Melón Cementos is the oldest cement producer in South America, having been in continuous production at its La Calera site since 1908. The company spent time as part of Blue Circle and then Lafarge, but has been part of the Peruvian conglomerate BRECA Group since 2009. Today it operates three sites and will shortly open a fourth. Iván Marinado, Melón’s CEO for Cement and Aggregates, recently took time out of his busy schedule to talk to Global Cement about the company’s Puerto Montt grinding plant.
Global Cement (GC): Please could you introduce the Puerto Montt plant and why it was built?
Iván Marinado (IM): Melón Cementos has been very well established in Chile for over 100 years, but Chile is a very long country - 4000km! Around 15 years ago the company started to look for ways to improve its logistics, as it had previously relied on its La Calera integrated plant, around 100km north of Santiago. It decided to set up clinker grinding stations in strategic locations along the coast.
The first of these was the Puerto Montt plant, which came online in 2008. It is located around 1000km south of Santiago. It was joined by the Ventanas plant in 2011. Puerto Montt originally consisted of a Chinese-built ball mill with a capacity of around 0.3Mt/yr, while Ventanas has a 0.7Mt/yr vertical roller mill.
Due to production selling out from the Puerto Montt plant in the mid 2010s, the decision was taken to upgrade it via the installation of a second ball mill. The site was ready for expansion using an identical Chinese ball mill, but Melón decided to opt instead for the Plug&Grind solution from Spain’s Cemengal.
GC: What led to the change of supplier?
IM: The team at Melón had become familiar with the Plug&Grind concept and had visited such a plant in Mexico. I met with Cemengal in Madrid and I was really impressed with the innovation of the product and the performance of the mill. I proposed to the Melón board that we install a Plug&Grind Xtreme at Puerto Montt instead of the planned Chinese mill. At 0.6Mt/yr, this is the largest that Cemengal produces in this modular concept. The board thankfully agreed to go with my suggestion. There was some trepidation, as this was the first order for a Plug&Grind Xtreme anywhere in the world, but we are very happy with the mill indeed.
GC: How did the modular project differ from a conventional mill?
IM: The raw material storage and handling, plus dispatch, are identical to the traditional mill. What differs is the mill-shop, which is completely different. This was the major attraction compared to a conventional mill. It was much quicker and cheaper to erect than the previous mill. The machine comes electrically and mechanically ‘ready to go.’ It took about half as long to install as a traditional mill and it cost less too. Normally one could expect to spend US$2 - 3m in erection costs for every US$1m of equipment being installed. With Cemengal it is more like US$1m per US$1m, so the cost is at least halved too. The cost of the equipment from the supplier was very similar, so the savings on installation costs are very noticable.
GC: How was the commissioning process?
IM: Commissioning was very interesting and very smooth. There was only one issue, with the separator, which was damaged by rainwater. It needed to be cleaned out and then we could re-start the commissioning process almost immediately. It was not long before the mill achieved Cemengal’s guaranteed performance values and we now routinely exceed these.
Production process
GC: What is the production process at the Puerto Montt plant?
IM: As Puerto Montt is a grinding station, its raw material is clinker. Over the past 10 years, this has been from Asia, predominantly South Korea and China. It is received from the ship to a 50,000t dome at the port. We then truck the clinker to the plant, where there is a 10,000t silo for day-to-day production.
After it is fed to and ground by the Plug&Grind Xtreme there are three cement silos. There are two cement products: ‘Extra,’ which is a high grade cement with high early strength, and ‘Especial,’ which is a standard grade. Around 60% of sales are of Extra cement, around 95% of which leaves the plant in bulk tankers, with 5% in bags and big bags. The other 40% of total sales are of Especial cement, which is bagged to the tune of around 95%, with 5% in bulk.
The bagging plant dates from 2008. It is a Haver & Boecker Rotopacker with a Metral palletiser and film-wrapping machine. Many of our clients like their bagged cement well wrapped due to the rainy weather conditions in this region.
GC: When was the most recent maintenance shut-down and what was done?
IM: The Cemengal mill has been in operation for almost two years and it has so far not had a big shutdown. We currently maintain the plant via monthly stoppages, typically for around 12 hours. This is for preventative maintenance. We don’t have plans for a big maintenance shut-down on this plant at the moment.
In contrast the Chinese mill has some issues that need to be solved. There are cracks in the shell of the mill and the main motor and reducer are also experiencing some issues. The main motor and reducer will be replaced in early 2021 and we may also replace the entire shell, as we have a spare available.
GC: What would you do to the plant if you had an infinite budget?
IM: When we installed the Cemengal Plug&Grind Xtreme mill, we also improved our gypsum storage area, paved new roads for trucks to enhance site safety and installed a casing on the mills to reduce noise pollution. As far as Puerto Montt goes, we are very happy! If I had a huge budget I would continue to grow the company to develop Chile by developing other sites.
Markets
GC: Where are Puerto Montt’s main markets?
IM: The Puerto Montt plant typically serves markets up to 300 - 400km away. The main market is Puerto Montt, north to Temuco and south to Coyhaique. Some destinations are served by our trucks going on public ferries, for example to Puerto Chacabuco. Some of the destinations represent small markets, maybe taking two deliveries per month, but each location is important and we serve them all to a high standard.
GC: Do you export cement?
IM: No. Chile is a continental island. It is cut off by the mountains to the east and the Pacific to the west. In the south the Antarctic, to the north the desert. To get anything out of Chile takes significant effort.
GC: Have you seen any changes in the markets since the new mill came along?
IM: The strong performance of the Cemengal mill has improved our competitive position within the Chilean market. We are more competitive in some areas and obviously there is an increase in capacity. We are increasingly seen as ‘the’ supplier, with around 70% of all cement sales around Puerto Montt. Our closest ‘local’ competitors are Cementos Bío Bío and Cemento Polpaico, both of which are 500km north of Puerto Montt.
GC: How was the construction market, and hence cement demand, affected by the Covid-19 pandemic in the first and second quarter of 2020?
IM: When Covid-19 hit South America, various authorities acted to shut down major cities and a lot of construction activities were halted, at least for a period. As far as Melón is concerned, this is only part of the pandemic story, as we serve four major markets. Cement demand from the mining sector was almost unchanged, by far the most ‘normal’ market for us. House-building in contrast almost stopped completely. However, public construction was considered ‘essential’ for the country, so around 80% of those activities continued. Finally, the industrial sector was around 50% of normal levels.
GC: How did this affect the Puerto Montt plant specifically? Does it rely more on one of these markets than others?
IM: The Puerto Montt plant was not as badly affected as our plants further north, as the further north you go in Chile, the worse the Covid-19 situation has been. This plant is set to achieve 80% of the production that we expected for 2020, around 0.3Mt. Elsewhere it is more like 70%.
GC: How did the outbreak affect production?
IM: We usually worked from Monday to Sunday but during the worst of the outbreak we decided to work Monday to Saturday due to the reduction in demand. In terms of staffing, we sent everyone home that could work from home. Secondly, we split the shifts into exclusive groups that don’t mix. This means that if one team is infected, the other can continue to operate. Thirdly, we applied very strict rules regarding segregation within teams. There are no longer communal areas and we have relaxed various pre-existing rules, for example to permit eating in the control room. Up until now we are happy with our approach, as we have recorded no cases within our workforce and have also seen zero cases in contractors.
GC: What is the biggest threat to the Puerto Montt plant over the next five years?
IM: We are dependent on imported clinker and this is our key ‘unknown’ in the years ahead. Up to now we see opportunities because freight costs and imported clinker costs little, around US$55/t delivered to our port-side dome. It is very reasonable considering how far it has come! However, we cannot control capacity and production in Asia, which may reduce further, limiting supplies of clinker at this price point in Chile. The second big unknown in Chile is how the economic and social crisis will develop. Even after Covid-19 is behind us, this will affect confidence among investors.
GC: What about the major opportunities?
IM: At the moment, many countries, including Chile, are rethinking their approach to industry and enacting policies to ‘bring manufacturing back,’ rather than buying everything from China. Such policies, if successful, will generate activities and economic drivers that demand cement.
GC: What’s next for Melón Cementos?
IM: Even before the project with Cemengal was completed at Puerto Montt, the company was so impressed with Cemengal that it has ordered a second Plug&Grind Xtreme for a new grinding station in Punta Arenas, around 2200km south of Santiago. When it is built in 2021, it will be the most southerly cement plant in the world.
A Plug&Grind Xtreme may be a bit big for the south of Chile right now, but there are benefits of sharing spare parts and expertise across the Puerto Montt and Punta Arenas sites. It represents a very exciting development for the company. We hope our continued growth will contribute to the further development of Chile and maintain Cementos Melón’s position as the leader in the most developed country in South America.
GC: Iván Marinado, thank you for your time!
IM: You are very welcome indeed!