Displaying items by tag: Votorantim
Spain: Cementos Cosmos has stopped exports from its Niebla cement plant due to an increase in the price of petcoke. The subsidiary of Brazil’s Votorantim has also implemented a Temporary Regulation of Employment from June 2017 to May 2018 that will enable it to suspend workers or reduce working hours, according to the Huelva Información newspaper. The cement producer says it is waiting for planning permission to install a dosing system for waste fuels that will cut it fuel bill. However, the local community has opposed attempts to use alternative waste fuels previously.
Unsurprisingly the European Commission blocked Duna-Dráva Cement’s (DDC) attempted purchase of Cemex Croatia this week. Merging the country’s biggest cement producer with its largest importer was going to be a challenge for the commission. Whereas in previous transactions the various parties offered business disposals to ease the commission’s concerns, here all they were got was access to a cement terminal in Metković in southern Croatia. And this facility on the Neretva river is currently being leased by Cemex! Clearly this didn’t give the impression of being a long term solution.
Compare this with the merger between Lafarge and Holcim in 2015 where multiple sales were proposed to make sure the deal went through. Or look at the acquisition of Italcementi by HeidelbergCement in 2016 where the parties sold Italcementi’s Belgian subsidiary Compagnie des Ciments Belges to Cementir to make the deal happen. In comparison to these deals the attempt by HeidelbergCement and Schwenk, through their subsidiary DDC, comes across as a calculated gamble designed to test the resolve of the commission. If the commission had somehow passed the proposed acquisition then the companies would have cornered the market. If it turned it down, as it has, then nothing would be lost other than putting together the bid. HeidelbergCement had its mind on bigger things as it bought and then integrated Italcementi.
Commissioner Margrethe Vestager summed up the mood of the commission: “For mergers between direct competitors, we generally have a preference for a clean, structural solution, such as selling a production plant. HeidelbergCement and Schwenk decided not to offer that. Instead they proposed to give a competitor access to a cement terminal in southern Croatia. Essentially, this amounted to giving a competitor access to a storage facility – without existing customers or established access to cement, without brands and without sales or managerial staff.”
Elsewhere, the other big story in the industry news this week was Votorantim’s decision to focus on the lime business in Brazil by adding lime units to some of its existing cement plants. Given the dire state of the local cement and construction industry, initiatives to break the deadlock have been expected. The alternative is plant closures and divestures, such as the ongoing talks by Camargo Corrêa to sell the other big local producer, InterCement. Votorantim plans to build lime units attached to the cement plants at Nobres in Mato Grosso, Xambioa in Tocantins, Primavera in Pará and Idealiza in Goiás. Unfortunately the agricultural areas of the country and ones with cement plants don’t overlay neatly. Cement production is mainly focused in the south-eastern states and Votorantim are targeting the Cerrado, in the centre of the country, for the lime business.
The scale of the project, at US$50m, the scale of the lime business generally and the addition of lime units at cement plants suggest that the pivot to lime can only be a sideline to cement and construction. Given the similarity of the cement and lime production processes the announcement would be much more significant were Votorantim set to convert clinker kilns into lime ones. A notable example of this was at Cement Australia’s Gladstone plant in Queensland, Australia. Here a mothballed FCB-Ciment clinker kiln was converted into a lime kiln in the early 2000s. At the time the cost of the conversion project was valued at just under US$20m. If Votorantim was seriously thinking of doing this at a few of their underperforming cement plants then one would expect the bill to be higher than US$50m. However, it’s early days yet.
Brazil: Votorantim plans to spend US$50m towards building new plants and adapting its existing cement plants to produce agricultural lime in addition to cement. The cement producer intends to double its market share to 16% by 2021, according to the Valor Econômico newspaper. The focus on the lime business follows a contraction in the construction industry and the growth of agribusiness.
"With the expansion of the agricultural frontier, demand will grow, especially in the Cerrado savannah, where soil need more correction. Experience shows that agricultural lime also helps in the crop productivity," said Laercio Solla, general manager for agriculture at Votorantim.
The company plans to open new quarries and build additional lime units at its existing cement plants. The focus at first will be on the region of Matopiba, which includes Tocantins and parts of Maranhão, Piauí and Bahia. Votorantim will build lime units attached to the cement plants at Nobres in Mato Grosso, Xambioa in Tocantins, Primavera in Pará and Idealiza in Goiás. The lime part of Votorantim’s business will receive most of its minerals from the cement division but also some from Votorantim Metals, the group’s mining division. It will also build two new 0.5Mt/yr lime quarries in Pará and in the Matopiba region.
Lime represents a small part of the company’s business. In 2015 it produced less than 2Mt of agricultural lime compared to 65.8Mt of cement, mortar and aggregates. Agricultural lime production is also expected to be less susceptible to foreign currency exchange rates as its market its mostly domestic.
Bolivia: President Evo Morales has inaugurated the Itacamba Cement plant in Yacuses in the department of Santa Cruz. The plant had an investment of US$220m and has a production capacity of 0.95Mt/yr, according to Via Empressa. Itacamba Cement is a joint venture between Spain’s Cementos Molins, Brazil’s Votorantim Cement and Camba Cement. The cement producer also operates a grinding plant in Puerto Quijarro and its hopes to produce up to 1.2Mt/yr of cement from both sites. The plant is also expected to create up to 540 direct and indirect jobs.
“One of the worst moments in its history.” That’s how Paulo Camillo Penna, the newly appointed president of SNIC - the Brazilian National Union of Cement Industry - described his industry last week. Few people are likely to be envying his position at the moment. As Camillo Penna went on to explain, domestic sales of cement fell by 11.7% year-on-year to 57.2Mt in 2016. He added that following capacity utilisation rates of 70% in 2015 and 57% in 2016 that he expected the rate to fall below 50% in 2017. When he said it was bad he wasn’t kidding.
Graph 1: Brazilian cement sales from 2011 to 2016. Source: SNIC.
Graph 2: Regional Brazilian cement production from 2014 to 2016. Source: SNIC.
Graph 1 illustrates how stark the decline in cement sales has been since the growth period at the start of the 2010s. Sales have fallen by 15Mt since 2014 in a country that has a production capacity of 88Mt/yr. Graph 2 presents a regional picture of sales. Note in this graph the sharp drops in sales (21%) in the southeast region of Brazil, an area that contains the key cement producing states of Minas Gerais and Rio De Janeiro. The decline in the northeast region including the state of Bahia, another key cement producing state, has been less extreme but it is still over 15%.
Votorantim, the country’s largest cement producer by production capacity, reported that its cement sale volumes fell by 6% to 26Mt in the first nine months of 2016, with declines in Brazil offset by business in other countries like the US. Its sales revenue also fell, by 7% to US$3.03bn. InterCement’s cement and clinker sales volumes fell by 16% to 11.8Mt in the first half of 2016 and its sales fell by 31% to Euro898m. As it described it, ‘the political and economic instability in Brazil in the first half, impacting on unemployment, investment and government spending, ultimately retracted the construction activity, compressing cement consumption.’ To compound these problems newly opened production capacity also ‘intensified’ competition. Later in 2016 InterCement’s parent company Camargo Corrêa was reported to be in talks to sell a minority stake in Argentina’s Loma Negra to pay off its debts from the cement business in Brazil. Finally, from an international perspective, LafargeHolcim’s global results for the first nine months of 2016 were negatively impacted by ‘challenging’ conditions in Brazil amongst other countries. It laid out an environment of reduced sales volumes and falling prices, although it said that it had used cost cutting to fight this.
Politically, the fallout from the Petrobras bribery scandal is continuing to shake out in the construction industry. In October 2016 it was revealed that the Brazilian Development Bank BNDES had frozen loan payments to construction firms involved in overseas projects worth up to US$7bn, including Camargo Corrêa. The Brazilian economy is expected to grow modestly, at a rise of 0.5% gross domestic product (GDP) in 2017 after dropping in 2016 although this forecast was falling towards the end of 2016. More hopeful news came from the São Paulo state construction union, SindusCon-SP, that in December 2016 released a report forecasting that the construction industry’s output could rise by 0.5%. However, this was dependent on economic reforms.
The question for Camillo Penna and the rest of the Brazilian cement industry is: where exactly is the bottom of the curve? SNIC forecast that cement sales will contract by a further 5 – 7% in 2017 and this is below the 11.7% drop experienced in 2016. So, does SNIC think that the industry is starting to hit against a bedrock of demand that economic headwinds can’t shift? In this kind of environment it seems likely to expect increased merger and acquisition activity. The merger of Brazil’s Magnesita and Austria’s RHI refractory companies that was announced in the autumn of 2016 may just be the start.
US: FCT Combustion has reported service updates to its clients in Ecuador, the US and Canada.
Hormicreto in Cuenca, Ecuador is preparing for commissioning of its G-Jet Hot Gas Generator for alternative liquid fuels firing, with a thermal capacity of 5.2MW. The system will provide hot air for the raw and cement swing mill application. FCT is responsible for the complete supply from the waste oil tank to the hot gas generator. Hormicreto is also commissioning a new riser duct natural gas firing system. FCT has also supplied two K-Jet Calciner Burners at the riser.
The Lehigh Cement Leeds plant in Alabama, US has awarded FCT with a new contract for a natural gas firing system for their riser duct. The system, rated at 30MW, will consist of a NPFA 86 Valve Train and K-JetCalciner Burner.
St Marys Cement, part of the Votorantim Group, has ordered, via Arctic Combustion, two K-Jet Calciner Burners for natural gas at the riser for its Ontario, Canada plant. The K-Jet Burner has a cutter block system that adjusts gas velocity on the fly during operation.
The CRH Mississauga plant in Canada has hired FCT to make an audit of several of its pieces of combustion equipment of the plant.
Brazil: Brazil's antitrust watchdog Cade has decided to end its investigation into 18 companies from the cement sector over alleged anti-competition practices. The allegations were that some of the companies had reached an agreement to refuse to provide three types of cement to competitors outside of an economic group, which would lead to increased prices of the products, according to the Valor Economico newspaper. Cade determined punishments were to be applied to Holcim Brasil, Cimento Tupi and Votorantim Pimentos. However, case leader Paulo Burnier decided that there insufficient evidence to apply sanctions on the majority of companies concerned. He also noted that some of the companies had already been set punishments by Cade for involvement in cartel practices.
US: St. Marys Cement’s has received inducement resolution approval from the Michigan Strategic Fund (MSF) for up to US$150m in private activity bonds to expand its Charlevoix plant in Michigan. The cement producer will now submit a more detailed plan to the MSF.
“This is great news for St Marys, its employees and customers,” said Senator Wayne Schmidt. “Not only will this project help the company to grow its Charlevoix plant and expand its capabilities to better serve customers, but it will also create new jobs in the community.”
According to MSF, the plant upgrade will expand the plant’s infrastructure to increase productivity. The project is expected to qualify for bond financing as a solid waste disposal and recycling facility. The company currently employs 232 people, and the expansion project is expected to add up to 200 jobs during construction and up to 10 permanent jobs upon completion.
Private activity bonds are a source of financial assistance to economic development projects in the state. They provide profitable firms with capital cost savings stemming from the difference between taxable and tax-exempt interest rates. A bond inducement is the first step in a bond transaction.
Brazil: Votorantim Cimentos has received Environmental Product Declarations (EPD) for five of its products. The company is the first in Brazil to obtain such certifications under the International Organization for Standardisation, according to Jornal Dia Dia. EPDs are comprised of reports about products' environmental impacts from the extraction phase to the final consumer.
Votorantim Cimentos' clients are now closer to obtaining sustainable construction certificates such as AQUA and LEED. According to a World Green Building Trends report, the number of sustainable projects record a two to six-fold increase every three years. In Brazil, the expansion rate for such projects is expected to increase from 6% to 36% over the next three years.
Peru: Consorcio Cementero del Sur (CCS), a subsidiary of Gloria Group, has signed a contract to buy all of Brazil’s Votorantim’s shares in Cementos Otorongo for US$4m and those of Votorantim’s subsidiary Corporación Noroeste. Cementos Otorongo is planning to build a cement plant in southern Peru for US$125m, according to the Gestión newspaper. Cementos Otorongo submitted an environmental impact study on the project in 2011 for proposed sites in La Joya, Arequipa and Mollendo, Islay. The planned plant will have a production capacity of 0.65Mt/yr.
This story was corrected on 18 August 2016 following clarification from Votorantim.