Displaying items by tag: China
HeidelbergCement boosted in ‘bizarre’ start to 2020
23 March 2020Germany: HeidelbergCement started the new year better than ever before, according to chief executive officer (CEO) Dominik von Achten. He reported that this had been mainly due to good weather before the onset of the coronavirus outbreak. Von Achten warned that the situation had already changed beyond recognition since mid-February 2020 for the multinational.
He said that the coronavirus outbreak had not only caused plants to be closed, either by enforcement or due to a lack of demand, but because migrant workers are unable to travel to construction sites. For example, workers from Eastern Europe are increasingly lacking in Western Europe. In Indonesia, a market that is important for HeidelbergCement, the lack of Chinese construction workers is stark, as they remain confined to their home country.
According to Von Achten, HeidelbergCement is now paying particular attention to its costs, has deferred all unnecessary investments and has considerable liquidity leeway. He added that the group is likely to benefit significantly from lower fuel costs as conditions improve over the course of 2020. HeidelbergCement is currently particularly affected in Lombardy, where its Italcementi subsidiary has its headquarters. HeidelbergCement has shut down its factories in Italy and imposed a freeze on hiring and non-essential spending. "You can see it's hitting the world like a wave," says Von Achten. "It's a tough test."
China Shanshui profit rises by a third
23 March 2020China: China Shanshi Cement Group has reported that its profit was US$420m in 2019, a rise of 35.3% year-on-year compared to 2018.
China: Hebei province-based Tangshan Jidong Cement’s net 2019 profit was US$298m, up by 42% year-on-year from US$210m in 2018. Cement and clinker sales remained flat. Tangshan Jidong Cement attributed the growth to increased prices due to a 9.9% year-on-year increase in infrastructure spending to US$1.86tn. Throughout the year, the company said, it completed energy-saving optimisation and upgrades to improve efficiency, implemented strategic marketing and reduced the cost of material procurement.
News roundup
18 March 2020With events moving fast in Europe with regard to the on-going health crisis, here are a few threads to consider from the cement industry news this week.
Firstly, there have been two solar power stories over the last week in North America. Grupo Argos said that it had installed a 10.6MW solar power plant at Cementos Argos’ Piedras Azules cement plant in Comayagua. Then US-based Alamo Cement Company was reported to have signed a contract with Renergetica to build a solar power plant at its integrated plant in San Antonio, Texas. Global Cement has looked at this topic on and off over the years from the steady addition of photovoltaic (PV) solar plants around the world to supply electricity to cement plants to more ambitious plans such as research into using concentrated solar power to start powering creating clinker directly. These two latest PV stories follow projects in El Salvador and Cyprus so far this year. We’re not going to comment now on the overall progress the cement industry is making towards moving away from fossil fuels but the general trend is encouraging.
Next, there are on-going investments and upgrade projects being announced. Germany’s KHD revealed on 17 March 2020 that is building a new raw mill and pyroprocessing line for an ACC plant in India. FCT combustion recently announced that it has won a deal to supply Titan Cement in the US with an upgrade to a kiln line to natural gas. Buzzi Unicem’s SLK Cement in Russia has agreed to co-process solid municipal waste at its Sukholozhskcement plant. South Africa’s PPC has invested in a pneumatic offloading facility and a silo for its George Depot cement terminal in the Western Cape. These will have likely been agreed before the global coronavirus outbreak but they are reminders that some level of capital expenditure by cement companies is happening.
In China the Ministry of Industry and Information Technology (MIIT) said this week that the domestic cement sector’s net profit grew by 20% year-on-year to US$26.6bn in 2019. With this in mind the first quarter results for 2020 from cement producers in China will make essential reading for producers from elsewhere around the world wondering what to expect. However, a recent interview with the president of Huaxin Cement, a company based in Hubei province at the epicentre of the outbreak, revealed that despite the short term economic disruption from the quarantine the company was expecting a rapid economic rebound after April 2020 provided that there is a suitable government stewardship. He also mentioned the key role the company was playing in disposing of clinical waste. As such it was hoping for tax breaks to support continuing incineration and the advancement of co-processing in general.
Finally, also on the health crisis, many cement industry events have been cancelled or postponed as work practices change including those organised by Global Cement. We’re taking our events online in the short term as virtual conferences with opportunities for information exchange and networking. We encourage as many of you as possible to register.
Cement industry events affected by coronavirus epidemic
18 March 2020World: A number of cement industry events such as a conferences and trade fairs have been affected by the coronavirus epidemic. Here is a roundup of some of the major ones.
This list will be continuously updated (please This email address is being protected from spambots. You need JavaScript enabled to view it. with anything we may have missed)
IEEE-IAS/PCA Cement Industry Technical Conference (Las Vegas 19-23 April 2020 - Cancelled (next event is in Orlando, Florida, 23-27 May 2021)
CemTech Asia (Jakarta) 14-17 June - Postponed
Solids Dortmund, Germany - postponed to 24 - 25 June 2020
Hannover Fair, Germany - first postponed to 13 - 17 July 2020, then cancelled - now due on 23-24 June 2021
IFAT, Munich, Germany - postponed to 7 - 11 September 2020
International Powder & Bulk Solids, Chicago, US - postponed to 6 - 8 October 2020
Global Slag Conference & Exhibition, Vienna, Austria - postponed to 10 - 11 November 2020
interpack, Düsseldorf, Germany - postponed to 25 February - 3 March 2021
HILLHEAD Quarrying and Recycling Show - Postponed to 22 - 24 June 2021
Cementtech, Anhui, China - postponed - dates TBA
Global CemProcess Conference & Exhibition, Munich, Germany - postponed - dates TBA
Intercem Shipping Americas, Chicago, US – postponed – dates TBA (Intercem Americas 26-28 October in Miami going ahead)
LogiMAT, Stuttgart, Germany - cancelled. Next: 9-11 March 2021
China: The Ministry of Industry and Information Technology (MIIT) has reported net profit growth for the entire domestic cement sector of 20% year-on-year to US$26.6bn in 2019 from US$22.3bn in 2018. Total revenues reached US$144bn, representing an increase of 13% from US$128bn. Xinhua China Economic Information Service has reported that the MIIT attributed the profit growth to a reduction in overcapacity throughout the year due to supply-side structural reform.
Xiamen cement plant converted into flats
16 March 2020China: A cement plant in Xiamen, Fujian province, that was shut down under the China Cement Association’s overcapacity crackdown has found a new lease of life as luxury flats. Dezeen News has reported that the flats incorporates modern industry and the ancient Chinese village through minimalist use of cement to evoke physical stasis and calm.
Breaking the cycle of cement overcapacity?
11 March 2020Announcements from two very different countries serve to highlight the global cement sector’s on-going and seemingly intractable overcapacity issues this week.
First up, India, the world’s largest democracy and second-largest cement market, will reportedly struggle to exceed 70% capacity utilisation in the forthcoming 2020-2021 fiscal year, according to the credit ratings agencies ICRA, India Ratings and Crisil. In the same week, however, we have heard that UltraTech Cement will launch a 3.5Mt/yr capacity expansion at its Bhogasamudam plant in Andhra Pradesh, while ACC committed to launching a 2.5Mt/yr plant in Chandrapur, Maharashtra early last week. In February 2020 Deccan Cements firmed up plans to expand its Mahankaligudem plant in Telengana and JSW wants to turn its Bilakalagudur plant into a 6Mt/yr beast. Back in January 2020. Shree Cement launched ambitious plans to spend US$1.3bn on upgrades in the period to 2023. With Indian capacity estimated to hit 500Mt/yr by the close of 2020, what do all of these producers know that ICRA et al don’t?
Second on the list is centrally-planned Vietnam, the world’s third-largest producer, having produced 96.5Mt of cement in 2019. Here, long-standing excessive capacity is looking increasingly ridiculous following a massive collapse in export sales in January and February 2020 due to the coronavirus outbreak. This, of course, continues to affect cement producers and users alike.
Just today, Nguyen Quang Cung, chairman of the Vietnam Cement Association (VNCA) said that demand is expected to remain high throughout 2020 as a whole. The Ministry of Construction (MoC) currently stands by its autumn 2019 forecast that Vietnam will produce a whopping 103Mt of cement this year. It expects domestic consumption to be around 70Mt, with exports of 33Mt. A 2.5Mt/yr plant in Tân Thắng Commune in the central province of Nghệ, and a 4.6Mt/yr plant in Bỉm Sơn Commune, Thanh Hóa, will come online in 2020, further adding to the country’s capacity. Exports were touted as the saviour of the sector back in January 2020. This assertion may now have to be revisited.
The drivers behind the overcapacity are different in each country. Indian producers have a long history of capacity addition in order to maintain or improve their market share. Standing still is tantamount to walking (or even running) backwards, so the biggest producers (and those that want to become big producers) tend to go ‘over the top’ with their expansion aims. Market forces eventually catch up with the smaller players, which find themselves bought up or shut down. This has the seemingly inevitable effect of maintaining low capacity utilisation rates.
In Vietnam, the overcapacity is due to central targets, which, as noted previously, are an entirely alien concept for cement producers across much of the rest of the world. As Vietnam’s obsession with high cement production has developed, it has become hooked on exports, entering a void recently vacated by Chinese exports. It often sells at scarcely-believable prices and now, with the introduction of the coronavirus into the mix, even these seem to be too high. After all, Vietnam’s cement association cannot ‘set targets’ for cement demand in other countries.
So… how to reduce capacity? There are two examples, again from different types of market. China has, of course, reduced its overcapacity massively to eliminate outdated capacity and improve the country’s environmental performance. This has been possible due to orders from the top of government. The other example can be found in Europe, where the EU Emissions Trading Scheme has finally found its teeth, with the oldest and least efficient plants now feeling the financial bite of their CO2 emissions.
It remains to be seen whether the collapse of the export market will force the Vietnamese cement sector to rationalise its inventory. From a market-based mindset it is clear that it should follow China’s lead. India, meanwhile, has a massive overcapacity that market forces seem slow (or indeed unable) to clear. The EU route may be more applicable here, but one might expect resistance from cement producers. Also, the development and demographic differences between India and Europe are stark, indicating that there may be a need, at some point in the future, for 500Mt/yr of capacity. The Indian majors are counting on this and laying the groundwork for a step-change in the future. Indeed, in a few years, 500Mt/yr may look vanishingly small if demand increases rapidly. What are the chances of that?
Vietnam: Producers exported approximately 2.82Mt of cement in January and February 2020, down by 49% year-on-year from 5.75Mt in the corresponding period of 2019. Vietnam News has reported that this is a result of the coronavirus outbreak. In February 2020 Vietnam’s Ministry of Construction said that Vietnamese cement exporters would face fierce competition as China and Thailand increase exports over the coming year.
Vietnam Cement Association president Nguyễn Quang Cung previously predicted that Vietnamese cement exports would hold steady at 34.0Mt in 2020 before falling by 26% to 25.0Mt in 2021 as a forecasted rise in domestic demand reduces the reliance on low-priced exports. China remains the primary importer of Vietnamese cement, which it buys at US$36.3/t. Domestic demand fell by 37% year-on-year to 2.88Mt in January 2020 from 5.43Mt in January 2019, according to Arab News.
Production rose by 0.1% year-on-year to 13.0Mt in January and February 2020 from 12.9Mt one year previously.
Cement and the Coronavirus
04 March 2020The Coronavirus Disease 2019 (COVID-19) took on direct implications for the international cement industry this week when an Italian vendor infected with the virus visited Lafarge Africa in Ogun state, Nigeria. The cement producer said that it had ‘immediately’ started contact tracing and started isolation, quarantine and disinfection protocols. This included initiating medical protocols at its Ewekoro integrated plant, although local press reported the unit’s production lines were still open. Around 100 people were thought to have had contact with the man.
Global Cement has been covering the epidemic since early February 2020 when the virus’ effect on the construction industry in China started to become evident. First, an industry event CementTech was postponed, financial analysts started forecasting negative financial consequences for producers and plants started going into coronavirus-related maintenance or suspension cycles. Then at least one plant started to dispose of clinical waste and now China National Building Material Group (CNBM) is considering how to restart operations at scale. Also, this week Hong Kong construction companies reportedly laid off 50,00 builders due to a lack of cement due to the on-going production suspension in China.
The major cement companies have identified that their first business risk from coronavirus comes from simply not having the staff to make building materials. LafargeHolcim’s chief executive officer Jan Jenisch summed up the group’s action in its annual financial results for 2020 this week when he said, “We are taking all necessary measures to protect the health of our employees and their families.” Other major cement producers that Global Cement has contacted have placed travel restrictions for staff and reduced access to production facilities.
The next risk for cement companies comes from a drop in economic activity. The Organisation for Economic Co-operation and Development (OECD) forecasts a global 0.5% year-on-year fall in real gross domestic product (GDP) growth to 2.4%, with China and India suffering the worst declines in GDP growth at around 1%. The global figure is the worst since the -0.1% rate reported by the International Monetary Fund (IMF) in 2009. The OECD blamed the disease control measures in China, as well as the direct disruption to global supply chains, weaker final demand for imported goods and services and regional declines in international tourism and business travel. This forecast is contingent on the epidemic peaking in China in the first quarter of 2020 and new cases of the virus in other countries being sporadic and contained. So far the latter does not seem to have happened and the OECD’s ‘domino’ scenario predicts a GDP reduction of 1.5%. All of this is likely to drag on construction activity and demand for cement and concrete for some time to come.
Moving to cement markets and production, demand is likely to be slowed as countries implement various levels of isolation and quarantine leading to reduced residential demand for buildings directly and as workforces are restricted. Business and infrastructure projects may follow as economies slow and governments refocus spending respectively.
The UK government, for example, is basing its coronavirus action plan on an outbreak lasting four to six months. This could potentially happen in many countries throughout 2020. This has the potential to create a rolling effect of disruption as different nations are hit. Assuming China has passed the peak of its local epidemic then its producers are likely to report reduced income in the first quarter of 2020. The effect may even be reduced somewhat due to the existing winter peak shifting measures, whereby production is shut down to reduce pollution. Elsewhere, cement companies in the northern hemisphere may see their busy summer months affected if the virus spreads. The effect on balance sheets may be visible with indebted companies and/or those with more exposure to affected areas disproportionately affected. The wildcard here is whether coronavirus transmits as easily in warmer weather as it does in the cooler winter months. In this case there may be a difference, generally speaking, between the global north and south. Exceptions to watch could be cooler southern places such as New Zealand, Argentina and Chile. Shortages, as mentioned above in Taiwan, potentially should be short term, owing to global overcapacity of cement production, as end users find supplies from elsewhere.
The cement industry is also likely to encounter disruption to its supply chains. Major construction projects in South Asia are already reporting delays as Chinese workers have failed to return following quarantine restrictions after the Chinese New Year celebrations. As other countries suffer uncontrolled outbreaks then similar travel restrictions may follow. Global Cement has yet to see any examples of materials in the cement industry supply chain being affected. On the production side, raw mineral supply tends to be local but fuels, like coal, often travel further. Fuel markets may prove erratic as larger consumers cut back and suppliers like the Organisation of the Petroleum Exporting Countries (OPEC) react by restricting production.
On the maintenance side cement plants need a wide array of parts such as refractories, motors, lubricants, gears, wear parts for mills, ball bearings and so forth. Some of these may have more complicated supply chain routes than they used to have 30 years ago. On the supplier side any new or upgrade plant project is vulnerable if necessary parts are delayed by a production halt, logistics delayed and/or staff are prevented from visiting work sites. Chinese suppliers’ reliance on using their own workers, for example, might well be a hindrance here until (or if) international quarantine rules are normalised. Other suppliers’ weak points in their supply chains may become exposed in turn. This would benefit suppliers with sufficiently robust chains.
Chinese reductions in NO2 emissions in relation to the coronavirus industrial shutdown have been noted in the press. A wider global effect could well be seen too. This could potentially pose problems to CO2 emissions trading schemes around the world as CO2 prices fall and carbon credits abound. This might also have deleterious effects on carbon capture and storage (CCS) development if it becomes redundant due to low CO2 pricing. In the longer-term this might undesirable, as by the time the CO2 prices pick up again we will be that much nearer to the 2050 sustainability deadlines.
COVID-19 is a new pandemic in all but name with major secondary outbreaks in South Korea, Iran and Italy growing fast and cases being reported in many other countries. The bad news though is that individual countries and international bodies have to decide how to balance the economic damage disease control will cause, versus the effects of letting the disease run unchecked. Yet as more information emerges on how to tackle coronavirus, the good news is that most people will experience flu-like symptoms and nothing more. Chinese action shows that it can be controlled through public health measures while a vaccine is being developed.
Until then, frequent handwashing is a ‘given’ and many people and organisations are running risk calculations on aspects of what they do. It may seem flippant but even basic human interaction such as the handshake needs to be reconsidered for the time being.