Displaying items by tag: US
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.
US: Titan America's Pennsuco plant, which includes cement manufacturing, aggregates, quarrying, block manufacturing and ready-mix concrete operations, has been officially recognised as a Gold Level Zero Waste facility, making it the only facility of its kind in the US to achieve Zero Waste Status.
"The Zero Waste Certification is a remarkable accomplishment and consistent with Titan America's commitment to striving for best-in-class sustainability practices. Congratulations to our Environmental Department and thanks to everyone at Pennsuco for their help and support. We should all feel very proud of this," said Randy Dunlap, president of Titan America's Florida business.
To qualify for Zero Waste Certification, the Pennsuco Complex was required to demonstrate greater than 90% diversion from landfill use for a minimum of 12 consecutive months. This includes reducing, reusing, recycling or composting discarded materials or recovering the materials for productive use in nature of the economy at biological temperatures and pressures. It requires implementing sustainable strategies for resource and waste management. The process for certification process also included an extensive on-site audit, which was performed by Zero Waste Council members.
Zero Waste recertification occurs every three years. The Pennsuco site is now aiming for Platinum Certification. Titan's Pennsuco Plant has also been recognised for other sustainability initiatives, including Wildlife Habitat Certification and EnergyStar Certification. Titan's two cement plants at Pennsuco and Roanoke have been EnergyStar certified for 10 consecutive years.
US: The CalPortland Rillito cement plant in Arizona has received an energy efficiency rebate of US$71,213 from Tucson Electric Power (TEP) as part of a programme providing incentive funds for energy efficiency projects. The cement plant installed an upgrade to its clinker cooler using funding from the TEP Commercial Energy Solutions program. To date, this is the construction materials producers largest rebate in the state of Arizona.
US: Germany’s Takraf has acquired the Material Handling Systems business of FMC Technologies (FMC MHS) based in Lansdale, Pennsylvania. FMC MHS provides material handling solutions to a variety of industries including mining, minerals, power and food. It also manufacturers a line of proprietary equipment for rotary drying and cooling of various materials. FMC MHS will be integrated into Takraf’s US business, located in Denver, Colorado and it will retain its office presence in Lansdale. No value has been released for the transaction.
“This acquisition brings with it a number of advantages that we seek to leverage. We identified a need to add to our equipment portfolio and this opportunity enables us to realise our strategic goals – to strengthen our position in the lighter material handling business and reinforce our growth strategy,” said Frank Hubrich, chief executive officer of Takraf. He added that FMC MHS’ product portfolio will enable the company to provide a range of equipment catering to smaller volumes and integrated in-plant conveyor solutions.”
US: The Environmental Protection Agency (EPA) has awarded its Energy Star certification to four of Buzzi Unicem’s cement plants. Plants at Chattanooga in Tennessee, Festus in Missouri, Maryneal in Texas and San Antonio in Texas have all received the certification. It is awarded to cement plants that score 75 or above on the Energy Performance Indicator (EPI), used by the EPA to measure energy efficiency. In addition, the plant must have a three-year history of environmental compliance. The Chattanooga, Festus, and Maryneal plants have received the certification eight consecutive years in a row.
US: Terex Corporation has completed the sale of its Material Handling and Port Solutions (MHPS) business to Finland’s Konecranes for US$595m and Euro200m in cash and 19.6 million newly issued class B shares representing a 25% interest in Konecranes. The final transaction is subject to post-closing adjustments for cash, debt, working capital, MHPS actual 2016 EBITDA and the closing of the sale of the Stahl CraneSystems business.
“We believe that the Konecranes-MHPS combination represents compelling industrial logic that will deliver significant value to Konecranes’ customers, team members and shareholders, including Terex,” said John L Garrison, Terex president and chief executive officer.
Terex Corporation is a manufacturer of lifting and material processing products and services.
UK: Bunting Magnetics, a US company specialising in the magnet and magnetic equipment sector, has signed an agreement to acquire Master Magnets, a UK-based manufacturer of magnetic separation equipment. The Redditch-based firm produces magnetic separation, recycling and metal detection equipment to several industries worldwide including the mining, quarrying and aggregate sectors. No value or terms for the deal has been disclosed.
“Master Magnets has deep customer relationships in new markets for us such as mining, quarrying and aggregates. We are especially excited to now be able to offer a large range of ATEX approved electromagnets and mineral separation equipment,” said Simon Ayling, Managing Director of Bunting Magnetics Europe. Ayling will assume operations management responsibility of this new division following the purchase.
Master Magnets was founded in 1978 and currently has 26 employees. The company designs, manufacturers and services a line of industrial magnetic separation equipment including eddy current separators, permanent and electro magnets, including overband magnets, drum magnets and suspension magnets. The company also supplies a range of mineral separation equipment for customers around the world. The company will continue to operate out of its Redditch headquarters in the UK.
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.
Puerto Rico: Cement production has fallen by 30% year-on-year to 756,000 bags in the first eleven months of 2016 from 1.08M bags in the same period in 2015. Cement sales fell by 13% in the same period, a faster rate of decline than 8.5% in 2015 and 9.8% in 2014, according to local press. The decline has been attributed to a lack of funding supporting infrastructure projects and a slowdown in the residential construction sector.
HeidelbergCement buys Italcementi
Undeniably the big story of the year, HeidelbergCement has gradually acquired Italcementi throughout 2016. Notably, unlike the merger of Lafarge and Holcim, the cement producer has not held a party to mark the occasion. Instead each major step of the process has been reported upon incrementally in press releases and other sources throughout the year. The enlarged HeidelbergCement appears to be in a better market position than LafargeHolcim but it will be watched carefully in 2017 for signs of weakness.
LafargeHolcim faces accusations over conduct in Syria
The general theme for LafargeHolcim in 2016 has been one of divestments to shore up its balance sheet. However, one news story could potentially sum up its decline for the wider public. In June 2016 French newspaper Le Monde alleged that Lafarge had struck deals with armed groups in Syria, including so-called Islamic State (IS), to protect its assets in 2013 and 2014. LafargeHolcim didn’t deny the claims directly in June. Then in response to a legal challenge on the issue mounted in November 2016 its language tightened to statements condoning terrorism whilst still allowing some wriggle room. As almost all of the international groups in Syria are opposed to IS, should these allegations prove to be true it will not look good for the world’s largest cement producer.
China and India balance sector restructuring with production growth
Both China and India seem to have turned a corner in 2016 with growing cement production and a generally more upbeat feeling for the industries. Both have also seen some high profile consolidations or mergers underway which will hopefully cut inefficiencies. China’s focus on its ‘One Belt, One Road’ appears to be delivering foreign contracts as CBMI’s recent flurry of orders in Africa attests although Sinoma’s equipment arm was losing money in the first half of 2016. Meanwhile, India may have damaged its own growth in the short term through its demonetisation policy to take high value Indian rupee currency notes out of circulation. In November 2016 cement demand was believed to have dropped by up to half as the real estate sector struggled to adapt. The pain is anticipated to carry on until the end of March 2017.
US industry growth stuck in the slow lane
The US cement industry has failed to take off yet again in 2016 with growth lagging below 5%. The United States Geological Survey (USGS) has reported that clinker production has risen by 1% in the first ten months of 2016 and that it fell in the third quarter of the year. In response, the Portland Cement Association (PCA) lowered its forecasts for both 2016 and 2017. One unknown here has been the election of President-elect Donald Trump and the uncertainty over what his policies might bring. If he ‘goes large,’ as he said he wants to, on infrastructure then the cement industry will benefit. Yet, knock-on effects from other potential policies like restricting migrant labour might have unpredictable consequences upon the general construction industry.
African expansion follows the money
International cement producers have prospered at the expense of local ones in 2016. The big shock this year was when Nigeria’s Dangote announced that it was scaling back its expansion plans in response to problems in Nigeria principally with the devaluation of the Naira. Since then it has also faced local problems in Ghana, Ethiopia and Tanzania. Its sub-Saharan competitor PPC has also had problems too. By contrast, foreign investors from outside the continent, led by China, have scented opportunity and opened their wallets.
Changes in store for the European Union Emissions Trading Scheme
A late entry to this roundup is the proposed amendment to the European Union (EU) Emissions Trading Scheme (ETS). This may entail the introduction of a Border Adjustment Measure (BAM) with the loss of free allowances for the cement sector in Phase IV. Cembureau, the European Cement Association, has slammed the changes as ‘discriminatory’ and raised concerns over how this would affect competitiveness. In opposition the environmental campaign group Sandbag has defended the changes as ones that could put a stop to the ‘cement sector’s windfall profits from the ETS.’
High growth shifts to Philippines and other territories
Indonesia may be lurching towards production overcapacity, but fear not, the Philippines have arrived on the scene to provide high double-digit growth on the back of the Duterte Infrastructure Plan. The Cement Manufacturers Association of the Philippines (CEMAP) has said that cement sales have risen by 10.1% year-on-year to 20.1Mt in the first three quarters of 2016 and lots of new plants and upgrade projects are underway. The other place drawing attention in the second half of the year has been Pakistan with cement sales jumping in response to projects being built by the China-Pakistan Economic Corridor.
Global Cement Weekly will return on 4 January 2016