Analysis

After another year of research and data collection from a variety of cement industry experts, associations and other sources, the Global Cement Directory 2013 will soon be with us. The new edition will feature more cement plants than ever before and shows a number of trends in the global cement industry.

The 2013 edition of the directory has an extra 70+ plants across Asia. This is in part due to the continued rampant demand in these cement-hungry nations, but is also due to the fact that the directory is impossible to keep 100% up-to-date. As one would expect, India sees significant extra entries compared with the 2012 edition, despite valid concerns of overcapacity.

Looking north, there are also new plants and projects in Russia, a major global cement player, with 60 plants listed in 2012 and 69 in 2013. Over the Bering Strait, North America has seen a minor contraction year-on-year, with the section of the directory dedicated to the US showing two fewer plants, 97 rather than 99. There are also an extra seven mothballed facilities in the US, although the vastness of the country means that regions have not been affected equally. Consolidation of older capacity ahead of an uncertain regulatory future is partly to blame for the mothballings and closures, although the fundamentals of the economy in 2012 have been surprisingly resilient.

In South and Central America, an area of strong growth, there are new projects and expansions in Brazil, Ecuador and Peru among others, with gradual expansion a common theme among producers eager to expand as markets develop. Mexico has provided a challenging environment for some, with little change year-on-year in the directory. In the Middle East and north Africa we have carried out significant updates. Despite continuing political challenges, countries here continue to demand cement, something that we highlighted for Egypt last week.

In contrast Europe continues to be a drain on the multinational cement players' balance sheets. The continent has lost 15 plants year-on-year with several others mothballed. Many countries, notably Spain, Greece and Italy, have cement industries much larger than their current needs demand. Considerable further closures are likely to be reflected in the 2014 version of the directory if the Eurozone financial malaise is not resolved, although many plants remain 'open' at the moment.

Also, new for 2013, the directory will expand by over 100 pages with the inclusion of cement industry reviews from various countries around the world, collated from recent issues of Global Cement Magazine.

The inclusion of the reviews will add not just literal weight to the directory, but will also contribute a new angle to the publication's information, adding context to the raw data. Countries with expanded entries include Russia, Brazil, USA as well as leading European and Asian cement producers along with extensive coverage of the Middle East.

At the beginning of October 2012 a digital 'beta' version of the Global Cement Directory 2013 will be released and seen by nearly 20,000 cement, lime and ancillary sector readers allowing a period for corrections from those 'on-the-ground', before the full print version is released for sale in November. Secure your company's space today, right-hand page advertising positions are available for the directory within the plant listings as well as in some of the newly included country reports. Contact Sören Rothfahl on direct line +44 (0) 1372 840 957 mobile +44 (0) 785 0669169 or at This email address is being protected from spambots. You need JavaScript enabled to view it..

Lawlessness, strike action and increases in energy inputs are the three factors hindering Turkish investment in Egypt.

These concerns arose in a meeting held last week between the Minister of Industry and Foreign Trade Hatem Saleh and a Turkish trade delegation. It was also reported that Turkish investors have applied to build a cement plant in the Sinai region of Egypt.

Investing in Egypt by a cement company seems risky given that both Italcementi and Lafarge have shown problems in the country in their recent financial reports. Italcementi reported a loss in sales in its first half results for 2012 partly due to the Egyptian market. Lafarge saw volumes fall by 11% in its second quarter in Egypt due to limited gas supply.

Nationally cement demand fell by 8% in 2011 to 45.2Mt due to the political unrest of the 'Arab Spring'. In January 2012 the government cut energy subsidies to heavy industry, including cement, to narrow its budget deficit.

Lawlessness is certainly a concern. In August 2012 Suez Cement suspended construction of a plant expansion project amid civil unrest. It had also suffered from strikes at its plants earlier in the year. Earlier in the month Egypt launched air strikes in the Sinai region close to the border with Gaza killing 20 people. Previous to this a group of Chinese cement workers working in the Sinai were kidnapped in January 2012.

Yet Titan, despite its losses so far in 2012, reported in its first half results at the end of August 2012 that the construction sector maintained its positive momentum in the country. In addition, it said that demand for building materials grew absorbing production from new cement plants entering the market.

Recent developments supporting this optimistic trend have included Arabian Cement increasing its capacity to 5Mt/yr with the opening of its second production line. FLSmidth recently won a contract to operate and maintain two production lines for Egyptian National Cement. ASEC Cement expects full production of 1.9Mt/yr at Minya to begin by the first quarter of 2013.

With a mixed picture emerging, the cement industry in Egypt shows potential for those producers willing to take the risks, or those able to minimise them. Even at the proposal stage the new Turkish project in Sinai has been linked with the al-Maghara coal supplies of the northern Sinai.

Coal ash seems to be in short supply in the Philippines. Lafarge Republic has signed a deal with a local energy producer to buy coal ash from a new 600MW coal plant.

Although the cost of the deal was not announced, the agreement will run from when the plant starts operation until 2019. This move follows a similar arrangement by Cemex Philippines in June 2012. In that instance Cemex agreed to purchase coal ash from the 200MW Kepco SPC Power Corp plant in Naga, Cebu for US$0.95/t.

Distinctively both arrangements were set up in conjunction with local government. For the Lafarge deal part of the agreement involved donating at least 10,000 bags of cement per month for use in various infrastructure projects of the province. Bataan governor Enrique Garcia put the value of the deal at US$1.19m/yr. For the Cemex deal the Cebu Provincial Government signed the agreement. In November 2009 Cebu Province and Kepco entered into an Ash Disposal Agreement, where Cebu Province was granted exclusive rights to the ash produced by the power plant.

Adding to the suspicion that the Philippines lacks sufficient coal ash, back in the autumn of 2011, the Cement Manufacturers' Association of the Philippines (CeMAP) asked the Department of Trade and Industry (DTI) to impose mandatory quality standards on raw materials, such as coal ash. This followed accusations by CeMAP that poor quality coal ash might be behind complaints from contractors working on infrastructure projects. In 2009 a DTI profile on the cement industry placed the demand for Portland cement at 73% and the demand for pozzolan cement at 27% of the total.

Cement sales in the Philippines have been steadily growing over the last decade. Lafarge Republic announced in August 2012 that it was increasing its capacity to just below 9Mt/yr in 2013. Around the same time CeMAP released data showing that sales were up 20% year-on-year for the first half of 2012. The local industry reported combined sales of 15.6Mt in 2011. Previous to this, Holcim Philippines announced the US$9.46m upgrade to a previously closed mill in Batangas.

Texas Industries (TXI) made the surprising move this week of appealing to the US authorities to investigate 'unfair' imports from Greece and the Republic of Korea. Of note was the accusation that imports from these countries had risen by 40% from 2009 to 2011, with a further rise over the first six months of 2012.

Given the distances involved and the rising optimism shown for the North American market in the latest financial results for the cement industry, targeting imports might at first seem odd. However looking at US Geological Survey (USGS) data shows that for January to May 2012 the top cement importers to the US, after Canada, were the Republic of Korea and Greece. Mexico, the USA's other land neighbour, could only manage fourth.

According to USGS data Texas was the leading cement-producing state in the US in 2011. In 2011 total imports of hydraulic cement and clinker from South Korea rose by 64% to 1.40Mt from 0.86Mt in 2009.

By customs districts Texas imported 0.99Mt in 2011 or 15% of the US total. Alarmingly though, Texas has already imported 0.77Mt from January to May 2012. If this rate continues for the rest of 2012 Texas could be facing a total imported figure of 1.84Mt, a rise of 85%!

Given that the Global Cement Directory puts Texan capacity at just under 14Mt/yr this might explain why one of the state's biggest producers has decided to take action. The problem of 'cheap' Greek imports looks likely to get worse as the economic troubles of the Eurozone drag on, especially if Greece exits the zone. If that happens, any Greek producer that can still afford to make cement may well be able to undercut the domestic production of any country willing to import it. TXI's move might be seen as a pre-emptive strike 'shot across the bows' to discourage increasing US demand for sucking in more imports, in order to shore-up demand for domestic production (and to firm up domestic pricing).

However, one place Greece or South Korea will have difficulty exporting their cement to is the moon.

Serious thought on creating cementituous materials on the moon dates back decades but last week NASA awarded US$135,000 to UC San Diego structural engineer Yu Qiao for research on the subject using materials that are readily available on the moon. Given that it currently costs from at least US$4m/t to put mass into low earth orbit, the lunar cement industry can rest easy from the threat of cheap Greek imports for the time being.

The news this week that GSO Capital Partners has patched together a group of investors to recapitalise Giant Cement and its owner Cementos Portland Valderrivas (CPV) has been a long time coming.

Giant may be based in the US but CPV is Spanish. Here cement production fell by 28% year-on-year for the first half of 2012. For its 2012 forecast Oficemen, the country's domestic producers association, forecast in July that consumption will fall by 25% compared to 2011, to 15Mt/yr, representing a drop of 73% from a high of 56Mt/yr in 2007. Potentially the Spanish cement industry could regress to a per capita consumption of only 325kg/capita, figures not seen in the country for nearly 50 years! It has already hit a 48-year low.

In other words it is the perfect time for cash-rich foreign firms to pick up a bargain. Yet the question that should be asked, especially by anybody else thinking of investing in highly indebted European cement assets, is how do investors expect to make any return?

Simply waiting for the market to improve is one strategy for those who can afford it. According to the Global Cement Directory 2012, Spain has 38 cement plants with a capacity of 48Mt/yr. Of this the big players – Cemex, Holcim, Lafarge and CPV – comprise 28Mt/yr. Even if the smaller producers stopped producing cement overnight the big producers would still have the capacity to produce twice as much cement as is currently required.

However, the focus on the CPV subsidiary Giant Cement is telling. The owner of CPV, Fomento de Construcciones y Contratas SA (FCC), was originally reported as trying to sell Giant by March 2012. With the US market starting to pick up, Giant would make an attractive acquisition. FCC's last attempt to sell Giant was, however, delayed by CPV's debt.

With a Giant sale delivering some return to the GSO Capital Partners investors, followed up by further on-going debt repayment from CPV, the only loser would be the future development of the Spanish cement industry outside of that done by the multinationals. Heavily indebted European cement producers with profitable overseas assets must be looking very attractive indeed to international investment firms. The bargain hunt has begun.