Global Cement speaks to Dr Martin Schneider, CEO of VDZ, to tie in with the 8th International VDZ Congress taking place in Düsseldorf on 26 - 28 September 2018.
Global Cement (GC): Please could you introduce VDZ for readers who may not be familiar?
Martin Schneider (MS): VDZ was founded in 1877 with the aim to develop cement standards and corresponding standards for physical testing. This also included the opening of a laboratory to allow third-party testing for the industry. VDZ has always been strong in terms of technical issues, based on this foundation. In 2000 VDZ began to provide comprehensive scientific, consulting, and technical services for the cement and building materials industry. Today, VDZ is deeply rooted in the cement industry and offers a wide range of services related to cement, concrete and environmental protection to customers all over the world.
GC: What are VDZ’s main activities in 2018?
MS: Our work is based on three fundamental pillars, namely: 1. Representing the German cement industry; 2. Pre-competitive research, and 3. Providing comprehensive services for the cement and building materials industry, so there are many areas in which we work for our clients and members. Worth mentioning is our International VDZ Congress on 26 - 28 September 2018 in Düsseldorf where speakers from leading international institutions, cement producers and equipment suppliers will share their expertise from their particular fields in the process technology of cement manufacturing (www.vdz-congress.org).
We are also consultants for other organisations in the environmental, political and construction spheres. As you can see there is no ‘main’ function because all three pillars are equally important, and together they create tremendous mutual benefits that intersect with each other.
GC: What about advocacy activities?
MS: VDZ has an office in Berlin with six employees who are well connected to the governmental institutions. We also work with the European Parliament and the European Commission on topics relating to the EU, for example the Emissions Trading Scheme (ETS). We are able to represent the German sector well at such a level with high-grade information and support, in good cooperation with CEMBUREAU, the European Cement Association.
GC: Please can you describe your background in the cement sector and VDZ?
MS: I am a laser physicist by training, which is not a classic route into the cement sector. The overlap was in environmental questions and trace gas analysis, which were the first topics I worked on at VDZ when I joined in 1991. I then took over the environmental department and later became head of the cement chemistry department and in 2000 Chief Executive Officer (CEO).
GC: That’s quite a long time to be at the helm. Is that typical for VDZ?
MS: It’s not uncommon for people to stay with VDZ for quite a long time. It has certainly been an interesting 27 years for me. Under my leadership VDZ has developed further, and we have created new fields of expertise and adapted our work to the needs of our members and clients. We have also become much more international. Today, 200 highly skilled and committed people work for VDZ.
You can imagine that it has never been static or repetitive. A significant recent development was to establish our digitisation group, which takes advantage of our existing modelling and data analysis abilities. When it comes to data standards, for example for Building Information Modelling (BIM), we support our industry and have to make sure that cement is appropriately addressed in these codes.
GC: What are your main day-to-day tasks?
MS: My most important task is keeping in touch with our members, clients and stakeholders. I also have to identify and act on future issues and plan how VDZ will navigate them. As we expand we also have to make sure that we have the right people working in the right places. It is a fascinating and rewarding experience to see the VDZ team develop and grow.
GC: So what are the next challenges for VDZ and its members?
MS: There is a major need to show the innovation within the cement industry and to underline that our sector is a modern and technology-based industry. Unfortunately, this is often still not the perception of those seeing our industry from the outside. However, when you engage with people and properly explain our sector, they value its benefits and how essential it is for our day-to-day lives. I am sure many of your readers will have had conversations with those outside the sector where people are surprised by the depth of the cement industry. As VDZ we put a strong focus on a wider discussion with various stakeholders to promote the sector and achieve wider engagement.
GC: What about VDZ’s future expansion plans?
MS: VDZ will continue to grow organically to meet the needs of our members and clients from the international cement and building materials industry. You may also know that we are currently building new premises to house VDZ in the long term.
German cement sector
GC: How did the German cement sector perform in 2017?
MS: The German construction sector was strong in 2017 on the back of a strong economy and it continues to be very solid so far in 2018. There is a very pressing need to invest in both the residential and non-residential sectors in our country. In 2017 the sector saw a 4% increase in consumption and a 4% rise in terms of production. Our members’ turnover for domestic sales was up by just over 5% too.
However, this is not the whole picture, as there is a huge bottleneck in securing contractors. There is a significant backlog. There would have been more rapid growth in 2017 if there had been more qualified construction workers. When it comes to other areas, for example alternative fuels, the sector maintained its high substitution rate of around 65% in 2017.
GC: Was there any great variation within Germany?
MS: There are a few Federal States that saw lower cement sales in 2017 than in 2016 but, of course, some grew faster than others. The ‘hot-spots’ are familiar to those who know where the major population centres are in Germany: Bavaria, Baden-Wuerttemberg and North Rhine Westphalia. Berlin has also become a greater magnet for people and hence construction in recent years and is seeing rapid growth in cement consumption, much faster than in the past.
GC: What about imports and exports?
MS: In 2017 Germany exported around 6.2Mt of cement and imported around 1.4Mt. Much of the exported cement is from North Rhine Westphalia to the Benelux countries, particularly the Netherlands. The imports are pretty stable at a level that we have seen for many years now.
GC: What are your expectations for the German cement sector in 2018?
MS: We are expecting a slower increase in 2018, with an estimated sales growth of approximately 1.4%. Of course this estimate is subject to a large number of factors, mainly the prevailing weather conditions and the number of contractors available.
GC: You mentioned the alternative fuel substitution rate in Germany is around 65%. This has been the case for a while now. Has the country hit a technical or other barrier at this point?
MS: I think there is still scope for some further increase in the alternative fuel substitution rate, perhaps to 70%, but not much higher. It is mainly a technical barrier. Some kilns are limited by not having calciners, for example, and those that have already hit their maximum possible limit, some at nearly 100% alternative fuels, can’t go any higher.
There are no big issues with the logistics of securing alternative fuels, as we have worked closely with waste management companies for many decades. It’s not a quality issue or an emissions issue, nor is it a permitting issue. Indeed, many plants are allowed to burn higher proportions of alternative fuels than they are able to from a technological standpoint. It is worth mentioning that through the biomass content in alternative fuels the German cement manufacturers were able to contribute to reducing their CO2 emissions significantly.
GC: What scope is there for the growth of alternative raw materials?
MS: Most people in the industry are familiar with the use of slag and fly ash as cement constituents. The use of granulated blast furnace slag is very common in Germany. Fly ash might be limited in future due to the successive replacement of energy from coal-fired power stations by renewable energy. Limestone is commonly used as an cement constituent too. Overall the national clinker factor is about 70% and it is decreasing steadily with time. There is potential for further reduction in our country and this is an issue VDZ and its members are working on.
In terms of the alternative raw materials that enter the kiln, there are strict permitting procedures set by the authorities and guidelines that have been developed by VDZ in collaboration with the cement producers. The use of these kinds of materials is not as common but gaining importance. It is however hard to say how much potential there is for this to expand.
GC: What are VDZ’s and its members’ view of the EU Emissions Trading Scheme and how it affects them on a day-to-day basis?
MS: The ‘helicopter view’ on the ETS is that it is working, which is reflected by the low CO2 price we have seen to date. Obviously, industrial production in Europe has dropped since the ETS was set up and the low price reflects the lower CO2 emissions, mainly due to economic factors.
However, on a plant level, producers in many European countries are already feeling the pinch of the reduced free allocation of allowances. They already have to buy credits due to the scarcity. It is a major challenge for producers, not only in Germany but all over the EU.
GC: Will the ETS put plants out of business?
MS: At this time there is effective protection against carbon leakage for the sector (i.e. free allowances up to a benchmark level) within the EU ETS, so the producers will not be under that kind of threat.
If, however, the carbon leakage protection were to be removed or if benchmark allocation is tightened, there would be a significant threat from imports. Ultimately, the removal of the free allowances would push up the production cost for German producers so that they would not be able to compete with efficient importers with modern kilns (and often comparatively low emissions).
GC: What other challenges does the German cement sector face in the coming years?
MS: Aside from the EU ETS, the main challenges for the German cement sector include getting permits for sufficient raw materials. This is due to very strong environmental legislation. However, I would argue that politicians and stakeholders have to take a longer-term perspective. In the long term, we borrow the land from nature, remove some limestone and then, crucially, return it to nature, often in an improved state. There are situations where a delay in gaining new reserves would be a critical threat for some individual plants.
It is also difficult to attract sufficient numbers of skilled people to the sector. This is closely linked to the need to communicate the innovation within our sector, which I mentioned earlier. We are for example working with schools and universities to help overcome this and want to develop a ‘Cement Degree’ at a local University of Applied Sciences. In the end we want to get people interested in our sector as early as possible.
GC: What are the main opportunities for your members in the coming years?
MS: The German economy remains strong and there is a construction backlog. This will drive the demand for cement forward, even if growth rates might be low. There still is a large need for infrastructure, on top of the housing and non-residential sectors I mentioned earlier. There are opportunities in smart buildings too. The foundations are strong for the continued success of the German cement sector.
GC: Thank you for your time today.
MS: You’re very welcome.