September 2024
Estonia: Cement producers achieved a total output of 129,000t of cement in the first half of 2020, down by 31% year on year from 187,000t in the first half of 2019. Eesti Statistika has reported that the sharpest decline was in June 2020, by 41% year-on-year to 25,800t from 43,700t. Estonian clinker production ended on 27 March 2020 with the closure of Kunda Nordic Cement’s 0.8Mt/yr integrated Kunda cement plant in Lääne-Viru County.
India: Sustainable roofing specialist Visaka Industries has acquired a 20-year patent for production of ATUM, a roofing system consisting of cement boards with integrated solar panels. The company says that the product, which has been in development since 2016, is both insulative and capable of generating up to 28W/m2 of power.
FLSmidth reinstates 2020 guidance 28 August 2020
Denmark: FLSmidth has announced the reinstatement of its 2020 guidance. The guidance predicts full-year sales of Euro2.28bn, down by 18% year-on-year from Euro2.77bn. Earnings before taxation, interest, depreciation and amortisation (EBITDA) margin is expected to decline to 6.0% from 8.1%. The company said that the guidance is “subject to higher uncertainty than usual” and conditional upon “no further escalation of Covid-19, no further extensive lockdowns or travel restrictions occurring before year-end, a gradual improvement in business sentiment for the remainder of 2020, and business improvement implementation of around Euro28.2m, of which Euro18.8m relate to the previously communicated improvement activities and around Euro9.40m relate to further improvement activities in cement.” It added, “The cement industry has been severely impacted, and the timing and extent of a rebound remain uncertain. Our goal for the cement business is to generate more stable, higher-margin earnings.”
Australia: Adelaide Brighton has recorded a net profit of US$21.1m in the first half of 2020, compared to a US$13.0m loss in the first half of 2019. Revenues fell by 7.3% to US$508m from US$548m due to a 12% construction decline over the period, according to the company. Residential construction fell by 16%, however mining and infrastructure activity remained consistent with levels in the first half of 2019. Adelaide Brighton said, “Cement demand is likely to continue to benefit from a strong production outlook for gold, nickel, and iron ore in particular, and stable demand from the alumina sector.”
Lucky Cement reports 68% profit drop in 2020 financial year 27 August 2020
Pakistan: Lucky Cement’s profit for the 2020 financial year ended 30 June 2020 was US$19.9m, down by 68% year-on-year from US$62.4m in the 2019 financial year. The company recorded a 13% sales drop to US$249m from US$285m, which it said was due to the impacts of the coronavirus pandemic.
UK: The Competition and Markets Authority (CMA) has said that Breedon Group’s acquisition of a minority of Cemex UK’s ready-mix and aggregates operations “may lead to a substantial lessening of competition in the supply of ready-mixed concrete, non-specialist aggregates or asphalt in 15 local markets across the UK” in a letter to the group. The Herald newspaper has reported that the potentially affected markets are in localities where Breedon Group is already dominant, such as eastern Scotland and the East Midlands.
CMA senior director Colin Rafferty said, “As consumers source the majority of these materials locally, it’s vital to ensure that enough competition will remain at the local level so there’s enough choice and prices remain fair.” If it fails to respond to the CMA’s concerns by 2 September 2020, Breedon Group will face an in-depth Phase 2 investigation into the deal.
Cahya Mata Sarawak’s profit slips in first half of 2020 27 August 2020
Malaysia: Cahya Mata Sarawak recorded a profit of US$8.72m in the first half of 2020, down by 63% year-on-year from US$23.4m in the first half of 2019. Total sales declined by 40% to US$117m from US$196m. Cement sales also declined, by 31% to US$46.8m from US$68.1m. The company attributed this to the impacts of the coronavirus lockdown.
Pakistani producers lobby for tax cuts 27 August 2020
Pakistan: Leading cement producers have said that prices will rise by 10% before 2021 if a reduction in Federal Excise Duty (FED) to US$5.95/t of cement from US$11.9/t does not materialise. DG Khan Cement owner Nishat Group chair Mian Mansha said, “Failing this, producers will take a US$119m total hit on revenues,” according to the Express Tribune newspaper.
Sunchon Cement supplies flood reconstruction efforts 26 August 2020
North Korea: The state-run KCNA news agency has announced that cement, iron and steel and timber production units throughout North Korea are ‘pushing forward’ with production to supply building materials to flood-ravaged areas, including in Unpha County (North Hwanghae Province) and Ichone County (Kangwon Province). It stated that the Sunchon Cement plant had provided 10,000t of cement to reconstruction sites in ‘a short span of time.’
Vietnam takes action 26 August 2020
Back on 11 March 2020, this column drew attention to the seemingly intractable overcapacity situation in Vietnam. On that day, incidentally the day that the World Health Organisation (WHO) declared the Covid-19 outbreak to be a full-blown pandemic, Vietnam held firm on its previous estimate that it would produce 103Mt of cement in 2020. 70Mt would be consumed domestically, with 33Mt exported. At the time much of the world was heading down the coronavirus rabbit hole and we were incredulous. South East Asia was worst affected by lockdowns at that point and demand was poor. It was clear that the country would struggle to find buyers, even with its famously reasonable prices.
Fast forward five months and figures from last week show that Vietnam’s cement producers actually exported an incredible 19.5Mt in the first seven months of 2020. The volume was 11% higher than the 17.6Mt exported in the corresponding period of 2019. However, prices suffered, with the value of exports falling by 5.4% to US$732m. That works out at US$37.54/t in 2020 against US$43.98/t in 2019 - a drop of US$6.44/t. Now, just as in March, the Ministry of Construction has maintained again that Vietnam will export 32-33Mt of cement and clinker in 2020. The volumes seem impressive, but it’s ‘sales for show, profit for dough.’ How much longer can the country continue to pour such vast amounts of cement into the global market at these low prices?
Well it seems the answer is ‘not any more.’ Following an announcement in May 2020 that no new cement plant projects would go ahead in 2020 after all, there is now a new cement industry development strategy to help move the sector forward. Under the plans, all plants with a capacity under 0.9Mt/yr will be forced to improve their productivity, product quality, energy efficiency and, crucially, environmental performance, by 2025. While the government says it will help to facilitate the changes, we can be reasonably sure that it wants to reduce its domestic capacity to a fairly meaningful extent. The Global Cement Directory shows that Vietnam has at least 28 plants of less than 0.9Mt/yr capacity, jointly contributing around 16.6Mt/yr. While we should be clear that the government is not calling for the wholesale elimination of capacity, removing these plants would leave the country with around 86Mt/yr of cement production and halve exports to around 16.4Mt/yr, assuming 70Mt/yr of domestic consumption. On the surface the government says it will help plants ‘facilitate’ the changes, but it remains to be seen whether its many older, less efficient plants will actually be able to jump through the hoops the authorities put in their way. Of course, one need look no further than neighbouring China to see how effective such directives from the top of government can be.
For its part the Vietnamese government is clear: Plants that don’t pick up the pace will be closed. It says that the strategy aims to “Develop the cement industry to an advanced and modern level, to produce cement of international standard quality with economical and efficient use of energy, giving high competitiveness in the international market, while meeting the needs of the domestic market, completely eliminating out-dated, natural resource-consuming and polluting technology.” The government stops just short of mentioning profitability, but it is clear that this would be another nice effect of reduced capacity in an economy where the state is effectively selling the cement by itself. China again shows what should happen next. Following major profitability improvements in 2017, 2018 and 2019, China’s producers continue to go from strength-to-strength in 2020, even taking coronavirus closures into account. This week Anhui Conch reported a 5.3% increase in its first half net profit (to a tidy US$2.33bn), with China Resources Cement chiming in with an 11% rise to US$541m. While it is unclear from outside of China just how much capacity has been terminated, the changes are having the desired effect.
So, after looking for perhaps slightly too long at dwindling returns, Vietnam’s government appears to be serious about overcapacity. Its (larger) cement producers look set to gain from supply-side reforms in the same way that many in China have. The industry will shrink over the next few years and, while closures and job losses will be unpopular, the country, its economy and its environment will benefit from this policy in the long run.