As VDZ members sit down at the VDZ Annual Cement Conference on 27 - 28 September 2016, they will be doing so in one of the most technologically-advanced, environmentally-conscious and competitive cement industries in the world, as well as in a country where cement demand could be set to increase in light of massive new infrastructure spending...
When the country with the 12th-largest road network in the world decides to undertake its largest-ever road building scheme, you know there’s a lot of work to be done. But that’s exactly what Germany announced in March 2016 with its Bundesverkehrswegeplan (BVWP) 2030. With the aim of renovating existing and building new road rail and waterway capacity, the BVWP was described by Alexander Dobrindt, Germany’s minister for transport and digital infrastructure, as ‘the strongest investment plan for infrastructure the country has ever seen.’
The BVWP sets aside Euro264bn of funds for use over the 14 years to 2030. Nearly half will be spent on roads, around 41% will be spent on rail and 9% will go on waterways. Approximately two thirds of the money is allocated for renovation, expansion and widening of existing facilities, with one third for entirely new connections.
Reaction
While the Green Party Environment Minister and local groups have already voiced their concerns over the planned works, especially with reference to the high prevalence of road projects, there will be a lot of new capacity to be built. The new capacity will inevitably require cement from Germany’s large and capable cement sector, although just how much is not clear at this point.
Speaking to Global Cement, Dennis Guhl, Statistical Consultant at the VDZ, said, “VDZ members are not getting too excited yet. The plans are too unspecific and whether BVWP 2030 will result in increased cement sales is not an easy question to answer.”
“While the amount of money available from BVWP 2030 is significantly more than in the past, we should remember that it now costs more to build each new km of road, due to rising land decontamination costs. The number of projects that will be built under DVWP 2030 remains to be seen and there is relatively low provision for new construction.”
21st Century trends
Cement stats at a glance | |
Integrated plants | 34 |
Grinding plants | 21 |
All plants | 55 |
Integrated capacity | 32Mt/yr |
Deliveries* | 24.8Mt/yr |
Consumption** | 27.1Mt/yr |
Imports** | 1.3Mt/yr |
Exports** | 6.2Mt/yr |
Above: Table 1. * = 2015, ** = 2014
Whether the BVWP has a noticable impact on German cement production remains to be seen, but any up-tick in fortunes would be welcome. The sector has been in a steady state of low growth in recent years. Despite German GDP (PPP) surpassing Euro3.3tn in 2015 and 1.5 - 1.6% economic growth in the last two years, cement production by members of the country’s cement association the VDZ actually fell to 24.8Mt in 2015 from 25.3Mt in 2014. However, this was due to decreased exports year-on-year, as total domestic consumption rose marginally.
Figure 3 shows the amount of cement delivered to domestic consumer by VDZ members, (which represent the vast majority of German cement capacity), since 1996. It shows a significant fall in the early 2000s. In the past 16 years German cement consumption has dropped by around 30% from 35.78Mt in 2000 to 24.8Mt in 2015. This level has remained virtually unchanged since around 2002.
The main reasons for the drop in consumption are a lower backlog of demand from the former East German states than in the 1990s, unfavourable demographic and tax frameworks for residential construction work and restricted government infrastructure spending so far in the 21st Century.
Consumption in 2014 and 2015
Figure 4 compares monthly cement production output for VDZ members in 2014 and 2015. This shows the high degree of seasonality of the German sector, which is typical of a temperate
European climate. Figure 5 shows the year-on-year change (and cumulative change) in monthly outputs in 2015 relative to 2014. Taken together, these figures show that the first nine months of 2015 were relatively poor, with the exception of March and June. After particularly low despatches in February 2015, the situation improved in the second quarter, with relative year-on-year gains in the final three months of the year. This may be explained by the fact that the weather in the final quarter of 2015 was unseasonably warm, which aided the continuation of construction activities right up to the New Year across much of Europe. Whether or not this trend continued into 2016 is yet to be seen.
Producer highlights
New line and upgrades for HeidelbergCement
In the first quarter of 2016, HeidelbergCement reported improved sales in its Western Europe region, led by improvements in Germany. Sales in the region were up by 3.1% year-on-year for the quarter and cement volumes were up to 17.6Mt across all operations in the first quarter of 2016, compared to 16.8Mt in the same period of 2015. This strong quarterly performance came on the back of a strong 2015.
In April 2016, HeidelbergCement also made the unusual step of announcing a new cement production line in Germany, for its Schelklingen plant in Baden-Württemberg. The Thyssenkrupp line will have a capacity of 4500t/day (~1.5Mt/yr) and will replace an existing, less efficient line of the same size. The company is also in the process of upgrading its 1.1Mt/yr Burglengenfeld cement plant in Bavaria. The plant will be fitted with a new clinker cooler from IKN by the close of 2016, with new pyroprocessing equipment from A TEC and mills from Gebr. Pfeiffer.
Dyckerhoff sees improved performance
In the annual report of parent group Buzzi Unicem, Germany was highlighted as a strong performer in 2015, with growth driven by domestic demand due to higher disposable income, lower unemployment and low inflation.
Holcim to supply 0.26Mt for A7 expansion
In 2015 Holcim Deutschland was awarded the contract as a cement supplier for the largest ongoing infrastructure project in Germany (prior to the BVWP). The A7, which bisects the country between the Danish and Austrian borders, is undergoing a Euro600m expansion to a 65km stretch between Hamburg and Bordesholm. The six-to-eight lane expansion will be completed by the end of 2018.
The project will require 0.26Mt of cement, with 90% of the total distance being built and topped with concrete due to superior durability over asphalt. The cement being supplied is specially developed by Holcim to meet strict alkali, set time, compressive strength and low thermal expansion requirements.
Upgrades at Schwenk Zement
Schwenk Zement has installed a Beumer Pipe Conveyor at its Bernburg plant in Saxony-Anhalt to feed increased amounts of fluffy refuse-derived fuel (RDF) to the main burner. The company also brought two Liebherr R 980 SME crawler excavators into operation at its limestone quarry in Heidenheim an der Brenz in October 2015.
Opterra supplies ‘Germany’s largest subway’
Opterra has been supplying a range of cement and pre-cast concrete products to the high speed ICE rail line project between Berlin and Munich, Bavaria. The controversial new line seeks to cut the travel time between the two cities to less than four hours from over six at present. It is slated for completion in 2017.
Described as one of Deutsche Bahn’s most ambitious projects ever, the line includes three tunnels in part of the route between Erfurt and Leipzig, including one that is 6.8km in length. This part of the line has been dubbed Germany’s ‘largest subway.’
Opterra has supplied 96,000m3 of concrete made from CEM II / AS 52.5 R Portland slag cement. In one section, where the line goes under the water table, the project has used Opterra’s CEM III / B 42.5 N-LH / HS / NA blast furnace cement. In addition to the high-strength and favourable setting characteristics, this cement is resistant to sulphate attack and has a low alkali content. The CEM III / B 42.5 N-LH / HS / NA was developed specifically for the project at Opterra’s Karsdorf plant.
Cemex HQ to move
Having sold its Kollenbach plant to CRH in 2015, Cemex Deutschland now only operates the Rüdersdorf plant in Brandenburg. To reflect this change the company is moving its headquarters to Rüdersdorf in 2016.
Light my fire - Germany has a huge track record in alternative fuels
German cement manufacturers were among the very first to pioneer the use of alternative and waste fuels in the cement production process. While the sector is often held up as an example of how the cement sector can become more sustainable, (and indeed it is), it is often forgotten that manufacturers first made the move in response to the oil crises of the 1970s, which caused fossil fuel prices to rise suddenly.
Alternative fuels through the years
Before the 1970s German cement plants traditionally used coal and lignite with small amounts of heavy fuel oil. Coal was partially replaced with petcoke, starting in the 1990s. Selected alternative fuels started to come into their own at around the same time.
Figure 6 shows how the average alternative fuel substitution rate has increased over the 21 years between 1993 and 2014. The proportion of alternative fuels increased at an almost constant 11% year-on-year in the first 10 years covered here, reaching 38.2% by 2003.
After this point, the rate at which alternative fuels continued to be taken up by the industry slowed somewhat, dropping to an average 2.8% year-on-year in the 11 years from 2003 to 2014. This included a period between 2010 and 2012 when the rate did not rise for three years (See Figure 7). This may have been due to manufacturers halting capital expenditure projects in response to the onset of the global financial crisis.
However, a return to growth in the alternative fuels rate has been seen in more recent years, with producers using alternative fuels for 63.4% of all thermal energy requirements in 2014. This is one of the highest collective alternative fuels rates in the world and is especially significant given the large size of the German cement industry and the many players present in the market. For comparison, the average rate across the 28 EU member states (including Germany’s high rate) was around 38% in 2012, according to the Cement Sustainability Initiative’s Getting the Numbers Right (GNR) programme.
The situation in 2015 and 2016
Due to the competitive nature of the German cement sector, it has not been possible to obtain up-to-date alternative fuel use information from a significant number of plants. However, Schwenk Zement has previously stated that it uses over 90% alternative fuels across all of its operations. The Cemex Rüdersdorf plant reported using 75-80% alternative fuels in our February 2014 issue. In its 2016 Environmental Statement it stated that it used alternative fuels for 72.4% of its thermal energy requirements in 2015. One of Germany’s single-plant operators reported using just shy of 60% alternative fuels in 2015, meaning that the range of alternative fuel substitution rates across the sector is at least 30%. Global Cement estimates that, for 2015, the average alternative fuel substitution rate will have been similar to that of 2014, with possible slight upward movement year-on-year.
Looking ahead
The IMF expects German GDP to rise by 1.7% for the whole of 2016 (as in 2015) and it is expected to rise by 1.5% in 2017. With major new investments like the BVWP 2030, increased levels of housing starts since the beginning of 2016 and increased manufacturing output, the fundamentals of the German economy appear to be improving.
As far as the cement sector is concerned, each of the above factors is likely to have some positive effect on cement demand. For example, if the major road projects described in Figure 8 were to use approximately the same amounts of cement as the A7 upgrade (3800t/km), they could create additional cement demand of around 2.6Mt. However, this is well within the capabilities of the sector as it stands and new cement production lines like at
HeidelbergCement’s Schelklingen plant will continue to be the exception, rather than the rule.