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Diverging fortunes in Europe and the Americas
Written by Global Cement Staff
17 October 2012
News from Mexico and the US over the past week confirms the contrasting fortunes of the cement industry in the 'Old World' and the 'New World,' of Europe and North America. First, Cemex reported a significantly reduced loss of US$203m in its third quarter, compared with a loss of US$730m in 2011. However, the firm's European units again faired worse than other regions.
The European problem is not limited to Cemex, but while much of the continent has seen a poor 2012 so far, North America appears to be in the midst of a construction renaissance. HeidelbergCement estimates US cement sales growth of 8-11% in 2012. In Mexico, a strong and growing industry, it has also been announced that the Mexican billionaire Carlos Slim had partly financed a new US$300m plant in Mexico, due to go into production early in 2013.
In light of this apparent upward trend in North America, it is surprising that France's Lafarge has agreed to sell two more of its US cement plants, this time to Eagle Materials. If the Eagle deal is approved, it will represent (along with the May 2011 sale of Lafarge's Roberta and Harleyville plants to Cementos Argos) a continued and substantial reduction in Lafarge's presence in the US. In under 18 months, Lafarge will have offloaded four plants, taking its total from 12 to eight.
Lafarge's decision to sell to Eagle seems like an attempt to meet its own debt-reduction schedule. Yet to do this it may be losing important territory in North America. This can't have been an easy decision.
Staying on track in Nigeria
Written by Global Cement staff
10 October 2012
"We believe that Nigeria has arrived as a cement manufacturing country," said Joseph Makoju, Chairman of the Cement Manufacturing Association of Nigeria (CMAN), to mark yet another 'moment' when Nigeria's ability to produce cement has overtaken its demand.
One of Makoju's reasons for Nigeria's 'arrival' was the fact that the Nigerian government hasn't issued any import licenses since the start of 2012.
As Global Cement Weekly #46 noted in April 2012 this is strange given that domestic consumption is up to 18Mt/yr: a figure 4Mt below modest estimates of national capacity which start at 22Mt/yr. According to Global Cement monthly price reviews the cost per bag has risen by 20% since 2010 despite presidential orders to keep it down. However much cement Nigeria seems to produce the price still keeps on rising.
The prices aren't the only figures that are rising year-on-year. Dangote, Nigeria's leading-producer, reported an increase in operating profit of 14% to US$745m in 2011 from US$654m in 2010. Lafarge WAPCO, the country's second largest producer, reported an increased operating profit of 41.7% to US$74.1m from US$52.3m.
Prices continue to rise but this could be due to cartel-like behaviour. President Goodluck Jonathan seemed to suggest as much in 2011 when he ordered prices down. Then again Nigeria's poor transport infrastructure and distribution chains could be to blame for rising prices instead. CMAN has announced plans to promote the use of concrete road construction with the government and Dangote announced plans in August 2012 to widen its distribution by opening more 'mega-depots' and signing on new distributors.
It's unclear exactly how much cement the Nigerian market actually wants. Its per capita consumption is 110kg, compared to 280kg in South Africa and over 600kg in Egypt. This is way down the consumption/GDP curve compared to Europe and North America. Its population has reportedly risen by 30m from 2006 to 2012. This implies massive total demand and demand potential.
So - past massive transport infrastructure projects, improved distribution and possible price inflation - how does Nigeria keep momentum? Ironically, given Nigeria's protectionist stance against imports, one of the measures CMAN is exploring is how to export cement to other countries. Recent news reports about local producers in Namibia and South Africa fighting foreign imports suggest that other African countries are starting to 'arrive' too. Even building the roads may not be enough to keep Nigeria's cement express-train on track.
How much is an American cement plant worth?
Written by Global Cement staff
03 October 2012
Eagle Materials has picked up two cement plants in the US from Lafarge with a combined capacity of 1.6Mt/yr for US$446m. The deal also included six distribution terminals, two aggregates quarries, eight ready-mix concrete plants and a fly ash business.
Following our column in August 2012 following an acquisition in India we decided to ask a similar question: how much are American cement plants worth?
Eagle's acquisition now increases its presence in the Midwest and South Central regions of the US, giving it a rough line of plants across the country nearly connecting Lake Michigan to the Gulf of Mexico. As shown in our industry report on the US between 2005 and 2011 cement consumption fell in both the states the plants are located in. Missouri's consumption fell by 45% from 2.82Mt to 1.56Mt, just above the US national average. By contrast Oklahoma's consumption only fell by 11%, from 1.6Mt to 1.43Mt, the fourth smallest decline in the country.
However, Eagle has demonstrated financial health in contrast to the US sector as a whole, reporting a 21% rise in total revenue in the quarter to 30 June 2012 and a 60% rise in operating earnings year-on-year in the quarter to 31 March 2012. The combined operations at the two plants generated about US$178m in revenue during the year ending in June 2012. By contrast Eagle Materials' revenue totalled US$529m during the same period. The plants' additional capacity will increase Eagle's total by about 60%.
Lafarge are still thinking big though, with the proviso that Eagle will supply certain Lafarge operations with cement for four to five years, as well as an agreement with a Lafarge affiliate to supply low-cost alternative fuels to the acquired operations. According to its 2011 annual report North America comprised 11% of Lafarge's cement sales. Lafarge's sales in the US remained flat in 2011. In that year the company's capacity was 12.8Mt with a 12% market share. This picture has started to change in 2012 with a reduced loss in earnings before interest, tax, depreciation and amortisation (EBITDA) in the first quarter followed by volume and sales increases of above 10% in the second quarter.
Back in June 2011 Cementos Argos picked up two plants from Lafarge in Roberta, Alabama and Harlyville, South Carolina for US$760m with a combined capacity of 2.7Mt/yr. As with the Eagle deal the sale included a number of peripheral assets including a clinker mill, cement mixer lorries and a marine port.
Cementos Argos recently put the world average at US$250m/t when publicising the expansion of its Rioclaro plant. The European Cement Association reports the figure at being above US$200m/t on its website. In August 2012, at the time of the potential CRH acquisition in India, the cost of Indian cement production capacity was placed at US$110/t-US$120/t.
Perhaps the question we should ask is how much is a US cement plant worth when it used to belong to Lafarge. Both the Cementos Argos sale and the Eagle deal worked out at US$280/t including all the ancillaries. The actual question we should ask is why has Lafarge chosen these specific plants to sell to a competitor in the US market?
China GETS ready for carbon trading
Written by Global Cement staff
26 September 2012
Today's report that cement producers from Taiwan are preparing for new Chinese NOx regulations is yet another reaction to several 'seismic' shifts of government-led change rocking the industry in China. These have included the closure of old, inefficient capacity and significant implementation of waste-heat recovery (WHR) systems. Last week's launch of the Guangdong Emissions Trading Scheme (GETS) is one more.
As reported by Reuters Point Carbon, GETS involves four cement plants from the start and it is the largest of seven such provincial schemes. It is as big and bold as the manufacturing hub that it covers. It includes over 800 manufacturing sites and will regulate the emissions from 42% of all power consumed in Guangdong and 63% of all its industrial emissions. It will be the fifth biggest ETS in the world after those in the EU, Australia, California and South Korea.
While GETS is large, the rate that it will be implemented will be more restrained. There will be three years of testing (2012-2015), an 'improvement period' (2016- 2020) and a proper market from 2020. The scheme's progress will be watched closely - its success or failure could determine the shape of emissions trading schemes (ETS) across China and the rest of Asia.
While the aims of ETS are laudable, they have met with 'mixed' reviews in other parts of the world. In Australia in 2011, there were dire warnings of the potential for job-losses and carbon-leakage, with China itself identified as a probable destination for both.
In Europe there is now a strong claim that the EU-ETS has been ineffective, with carbon prices slumping to under Euro10/credit (~US$13/credit), less than a quarter of projected levels for 2012. In the midst of the downturn Ireland's CRH 'earned' millions of Euros in unused credits. Security has also been a problem for the EU-ETS.
Even GETS, less than a month old, has drawn criticism. Unnamed commentators have suggested that the higher-than-expected prices, US$9.50/credit, (only slightly lower than in Europe), already look like the result of collusion in the market.
With all of these concerns, the immediate demand from the cement producers, China Resources Cement, Sinoma, Taipai and Yangchun Hailuo, looks a little strange. However, local media reports that there are advantages to be gained by buying early. All of the four producers have to buy credits for cement plant projects they are currently working on. They are gambling on the fact that carbon prices can only rise - something that is not expected by analysts.
In addition the producers can gain valuable experience of the scheme before it has to be used 'in anger,' which may give them an operational advantage over others. They also know that, unlike in other parts of the world, the government will not backtrack on its decision. Recent NOx regulations, closure of older capacity and implementation of WHR have all been imposed (or are being imposed) from above. They know that it is better to jump into the deep end than to be pushed.
Global Cement Directory 2013 - Coming soon
Written by Global Cement staff
19 September 2012
After another year of research and data collection from a variety of cement industry experts, associations and other sources, the Global Cement Directory 2013 will soon be with us. The new edition will feature more cement plants than ever before and shows a number of trends in the global cement industry.
The 2013 edition of the directory has an extra 70+ plants across Asia. This is in part due to the continued rampant demand in these cement-hungry nations, but is also due to the fact that the directory is impossible to keep 100% up-to-date. As one would expect, India sees significant extra entries compared with the 2012 edition, despite valid concerns of overcapacity.
Looking north, there are also new plants and projects in Russia, a major global cement player, with 60 plants listed in 2012 and 69 in 2013. Over the Bering Strait, North America has seen a minor contraction year-on-year, with the section of the directory dedicated to the US showing two fewer plants, 97 rather than 99. There are also an extra seven mothballed facilities in the US, although the vastness of the country means that regions have not been affected equally. Consolidation of older capacity ahead of an uncertain regulatory future is partly to blame for the mothballings and closures, although the fundamentals of the economy in 2012 have been surprisingly resilient.
In South and Central America, an area of strong growth, there are new projects and expansions in Brazil, Ecuador and Peru among others, with gradual expansion a common theme among producers eager to expand as markets develop. Mexico has provided a challenging environment for some, with little change year-on-year in the directory. In the Middle East and north Africa we have carried out significant updates. Despite continuing political challenges, countries here continue to demand cement, something that we highlighted for Egypt last week.
In contrast Europe continues to be a drain on the multinational cement players' balance sheets. The continent has lost 15 plants year-on-year with several others mothballed. Many countries, notably Spain, Greece and Italy, have cement industries much larger than their current needs demand. Considerable further closures are likely to be reflected in the 2014 version of the directory if the Eurozone financial malaise is not resolved, although many plants remain 'open' at the moment.
Also, new for 2013, the directory will expand by over 100 pages with the inclusion of cement industry reviews from various countries around the world, collated from recent issues of Global Cement Magazine.
The inclusion of the reviews will add not just literal weight to the directory, but will also contribute a new angle to the publication's information, adding context to the raw data. Countries with expanded entries include Russia, Brazil, USA as well as leading European and Asian cement producers along with extensive coverage of the Middle East.
At the beginning of October 2012 a digital 'beta' version of the Global Cement Directory 2013 will be released and seen by nearly 20,000 cement, lime and ancillary sector readers allowing a period for corrections from those 'on-the-ground', before the full print version is released for sale in November. Secure your company's space today, right-hand page advertising positions are available for the directory within the plant listings as well as in some of the newly included country reports. Contact Sören Rothfahl on direct line +44 (0) 1372 840 957 mobile +44 (0) 785 0669169 or at This email address is being protected from spambots. You need JavaScript enabled to view it..