The Federative Republic of Brazil, which spans 8,515,767km2, is the largest country in South America and the fifth largest country in the world. With a population of 201 million in 2013, it is also the fifth most populous country world-wide. As the home of a developing cement market, Global Cement Magazine has produced an overview of the Brazilian cement industry, with particular focus on recent trends and economic developments.
Introduction
Brazil, which is divided into 26 states and one federal district, has been governed as a federal republic since 1988 from Brasília, the capital city of Brazil. The current president, Dilma Rousseff, succeeded Luís Inácio Lula da Silva in 2011 and is Brazil's first female president. Brazil was claimed by Pedro Álvares Cabral for Portugal in 1500 and ruled by the Portuguese for three centuries. In 1822 the Brazilians claimed independence, overthrowing
Portuguese rule and forming the Empire of Brazil. The country became a presidential republic in 1889 and was ruled by populist and military governments until 1985, when the need for a federal republic with an elected leader became clear.
Brazil was a founding member of the United Nations (UN), the G20 and the Union of South American Nations. As one of the world's 17 mega-diverse countries, it is home to a wide variety of protected habitats, natural resources and endangered species. The South American country is most famous for the Amazon river, the annual Rio Carnival in Rio de Janeiro and for being the world's largest coffee producer, a title it has held for more than 150 years.
Economy
As in many regions of the world, the Brazilian cement industry is closely linked to the economic well-being of the country. As for the other BRIC economy countries, namely Russia, India and China, Brazil is characterised by newly advanced economic development. The BRIC countries have held annual summits since 2009 and at the inaugural event, the group 'issued a declaration calling for the establishment of an equitable, democratic and multipolar world order.'1
Brazil experienced a much milder recession than most of the world in 2008 and only for two quarters. During this time, demand for Brazilian commodity-based exports was vastly reduced. As one of the first emerging markets to begin recovery from the recession, Brazil experienced high GDP growth rates until 2010, when the government took measures to calm the growing inflation rates (Figure 2). GDP grew by 2.5% to US$2.422tn in 2013, up from US$2.362tn in 2012 and US$2.342tn in 2011.2 This has been attributed to increased productivity, extensive investments and higher levels of employment. GDP/capita hit US$12,100 in 2013, up from US$11,900 in 2012, which was unchanged from 2011. Inflation increased in 2013, reaching 6.15%, up from 5.40% in 2012.
The Brazilian economy is largely reliant upon commodity exports, including coffee, automobiles, steel, cement and crops. With an expanding labour force, which reached 107.3 million in 2013, Brazil's industrial production growth rate was 3% in 2013. In contrast to advanced economies, 'only' 71% of the labour force worked in the service sector, 15.7% worked in agriculture and 13.3% worked in industry in 2011. Unemployment rates increased slightly from 5.5% in 2012 to 5.7% to 2013, with youth unemployment higher. As for the other BRIC countries, a large proportion of the Brazilian population lives below the poverty line, which in 2009 was estimated at 21.4%. The Brazilian population continues to grow at a rate of 0.8% in 2014 (estimated), contributed to by a birth rate of 14.72/1000, a death rate of 6.54/1000 and a negative net immigration rate of -0.15/1000.
According to local media, corruption costs the Brazilian economy US$41bn/yr.3 "Corruption is widespread," said Wagner Giovanini, cluster compliance officer of Siemens in Brazil. "However, Brazilians have a habit of exaggerating the problem. It is possible to run a business without resorting to bribes, if you are committed to doing so." Though 69.9% of Brazil-based companies have reported that corruption is a large business constraint, efforts are on-going to reduce corruption by increasing business transactions with international firms, which are bound by anti-bribery regulations.
Cement industry overview
The Brazilian cement industry can trace its roots back to the late 19th Century, when the earliest cement plants were built. Industrial-scale production began in 1926 with the commissioning of the Companhia Brasileira de Cimento Portland cement plant. The country's exports exceeded its imports for the first time in 1933. Cement consumption rose from 12.9kg/capita in 1935 to 67.7kg/capita in 1962 following large-scale industrialisation and strong infrastructure growth. The industry reached the milestone of 40Mt/yr domestic cement consumption in 1999, but was plagued by economic difficulties until 2004. Since that time, the cement industry in Brazil has shown year-on-year growth, thanks to regulations that encouraged housing developments and other construction projects.
The Sindicato Nacional Da Indústria Do Cimento (SNIC) was established in 1953 in order to protect the interests of the cement industry and to collaborate with the Brazilian government on behalf of cement manufacturers. The SNIC reported that cement consumption reached 69.3Mt in 2012 (the latest year for which full data is available), up by 7.3% from 64.1Mt in 2011.4 Consumption hit 353kg/capita in 2012, up from 333kg/capita in 2011, while exports fell to 0.26Mt and imports fell to 0.977Mt in 2012. Brazil is one of the world-leaders with regards to cement consumption, trailing only China (2.05bnt), India (236.9Mt) and the USA (72.2Mt) in 2011. In 2013 total cement production was 70Mt, up from 68.8Mt in 2012, while clinker production capacity was 60Mt/yr, up from 57Mt/yr in 2012 (Figure 2).
Brazil is also home to the Brazilian Portland Cement Association (ACPB), which was founded in 1936 to 'promote studies on cement and its applications.' Unlike the SNIC, the ACPB focuses on technological advances and partnerships with educational and research facilities.5 The ACPB partnered with the Faculty of Architecture at Mackenzie University in São Paulo to produce the course 'Architecture & Construction: Materials, Products and Applications: Introduction to Building Systems,' in 2014,6 as well as the production of architectural handbooks on the construction of public architecture projects.7
In addition to ordinary Portland cement (OPC), Brazil is also home to a healthy white cement industry. White cement sales grew from 0.96Mt in 2006 to 1.15Mt in 2007, although they fell to 0.86Mt in 2008, the latest year for which data is available.4
The cement industry in 2014
In 2014 the Brazilian cement industry has a total installed production capacity of 72.2Mt/yr from 72 integrated plants, up from 69.2 Mt/yr in 2013 from the same number of plants. No new plants were built during the 12 months, although construction is on-going at several, while a few plants underwent expansion projects. Cement production is spread across 23 states and is primarily focused in the most populous states like São Paulo (43.7m inhabitants), Minas Gerais (20.6m) and Rio de Janeiro (16.4m), which also possess the largest apparent cement consumption (Figure 4).
Sales volumes rose year-on-year throughout 2012-2013 and in the first two months of 2014 (Figure 5). The majority of Brazilian cement is sold to retail units (55%), while sales to ready-mix concrete producers (21%), other concrete producers (11%) and contractors (12%) are less significant, according to the SNIC (Figure 6).
The Brazilian cement industry is dominated by eight companies that possess a total production capacity of 65.05Mt/yr from 64 plants (Table 3), which represents 90.1% of the entire country's production capacity and 80.0% of the country's cement plants.
State | Cement production capacity (Mt/yr) |
Minas Gerais | 20.5 |
São Paulo | 9.52 |
Bahia | 8.20 |
Rio de Janeiro | 6.15 |
Paraíba | 3.65 |
Sergipe | 3.46 |
Santa Catarina | 2.80 |
Permambuco | 2.31 |
Above - Table 1: The top eight cement producing states in Brazil in 2014 by installed capacity. Source: Global Cement Directory 2014, research performed for the Global Cement Directory 2015 and company websites.
Area | 8,515,767km2 |
No of states | 26 |
Capital city | Brasília |
Population | 201m |
Language | Portuguese |
Integrated plants 2014 | 72 |
No of producers 2014 | 15 |
Cement capacity 2014 | 72.2Mt/yr |
Clinker capacity 2013 | 60Mt/yr |
Cement consumption 2012 | 69.3Mt |
Cement production 2013 | 70Mt |
GDP 2013 | US$2.422tn |
GDP/capita 2013 | US$12,100 |
GDP growth rate 2013 | 2.5% |
Unemployment rate 2013 | 5.7% |
Inflation rate 2013 | 6.15% |
Industrial growth rate 2013 | 3% |
Above - Table 2: Key facts about Brazil.
Votorantim Cimentos is the industry leader in Brazil, with a total installed capacity of 23.3Mt/yr from 19 cement plants, including several that are currently under construction. Since its establishment in 1933, the Brazilian company has developed a truly international business, with operations on every continent. In addition to cement, Votorantim Cimentos also produces concrete, aggregates, mortar and lime.8
InterCement Brasil SA, which is owned by the Brazilian construction group Camargo Corrêa, is the second largest cement producer in Brazil, with 13 integrated plants and a total production capacity of 14.9Mt/yr. The company constructed the Apiai cement plant, its first plant, in São Paulo in 1968 and now operates world-wide.9
Cimento Nassau, part of the John Santos Group, owns 10 integrated cement plants in Brazil with an installed capacity of 6.71Mt/yr, which makes it Brazil's third-largest cement producer. The plants are located mainly in the northern region of the country, giving Cimento Nassau the largest stake in the northern region of Brazil.4
Lafarge Brasil SA, part of French cement producer Lafarge, has been present in Brazil since 1959. The company employs 1800 staff across its seven plants in the country, with a total production capacity of 6.33Mt/yr, making it the fourth-largest cement producer in Brazil.10
Holcim Brasil SA, part of Swiss firm Holcim, is Brazil's fifth-largest cement producer with an installed production capacity of 4.50Mt/yr from its four plants. Holcim Brasil has operated since 1951 and employs around 2000 staff across its Brazilian sites.11 The company operates primarily in the south-east of the country.
Cimento Tupi is Brazil's sixth-largest cement producer with an installed capacity of 3.50Mt/yr from three plants. The company was founded in 1949 under the name Cement Company Vale do Paraíba and has grown steadily over the years.12 In 2013 Cimento Tupi completed the expansion of its Pedra do Sino plant in Minas Gerais. The company produces composite Portland cement and high early strength Portland cement.
Brennand Cimentos, part of the Brennand Group which was founded in 1917, will have a cement production capacity of 3.00Mt/yr from three plants once construction of the Joao Pessoa plant is completed. This will make it the seventh-largest cement producer in Brazil. The company produces a variety of cements as well as aggregates and concrete products.13
Mizu Cimentos Especiais has a cement production capacity of 2.81Mt/yr from five cement plants in Brazil, making it the eighth-largest cement producer by installed capacity.14
Environmental responsibility
According to the SNIC, matters of sustainability and environmentally-friendly business practices are a high priority for all of the major Brazilian cement producers in Table 3. These companies report growing rates of alternative fuel substitution, using tyres, waste oils and plastics, in addition to biomass fuels such as rice hulls and bagasse. Environmental protection projects are also a high priority. For example, Brennand Cimentos has, in partnership with the Sete Lagoas State Forestry Institute (IEF), maintained a reforestation programme in Minas Gerais since 2010.
In 2009 the National Policy for Climate Change was approved, which described a voluntary commitment to reduce total Brazilian emissions by 36-39% by 2020. Brazilian cement plants are typically highly energy-efficient, resulting in reduced CO2 emissions.15 Brazil has no country-wide limit to the levels of SO2 and NOx produced by cement plants, although industry contacts state that these emissions are limited on a state-by-state basis.16 However, mercury emissions are limited to 0.05mg/Nm3 (with reference to 7% O2), while particulate matter (PM) is limited to 70mg/Nm3 (with reference to 11% O2).
Votorantim Cimentos has a particularly strong dedication to environmental protection and was one of the 10 founding members of the Cement Sustainability Initiative (CSI). The company uses co-processing technology for the burning of alternative fuels and substitutes limestone, clay and iron ore as raw materials. Votorantim Cimentos reduced its CO2 emissions by 20.0% between 1990 - 2011 in Brazil and in 2013 dedicated itself to continuous emissions monitoring, including SOx, NOx, PM, volatile organic compounds (VOC) and heavy metals.
Company | Plants | Cement production capacity (Mt/yr) |
Votorantim Cimentos | 19 | 23.3 |
InterCement Brasil SA | 13 | 14.9 |
Cimento Nassau | 10 | 6.71 |
Lafarge Brasil SA | 7 | 6.33 |
Holcim Brasil SA | 4 | 4.50 |
Cimento Tupi | 3 | 3.50 |
Brennand Cimentos | 3 | 3.00 |
Mizu Cimentos Especiais | 5 | 2.81 |
Above - Table 3: The top eight cement producing companies in Brazil by installed capacity. Source: Global Cement Directory 2014, research performed for the Global Cement Directory 2015 and company websites.
Acquisitions, sales and mergers
In February 2013 Portugal-based Cimpor announced the merger of two of its subsidiaries in Brazil, Cimpor Cimentos do Brasil and InterCement Brasil. Both companies were fully and indirectly owned by Cimpor, which itself has been controlled by Brazil's Camargo Corrêa since June 2012. The merger received the approval of Cimpor's board of directors on 30 January 2013. "The merger of these two companies will make it possible to create joint value, promote synergies, improve operating efficiencies and quality of services," said officials at Cimpor.
In April 2013 Camargo Corrêa announced plans to invest up to US$1.5bn in the Brazilian cement industry by 2016. Among the nine countries Camargo Corrêa began operating in through its Cimpor deal, the Brazilian market shows the greatest growth potential. Planned projects include the construction of four cement plants and an expansion of the Cezarina plant in Goiás.
New plants
Construction is on-going at Brennand Cementos' new cement plant in the state of Paraíba. In July 2013 FLSmidth received an order for a 3300t/day line for the Joao Pessoa plant, while in September 2013 Hazemag & EPR GmbH received an order for two crushers for the same plant. The order comprised one limestone crusher with a throughput rate of 1500t/hr for the production of a final product of 95% <90mm. A second product of 95% <50mm can also be produced at a lower throughput rate. HAZtronic, a hydraulic input apron control, can switch between the two production modes. The second crusher was for clay, with a throughput of 300t/hr for the production of a finished product of 0-90mm. Commissioning of the Joao Pessoa plant is planned for late 2014 (Figure 7).
Upgrades and expansions
FLSmidth completed the expansion of InterCement Brasil's Cezarina plant in Goiás in early 2013 (Figure 8). The order included a new pyro-processing line comprising an ATOX raw materials grinding mill, a CF raw meal blending silo, an in-line calciner preheater system, a ROTAX-2 kiln, an FLSmidth Cross-Bar cooler and a pollution control system.
Haver & Boecker Latinoamericana (HBL), the Brazilian subsidiary of the German engineering firm Haver & Boecker, celebrated the expansion of its headquarters in São Paulo on 1 March 2013. The expansion represents part of the investments made by the company to meet the growing demand registered in the Brazilian and Latin American markets. Haver & Boecker also announced the creation of Haver & Boecker Holding Americas to support technical, financial and communications for all branches in Latin America and North America. Adrián Gamburgo, who was previously the director of HBL, will lead the holding company. Rodrigo Campos became the managing director for the branch in Brazil.
In July 2013 Cimpor began exports from Portugal to the port of Manaus, Amazonas. The first shipment was 28,000t of cement. InterCement, which directly owns Cimpor, planned to import 70,000t/yr of Portuguese cement to Brazil due to the continuing economic downturn in Portugal.
In October 2013 the Brazilian logistics firm América Latina Logística (ALL) announced plans to increase the volume of clinker and cement it transports for Votorantim Cimentos by over 30% before the end of 2013. ALL plans to increase its shipments for Votorantim to 1Mt/yr from 0.75Mt/yr. ALL recently invested US$3.4m in trains and improving unloading bays in Paraná and borrowed US$771m from the Brazilian Development Bank in 2013.
In July 2014 FLSmidth received an order for an OK-33 vertical roller mill from Cimento Itambé. The cement mill will be installed at the Balsa Nova Plant in Paraná and is the 19th OK mill sold in Brazil.
Cartel allegations
The case between the Brazilian Competition Authority (Cade) and several major cement producers continues to blight the Brazilian cement industry eight years after investigations first began. In April 2014 the industry received confirmation of a US$1.4bn fine, along with the mandatory sale of 24% of the cement assets of the companies involved, for alleged cartel practices. Lafarge Brasil had previously settled with Cade by way of an agreement on divestments and a negotiated fine of US$19m.
Votorantim Cimentos would be fined US$662m and be forced to sell 35% of its assets, which represents 11Mt/yr of cement production capacity, while Holcim Brasil would receive a penalty of US$216m and be compelled to divest 22% of its assets.
Itabira Agro-Industrial (owned by Cimentos Nassau) would be fined US$175m and be forced to sell 22% of its assets, Cimpor Cimentos would receive a penalty of US$126m and have to sell 25% of its assets, InterCement Brasil S/A would be fined US$103m and forced to divest 25% of its assets, while Cimento Itambé would receive a fine of US$37.5m and would not have to sell any assets as it only owns one cement plant.
A legal battle is expected to follow the final decision. Cade said that the cement cartel, which allegedly existed between 1986 and 2007, led to increased prices that were passed on to consumers and cost the economy around US$6.3bn.
Financials
The Brazilian cement industry has continued to show growth in recent months. The SNIC reported that from January 2013 to January 2014, 70.4Mt of cement was sold, a 2.5% year-on-year increase. In January 2014 domestic cement sales rose by 6.8% compared with the same month of 2013, while exports fell by 54.2% in the same month. February 2014 saw cement sales volumes increase by 0.8% year-on-year to 5.6Mt, while exports fell by 71.1%. The falling exports can be attributed to increased domestic consumption.
Despite this, several of the major cement producers reported a disappointing 2013. Votorantim Cimentos summarised 2013 as a year of 'instability and disappointing growth,' although the domestic market showed the most promise. Cement sales volumes in Brazil grew by 4.1% year-on-year and net revenues rose by 10% over the same period in 2013. However, in August 2013 the company cancelled a US$4.8bn initial public offering (IPO) due to poor market conditions. According to Dow Jones, the cement producer had initially delayed its IPO in July 2013 to September 2013. "The IPO continues to be the company's plan and we will continue to monitor the evolution of the capital market conditions to be able to resume the offer," said CEO of Votorantim Cimentos, Lorival Luz. At the time when Votorantim Cimentos does make its debut on the stock exchange, it will be the first Brazilian cement company to do so.
Holcim Brasil also reported poor results in 2013, with a 4.6% year-on-year fall in cement sales that were not mitigated by a 2.2% year-on-year increase in cement prices. The poor sales volumes were attributed to delays in infrastructure projects and were largely reflective of the cement sales volumes of the entire Latin America region, which were 25.0Mt in 2013, a 0.1% year-on-year increase over the 24.9Mt sold in 2012. Lafarge Brasil reported similar results, with disappointing cement sales volumes due to 'production limitations in quarter four.' However, cement sales increased by 3% year-on-year due to rapid inflation and the devaluation of the Brazilian Real.
Outlook
The IMF's latest economic outlook update in January 2014 has forecast that Brazil's GDP will remain at 2.3% in 2014 and will grow by 2.8% in 2015. Stronger growth is expected for the Latin America and Caribbean region overall, as well as the emerging market economies (Table 4).
In 2013 Costdriver, the Brazilian publisher of raw materials industry forecasts and trends, stated that the Brazilian cement industry is expected to expand significantly in the near future.17 A cement production capacity of 120Mt/yr is expected by 2016, largely due to an expected 25% increase in infrastructure developments, half of which are expected in the residential housing sector.
Several of the cement large producers also expect an improvement of the Brazilian cement industry in 2014. Votorantim Cimentos has forecast a positive trend in cement consumption for the near future, which it attributes to the housing deficit and bottle-necked infrastructure developments. Holcim Brasil expects improved cement sales volumes in 2014, although sales volumes of ready-mix concrete are expected to remain stable or fall.
Given the positive forecasts by the IMF, industry experts and cement producing companies, the Brazilian cement industry seems likely to continue to expand steadily in the coming years. As host to the 2014 FIFA World Cup Brazil and the Rio 2016 Olympic Games, Brazilian infrastructure projects are likely to be on the up-swing. Stabilisation of the rapidly-fluctuating Real exchange rates and greater control of country-wide corruption would further improve the attraction of Brazil to foreign investors. However, a close eye should be kept on the growing inflation rate which may yet be the downfall of many Brazilians, most notably to Brazil-based companies and low-income families.
Region | 2012 | 2013 | 2014 | 2015 |
Brazil | 1.0 | 2.3 | 2.3 | 2.8 |
Latin America | 3.0 | 2.6 | 3.0 | 3.3 |
Emerging market countries | 4.9 | 4.7 | 5.1 | 5.4 |
Above - Table 4: GDP growth rate forecasts for Brazil, Latin America and the Caribbean and emerging market economies (%). Source: IMF World Economic Outlook Update January 2014.
References
2. CIA World Factbook, Brazil.
3. http://www.latinbusinesschronicle.com/app/article.aspx?id=4550.
4. Sindicato Nacional Da Indústria Do Cimento website, http://www.snic.org.br.
8. http://www.votorantimcimentos.com.br.
9. http://www.intercement.com.
10. http://www.lafarge.com.br.
12. http://www.cimentotupi.com.br.
13. http://www.cimentonacional.com.br.
15. EPA, "National Greenhouse Gas Emissions Data," 2012.
16. Peter Edwards, "Global Cement emissions standards," Global Cement Magazine, March 2014.
17. http://www.costdrivers.com.br/costdrivers/en/news/2013/6/high-consumption-attracts-investors-141993.