This article is the second in a series of four to look at the prevailing trends in the global cement sector over the past 40+ years, this time looking at cash-driven growth seen in the 1990s.
1 Technology and operations
A single image representing the cement industry of the 1990s would be a long line of the cement trucks waiting at a plant’s despatch. Over the whole decade there were very few countries where demand shrank, thanks in part to colossal post-Cold War construction booms in cities like Berlin.
Large projects created demand intensities in excess of 1000kg/capita/yr in places where they had traditionally been 200 - 300kg/capita/yr. In addition to mega-projects, some of which lasted for the entire decade, baseline demand was mostly strong, steadily growing year after year.
These strong conditions created at-least three operational trends. Firstly, it started a boom in cement capacity investments. In some markets it was possible to see several large cement plants under construction from the top of their competitor’s preheater tower. Secondly, older technology at smaller plants had to meet rising demand, at least until the new plants were up to speed. Thirdly, there was significant growth in cement imports, which globalised the industry, triggered construction of large terminal and coastal plants, and challenged the ‘200km from the plant distribution radius’ paradigm.
Almost universally, plant operators squeezed more cement from old plants as long as possible with as little capex as possible. Production became king and debottlenecking a valued skill. This has served the industry well by creating a generation of plant operators able to do a lot with very little.
At the same time, many seemingly minor, but essential new technologies were developed: Gamma Metrics to control quality of raw materials in real time, blending, expert systems, sophisticated combustion and refractory management – all those process technologies helped to achieve more stable operations, prolonged plant life, improved cement quality and reduced the mean time between failures, with relatively low capex.
Maintenance departments gradually progressed to more predictive procedures using improved IT-driven methodologies and more modern civil and mechanical engineering solutions. Better tools and more wear-resistant materials were also a key to ever-increasing reliability, especially around the kiln. As a result, many 40 - 50 year old, fully depreciated assets often operated at above 90% utilisation, some producing more clinker than their nominal capacity until their final days. Indeed, some are still running after 60 - 80 years. The combination of fully-depreciated technologies managed at high utilisation factors created continuous cash flows for operators able to run such plants... and a long list of safety, technical and financial troubles for those businesses which could not. The more technically capable companies usually acquired ‘failing’ assets, before debottlenecking them at minimum capex to ‘print more cash.’
These old plants continued to generate ‘infinite’ returns until the mid 1990s. However, once the new operations came online, the party started to wind down. While the cash generation continued, suddenly the book values sky-rocketed to hundreds of millions, or even billions for a single plant. New financial performance measures, such as low return on capital employed, appeared in financial reports, instantly starting cost reduction programs and hunts for better pricing and / or lower capex.
The technology for making cement, having undergone exciting advancement and the initial proof of concept phase in the 1980s, now entered a ‘going to market’ phase. The 1990s began with numerous long dry and wet kilns in the US and Europe, as well as shaft kilns in China. However, by the late 1990s new pre-calciner plants were in operation everywhere. Low return on capex became a catalyst for moving equipment manufacturing to China and design standardisation. There were even some reverse technological trends, where less advanced but cheaper new equipment was selected.
In terms of the new technologies, the 1990s saw more of a slow evolution than a revolution. However, there were some notable exceptions. Grate cooler manufacturers in Europe developed a third generation technology, characterised by improved recuperation efficiency and lower maintenance costs. However, retrofitting these to existing lines was expensive and the time required for installation cut into the demands for maximum production. 30 years later there’s still a steady stream of retrofits.
Probably the biggest step forward in the 1990s, from the equipment point of view, was the development of the vertical roller mill (VRM) for clinker grinding. The biggest single advantage was in scale. Ball mills without a roller press were only proven up to 150t/hr, whereas vertical mills extended this to 500t/hr. Finally, the upscaling of kilns could be matched by a single, high capacity unit for clinker grinding. There were also power efficiency advantages, as well as the ability to transition rapidly from one product type to another, a key feature as the number of cement types offered began to expand.
Precalciners also evolved, with recognition that they could combust fuels, especially alternative fuels (AF), that could not be used in the kiln. The most common was tyre chips. Correctly sized, these could be suspended in the rising gas stream, with residence times of over 8 seconds, enabling full combustion.
Precalciner design became a precise science for low NOx and improved flow mixing, using computational fluid dynamics (CFD) for better combustion. In the early 1990s, cement companies had no computer power for such modelling. Indeed. the authors were fortunate to use the UK Atomic Energy Authority’s supercomputer to play with some of the first models. However, by the late 1990s, CFD became a common tool for several equipment manufacturers. With low pressure drop preheater design, precalciners could now be coupled with five or six preheater stages over heights of up to 125m.
Also in the 1990s, waste heat recovery (WHR) finally broke out of Japan. China led the way, with new plants obliged to install WHR. Several countries in the region followed suit, but water conservation and other factors limited WHR elsewhere.
Finally, automatic control of kilns and mills by expert systems progressed to competent levels, mainly driven by improved algorithms and higher computing power. However, these were still limited by poor reliability in some process instrumentation and sensors.
No technological history of the cement industry in the 1990s would be complete without the story of Asia, which would quickly move to install new cement capacity, as several countries grew at double digit rates. For sheer cement volume, China takes centre stage. During the 1970s there was growth in Chinese cement capacity, but mainly using wet kilns and there was also a proliferation of small capacity vertical shaft kilns. By 1980 there was approximately 100Mt/yr capacity, roughly equal to that of the US, India and the USSR, then the largest cement producing nations.
However, for China much of this capacity was in small, inefficient and environmentally-damaging plants. This misstep was corrected vigorously with rapid growth in first preheater, then precalciner kilns based on European and Japanese models. In terms of installed capacity, the decade concluded with China several times ahead of any other country.
2 Energy, emissions, alternativefuels / materials
By the beginning of the 1990s ‘Global Warming’ had become an accepted science. Sweden was the first country to introduce a national carbon tax scheme, in 1991. However, despite COP 1 being held in 1995 and the signing of the Kyoto Protocol agreement in 1997, the next serious move towards CO2 emission reduction did not occur until 2005. (More on this in our forthcoming article on the 2000s).
Alternative fuel replacement progressed in Europe and Japan, where the combination of well-organised waste collection systems and high landfill taxes was a necessary precursor to success. Some countries rose from 10% to 50% alternative fuels (AF) and several plants in the US and Europe even achieved 100% replacement of coal, highly impressive as this was before government programs to reduce coal use. Unfortunately, the rest of the world remained at AF levels of below 5%. This period demonstrated that using AF added complexity to operations and, without regulation, new technologies, societal pressure or a strong financial incentive, little substantial progress was made.
For fossil fuels, the relative costs of coal and petcoke (per unit of energy) varied significantly, but generally there was a trend to using more petcoke - not an easy option. Getting the grinding of petcoke and the burner design right may have developed quickly, but the sales of air cannons boomed as difficulties with controlling preheater build-up multiplied.
Alongside the AF challenge, environmental authorities ramped up coverage and the species covered by stack emission limits. Some of this was due to the desire to burn alternative fuels and pressures from some incinerators to level the playing field. NOx and SOx limits led the way in many countries. Restrictions on dioxins and furans, heavy metals and many other pollutants followed. The imposition of these limits triggered the development of new technology and European emissions of SOx and NOx dropped enormously.
3 Products
By 1990 both ground granulated blast furnace slag (GGBFS) and clean fly ash were well established additions in concrete. As supply shortages and the environmental and economic costs of producing clinker increased, the use of cementitious materials continued to grow. Each country evolved differently. For example, in India, ordinary Portland cement (OPC) represented 70% of sales in 1990, but just 40% in 1999 - a massive transition.
In 1991 Cembureau published ‘Cement Standards of the World.’ It ran to 250 pages of tightly packed tables. In France there were 166 cement types listed. In some countries there were just two! There are obviously many factors which were common in these standards, such as strength classes, recipes with ranges of contents (clinker percentage etc.), other performance and physical requirements. However, the majority of types defined were not comparable from country to country. In a world of increasing trade and competition this was not likely to survive, and so it proved. In 1997 EN 196 and 197 were issued and Europe at least had a unified set of cement standards. The US had a competing standard, ASTM C-150, for most cement types.
Although some major cement producers such as China, India and Brazil retained their national standards, many other countries either adopted the EN or ASTM standard, or aligned themselves closely to one or the other. Both standards have evolved, notably allowing more additions. The impact of these changes was also to encourage the use of more GGBFS, limestone, pozzolans, and many other cementitious materials. One other significant step forward in standards was the 1997 publishing of arguably the first ‘performance based’ cement standard, ASTM C-1157.
The chemistry of grinding aids, strength enhancers and superplasticisers all advanced rapidly in the 1990s, producing marked benefits in mills, cement and concrete performance. On top of this, a slow but steady transition from bag to bulk cement supply progressed, cutting the waste generated by bags and pallets but in some cases contributing to growing commoditisation. Ironically, the opposite trend also became noticeable in some markets, with the growth of masonry cements, well cements and various dry mixes sold in different types of bags.
4 Corporate - Models and economies
The fall of the Berlin Wall on 9 November 1989 opened many new opportunities to modernise the old and inefficient industries of Eastern Europe. The most immediate effect was through the privatisation programs. A ‘gold rush’ developed as cement companies sought to purchase assets. The quality of those plants varied from ‘excellent’ to negative value in markets as diverse as Romania to Russia. The wave of acquisitions moved rapidly from West to East with rapid debottlenecking and modernisation. The busiest was probably East Germany with its massive funding and the move of Germany’s capital back to Berlin, but almost every former Soviet bloc country saw the arrival of new precalciners and growing demand.
Restructuring in Europe was not limited to the east, as the mid-sized cement companies that sought to establish a foothold in the east, themselves became targets. In 1992 Italcementi acquired the much larger capacity Ciments Français, projecting itself from an almost uniquely Italian company to a multinational in a single step. A year later Heidelberger Zement bought CBR of Belgium. Buzzi acquired Unicem in Italy in 1999. It followed up with the purchase of Dyckerhoff in Germany in 2004. In 2000 Blue Circle purchased Heracles in Greece.
The appetite for such acquisitions did not stop there. Strong profits from North American operations and plenty of local companies that had missed the technological boat gave rise to much activity in that market. The result was that, by the end of the 1990s the majority of North American cement capacity was controlled by foreign manufacturers.
The rationale for those acquisitions was traditional: investors believed that the new management would improve performance of the target company in the areas of safety, customer focus, products, technology, quality, environment, trading and finance. In addition, there was also the motive to balance geographic portfolio or vertically integrate.
The other stimulus for global growth was improvements in communication and improvements in cross border management of all areas necessary to manage internationally in the 1990s. Running a global cement business in the 1970s was challenging. With communications limited to the post, expensive phone calls, Telex, with literal cash transfers in suitcases, there had to be a great deal of faith, as well as expensive controls that the parent company had to enforce. In the 1990s, the nascent internet, cheaper and easier travel and free-flowing international finance enabled the evolution of much more coherent multinational companies. Other than the inconveniences of time zones and languages, a cement plant 10,000km from the headquarters became little different from one nearby.
Most importantly, the successful cement companies - those that invested in safe, energy efficient, clean technologies, strong compliance systems and the best management practices - accumulated some serious cash, both from those long lines of trucks at the despatch, and from flexible capital markets. In most of these acquisitions there was a strong element of vertical integration, involving cement players moving into aggregates, ready mix and concrete products… but that story takes us into the ‘New Millennium.’
Up next
In the next article, the authors will look at the cement industry of the 2000s, a decade of boom and bust in demand, vertical integration, escalating decarbonisation efforts, and the new era of mega-mergers.
Note
The views, information and opinions expressed in this article are solely those of the individual authors and do not necessarily represent those of their past or present employers, the publisher or any other organisation. The photos have been provided by the publisher from its archive.
About the authors
Gregory Bernstein has worked for Holcim for more than 30 years. He met Lawrie Evans in the UK in the early 1990s, before taking on process, project, strategy, well cement and business development roles in the UK, Europe and the US. He is currently developing worldwide partnerships to accelerate sustainable construction solutions.
Lawrie Evans founded EmCem Ltd, a UK-based cement consultancy, in 2014. He previously worked for more than 40 years at Italcementi, Heracles Cement and Blue Circle in the UK, Greece, the US and Italy across optimisation, management, operations and chemical engineering.
