Displaying items by tag: China

China: Shanshui Cement ended the nine months to September 2019 with a net profit of US$352m, up by 46.6% year-on-year from US$221m in the corresponding period of 2018. Revenue increased by 28.5% to US$2.3bn from US$1.8bn.

Democratic Republic of the Congo: The government has decided to resume the construction of the Maiko cement plant in Kisangani. Work on the project had been stalled, according to Radio Okapi. Industry Minister Julien Paluku said that contacts are already underway with a new partner to continue the work on the unit. Work on the 1Mt/yr plant started in 2007 with an investment of US$250m. China’s Satarem Hong Kong was previously linked to the project as an investor.

Laos: An explosion at a quarry related to a cement plant near Phonemany village, Nam Bak district in Luang Prabang province has killed one person and injured over 20. The nearby village was affected by the blast causing damage to houses and vehicles, according to Radio Free Asia. A villager alleged that the Chinese-owned plant never warned locals of the blasting schedule and that the explosion was larger than usual. Khammany Inthirath, Minister of Energy and Mines, said that the government had sent a team to investigate what happened.

Philippines: Cemex Philippines has ordered a MVR type mill for cement raw material grinding from Germany’s Gebr. Pfeiffer for a plant in Antipolo. The order also includes a MPS mill to grind coal. Gebr. Pfeiffer said that the order was received through a Chinese general contractor. No value for the order or timescale was disclosed.

No overarching theme this week but rather four changes of note in different markets. The first is Lehigh Hanson’s agreement to buy the integrated Bath plant in Pennsylvania, US, from Giant Cement, a subsidiary of Mexico’s Elementia. Lehigh Hanson, a subsidiary of Germany’s HeidelbergCement, plans to pay US$151m for the 1.1Mt/yr unit giving it a cost of US$137/t of cement capacity. That’s a similar price that Elementia paid when it acquired Giant Cement in 2016. The Mexican conglomerate paid US$220m for a 55% stake in 2016 for three cement plants with a combined production capacity of 2.8Mt/yr or US$143/t.

The purchase by HeidelbergCement draws a line following problems selling its business activities in Ukraine. The group blamed a drop in profit in the first half of 2019 on this. Since then though it has been linked to a takeover of UltraTech’s stake in Emirates Cement, the owner of the 0.5Mt/yr Emirates grinding plant in Dhaka, Bangladesh. Buying a cement plant in North America, its second most lucrative region after Western and Southern Europe, looks set to be a wise investment.

The timing here is interesting given that Elementia, the building materials company partly-owned by ‘Mexico’s richest man,’ Carlos Slim, has been steadily expanding in recent years. As stated above it only acquired Giant Cement in 2016. However, its net sales and earnings fell in the second quarter of 2019 caused by a market contraction in Mexico affecting all of its businesses. Sales from its cement businesses in the US and Central America grew but they fell by 6% at home in Mexico. Elementia said that proceeds from the sale of the Bath plant will be used for debt repayment and ‘general’ corporate purposes. Notably, Ricardo Naya Barba, the president of Cemex Mexico, has also described the local market as ‘difficult’ this week, in comments reported upon by local media.

Meanwhile in Africa, China’s Huaxin Cement purchased Maweni Limestone from Athi River Mining (ARM) Cement in Tanzania as part of the latter’s on-going administration process. Local press reported the transaction as costing US$116m and subject to regulatory approval. This one’s interesting because it shows a major Chinese cement producer buying related assets outside of China. This is likely part of the country’s Belt and Road Initiative to develop industry and infrastructure around the world and to give its overproducing industries new markets. Perhaps the surprise here is that Huaxin Cement hasn’t gone after the rest of Kenya’s ARM Cement… yet.

The other African news story of note this week was the confirmation that Singapore’s International Cement Group (ICG)’s intended purchase of Schwenk Namibia had failed. This deal was announced in March 2019 but it later ran into trouble when the Singapore Exchange blocked the proposed acquisition in June 2019 on the grounds that ICG didn’t appear to have the money to pay for it.

Lastly, Yamama Cement announced that it wants to sell its Production Lines 1-5, which have a daily clinker production capacity of 5600t/day. The producer previously temporarily shut down the lines in 2017 and it has been planning to build a new cement plant. Since then though it has faced shrinking sales and profits in the tough Saudi Arabian market.

The takeaway from all of this is that, despite the doom and gloom of a world producing too much clinker, some cement companies are targeting growth in specific territories. Sometimes these schemes succeed, as in the case of HeidelbergCement and Huaxin Cement, and sometimes they don’t, as ICG has found out. Heavy building materials like cement are costly to move around so a plant or assets in the right place at the right time can make a fortune.

Saudi Arabia: Al Jouf Cement has signed a six-month technical contract with China’s Riga Company to convert its second production line to produce white cement. The contract was signed to coincide with the arrival of the project team that will handle the conversion. No value for the upgrade has been disclosed.

Tanzania/China: China’s 100Mt/yr-capacity Huaxin Cement has bought Maweni Limestone from the Kenyan-based Athi River Mining (ARM) Cement. Huaxin has stated that this first incursion into East Africa is ‘integral to its broader strategy’ of expansion in emerging markets. It adds the Tanzanian producer of Rhino cement to its burgeoning portfolio of overseas assets including cement plants in Tajikistan, Uzbekistan, Cambodia and Nepal.

China: Taiwan Cement has published information on behalf of its shipping subsidiary Ta-Ho Maritime concerning the latter’s purchase of two 84,000t capacity bulk carrier vessels at a price not exceeding US$70m from Japan-based shipbuilder Sumitomo. The deal contains an option to purchase a third unit for not more than US$35m, to be exercised before 30 September 2019.

China/Finland: Metso Corporation has announced that it will complete its takeover of Shaorui Heavy Industries with the exercise of its call option over 25% of shares. Markku Simula, President of the Aggregates Equipment division of Metso, has expressed the company’s high expectations of Shaorui, one of China’s ‘leading mid-market crushing and screening equipment producers.’ The purchase will be completed in late 2019.

Forgive the poor image quality but our magazine editor Peter Edwards spotted this provocative graphic (above) at the Federación Interamericana del Cemento (FICEM) technical congress that is taking place in the Dominican Republic this week. It came from a presentation given by Yassine Touahri from On Field Investment Research. The reason this slide raises eyebrows is because it seems to inversely link CO₂ emission regulations with cement grinding capacity growth.

One would expect integrated or clinker production capacity addition to decline in the face of various carbon taxes because the majority of emissions in cement production are process emissions. Yet this graphic suggests that it goes further by affecting the supply of clinker in these regions. If correct then it supports the argument that introducing carbon taxes forces related capacity investment to go elsewhere. In other words, if governments try to control industrial CO₂ emissions, then the market will follow the path of least resistance. The world has a clinker production capacity surplus and the countries with no CO₂ regulations are scooping it up.

The counter argument is that capacity growth and CO₂ legislation is unrelated. The regions with flat or falling grinding capacity additions are the places were this trend is occurring anyway for other reasons. These areas have built their houses and infrastructure and so one would expect no or low capacity growth. In this environment it is easier to introduce CO₂ laws because, rightly or wrongly, it is perceived to be less important to the overall economy. Meanwhile, outside of these zones national economies are growing: they want to build things and new grinding plants to take advantage of a global glut of clinker are helping them to do this.

Other issues with this graphic are the widely different reasons for low cement grinding capacity growth in the areas with CO₂ legislation. Europe, for example, has endured the European Union (EU) Emissions Trading Scheme (ETS) for over a decade and it has seen growth in the slag-cement grinding model in some countries in recent years. General trends have also seen a considerable drop in production capacity in Southern Mediterranean countries as their export markets decline. China is actively trying to manage a reduction in production capacity following a period of unparalleled growth. CO₂ legislation is one potential means to do this.

The next step here would be to model the effect of a carbon tax on a developing market, which is genuinely growing its cement consumption, compared to a more mature one. This might help to answer whether economic development can be untangled from carbon emissions. CO₂ regulations are undoubtedly distorting cement markets though. Touahri is right when he says that, “CO₂ management will be the key challenge for the cement industry in the 21st century.” Once it is given a value then it changes the nature of the business.

There will be a full review of the FICEM technical congress 2019 in a future issue of Global Cement Magazine