allowances to cover the majority of its CO₂ emissions. Plants that decrease their production, or that carry on non-CO₂-emitting activities at over 10% of their operations, will pay a higher rate of Euro40/t of CO₂.

2 – A 10% transaction fee for the sale of free allocations under the EU ETS, payable to the Hungarian Climate Protection Authority.

Less than three years ahead of full implementation of the EU carbon border adjustment mechanism (CBAM), the Hungarian government has seemingly moved unilaterally against cement production – this in a country surrounded by seven other cement-producing countries. Multiple foreign cement producers connected to the major market of Budapest by rail, river and road will be watching developments with interest. These include CRH, which, besides two smaller plants inside Hungary, operates the 800,000t/yr Cementáreň Turňa nad Bodvou plant, immediately over the border in Slovakia.

This comes at a time when the domestic cement industry is facing historically high costs and low demand, with a 30% year-on-year decline in construction activity in July 2023, following double-digit inflation throughout 2022 and the first half of 2023.

Catastrophising may be a common symptom of environmental regulation in industry associations, but one can understand on this occasion. The Hungarian cement and lime industry association, CeMBeton, backed its members’ gloomy announcement about their future with an estimate for extra annual taxes of ‘several billion forints’ (1bn forint = US$2.84m), in a statement following the decree. Assuming annual CO₂ emissions of 565kg/t across its 5.4Mt/yr cement capacity, the sector might expect to pay US$61m/yr in CO₂ rates alone.^{2, 3} According to analyst ClearBlue, the government will raise additional tax revenues worth US$278m/yr across all of the 40 aforementioned heavy emitters in Hungary.⁴

It may seem surprising that CeMBeton did not even draw up a projected tax bill during consultations over the new tax scheme – but, in fact, no such consultations took place. In its most recent statement, the association said “We do not know the government’s intentions.” Outside of official releases, Hungary’s cement producers have not always been so reserved about the government’s perceived aim.

Global Cement reported in April 2023 that the Hungarian government was allegedly interfering in the cement sector to make producers sell up – as per accusations by an anonymous industry executive.⁵ There is arguably a course of action on the government’s part which, more or less, appears consistent with this aim:

October 2020 – The Hungarian Competition Authority (GVH) starts competition supervision proceedings against CRH, Duna-Dráva Cement and Lafarge Cement Magyarország.

July 2021 – Emergency Decree 2021/404 imposes a 90% tax on producers’ ‘excess’ profits, based on threshold cement sales revenues of Euro56/t. Additionally, producers must report their exports.

September 2021 – GVH finds insufficient evidence to support the initiation of competition supervisory proceedings in the cement industry.

January 2023 – (Retroactive) entry into force of CO₂ emissions tax.

May 2023 – The government of Hungary reportedly initiates negotiations to acquire Duna Dráva Cement and Holcim Magyarország, according to the Hungarian builders’ association, National Professional Association of Construction Contractors (ÉVOSZ). Duna Dráva Cement owners Heidelberg Materials and Schwenk Zement state that they have entered into no such negotiations, while Holcim declines to comment.

July 2023 – The Act on Hungarian Architecture lets the government dictate producers' volumes and prices and require them to supply cement to National Building Materials Stores (a proposed state-owned construction materials retail monopoly).⁶ Additionally, the government gains a right of first refusal over the divestment of any asset by the cement industry’s foreign owners.

20 July 2023 – The government enacts Emergency Decree 320/2023. ETS transaction fees enter into force.

The government can now expect a legal challenge to its latest move. CeMBeton’s first ally may be the font of all emissions legislation – the EU itself. Within the EU ETS framework, tax rates are down to member states to determine. However, the introduction of a transaction fee may constitute an illegal restriction to free allowances, OPIS News has reported. The association has also indicated its readiness to mount a constitutional challenge, specifically with regard to the legislative retrofit involved in the CO₂ emissions tax. The Fundamental Law of Hungary does not generally permit legislation to apply retroactively, though how courts will balance this consideration against the rights of the government is untested.

The government amended the constitution to provide for new emergency powers, and subsequently adopted them in May 2022, in response to the ‘state of danger’ created by Russia’s war in Ukraine – though its actions on the international stage suggest careful neutrality, if not ambivalence. At home, the war has brought a consolidation of the government’s control over various areas of life, including the economy, according to Human Rights Watch.⁷

Climate protestors around the world might be glad to see governments wield emergency powers against their own heavy industries. In Hungary, however, the wider sustainability goals are not yet clear with regard to a policy that seems, at least partly, politically motivated.

References

1. CeMBeton, Sajtónyilatkozat, 21 August 2023, https://www.cembeton.hu/hirlevel/2023-08-21/202308-mozgalmas-osz-ele-nezunk/116/sajtonyilatkozat/668

2. Heidelberg Materials, ‘Energy and climate protection,’ 2022, https://www.heidelbergmaterials.com/en/energy-and-climate-protection

3. Global Cement, Global Cement Directory 2023, https://www.globalcement.com/directory

4. OPIS News, ‘Hungary's New Carbon Tax Unlikely to Set EU Precedent, Say Analysts,’ 16 August 2023

5. Global Cement, 'Update on Hungary,' April 2023, https://www.globalcement.com/news/item/15572-update-on-hungary-april-2023#:~:text=Heidelberg%20Materials'%20subsidiary%20Duna%2DDr%C3%A1va,the%20country's%20active%20national%20capacity.

6. Daily News Hungary, ‘Hungarian government’s new nationalising plan could violate EU law,’ 27 February 2023, https://dailynewshungary.com/hungarian-govts-new-nationalizing-plan-could-violate-eu-law/

7. Human Rights Watch, ‘Hungary’s New 'State of Danger',’ 8 June 2022, https://www.hrw.org/news/2022/06/08/hungarys-new-state-danger

Austria: Christine Gröll has taken over the role of head of material flow management and process control at Alpacem Zement Austria. The producer created the new role for Gröll, who will lead a dedicated team of eight people to achieve net zero CO₂ cement production at the company’s Wietersdorf cement plant by 2035. The team will focus on alternative raw materials and alternative fuel (AF) substitution.

Gröll is an Ulm University-trained chemist with over four years’ experience working within Alpacem Zement Austria. Prior to that, she worked as a research associate for Schwenk Zement in Germany, on the development of its Celitement hydraulic binder.

Alpacem Zement Austria’s technical director Florian Salzer said "It fills us with particular pride that we were able to fill the new department with talented employees from our own company. This clearly underlines the potential that exists in our team and emphasises the extensive expertise that we have built up. We are also pleased that the department management is in the competent hands of Christine Gröll, who brings an incomparable mix of research drive and practical experience.”

US: James Hardie Industries, the world's largest producer and marketer of high-performance fibre cement and fibre gypsum building solutions, has announced the appointment of Rachel Wilson as its Chief Financial Officer (CFO), effective 16 August 2023. She was appointed after Jason Miele stepped down as CFO. He will remain at James Hardie for three months as an advisor to the CEO for special projects, and will subsequently leave the organisation.

Wilson has joined James Hardie following a successful career of over 25 years in the global technology, business services and consumer products industries. Most recently, she served as Executive Vice President, CFO and Treasurer at R1 RCM. Previously, she held leadership positions at global companies such as Iron Mountain, Jarden Corporation and Avon Products. She earlier served in corporate finance and merger and acquisition investment banking roles at Citigroup and Morgan Stanley.

Commenting on the appointment, James Hardie Industries CEO Aaron Erter said "Rachel has deep experience in corporate finance, capital markets and leading and developing high performing teams, along with a demonstrated focus on driving profitable growth. Rachel is clearly a valuable addition to the leadership team and will help us as we pursue our strategic growth plans."

Wilson said "It's an honour to join James Hardie, a leader in the building products industry with an outstanding culture of business and product innovation. I look forward to working with Aaron and being part of this high-performing team. It is an exciting time to leverage our capabilities and to continue to drive our global growth."