Displaying items by tag: Government
With president-elect Trump due to take office this week we wonder what this means for the cement industry in Mexico. In 2016 this column looked a couple of times at the implications of Trump upon the US cement industry. First, we looked at who might benefit if he builds his wall along the Mexican border and then we wondered what his policies might mean for the US industry. To answer the latter first, the main issues for the US industry are infrastructure, changes to the Environment Protection Agency (EPA) and the repercussions if Trumps serious about a trade war with China. So long as a trade war doesn’t happen then Trump is probably good news for the US cement industry. As for Mexico, the joke has been that Trump will be good for the construction business ever since market analysts Bernstein’s passed a note around in the summer of 2016 about that wall.
Graph 1: Breakdown of Mexican cement industry by production capacity. Source: Global Cement Directory 2017.
The makeup of the domestic Mexican cement industry hasn’t changed too much in the last decade, even with the merger between Lafarge and Holcim, preserving the same market share in production capacity between the companies. Most of the producers have reported growth in 2016. Cemex reported that its cement sales volumes rose by 3% for the first nine months of 2016 and by 10% in the third quarter of that year. Overall though, its net sales fell slightly to US$2.16bn in the first nine months, alongside a fall in ready-mix concrete sales volumes. Cemex, crucially, also seems to have taken charge of its debts in 2016, saying that it was on track to meet its targets and that it had announced nearly US$2bn worth of divestments in that year. Currently the company is trying to buy out Trinidad Cement in the Caribbean, which may be a sign that it has turned a corner.
Grupo Cementos de Chihuahua’s (GCC) cement sales volumes rose in the first three quarters of 2016, in its case by 4%. Its overall net sales in Mexico rose by 4.2% in Mexican Pesos for the same period but fell when calculated in US Dollars due to currency variations. GCC attributed its sales growth to better pricing environment and increased cement volumes, mainly for projects in the commercial and industrial sectors that compensated for a decline in the public sector, following the culmination of two major urban paving and highway construction projects in 2015. At the smaller end of the market, Elementia reported that its cement sales skyrocketed by 30% to US$104m in the first nine months of the year aided by higher prices and volumes.
The major Mexican cement producers all have a presence in the US with the exception of Cruz Azul. Cemex has held assets north of the border for years, Cemento Portland Moctezuma has links to Buzzi Unicem, GCC bought US assets from Cemex in 2016 and Elementia completed its purchase of Giant Cement also in 2016. These companies have clinker in their kilns in plants on US soil manned by US citizens. This represents investment in local industry and it is exactly the kind of thing that appeals to the rhetoric of Trump’s approach so far. If the new president builds his wall then Mexican producers will probably be producing much of the cement that builds it. Even the Mexican Peso’s slow decline since 2014 could help the local cement industry, as it will cut the cost of moving exports and materials north of the border. Indeed, Enrique Escalante, the chief executive officer of GCC said in late 2016 that his company was ‘ready to build’ Trump’s wall.
However, the sheer uncertainty factor of an incoming president with as little experience of public office as Donald Trump must be giving chief executives pause for thought. After all, Trump's tweets before he has assumed office have forced car manufacturers to change policy. If he manages to disrupt the North American Free-Trade Agreement (NAFTA) in order to protect US jobs then the repercussions for the Mexican economy will be profound. It sends nearly three quarters of its exports to the US. Local cement producers would surely suffer in the resulting economic disruption.
So, currency devaluations aside, Mexican producers are making money from their cement operations at home and they are increasingly hedging their bets by operating or buying units in the US. Some, like GCC, are even being ebullient about the benefits that might come their way. It may be a bumpy ride but the Mexican industry is ready. However, it may wish to avoid appearing in any of Donald Trump’s tweets anytime soon.
Spain: LafargeHolcim’s Sagunto cement plant in Valencia cut its production by nearly 10% in 2016 due to a fall in exports to Algeria. The plant exports 85% of its production and Algeria cut its imports by half, according to the Expansión newspaper. The plant is considering new export destinations including Colombia. However, its permit to mine aggregates from the Salt de Llop quarry is due to expire in December 2017 and the local government is reportedly not keen to renew it.
Russia: The Federal Antimonopoly Service (FAS) has issued warnings to companies certifying cement products that certification has been mandatory since March 2016. The competition body reported that the decision by Cemiscon and SibNIIcement to refuse some applications for certification without adequate grounds could restrict competition in the cement market. The FAS has since warned the companies that their actions broke the law.
Egypt: Aumund has won a contract to supply clinker conveying equipment for six production lines. The tender is part of a project by Chengdu Design & Research Institute of Building Materials Industry (CDI), a subsidiary of Sinoma International Engineering, to build the 6000t/day lines for the government. No value has been released for the order.
The lines will each be equipped by Aumund with four 650t/hr BWG belt bucket elevators and three 550t/hr BWZ chain bucket elevators. The machinery package also includes four 170t/hr BWG-L belt bucket elevators, one 80t/hr BWZ-L chain bucket elevator and six 375t/hr pan conveyors for each of the six lines. Altogether the order comprises 108 machines.
The new project in Beni Suef is to be completed by the end of 2020. The pilot phase of the new production lines is due to start as early as December 2017. Aumund will supply the machines to Egypt in three deliveries, between April and June 2017.
Belarus: The Belarusian government has reduced its national plan for the production, consumption and export of cement from 2017 to 2020. The national cement production target has been set at 4.5Mt in 2017, 4.7Mt in 2018, 4.9Mt in 2019 and 5.1Mt in 2010, according to local media. During this period it is anticipated that the country’s cement production capacity will fall to 5.9Mt/yr from 5.4Mt/yr. Exports of cement are forecast to reach 1.6Mt in 2017, 1.7Mt in 2018 and 2019 and 1.8Mt in 2020. Consumption of cement is planned to be 3.3Mt/yr in 2017, 3.4Mt in 2018, 3.5Mt in 2019 and 3.6mt in 2020. The country produces cement from three state-controlled integrated plants.
Nepal: Government plans to grade domestic brands of cement have been delayed due to administrative issues at the Nepal Bureau of Standards and Metrology (NBSM). The NBSM prepared a draft for the certification in the autumn of 2016 but it has failed to approve it internally before forwarding it to the Nepal Standard Council, according to the Himalayan Times. The delay has been blamed on the busy schedule of NBSM employees. Under the plan, cement produced by local companies will be certified under three quality categories: 33-grade, 43-grade and 53-grade cement.
Algeria: Abdesslam Bouchouareb, the Minister of Industry and Mining, has inaugurated the second production unit at the Ain El Kebira (SCAEK) cement plant near Setif. The new unit will have a cement production capacity of 2Mt/yr, according to the Algerian Press Service. The plant is controlled by the government backed Groupe Industriel des Ciments d'Algérie (GICA).
Bouchouare announced that the 1.5Mt/yr Adrar cement plant is due to be commissioned by April 2017 and the 2Mt/yr Chlef plant by October 2017. He added that national cement production is expected to increase by 5.5Mt/yr in 2017, allowing Algeria to export its surplus by early 2018.
Nigeria: The government of Cross River state has secured operational licenses from the Federal Government to build its own cement plant and limestone quarry in the Akamkpa region of the state. George O’Ben-Etchi, Commissioner for Solid Minerals Development, made the announcement following a meeting with the Solid Minerals Development Board, according to the Daily Trust newspaper. The plant and quarry are intended to compliment the state’s Superhighway project.
US: The Center for Biological Diversity, a non-government agency, has described plans to give Mitsubishi Cement a 120-year permit to mine limestone from a new quarry in San Bernardino National Forest in southern California as ‘unreasonable.’ Ileene Anderson, a senior scientist with the Center for Biological Diversity, made the comment on the basis that local flora and fauna would be adversely affected by the decision, according to the San Bernardino Sun newspaper. The US Forest Service and the County of San Bernardino are seeking comment on the proposal until 1 February 2017.
The new quarry will be located on public land abutting Mitsubishi Cement’s existing quarries at the site. It will serve the nearby Lucerne Valley cement plant.
China: Sinoma Hanjiang Cement, a subsidiary of China National Materials Company (Sinoma), has been ordered to pay back a US$8.3m tax rebate by the Tax Office of Hantai District, Hanzhong City in Shaanxi. A notice issued by the office said that the cement producer failed to meet the requirements for the rebate, according to ET Net News agency. The office decided to disqualify Sinoma Hanjiang from the entitlement due to its policies regarding rebate and exemption of value-added tax for products and labour services involving comprehensive utilisation of resources. Sinoma said that the extra cost is expected to decrease its profit in 2016.