Analysis

Peru’s been the place over the last week with news reports of new production capacity and its targeting as a key export market by Vietnam.

Local press reported this week that three new cement grinding plants are planned to start production in 2019. Cemento Inka plans to build a 0.6Mt/yr grinding plant at Ica near Pisco. It also plans to upgrade the kilns at its plant at Cajamarquilla near Lima. Then Mixercon, a ready-mix concrete firm, wants to spend US$20m towards building two new plants in northern Lima, also in 2019. It also has plans to open distribution centres around the capital too.

For a local industry generally dominated by local often family-controlled producers this is quite a change. The larger companies – Pacasmayo, UNACEM and Yura – normally dominate the headlines and the market here. Unsurprisingly then that Pacasmayo and Yura also have upgrades planned for their plants in 2019 too.

Changes to capacity started in late May 2018 when Salaverry-based importer Invecem was said to be buying equipment for a 0.25Mt/yr grinding plant. Then things really started moving when Unacem bought Cementos Portland (Cempor), a joint venture between Chile's Cementos Bío Bío and Brazil’s Votorantim Cimentos. The foreign companies were planning to build a plant near Lima but the project was delayed by a legal battle over environmental issues intitiated by Unacem. This was followed by Cal & Cemento Sur (Calcesur), a subsidiary of Grupo Gloria, announcing that it was going to add a new production line to its cement and lime plant in Puno.

With this level of interest in grinding plants going on it’s unsurprising that Vietnam, a major exporter of cement, has taken an interest. Imports of cement to Peru rose by 65% year-on-year to 0.94Mt in the 12 months from December 2017 to November 2018 from 0.57Mt in the same period previously. Imports of clinker rose by 37% to 0.78Mt from 0.57Mt. This compares to a rise of 21% to 0.61Mt in cement imports in 2017 and a fall of 1.2% to 0.51Mt in 2016. In the 12 months to the end of November 2018 most of that imported cement (81%) came from Vietnam followed by 14% from China and 3% from Mexico. Clinker imports have been more varied with 39% from South Korea, 31% from Vietnam, 19% from Ecuador and 11% from Japan. The general situation for the clinker producers has been a slight increase in cement production to 10Mt for the 12 months to the end of November 2018 and slightly higher increases in despatches.

So, it looks like an apparent cement demand is up in Peru and the importers are rushing to meeting demand. The question, then, is why haven’t the clinker producers announced projects to squeeze out the grinders? As mentioned above Pacasmayo and Yura have upgrades planned but nothing really large seems to be coming yet. Also, given the tough time Cempor was given by the local companies what kind of opposition are the new projects by Cemento Inka, Mixercon and Invecem likely to face? The country’s gross domestic product (GDP) growth rate is below the glory days of the 2000s when it topped 6% but it is still one of the strongest in South America with 3.8% forecast for 2019 by the World Bank. This is the country in the region to watch in 2019.

Making predictions is a mug’s game. Mug, if you don’t know already, is British slang for a fool. Although you can also drink tea or coffee out of a mug. Newspapers and magazines love predictions at this time of year and Global Cement is no exception. But before we give you our predictions, let’s see how a real expert got on 36 years ago. The science fiction author Isaac Asimov, of Three Laws of Robotics fame, had a go in 1983 when he was asked by the Toronto Star newspaper to try and guess the state of the world in 2019. You can read his original article here.

First up for a construction audience is where the great writer of fiction set in space gets it wrong: space. Asimov thought we’d be on the moon ‘in force’ by 2019, building a mining station to process minerals to make materials such as a concrete, metals, ceramics and glass. Other projects would include satellite solar farms in low earth orbit, observatories, factories and serious planning towards an off-earth settlement. ‘Mooncrete’ or ‘lunarcrete’ is definitely a theoretical thing that has received academic thought since the mid-1980s. We’re guessing that CO₂ emissions for cement and concrete would be less of a problem on the moon! Observatories and probes like the Hubble Space Telescope satellite have enriched astronomy. Factories and extra-terrestrial settlements appear another 36 years away.

As for the rest of the predictions, Asimov starts off with an immediate misstep for us smug citizens of 2019 with a riff on a potential nuclear confrontation between the US and the Soviet Union invalidating everything else he was about to say. Past this opening fumble though he’s not bad. He immediately identifies computers as the source of coming change on the scale of the industrial revolution as they enable some human jobs to be replaced and change the nature of others. Next up he identifies pollution and overpopulation as concerns for society before heading on to the importance of trans-national organisations to tackle these issues. He’s generally on trend although there are plenty of holes. For example, he doesn’t foresee networking effects such as a social media and the political implications of enhanced connectivity.

So, having seen how well a noted science fiction author got on, our first forecast is not to trust our predictions. However, if you really want to hear our thoughts, read on.

Chinese cement companies continue to build plants overseas
The background to this is that Song Zhiping, the former chairman of China National Building Material (CNBM) said in late 2017 that the company was planning to build 100 new plants in 50 countries by 2021. Lots of Chinese companies are backing projects in Central Asia and Africa. Many of these are joint ventures. The question arises as to what will happen if local investors default on their loan repayments…

Indian market heats up
Many of the major cement producers are betting on India in 2019 to hold their finances together. The Cement Manufacturers Association of India has forecast growth of 10% in the 2019 financial year to the end of March 2019, the fastest growth in the sector since it slowed down in 2011. A pledge by Prime Minister Narendra Modi to cut the Goods and Services Tax (GST) on cement to 18% from 28% can only help the market.

A tale of two Africas
By the demographics, investing in Africa should be a no-brainer for cement companies as countries develop. However, northern Africa is rapidly turning into an export market as capacity outstrips local demand. Sub-Saharan Africa is decidedly mixed as the coastal regions potentially get swamped by foreign clinker imports and capacity investments further inland can be risky. The current political instability in the Democratic Republic of Congo is one example of this. Another, the collapse of Kenya’s ARM Cement in mid-2018 offers a warning to investors of what can happen when things go wrong. Producers like Ngieria’s Dangote Cement are waiting in the wings to snap up a bargain. Expect more of the same in 2019.

Acquisitions to continue in Brazil
After years of poor performance the acquisitions and divestments in the cement industry finally started in Brazil in 2018. A new ‘pro-business’ president and a growing economy suggests that this trend should continue in 2019.

European cement producers test how fast legislators are prepared to meet climate commitments
European cement associations were warning in 2018 that the local industry faces issues balancing competiveness versus tightening climate legislation. In October 2018 three plants – two in Spain and one in Sweden – were targeted for closure proving that the associations were not kidding. More difficult choices are likely to follow in 2019.

If any readers have their own industry forecasts for 2019 let us know by emailing This email address is being protected from spambots. You need JavaScript enabled to view it.. If we get enough we’ll run a recap at the end of the year to let everyone know how they got on.

Happy New Year from Global Cement!

Previously we’ve finished the year by recapping the major news stories from an editorial perspective. If you’re interested in that approach we suggest you read the trends articles in the December 2018 issue of Global Cement Magazine. Here on the website though we’ve decided to run it by readership figures. So, instead of suggesting what we think you should be interested in, we’re flagging up what you are actually stimulated by. Fortunately, unlike the search engines, we don’t run the kind of content to make one lose faith in humanity. Nevertheless though there are some interesting observations to make.

Top 5 country tags on Global Cement website in 2018

5. Egypt
4. Vietnam
3. Pakistan
2. Philippines
1. India

Firstly, as the list of country tags shows the emphasis from readers is very much on developing economies with strong cement industries. India is the second biggest cement producing country in the world and the others are all major manufacturers in their regions. The Philippines is riding an infrastructure boom, Pakistan is a major exporter of cement and has its own infrastructure growth from Chinese investment, Vietnam is another major exporter and Egypt is the largest producer in Africa. Incidentally, Egypt opened a 13Mt/yr cement plant at Beni Suef with six production lines in 2018. These are places where the action is at in the cement industry.

Top 10 news stories on Global Cement website in 2018

10. Big Boss Cement to launch in the Philippines
9. Dalmia Bharat set to buy Kalyanpur Cement
8. Wonder Cement plant launched in Maharashtra
7. LafargeHolcim to sell US$1.7bn of assets after poor first half
6. Birla Corporation confirms plans to build new cement plant at Mukutban
5. ACC in talks to buy remaining cement business from Jaiprakash Associates
4. LafargeHolcim to close Paris headquarters
3. Global Cement & Concrete Association launches
2. ThyssenKrupp to build new cement plant for LafargeHolcim in Morocco
1. Brisk cement trade reported at Ethiopian-Eritrean border

As for the news stories there are several general trends to note. Firstly, the machinations of the Indian producers fill up four of the top ten positions. We’ve noted the size of the industry but it is also worth remembering the common use of English in that country. Secondly, the world’s largest multinational cement producer, LafargeHolcim receives three mentions. Again, no surprise here. We have shades of the company realigning itself after poor financial results and pointing at developing countries. The closure of the former Lafarge headquarters in Paris ties into the former and strikes a nostalgic note following the merger between Lafarge and Holcim in 2015.

From here there’s one story that we included in our roundup for 2018, the formation of the Global Cement & Concrete Association (GCCA). Readers of the BBC News website would have spotted the GCCA’s head Benjamin Sporton popping up in a feature on cement industry carbon emissions. He’s not long been in the job but this is exactly the kind of advocacy the association should be doing on behalf of the industry.

As for the top news story for 2018, it’s not what we’d have chosen in a round-up, but it sums up the importance of cement to people’s lives. It’s a commodity and where people build things they need it. Normalise relations between bordering countries and cement will flow if it can. Now that’s a goodwill story to end the year.

Enjoy the Christmas and New Year break if you have one.

Global Cement Weekly will return on 2 January 2019

Research from the Global Carbon Budget (GCB) this week forecasts that fossil CO₂ emissions from the Indian cement industry will rise by 13.4% in 2018. This is in stark contrast to the smooth mood music from the Cement Sustainability Initiative (CSI) last week, which stated that the local industry was on track to meet its commitments towards decarbonisation. So what’s going on?

The situation is akin to the fable about the blind men and the elephant. Both the GCB and the CSI are approaching the emissions of the Indian cement industry from different directions. The GCB is using available data (including data from the CSI) to try and estimate what the CO₂ emissions are. It takes cement production data using a method adapted from a paper published by Robbie M Andrew of Norway’s CICERO Center for International Climate Research in 2018 and then it takes into account the types of cement being produced and the clinker factor. This is then converted into an estimated clinker production figure and this is then converted into a CO₂ figure.

However, the CSI meanwhile actually has direct data from its local members. At the moment these include ACC, Ambuja Cements, CRH, Dalmia Cement (Bharat), HeidelbergCement, Orient Cement, Shree Cement, UltraTech and Votorantim Cimentos. As part of the Getting the Numbers Right (GNR) database it collects production and sustainability related data from its members. However, for reasons of competition, it maintains a year gap before it reports its data. This means that the GCB can report its estimate ahead of the CSI data.

There is nothing to stop the CSI reporting its progress against its targets though. And this is exactly what it has done in India with the recent document outlining progress towards the 2030 targets from the low carbon technology roadmap (LCTR). The headline CSI metric was direct CO₂ emission intensity. According to the CSI, this has fallen by 32kgCO₂/t cement to 588kgCO₂/t cement in 2017 mainly due to an increased uptake of alternative fuel and blended cement production, as well as a reduction in the clinker factor. This is bang on target with its aim of hitting 320kgCO₂/t in 2050 (around 560 kgCO₂/t in 2020, assuming a linear decrease).

The problem is that cement production growth in India suddenly sped up in 2018. Global Cement estimates that India’s cement production is set to rise by 7% year-on-year to 296Mt in 2018 from 280Mt in 2017. Data from the Ministry of Commerce & Industry shows that cement production rose by nearly 16% year-on-year to 244Mt in the first nine months of 2018 from 211Mt in the same period in 2017. Along these lines the Cement Manufacturers Association of India has forecast growth of 10% in the 2019 financial year to the end of March 2019. It reckons that this is the fastest growth in the sector since the industry slowed down in 2011.

India’s per capita cement consumption is low (222kg/capita) and its urban population is also low (around 30%). That’s a lot of cement that’s going to be used as it shifts to developed global rates and already it’s the globe’s second biggest cement market. The CSI was right to get in there eight years ago. Yet, the question now is can CO₂ emissions decrease whilst the market grows? Research in the US suggests that the real reason for emission drops in the 2010s was the economic recession, not policy shifts or changes in the energy mix. If that holds in India then the cement industry will have a hard time reducing its carbon footprint irrespective of the work the CSI has done.

Fascinating information came out of LafargeHolcim last week as part of its Capital Markets Day 2018. The building materials company said it is expecting sales growth to slow in 2019 but earnings to grow. Jan Jenisch, the chief executive officer (CEO), said that the group was ‘aggressively’ moving forward in aggregates and ready-mix concrete. Alongside this, its recent divestment of its Indonesian operations was declared a ‘major’ milestone in focusing its portfolio and cutting down on debt.

Graph 1: LafargeHolcim’s major product lines by sales (%), 2015 – 2017. Source: Company reports.

Graph 1, above, gives a good idea of how LafargeHolcim has been changing its business. Cement sales as a percentage of total sales have been cut to 60% in 2017 from 67% in 2015. Ready-mix concrete and other sales (including asphalt) have risen to 26% from 19%. Aggregate sales have stayed at around 14%. If the world is making too much cement then LafargeHolcim is switching to concrete and balancing out its supply chain. Naturally, this was backed up in one of its investor presentations showing a more even split in the world building materials market between cement, concrete and aggregates. This fits with Jenisch’s background as the former head of Sika. That company manufactures a wide range of specialty chemicals for the construction and automotive industries.

That shift in focus could also be seen at the inaugural Global Cement and Concrete Association (GCCA) event in late November 2018 where concrete was very much the centre of attention from a sustainability angle. The main companies involved with the GCCA are vertically integrated ones and, by switching its product balance, LafargeHolcim seems to be moving in the same direction. In a sense this is a continuation of the synergy-seeking that was promised when Lafarge and Holcim merged in 2015.

Graph 2: Forecast cement demand growth in LafargeHolcim markets. Source: LafargeHolcim investor presentation 2018.

The other interesting question for LafargeHolcim is where next for growth? The graphic above shows a number of promising areas, including India and east Sub-Saharan Africa. Also, note the slowdown forecast for China. That renewed faith in India is timely this week given the expectation by the Indian Cement Manufacturers Association that cement demand growth in the country will rise by at least 10% in the current financial year to March 2019. If the momentum holds up after a strong first half then it will mark the fastest increase for the region since the market slowed down in 2011. LafargeHolcim doesn’t appear to be on course to grow significantly in India anytime soon but it has major ‘skin in the game’ in a promising market.

Another indication of the vibrancy of the Indian market also came this week from the Cement Sustainability Initiative (CSI) with the results of a status review from its low carbon technology roadmap (LCTR). The results were fairly good for such a large industry, with falling CO₂ emissions intensity, growing co-processing rates and a decreasing clinker factor. This report carried a sad note given that the work that the CSI does will be taken over by the GCCA in January 2019. However, if this is the last we’re going to hear from the CSI, then they’ve left on a high note.

Lastly, leafing through old financial reports may not be everybody’s idea of a good time but it does let one see how LafargeHolcim’s product mix has changed. It also gives one time to catch up with old faces. Like Bruno Lafont and Eric Olsen. Once again those two former executives popped up in the latest twist of the on going Lafarge Syria legal case as a group of Yazidi women have applied to become ‘civil parties’ in the case. Whether the war crimes inflicted upon the Yazidis can be pinned on Lafarge Syria remains to be seen. Yet, for all of the LafargeHolcim’s business reorganisation, its predecessor’s conduct in Syria continues to make headlines. However much progress the company makes in turning around its fortunes, if it can be, this will continue to overshadow everything. Once a line is drawn under the affair then LafargeHolcim can move on properly.