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Update on the Philippines, October 2022
12 October 2022Cement imports are back on the agenda this week in the Philippines with the news that the Tariff Commission has backed repealing the duties currently being implemented. If it’s anything like what happened last time, back in 2019, the commission’s opinion will once again be passed back to the Department of Trade and Industry (DTI) for the final decision. The safeguard measure the commission wants to cut covers Ordinary Portland Cement (OPC) and Blended Cement. It summarised the situation as follows, “There is no existence of an imminent threat of serious injury and significant overall impairment to the position of the domestic cement industry in the near future.”
The commission reviewed the sector between 2019 and 2021 and concluded that the domestic cement industry maintained its market position, increased its mill capacities, stabilised its manufacturing costs and improved its profitability. It found that local producers recovered their profits in 2021, following the coronavirus pandemic. It also noted that imports continued to rise whilst the safeguard measure was in force. Volumes of imported OPC and blended cements increased at levels above 10% year-on-year in both the 2019 – 2020 and 2020 – 2021 periods. They also rose by 7% year-on-year to 3.51Mt in the first half of 2022 compared to the half-year average from 2019 - 2021. In the commission’s view, relaxing the duties on imported cement would slow price rises for both locally produced and imported cement leading to an overall national economic benefit.
Local cement producers in the Philippines are likely to be unhappy with the Tariff Commission’s recommendation. The Cement Manufacturers Association of the Philippines (CEMAP) spent the summer of 2022 lobbying for the safeguard measure to be extended past October 2022. It too pointed out that imports of cement had continued to grow even whilst the increased duties had been levied from 2019. A few days before the commission’s decision was published, APO Cement said that it had temporarily suspended operations at its Davao terminal. The subsidiary of Cemex Philippines blamed imports of cement, particularly from Vietnam, for the decision.
Yet, the local sector has been active over the last year with a number of capacity upgrades being launched or underway. In January 2022 the government gave tax breaks to San Miguel Equity Investments for the construction of a 2Mt/yr cement plant in Mindanao. In February 2022 San Miguel subsidiary Southern Concrete Industries said it was doubling the capacity of an upgrade to its grinding plant at Davao del Sur, with initial commissioning planned in mid-2022. Meanwhile, Solid Cement’s upgrade of a new production line at its integrated plant in Antipolo, Rizal, has been ongoing since it officially started in 2019. The current commissioning date for the subsidiary of Cemex is now expected in early 2024. In August 2022 Taiheiyo Cement Philippines held a groundbreaking ceremony for the start of construction of a new production line at its integrated San Fernando plant in Cebu. The US$85m project is due to be commissioned in mid-2024. Finally, importer Philcement revealed in late September 2022 that it had taken out a US$1.73m loan for an expansion and upgrades to its Mariveles cement terminal in Bataan.
Holcim Philippines’ president and chief executive officer Horia Adrain told local press in July 2022 that the cement sector was continuing to recover in 2022, following the coronavirus pandemic in 2020, but that the pace would be slower. And so it proved, with reduced revenue, earnings and profits reported by Holcim for the first half of 2022. Costs rose due to higher fuel and energy prices like elsewhere in the world but a construction ban in connection with the presidential election in May 2022 didn’t help either. Both CRH and Cemex Philippines reported a similar situation in their financial results. However, Eagle Cement did manage to raise its revenue in the same period.
The Tariff Commission has been explicit with its opinion about the impact of imports upon the local cement sector. Investment by the local producers has been forthcoming with a number of new plants and upgrades on the way. Finally, despite the market recovering since 2020, there has been less growth in the first half of 2022 due to global energy prices and the country’s elections. This last point has handed a gift to the cement producers as any further reductions in growth can be blamed on imports, whether it is connected or not. One thing is certain, if or when the safeguard measures are lifted, then the regular calls to restrict imports will resume just like they did prior to 2019.
El Salvador: Holcim El Salvador plans to invest up to US$50m over the next three years to help it generate 70% of the energy it uses. It plans to build a 17MW solar plant and a wind farm to enable this, according to La Prensa Gráfica newspaper. The investment will also help the subsidiary of Switzerland-based Holcim to progress towards its net-zero sustainability goals. The solar project has a budget of US$19m and will be built in agreement with AES Corporation. It will be located at Holcim’s integrated El Ronco cement plant. It will supply 21% of the energy used at both the El Ronco and Maya cement plants.
The investment has also included the installation of a solid waste shredder earlier in 2022. Its official inauguration is planned for mid-November 2022. Holcim El Salvador reached a 30% alternative fuels substitution rate in October 2022.
Update on Peru, October 2022
05 October 2022Cemento Yura said it was considering expanding cement and lime production this week. The announcement, made in an interview to business newspaper Gestión, follows a strong second quarter for the subsidiary of Grupo Gloria with clinker production volumes jumping up by 36% year-on-year to 0.51Mt. Overall for the half-year its clinker and cement production rose by 12.8% year-on-year to 0.86Mt and 12.7% to 1.47Mt. The success was attributed to consistent demand from the domestic sector as well as various large-scale mining projects. Julio Cáceres, the commercial director for its Cement, Concrete and Lime Division in Peru, Chile and Bolivia, wouldn’t say where the company was considering heading next, other than that remarking that it was attentive to new markets.
As Cáceres’ job title implies Cemento Yura also operates cement plants outside of Peru. At home it runs one integrated plant in the south of the country near to Arequipa as well as a lime plant at Juliaca. Outside of Peru though it also runs two integrated plants and a grinding unit in Bolivia, via its Sociedad Boliviana de Cemento (SOBOCE) subsidiary, and two integrated plants in Ecuador, via its Union Cementera Nacional (UCEM) subsidiary. The company also has assorted concrete assets. The international aspect to Cemento Yura’s business is interesting given that the larger cement producers in Peru are dominant in different parts of the country with Cementos Pacasmayo in the north, UNACEM (Unión Andina de Cementos) in the centre around Lima and Cemento Yura in the south. Notably, UNACEM also runs a plant in Ecuador and one in Arizona, US. It is also worth mentioning that competition issues have been reported in the local market previously. In mid-2021 Peru’s competition authority, the National Institute of the Defense of Competition and Intellectual Property Protection (INDECOPI), investigated Cemento Yura.
Cemento Yura’s rise in clinker production in the second quarter of 2022 is worth considering because in a previous interview with the local press Humberto Nadal, the chief executive officer of Cementos Pacasmayo, said that importing clinker had become more expensive in 2021. Subsequently, the company started a US$70m upgrade at its Pacasmayo plant to increase its production capacity by 0.6Mt/yr. In its second quarter financial results for 2022 Cementos Pacasmayo directly credited a 27% increase in its earnings on higher operating profits arising from decreasing costs by using less imported clinker. Sure enough data from Association of Cement Producers (ASOCEM) shows that both cement and clinker imports started to fall in October 2021 and have mostly followed a downward trend since then. Clinker imports fell by 41% year-on-year to 0.66Mt from January to August 2022 compared to the same period in 2021.
Graph 1: Cement production in Peru, 2014 – present. Source. Association of Cement Producers (ASOCEM).
Looking at the wider picture in Peru, cement production has stayed fairly consistent since 2014 at around 10Mt/yr. An upward trend probably started in 2019 but then the Covid-19 pandemic cut it off in the first half of 2022 before the market surged back in the second half of that year. 2021 was a good year with production peaking at 12.9Mt. So far the first eight months of 2022 have seen production rise by 5.3% year-on-year to 8.64Mt.
In summary, cement production is rising in Peru, importing clinker appears to have become more expensive for at least one of the producers and some of the larger local companies are investing in new production capacity, considering it or thinking about acquisitions elsewhere. Local clinker producers appear to be in a good place; clinker importers, or those reliant on it, not so much.
Flying Cement to expand Lilla cement plant
05 October 2022Pakistan: Flying Cement plans to expand Line 2of its 1.2Mt/yr Lilla cement plant by 17% to 9000t/day. Mettis Global News has reported that the producer has already received clearance from the Punjab Environment Protection Agency for the expansion. The upgraded line will be operational from mid-late 2023.
Flying Cement will also establish a new 21MW captive power plant at the Lilla cement plant.
Arabian Cement considers status of upgrade project
05 October 2022Saudi Arabia: Arabian Cement says it is considering how it can complete work on the construction of new cement mills at its integrated Rabigh plant. The announcement follows a statement from the cement producer reporting that contractor China National Building Materials Company (CNBM) said that it was unable to complete the project due to the necessity of “involving a third party.” The project has suffered repeated delays, such as Covid-19-related travel bans, and dates back to at least 2015.
Holcim and TotalEnergies to work together on decarbonising upgrade to Obourg cement plant in Belgium
05 October 2022Belgium: Holcim and TotalEnergies have signed a memorandum of understanding (MOU) to work towards the full decarbonisation of the Obourg cement plant. Various energies and technologies will be assessed for the capture, utilisation and sequestration (CCUS) of around 1.3Mt/yr of CO2 emitted by the unit. The project will include working towards building an oxyfuel switchable kiln as part of an upgrade project at the plant and the transportation and use of the captured CO2 by TotalEnergies for a synthetic fuel producing scheme and/or deposit in geological storage in the North Sea.
TotalEnergies will also assess the development of renewable projects to power a new electrolyser, which would generate the green hydrogen needed to produce synthetic fuels. This new renewable energy production capacity would also power Holcim’s new oxyfuel kiln. Finally, the oxygen emitted by the electrolyser would be used to fuel the new kiln.
Bart Daneels, the chief executive officer of Holcim Belgium said “Cement industry decarbonisation is extremely challenging because of the process's inevitable CO2 emissions, which put us firmly in the hard-to-abate sector. CCUS is vital for Obourg to become the first net carbon neutral clinker plant in northwest Europe. We are very happy to work with TotalEnergies to accelerate the development of these CCUS solutions for GO4ZERO. By joining the first movers, we want to set the standards for future clinker manufacturing plants.”
Fives to supply Pillard NOVAFLAM burner to cement plant in France
30 September 2022France: Fives has secured a contract to supply a 65MW Pillard NOVAFLAM Evolution burner to a cement producer. The customer’s aims are to continue to maximise alternative fuel (AF) use, to improve clinker quality and to reduce NOx emissions at its cement plant. The order also includes precalciner burners and a natural gas-powered 35MW Pillard hot gas generator, as well as valve trains and pumping systems.
Birla Corporation to invest US$1bn in cement capacity growth
28 September 2022India: Birla Corporation plans to invest a total of US$1bn in realising its planned 50% cement capacity footprint expansion to 30Mt/yr by 2030. The producer is considering establishing 4Mt/yr-worth of new cement plants, possibly in the form of a new 4Mt/yr integrated cement plant in Chhattisgarh. It would also carry out 4Mt/yr-worth of upgrades and 2Mt/yr-worth of debottlenecking work.
The producer expects its newly commissioned Mukutban cement plant to contribute 600,000 - 700,000t of cement production during the remaining five months of the 2023 financial year, rising to 3Mt/yr by 2024.
During the 2022 financial year, Birla Corporation increased its cement sales volumes by 6% to 14Mt. The company said that it achieved 95% capacity utilisation throughout the year. It noted continuing cost pressures and slow demand growth so far in the 2023 financial year.
Chair Harsh Vardhan Lodha said "Things may not look up immediately, but post-Diwali we are hopeful of a robust turnaround."
Ciments Calcia sets date for start of construction of new production line at Airvault plant
28 September 2022France: HeidelbergCement subsidiary Ciments Calcia plans to lay the first stone of a major upgrade project at its Airvault cement plant on 5 October 2022. The event will mark the start of the construction phase of a new 4000t/day clinker production line, according to La Nouvelle République newspaper. The Euro300m project will be built by Germany-based ThyssenKrupp.
Titan Cement Group’s H2CEM green hydrogen project included in EU Hy2Use initiative
27 September 2022Greece: Titan Cement Group says that its H2CEM green hydrogen projection has received inclusion under the EU Important Project of Common European Interest (IPCEI) Hy2Use. Hy2Use consolidates funding for hydrogen electrolysis, transport and storage development projects across Europe. Titan Cement Group’s H2CEM project consists of Euro60m-worth of new green hydrogen production installations at its Drepano, Efkarpia and Kamari cement plants. The installations will produce hydrogen through electrolysis using renewable energy sources. The producer says that use of the hydrogen as cement fuel will reduce the plants’ CO2 emissions per tonne of cement by 8%, corresponding to 160,000t/yr of emissions. H2CEM is Hy2Use’s only cement plant project.
Titan Cement Group aims to achieve carbon neutrality by 2050.