Displaying items by tag: CNBM

Holcim has announced today that it has concluded the sale of its 75% stake of its Zambian business to Huaxin Cement. Meanwhile, in Tanzania last week, Huaxin Cement officially commissioned a cement grinding line at its Tanzanian Maweni Limestone plant. China produces about half the world’s cement and some its producers are expanding overseas as domestic growth dwindles. These actions and others place increased scrutiny on sustainability issues for Chinese cement producers. Readers therefore may be interested to note the publication last week of a list of the 100 largest Chinese corporate emitters of CO₂ in 2020.

The Chinese Cement Association (CCA) website carries some highlights on the work by from the cement sector’s perspective. China Venture Carbon and Caixin compiled the list of publicly listed companies using a mixture of freely available data such as sustainability reports, by adjusting public data or by making estimates. The companies covered released 4.42Bnt of CO₂ in 2020 or 45% of the Chinese total. The 15 cement firms in the top 100 were responsible for 893Mt of CO₂ or around 9% of the national total. This ratio is in keeping with the usual 5 – 10% share of global CO₂ emissions attributed to cement production.

Graph 1: Global gross CO₂ emissions by large cement companies in 2020. Source: China Venture Carbon/ Caixin, corporate sustainability reports. Note: Includes all reported direct and indirect emissions for all company business lines.

Many of the Chinese cement companies already release sustainability data each year so this data isn’t exactly new. Yet seeing it all in one place like this is illuminating. Unsurprisingly, on the cement side the ranking is a list of producers ordered roughly by production capacity. The world’s biggest cement producer CNBM is also the cement company that emits the most CO₂. It released 255Mt of CO₂ in 2020. If it were a country, for example, it would be around the 20th largest emitter in the world with a similar output to France or Thailand. In China CNBM is then followed by Anhui Conch, BBMG, Tangshan Jidong Cement and China Resources Cement (CRC).

Graph 1 above also includes the total gross CO₂ emissions for other large cement producers outside of China in 2020 for comparison. These figures are estimates compiled from company sustainability reports and they attempt to cover all direct and indirect emissions across all business lines not just cement. Similar to the Chinese list, generally, the less CO₂ a cement company emits on this graph the less cement it produces. It is also worth noting that 2020 was an unusual year given the outbreak of the coronavirus pandemic. Generally this reduced global manufacturing output but there was wide regional variation.

The other interesting point to note from the China Venture Carbon-Caixin project is that they re-ranked their list by carbon emission intensity, measured as emissions as a proportion of revenue. This totally changes the ordering. Where before the 15 cement companies were fairly evenly spaced out amongst power generators, coal producers and petrochemical companies, now all of them are in the top 50. As the CCA notes in its commentary, “The emission intensity of electricity and cement is much higher than that of other industries. The top 30 companies in terms of carbon emission intensity are almost all power and cement companies.” Whilst most of these companies are probably safe for the time being, given their size, what this might mean for smaller Chinese cement companies with high emission intensity in light of the Chinese government’s energy efficiency drives might be seen as worrying.

Promoting gross CO₂ emissions by cement producers is generally avoided by cement producers because it makes them look bad! It prompts an argument with the environmental lobby and doesn’t recognise the essential nature of cementitious building products to society. However, to their credit producers are publishing the data. The preferred metric for the non-Chinese multinationals is specific emissions per tonne of cement as this better shows the hard-work made to reduce emissions. However, this risks a credibility gap from the outside world, if specific emissions go down but total emissions keep rising each year. In the meantime though the more data the better from China and everywhere else.

China: Ma Mingliang, the chairman and president of Sinoma Energy Conservation, has died at the age of 57. He was reportedly taken ill whilst on a business trip to Zhaotong City in Yunnan Province. Ma Mingliang was a trained engineer who worked for China Triumph International Engineering from 1997 to 2006 before later becoming the chief engineer of the foreign department of China National Building Material (CNBM) International Engineering from 2006 to 2007. Subsequently he held a number of senior positions within CNBM group eventually leading Sinoma Energy Conservation, the subsidiary of CNBM responsible for manufacturing waste heat recovery (WHR) systems.

Indonesia: China-based China National Building Material (CNBM) International Engineering has commissioned a 2.1Mt/yr cement plant at Grobogan, Semarang, in Central Java for GITI Group. The 6000t/day project was ignited and started production in mid-November 2021. Work on the US$350m project originally started in late 2017. GITI Group is a conglomerate based in Singapore principally known for tire manufacture.

Interesting move from HeidelbergCement this week with the news that it has agreed to buy a cement plant in Tanzania. The Germany-based multinational producer has signed a deal to buy a 68% stake in Tanga Cement from South Africa-based AfriSam. There has been no indication of the price but the arrangement will give HeidelbergCement a 1.3Mt/yr integrated plant in the north of the country along with a limestone quarry with reserves to last 30 years. The transaction is expected to close in the second quarter of 2022. HeidelbergCement says it then hopes to buy the remaining shares in the company.

HeidelbergCement already operates one integrated plant in Tanzania, Tanzania Portland Cement’s (TPC) Wazo Hill Plant in the capital Dar es Salaam. It took control of the plant in the early 2000s when its subsidiary Scancem International purchased over half of the company’s shares. The plant commissioned a new cement mill in 2014 to increase its production capacity to 2Mt/yr. Local press reported in April 2021 that the subsidiary planned to invest US$15m towards modernising the unit in 2021. It sells cement under the Twiga brand.

Tanga Cement runs a plant near Tanga that was originally commissioned in 1980. Holcim took it over in the mid-1990s before South-Africa based AfriSam assumed control in the early 2010s. The plant commissioned a second production line in 2016 and it has a production capacity of 1.3Mt/yr. It sells cement under the Simba brand.

HeidelbergCement’s decision to buy a plant in Tanzania is noteworthy because it goes against the general trend in acquisitions by western-based multinational cement companies in recent years. Instead of shrinking away from markets in developing economies and doubling-down on ‘safe havens’ in mature markets it has bought a plant in a developing country. Although one might argue that it does fit the definition of a well-chosen bolt-on acquisition.

Graph 1: Cement production in Tanzania, 2011 – 2020. Source: Tanzania National Bureau of Statistics.

As Graph 1 above shows, cement production in Tanzania has more than doubled over the last decade, from 2.4Mt in 2011 to 6.5Mt in 2020. Tanzania Portland Cement estimated local demand at 5.9Mt, including exports, in 2020. This was against a total cement production capacity, from both integrated and grinding plants, of 11Mt/yr. As well as the TPC and Tanga Cement plants mentioned above, Holcim runs an integrated plant in Mbeya and Huaxin Cement operates one near Tanga. Alongside this, new integrated plants have opened including Lake Cement’s 0.5Mt/yr Kimbiji plant in 2014 and Dangote Cement’s 3Mt/yr Mtwara plant in 2015. The big project on the horizon is a proposed 7Mt/yr integrated plant from China-based CNBM/Sinoma, although not much has been heard publicly about it since mid-2020. At that time local press was reporting that compensation was being finalised for residents of the proposed site near Tanga. Needless to say, given the size of the plant compared to the Tanzanian cement market, much of the plant’s output is intended for export.

With the CNBM plant in mind, it is noteworthy that HeidelbergCement committed to buying an extra plant in the country. Production has been going up over the last decade to presumably meet demand but the new Chinese project could potentially blot out the entire existing production. Tanzania faced a cement shortage at the end of 2020 despite coronavirus. TPC has repeatedly warned of production overcapacity in Tanzania and the challenges of competition. Yet it reported a new sales record in 2020 and growth of 7% in the national cement market. Despite a 5Mt overcapacity, TPC says it managed to adapt to the new market conditions. It also managed to grow its operating profit by 20% year-on-year to around US$46m in 2020 compared to HeidelbergCement Group’s 8% rise in results from current operations in 2020. This kind of return no doubt helped HeidelbergCement to make up its mind.

Kenya: National Cement has awarded a contract to Sinoma International Engineering for the construction of power plants with a total capacity of 35MW. Gelonghui News has reported that the supplier will provide a biomass-fuelled power plant and waste heat recovery (WHR) plant with a combined capacity of 10MW and a further 25MW power station. It previously delivered a WHR system for the producer in 2019.

World: Forty cement and concrete producers, representing 80% of concrete production outside of China in 2020, have together affirmed their commitment to the Global Cement and Concrete Association (GCCA)’s Roadmap to Net Zero concrete decarbonisation strategy. The roadmap’s seven-point plan consists of increased cement plant efficiency, which should eliminate 22% of emissions, increased concrete production efficiency (11%), adjustments to cement and binders (9%), decarbonisation of raw materials (11%), carbon capture and storage (CCS) (36%), a transition to renewable energy (5%) and the natural recarbonation of concrete (6%).

Besides full decarbonisation by 2050, the strategy provides for a 25% reduction in the global concrete sector’s CO₂ emissions by 2030 and the elimination of 4.9Bnt of CO₂ emissions by 2030 alone. The GCCA called the new commitment a ‘significant acceleration’ of cement and concrete producers’ on-going decarbonisation efforts, and said that it represented ‘the biggest global commitment by any industry’ to carbon neutrality. Acknowledging the burden on cement producers, the GCCA called on downstream companies and governments to support the industry’s transition.

GCCA member China National Building Material (CNBM) CEO Cao Jianglin said “This is a landmark for industry co-operation in decarbonisation. As part of a global industry, it will need collaboration across our sector to achieve it. As one of the leading cement and concrete producers in China, we will play our part in decarbonising the industry.”

Dominican Republic: Domicem has signed an engineering, procurement and construction contract with China-based Sinoma Construction for a 3500t/day clinker production line at its Palenque plant. The scope of the project includes a production line, from raw material feeding to the clinker warehouse and the transformation of the cement mill workshop, according to Digital Cement. The Chinese engineering company previously built the first production line at the site. Domicem’s parent company Colacem said in March 2021 that it was preparing to invest US120m towards doubling the production capacity of the Palenque plant.

Poland: Lafarge Poland has laid the foundation stone for the Euro100m new kiln line at its Małogoszcz cement plant. The replacement of the three existing kilns and installation of an alternative fuel (AF) line aims to reduce the plant’s CO₂ emissions by 20% and its energy consumption by 33%. The company, a subsidiary of Switzerland-based Holcim, aims to make the cement plant into one of the European Union’s most modern. China National Building Material (CNBM) subsidiary Nanjing Kisen International Engineering will carry out the work, which is scheduled for completion in early 2023.

Project director Krzysztof Byczyński said “One of the three kilns has already been demolished and in its place a new kiln will be built with the necessary installations. Preparatory works for the construction of a new kiln are currently underway.”

China: Sales revenue from China National Building Materials’ (CNBM) cement business grew by 3% year-on-year to US$9.26bn in the first half of 2021 from US$8.98bn in the first half of 2020.Adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 12% to US$3.02bn from US$2.70bn. The group’s cement and clinker sales increased by 7.6% to 177Mt. Its concrete sales volumes increased by 13% to 52Mm³. It reported that government fiscal policy boosted demand from January to April 2021 but that heavy rainfall and increasing bulk commodity prices in May 2021 slowed the progress of some projects.

Across all business lines, the group’s revenue grew by 14% to US$18.9bn from US$16.5bn in the same period in 2020. Adjusted EBITDA rose by 13% to US$3.98bn from US$3.51bn. Total revenue benefitted from particular gains from its New Materials and Engineering businesses. However, the Engineering businesses segment reported significant drops in earnings in the reporting period. Sinoma International reported that it faced ‘multiple challenges’ such as the coronavirus pandemic outside of China, rising raw material prices and negative currency exchange effects.

It’s time for a macroscopic view of the Chinese cement sector this week with the release of the half-year financial results by some of the larger Chinese cement producers. On the national level the picture so far in 2021 has been one of continued recovery from the coronavirus lockdowns at the start of the year and then a slowing market as state controls on real estate speculation started to take effect. However, poor weather in the spring and mounting raw material prices appear to have compounded the effects of the real estate regulations, leading to price falls.

Cement output data from the National Bureau of Statistics of China in Graph 1 shows that local production took a knock in the first quarter of 2020 due to the coronavirus pandemic and this strongly recovered in the same period in 2021. The market recovered fast in mid-2020 and so the year-on-year growth for the second quarter was less in 2021. Output on a monthly basis remained ahead year-on-year from April 2020 and stayed ahead until May 2021. However, output in June 2021 was behind the figure in June 2020 and the figure for July 2021 was behind both July 2020 and July 2019.

Graph 1: Cement output by quarter in China, 2019 – mid-2021. Source: National Bureau of Statistics of China.

The Chinese Cement Association (CCA) was lamenting falling cement prices at the start of July 2021. It blamed the situation on slowing infrastructure development in some regions, increasing government restrictions on real estate development, especially poor mid-year weather and higher input prices such as for steel. China Resources Cement (CRC) expanded upon the point about increasing real estate regulations in its financial results for the first half of 2021 explaining that the Chinese government has been promoting a policy that aims to ensure that “residential properties are not for speculation” including controls on the financing of real estate. Later in mid-August 2021 the CCA reported that prices were recovering in east and central-southern regions although the situation remained poor in Guizhou province with shipments down to 60% of normal levels. Production control measures are expected to be implemented to stabilise the situation.

Graph 2: Sales revenue of large Chinese cement producers in first half of year, 2019 – 2021. Source: Company reports.

On the corporate side the sales revenue from some of the large Chinese cement producers mostly show the usual gap-tooth pattern that coronavirus has created everywhere as the market recovered. Notably Anhui Conch managed to avoid falling sales year-on-year in the first half of 2020. However, the CCA’s observation above about rising input costs is visible in the falling profits of some (but not all) of the companies covered here. For example, Anhui Conch’s net profit fell by 7% year-on-year to US$2.32bn in the first half of 2021. It blamed this on a significant rise in the price of raw coal. CRC also reported falling profits attributable to increased production costs.

CNBM reported an increase to cement and clinker sales volumes of 7.6% to 177Mt and concrete sales volumes by 13.4% to 52Mm³. It noted that, “In the first half of 2021, the national cement market showed the characteristics of high price level fluctuation adjustment.” From January to April 2021 local fiscal policy boosted demand for cement but from May 2021 continuous heavy rainfall and increasing bulk commodity prices slowed infrastructure project development. Anhui Conch’s cement and clinker sales volumes for both production and trading grew by 11.5% to 208Mt. It reported stable market demand in eastern, central and southern regions but noted falling prices in the west.

Looking ahead, two issues, among many, to consider are carbon trading and imports. The former has been coming for a while and was launched formally online nationally in mid-July 2021 for the power generation industry. The carbon price was nearly Euro7/t in late July 2021 in China compared to around Euro53/t in the European Union. Cement and steel are expected to join the Chinese national scheme in the next phase although analysts believe that issues such as data gathering, permit allocation rules, accounting standards, sector reduction targets and related financial support all need to be improved before this can happen. Imports are a connected issue and it has been interesting in recent months to hear financial analysts point out the risks, for example, of major exporting nations such as Vietnam relying on China so much. The CCA reckons that China imported 33.4Mt of clinker in 2020, an increase of 47% year-on-year, with 60% of this derived from Vietnam. With the Chinese government trying to tackle cement production overcapacity and meet growing environmental targets, imports look set to become a ‘hot ticket’ issue. In this context it is telling to see talk from the CCA of ensuring standards for imports such as verified carbon emissions. Naturally, the imports that could be trusted the most will probably be the ones from plants that Chinese cement producers have built themselves overseas. As waste importers into China found out previously, relying heavily on one market with strong state controls carries considerable risks. Cement exporters in South-East Asia take note.