Analysis

In the two and a half years since Calix brought together cement producers across corporate and national boundaries to form the first Low Emissions Intensity Lime And Cement (LEILAC-1) consortium and commissioned a carbon capture installation at the Lixhe cement plant in Belgium on 10 May 2019, carbon capture and storage (CCS) has passed some major milestones. New installations have made Global Cement headlines from Canada (at Lehigh Cement’s Edmonton plant in November 2019) to China (at a China National Building Material (CNBM) plant in July 2021). Twelve other European cement plants now host current or planned carbon capture trials – including the first full-scale system, at HeidelbergCement’sBrevik plant in Norway. A second Calix-led project in Germany, LEILAC-2, attracted Euro16m-worth of funding from the European Union in April 2020.

The work of LEILAC-1 – backed by HeidelbergCement, Cemex, Lhoist, Tarmac and others, with Euro12m in funding – set the benchmark in innovation. Its pilot plant successfully captured 100% of 'unavoidable' process emissions by indirectly heating raw materials inside a vertical steel tube. Called direct capture, the model removes a CO₂ separation step, as our subsequent price analysis will reflect.

In October 2021, the LEILAC-1 consortium published its report of the concluded Lixhe trial. It described the three-fold key successes of the study:

1) Both limestone and raw meal may be processed;

2) CO₂ is successfully separated;

3) The energy penalty for indirect calcination is not higher than for conventional direct calcination.

Additionally, Calix’s first departure into the cement sector has demonstrated that its model exhibits no operational deterioration, does not suffer from material build-up and has no impact on the host plant when used in cement production. The plant’s clinker capacity remained the same as before the trial. Most importantly of all, the Lixhe cement plant recorded no process safety incidents throughout the duration of the trial.

The study has also put an evidence-based price tag on industrial-scale CCS at a cement plant for the first time: Euro36.84/t. Figure 1 (below) plots the full-cycle costs of three different carbon capture installations at retrofitted 1Mt/yr cement plants using 100% RDF, including projections for transport and storage. Installation 1 is an amine-based carbon capture system of the kind installed in the Brevik cement plant’s exhaust stack; Installation 2 is the Calix direct capture system and Installation 3 consists of both systems in combination. Direct capture’s costs are the lowest, while the amine retrofit and the combination installation are close behind at Euro43.68/t and Euro43.25/t respectively.

Figure 1: Full-cycle costs of three different carbon capture installations at retrofitted 1Mt/yr cement plants using 100% RDF

Installations 1 and 3 both entail additional energy requirements for the separation of CO₂ from flue gases and air. With the inclusion of the CO₂ produced thereby, the cost of Installation 1 rises to Euro94/t of net CO₂ emissions eliminated, more than double that of Installation 2 at Euro38.21/t. The combination of the two in Installation 3 costs Euro67.3/t, 76% more than direct capture alone. Figure 2 (below), breaks down the carbon avoidance costs for each one and compares them.

Figure 2: Carbon avoidance costs of three different carbon capture installations at retrofitted 1Mt/yr cement plants using 100% RDF

The Global Cement and Concrete Association (GCCA)’s seven-point Roadmap to Net Zero strategy puts CCS at the forefront of concrete sector decarbonisation. CCS is expected to eliminate an increasing share of global concrete’s CO₂ emissions, rising to 36% in 2050 – by then 1.37Bnt of a total 3.81Bnt. This will depend on affordability. Calix’s model has reduced the capital expenditure (CAPEX) of a carbon capture retrofit by 72% to Euro34m from Euro98m for the amine-based equivalent. When built as part of a new plant, the CAPEX further lowers to Euro27m. Both models may also be retrofitted together, for Euro99m. In future, Calix expects to install direct capture systems capable ofachieving Euro22/t of captured CO₂. By contrast, the cost of emitting 1t of CO₂ in the EU on 11 October 2021 was Euro59.15.

In what it calls the Decade to Deliver, the GCCA aims to achieve a 25% CO₂ emissions reduction in global concrete production between 2020 and 2030, in which CCS plays only a minor part of less than 5%. LEILAC-1 presents a visionof affordable carbon avoidance which complements cement companies’ 2030 CO₂ reduction aspirations.

Unlike conventional CCS methods, however, direct capture only does two thirds of a job – eliminating the emissions of calcination, but not combustion. This would appear to make it unsuited to cement’s longer-term aim of carbon neutrality by 2050 in line with the Paris Climate Accords’ 2°C warming scenario. On the other hand, direct capture is not designed to work alone. Calix recommends use of the technology in conjunction with a decarbonised fuel stream to eliminate the plant’s remaining direct emissions. This increases the price - by 47% to Euro56.05/t of CO₂ avoided for biomassand by more than double to Euro104.48/t for an E-kiln.

The Lixhe cement plant’s carbon capture story is one of a successful crossover from one industry into another: Calix previously applied the technology in the Australian magnesite sector. Realisation of the Calix carbon capture vision in the global cement industry is a challenge primarily due to the scale of the task. It will require continued collaboration between companies and with partners outside of the industry. Further than this, parliaments must continue to enact legislation to make emission mitigation the economic choice for producers.

There have been a couple of news stories worth noting in the Turkish market this week. First, it was revealed that Medcem had chosen Sintek Group to build a new production line at its integrated plant in Mersin. Second, Çimko Çimento agreed to buy two integrated plants and a grinding plant from Çimsa.

The Medcem upgrade project will see the subsidiary of Eren Holding add a second production line, with a clinker capacity of 9000t/day. Sintek Group reportedly has agreed to do this for US$128m. This follows an announcement from Medcem in late May 2021 that it was intending to invest over US$200m towards increasing its plant’s overall production capacity to 6.5Mt/yr from 3.5Mt/yr. The plan at this point was to start construction work in August 2021 with eventual commissioning of the second line in the first quarter of 2023. In addition the cement producer said at the time that it was going to open a new terminal in the US shortly. This was intended to join the company’s existing grinding plants in Cameroon and Tunisia and terminals in Russia and Northern Cyprus. On a side note, Medcem likes to point out that the 11,500t/day clinker production capacity on its existing line at its plant is the biggest in Turkey and Europe.

The Çimko Çimento deal with Çimsa was for US$127m. It includes the Nigde Kayseri integrated plants, the Ankara grinding plant and seven ready-mix concrete plants. As would be expected, the transaction is subject to the approval of the local competition authority.

Graph 1: Domestic and export cement sales in Turkey, January – June 2017 – 2021. Source: Türk Çimento.

Graph 1 above gives an idea why some cement producers might have decided that it’s time to expand either through upgrades or acquisitions. The general Turkish economy suffered a jolt in mid-2018 when the value of the Turkish Lira dropped and interest rates rose. The coronavirus pandemic hit in 2020 but after a slowdown at the start of that year the economy managed to grow. The growth has continued so far in 2021 but inflation rates have also soared. In the cement sector, annual domestic sales fell consecutively from 2017 to 2019. They started to recover in 2020 and so far in 2021 it looks like they are continuing to grow. As domestic sales fell the sector focused on exports and they have grown steadily on an annual and half-year basis since 2018. Annual exports hit a high of 16Mt in 2020 or 23% of total sales.

Despite this, in June 2021 the Turkish Cement Manufacturers' Association, Türk Çimento, was warning that input costs were mounting, particularly in the last year. It reported that the price of petcoke had nearly tripled in this period. It also warned of mounting production overcapacity, estimated at over 20Mt/yr in 2019 although down to 7Mt/yr in 2020. Coupled with a fall in annual domestic sales from 2017 to 2019, in its words, “The contraction in domestic consumption during that period steered our companies toward exports.” Some of the larger cement producers, including Oyak, Akçansa and Çimsa all reported healthy rises year-on-year in revenue and operating profit in the first half of 2021. They also reported mounting costs which have risen by 35 – 80%.

The other recent stories from Turkey to note are a two week strike organised by the Building Contractors Confederation (IMKON) in September 2021 due to high costs, particularly cement. The confederation claimed that the price of cement had tripled over the last year. Earlier, in late April 2021, the Turkish competition authority Rekabat Kurumu launched a probe into alleged collusion by nine cement producers including Oyak, Çimsa and Limak. We are not saying these two stories are connected. The current state of the Turkish economy is more than enough to cause input costs for cement producers to spike. Yet headlines like this cannot be reassuring to builders wondering why the cost of cement is going up.

In summary, it’s an uncertain time for the Turkish cement industry. Sales are recovering but this has been achieved by pushing exports more than a rally at home. Alongside this, currency instability and high inflation rates are raising costs for cement producers and end-users. This hasn’t been enough though to stop growth activity from a couple of producers in the last week.

For more on the Turkish cement sector read ‘Cement in Turkey’ in the October 2021 issue of Global Cement Magazine

Raysut Cement Company (RCC) announced this week that it is preparing to commission its Duqm grinding plant in late 2021. It follows the news from earlier in September 2021 than Oman Cement Company (OCC) is planning to build a new clinker production line at its Rusayl cement plant.

First some detail on the RCC project. The new US$30m unit will have a production capacity of 1Mt/yr, bringing the company’s total cement production capacity to 7.4Mt/yr. As part of the development process, RCC signed a land lease and Port of Terminal services agreement with the Port of Duqm Company. The new grinding unit is also intended to complement RCC’s expansion and new investments and acquisitions in Oman, Asia and East Africa.

Other relatively recent RCC news include, in 2019, its acquisition of Sohar Cement Company in Oman for US$60m, the announcement of plans to build a new 1.2Mt/yr integrated plant in Georgia for US$200 and a joint-venture deal to establish a 1Mt/yr grinding plant in Somaliland for US$40m. Then in 2020 it obtained a 75% stake in a cement terminal in the Maldives owned by subsidiaries of Holcim, and a project to build a 0.75Mt/yr grinding plant in Toamasina, Madagascar, for US$30m was detailed in the local press. More recently in 2021, China-based Sinoma started building a waste heat recovery (WHR) unit at RCC’s Salalah cement plant, RCC gained certification for some of its cement products for export to the European Union, and the Competition Authority of Kenya granted RCC permission to sell a majority stake in its East African based business.

OCC’s upgrade to its Rusayl cement plant will see it add a new production line and increase the capacity of one of the existing lines. Overall the project will increase the unit’s nominal clinker production capacity to 15,000t/day from 8700t/day at present by adding a new 10,000t/day line and increasing the current Line 3 to 4000t/day from 2700t/day at present. Lines 1 and 2, at 2000t/day and 2700t/day, will then be decommissioned after the new line starts operation. OCC says that the new line, when built, will be the biggest in the country. Scant detail has been released beyond the main vision but the company says it wants to focus on low power consumption, consider using a waste heat recovery unit, increase its fuel efficiency, use alternative fuels and adhere to ‘best’ environmental standards. It has hired PEG Resources, a Switzerland-based engineering consultancy, to conduct a technical study, tendering and contracting as well as supervision of the project execution. The company had also been working towards building a new integrated plant at Duqm. However, this project was put on hold in the first quarter of 2021 pending confirmation of fuel availability and as the Rusayl upgrade took priority.

The Omani cement sector is dominated by OCC and RCC since they own the biggest plants and they have consolidated this by buying competitors and building new plants. Both companies suffered from reduced sales year-on-year in 2019 due to imports from the neighbouring UAE. The government duly implemented anti-dumping measures in 2020 and company revenues recovered that year. However, the coronavirus pandemic then hit, leading to losses at RCC in 2020 although the situation appears to have improved for the company in the first half of 2021. OCC reported continued ‘intense’ price competition between local producers and importers in the same period.

OCC is majority owned by the government via an investment fund. As the recent announcement shows, it has decided to focus on building production capacity domestically. This week’s launch of its Al Burj Cement as a distinctive local product looks like another part of this approach. However, as Bloomberg reported in May 2021, the government was considering selling its stake in the producer and had been in discussions with financial advisors on the matter. By contrast, RCC’s biggest shareholder at the end of 2020 was the Abu Dhabi Fund for Development, with a 15% share. RCC has taken a more international approach, operating an integrated plant in the UAE and focusing on trading and grinding cement around the Arabian and African parts of the Indian Ocean.

Similar to other Gulf States, the building materials markets in Oman are dominated by government spending and the price of oil. Market forecasts predict recovery in the building materials markets in 2021 but in the longer term growth depends on general economic diversification. Oman, like its neighbours, is trying to do this. In this context it is instructive to see that OCC and RCC are pursuing different business strategies.

It’s been a good week for carbon capture in cement production with new projects announced in France and Poland.

The first one is a carbon capture and utilisation (CCU) collaboration between Vicat and Hynamics, a subsidiary of energy-provider Groupe EDF. The Hynovi project will see an integrated unit for capturing CO₂ and producing methanol installed at Vicat’s Montalieu-Vercieu cement plant in 2025. It aims to capture 40% of the CO₂ from the kiln exhaust stack at the plant by using an oxy-fuel method and installing a 330MW electrolyser to split water into oxygen and hydrogen for different parts of the process. The CO₂ will then be combined with hydrogen to produce methanol with potential markets in transport, chemicals and construction. The setup is planning to manufacture over 0.2Mt/yr of methanol or about a quarter of France’s national requirement. The project was put forward under a call for proposals by the Important Projects of Common European Interest (IPCEI) program. Pre-notification of its participation in the program has been received from the French government and it is currently being evaluated by the European Commission. Vicat’s decision to choose its Montalieu-Vercieu plant for this project is also interesting since it started using a CO₂ntainer system supplied by UK-based Carbon8 Systems there on an industrial scale in November 2020. This system uses captured CO₂ from the plant’s flue gas emissions to carbonate cement-plant dust and produce aggregate.

The second new project is a pilot carbon capture and storage (CCS) pilot by HeidelbergCement at its Górażdże cement plant in Poland. This project is part of the wider Project ACCSESS, a consortium led by Sintef Energi in Norway that aims to cut carbon capture, utilisation and storage (CCUS) costs and to link CO₂-emitters from mainland Europe to storage fields in the North Sea. The cement plant part in Poland will test an enzyme-based capture method using waste heat at the plant. Another part of the project will look at how the captured CO₂ can then be transported to the Northern Lights storage facility in Norway including the regulatory aspects of cross-border CO₂ transport. ACCSESS started in May 2021 and is scheduled to end in April 2025. It has a budget of around Euro18m with Euro15m contributed by the European Union (EU) Horizon 2020 fund.

HeidelbergCement also says that the second stage of its LEILAC (Low Emissions Intensity Lime And Cement) project at the Hannover cement plant is part of ACCSESS, with both testing of the larger-scale Calix technology to capture CO₂ and the connected transport logistics and bureaucracy to actually get it to below the North Sea. That last point about Calix is timely given that US-based Carbon Direct purchased a 7% stake in Calix in mid-September 2021 for around US$18m. Whilst on the topic of carbon capture and HeidelbergCement don’t forget that the group’s first full-scale carbon capture unit at Norcem’s Brevik cement plant, using Aker Solution’s amine solvent capture technology, is scheduled for commissioning in September 2024. Another carbon capture unit is planned for Cementa’s Slite plant in 2030 but the proposed capture method has not been announced.

Other recent developments in carbon capture at cement plants include Aalborg Portland Cement’s plan to capture and store CO₂ as part of the Project Greensand consortium. The overall plan here is to explore the technical and commercial feasibility of sequestering CO₂ in depleted oil and gas reservoirs in the Danish North Sea, starting with the Nini West Field. The project is still securing funding though, with an Energy Technology Development and Demonstration Program application to the Danish government pending. However, the Danish Parliament decided in December 2021 to set aside a special funding pool to support a CO₂ storage pilot project so this initiative seems to be making progress. If the application is successful, the consortium wants to start work by the end 2021 and then proceed with an offshore injection pilot from late 2022. How and when Aalborg Portland Cement fits in is mostly unknown but a 0.45Mt/yr capture unit at its Rørdal cement plant is tentatively planned for 2027. There’s also no information on the capture method although Aker Carbon Capture is also part of the Project Greensand consortium. Finally, also in September 2021, Chart Industries subsidiary Sustainable Energy Solutions announced that it had selected FLSmidth to help adapt and commercialise its Cryogenic Carbon Capture carbon capture and storage (CCS) system for the global cement industry.

All of this tells the cynics in the audience that a large international climate change meeting is coming up very soon. Most cement companies will likely want some good news to show off when the 2021 United Nations Climate Change Conference (COP26) dominates the media agenda in November 2021. Other observations to point out include that none of the projects above are full-scale industrial carbon capture installations, most of them are consortiums of one sort of another and that they are all subsidised or want to be. While hydrogen and CO₂ networks get built this seems inevitable. Yet, we’re not at the stage where cement companies just order carbon capture units from a supplier, like they might a new clinker cooler or silo, without the need for long lists of partners. When this changes then carbon capture looks set to flourish.

On a final note, the UK is currently experiencing a shortage of commercially-used CO₂. The reasons for this have nothing to do with the cement industry. Yet consider the constant doom-and-gloom about record global CO₂ emissions and the sheer amount of effort going into reducing this by the projects mentioned above and others. Life has a sense of humour at times.

For a view on the CO₂ sequestration permitting process in the US look out for the an article by Ralph E Davis Associates, in the forthcoming October 2021 issue of Global Cement Magazine

Companhia Siderúrgica Nacional (CSN) Cimentos was confirmed this week as the agreed buyer for Holcim’s Brazilian cement business for US$1.03bn. The deal includes five integrated cement plants, four grinding plants and 19 ready-mix concrete facilities. CSN is now poised to become Brazil’s third-largest cement producer by production capacity after Votorantim and InterCement. Or second place if you believe CSN’s cheeky claims about a competitor’s idle capacity!

Figure 1: Map of cement plants included in CSN Cimentos’ deal to buy LafargeHolcim Brazil assets. Source: CSN Investor Relations website.

CSN originally started out in steel production and this remains the major part of its operations to the present day. In 2020 it reported revenue of US$5.74bn. Around 55% of this came from its steel business, 42% from mining, 5% in logistics and only 3% came from its cement segment. CSN’s path in the cement sector started in 2009 when it started grinding blast furnace slag and clinker at its Presidente Vargas Plant at Volta Redonda in Rio de Janeiro state. It then started clinker production in 2011 at its integrated Arcos plant in Minas Gerais. Not a lot happened for the next decade, publicly at least, as the country faced an economic downturn and national cement sales sunk to a low in 2017. From around 2019, CSN Cimentos then started talking about a number of new proposed plant projects elsewhere in Brazil, dependent on market growth and an anticipated initial public offering (IPO). These included plants at Ceará, Sergipe, Pará and Paraná and expansion to the existing units in the south-east. Then CSN Cimentos agreed to buy Cimento Elizabeth for US$220m in July 2021.

It is worth noting that the Holcim acquisition is subject to approval by the local competition authority. For example, the Cimento Elizabeth plant and Holcim’s Caaporã plant are both in Paraíba state and within about 30km of each other. If approved, this would give CSN Cimentos two of the four integrated plants in the state, with the other two operated by Votorantim and InterCement respectively. CSN also stands to pick up four integrated plants in Minas Gerais from Holcim to add to the one it holds at present. Although this would seem to be of less concern due to the high number of plants in the state.

Holcim has made a point of saying that its divestment in Brazil is part of its strategy to refocus on sustainable building solutions with the proceeds going towards its Solutions & Products business following the Firestone acquisition that completed in early 2021. It has also stated previously that it wants to concentrate on core markets with long term prospects. In this context a major steelmaker like CSN diversifying into cement is a contrast. Both industries are high CO₂ emitters so CSN is hardly moving away from carbon-intensive sectors. Yet the two have operational, economic and sustainability synergies through the use of slag in cement production. This puts CSN Cimentos in company with Votorantim in Brazil and JSW Cement in India, two other steel manufacturers that also produce cement. Whatever else happens at the 26th United Nations Climate Change conference (COP26) in November 2021, it seems unlikely that global demand for steel or cement is likely to be significantly reduced. CSN Cimentos is now going to resume its IPO of shares to raise funds for the Holcim acquisition.

Acquisitions are all about timing. The CSN Cimentos-Holcim deal follows the purchase of CRH Brazil by Buzzi Unicem’s Companhia Nacional de Cimento (CNC) joint-venture earlier in 2021. As mentioned above, the cement market in Brazil has been doing well since it started recovering in 2018. The coronavirus pandemic barely slowed this down due to weak lockdown measures compared to other countries. The current run of sales growth may be tapering off based on the latest National Cement Industry Association (SNIC) figures for August 2021. Rolling annual totals on a monthly basis had been growing since mid-2019 but this started to slow in May 2021. Annual sales will be up in 2021 based on the figures so far this year but after that, who knows? A CSN investors’ day document in December 2020 predicted, as one would expect, steady cement consumption growth in Brazil until at least 2025, based on correlated forecast growth in the general economy. Yet fears of inflation, rising prices and political uncertainty ahead of the next general election in late 2022 may undermine this. InterCement, for example, cancelled a proposed IPO in July 2021 due to low valuations amid investor uncertainty. CSN Cimentos may encounter similar issues with its own planned IPO or face over-leveraging itself when it picks up the tab for LafargeHolcim Brazil. Either way, CSN decided to take the risk on its path to becoming Brazil’s third largest cement producer.