Displaying items by tag: China
Huaxin steps in on ARM Cement divestment rush
27 September 2019Tanzania/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.
Taiwan Cement purchases two bulk carriers with option for a third
19 September 2019China: 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.
The effects of CO2 regulation on cement production
04 September 2019Forgive 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
Conifers indicate cement plant’s carbon footprint
04 September 2019China: Research conducted by the North-West Institute of Eco-Environment and Resources has ascertained detailed data on carbon dioxide (CO2) and mercury (Hg) output at a cement plant in Lanzhou using local spruces.
VerticalNews has reported of distance-dependent variations of Hg concentration in needles close to the cement plant, with the highest concentrations observed in needle samples from the site nearest to the plant. Hg in tree rings increased gradually for all sites by year, reaching a concentration of 65.8ng/g in the last growing period at 0m from the plant.
The study fuels hopes of accurate quantification of historical accumulation of air pollutants, including heavy metals, as well as contributing to our understanding of biochemical Hg cycling in forest ecosystems.
DongWu Cement reports on first half profits
30 August 2019China: DongWu Cement’s net profit over the six months to 30 June 2019 was US$4.83bn, up by 20.6% from US$4.00bn over the same period of 2018. Its cement segment reported a net profit of US$5.37bn, up by 9.1% from US$4.92bn in the corresponding period of 2018.
In its financial statement, DongWu noted a year-on-year growth in China’s total cement output of 6.8% to 1.05Bnt in the first half of 2019, with prices also increasing by 4.1% to US$60.9/t, though growth rates have slowed.
Infrastructure developments have driven swelling demand, while compressed supply has brought the centrally organised economy’s cement reserves to a medium-low level.
Uzbekistan: Uzbekistan’s cement imports totalled US$105.6m over the six months to 30 June 2019, up by 32.3% from 2018.
Chinese investment in Uzbek domestic cement production saw two cement plants of 1.2Mt/yr and 2.4Mt/yr capacity enter development in 2018. Huaxin Cement’s Zafarabad plant is expected to become operational in December 2019, with Gansu Hengya Cement’s Kattakurgan plant also due to enter operation in the coming months.
Half-year update on China 2019
28 August 2019The publication of CNBM’s financial results presents a good opportunity to take stock of the Chinese cement industry in the first half of 2019. Looking at the big picture first, cement sales rose by 5% year-on-year to 1.03Bnt in the first half of 2019 from 0.98Bnt in the same period in 2018. Graph 1 below shows the sales over the last five years since 2014. Generally, sales are decreasing each year but there has been some variation in the half-year periods.
Graph 1: Cement sales in China, 2014 – 2019. Source: National Bureau of Statistics of China.
As the China Cement Association (CCA) pointed out in its summary for the first half of 2019, the cement industry ‘swelled in volume and price’ as industry efficiency grew but that the growth rate dropped ‘significantly’ compared in 2018. By region, as Graph 2 shows, variation can be seen between the south-east of the country where growth was slow or even fell compared to stronger performance elsewhere. Cement production increased by above 20% in Jilin, Shanxi, Shandong, Tibet and Heilongjiang and by over 10% in Hebei, Gansu, Tianjin, and Liaoning. However, it fell in Hainan, Beijing, Qinghai, Guizhou, Guangxi, Hunan, Guangdong and Ningxia. Most of these changes were attributed to either rising or falling demand for cement, except for Jilin where reduced imports from neighbouring provinces pushed up its demand. In most of these latter regions it attribute the decline to falling demand for cement.
Graph 2: Cement production growth by province in first half of 2019. Source: China Cement Association.
Other points of note from the CCA include the surge in imports to China. Imports of cement and clinker rose by 149% year-on-year to 8.97Mt in the five months from January to May 2019. Vietnam supplied 68% of this followed by 11% from Thailand. On the production side, 10 new production lines with a total capacity of 15.5Mt/yr were commissioned in the period. These were fairly scattered across nine provinces, in Shanxi, Anhui, Hubei, Fujian, Guangxi, Hunan, Guizhou, Gansu and Yunnan respectively.
Sales and profits were supported by growing demand and prices on the corporate side. CNBM’s operating income for its cement businesses grew by 16% to US$8.14bn from US$7.04bn. Its adjusted profit increased by 40% to US$2.76bn from US$1.98bn. Anhui Conch’s sales rose by 17.9% to US$2.15bn from US$2.11bn. It blamed poorer profits in the south of the country on adverse weather leading to weakened demand.
The weaker sales in the south could be seen in China Resources Cement’s (CRC) results with its turnover down by 6% to US$2.22bn from US$2.36bn. Likewise, its earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 8.5% to US$820m from US$896m. The majority of its cement plants are based in Guangxi, Guangdong and Fujian. Jidong Cement was also reported as having received US$30m in subsidies from the government during the first half of 2019 in relation to its ‘daily activities.’
As is usual for these kinds of roundups the dynamic in China is between government industrial policies, like peak shifting and pollution mitigation, and local demand and price trends. One of the latest spins on peak shifting, for example, is a rating system that is being considered to decide which companies should be subject to production limits and for how long. General cement sales are slowly falling each year but the rise of imports into the word’s biggest cement producing nation (!) mark an interesting trend. Also, it may not be connected, but lots of those provinces with falling demand so far in 2019 are those on the south coast facing the heavy clinker exporting nations of South-East Asia. Given the decisiveness with which the Chinese government dispensed with imports of waste materials under its National Sword initiative since 2017, those countries importing cement to China should beware. It could change very quickly. The Chinese cement market is never dull.
CNBM shares interim results
28 August 2019China: CNBM have reported a good first half of 2019, with profits of US$1.23bn, an increase of 30.6% from US$0.94bn in the same period of 2019.
Anhui Conch’s net profits rise 17.9% year-on-year
22 August 2019China: The net profit of Anhui Conch Cement in the first half of 2019 was US$2.15bn, up 17.9% from US$2.11bn at the close of the first half of 2018. Anhui Conch’s interim report stated that the gross profit margin increased in the eastern and central regions by 2.67% and 0.51% respectively in response to steadily increasing market demand, and remained flat year-on-year in the southern region in spite of adverse weather precipitating a decline in the local market.