Displaying items by tag: China
Cutting cement’s carbon footprint
11 April 2018Two reports out this week have looked at the carbon footprint of the cement industry. The first, a technology roadmap by the Cement Sustainability Initiative (CSI) and the International Energy Agency (IEA), laid out a technology pathway for the sector to reduce its direct CO2 by 24% from current levels by 2050 to meet the IEA’s 2°C scenario (2DS). The second, a report by the CDP (formerly the Carbon Disclosure Project) on the progress of 13 major cement producers to reduce their emissions, was a progress report on the business readiness for a low carbon economy transition.
Graph 1: European Union industry emissions by sector, 2013 - 2017. Source: Sandbag, European Commission.
The scene was set last week when the environmental campaign group Sandbag picked up on the latest emission data from the European Union (EU) Emissions Trading Scheme (ETS). Industrial emissions as a whole rose by 2% year-on-year to 743Mt in 2017. The cement and lime industry reported a rise of 3% to 148Mt in 2017 from 144Mt in 2016. As Sandbag reported, industrial emissions have remained ‘stubbornly high’ for the duration of the ETS. It then went on to say that, “the EU urgently needs a new industrial strategy to bring about radical industrial process changes and/or carbon capture and storage, especially for the high-emitting steel and cement sectors.”
The CDP’s report provided a global scorecard on the readiness of the cement industry to adapt to a low-carbon future. Unfortunately, the report used data from self-reporting questionnaires and it lacked data from the two largest Chinese cement producers, Anhui Conch and China National Building Materials (CNBM), although it did try to compensate for this. The CDP assessed companies across four key areas aligned with the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).
Graph 2: Opportunity vs. risk for low-carbon transition. Source: Building Pressure report, CDP.
Surprisingly, the study, even with its limitations, found regional variation. As can be seen in Graph 2, the Indian cement producers came out on top from the criteria used: transition risks, physical risks, transition opportunities and climate governance and strategy. CDP pinned this on better access to alternative materials such as fly ash and slag coming from other carbon intensive sectors, such as thermal power generation and steel production. Reported process emissions measured by the clinker ratio for the Indian companies was 69% versus 78% for the other companies. They also benefited from newer cement plants driven by high market growth in the region compared to older plants in Europe.
The technology roadmap from the CSI and the IEA set out key actions for the industry to take by 2030 to have at least a 50% chance of achieving the 2°C 2DS scenario followed by a possible transition pathway that could be achieved through technology, legislation and investment. The key actions are protecting carbon pricing mechanisms from carbon leakage, putting new technology into action and supporting it by legislation, and greater government support for products with a lower clinker factor.
The CSI’s and IEA’s targets for 2030 included reaching a clinker to cement ratio of 0.64 in 2030 from 0.65 in 2014, a thermal energy intensity of clinker of 3.3GJ/t from 3.5GJ/t, an electricity intensity of cement of 87kWh/t from 91kWh/t and a alternative fuel co-processing rate of 17.5% from 5.6%. Perhaps the most optimistic is a CO2 capture and storage amount of 14MtCO2/yr in 2030 from nothing at the moment. This last target seems unlikely to be achieved given the lack of projects outside of the pilot stage, but it’s not impossible.
This column barely touches on the detail within either report or even the latest data from the EU ETS. Both reports offer ways forward to meet the 2°C global warming target outlined in the Paris Agreement. It’s easy to be pessimistic given the on-going clash between environmental optimism and business logic but both reports offer a way forward. The CDP report sets out a baseline with a look to the future, whilst the CSI/IEA roadmap offers what it says is a realistic route to reach that 2DS target. Lastly, if the CDP’s assessment is correct about the Indian producers then it’s possible that other developing cement industries may inherently be cleaner due to their use of newer plants and equipment. If worldwide government support can be provided for use of alternative fuels and materials on a much larger scale, as well as all the other recommendations, then meeting the Paris agreement may be easier than expected as new markets build new production capacity.
Two examples of carbon capture utilisation and sequestration projects will be covered in the May 2018 issue of Global Cement Magazine
CBMI deal resurrects Djelfa plant for ASEC Cement
10 April 2018Algeria: China’s CBMI has signed a contract with ASEC Cement to build a 4500t/day clinker production line at ASEC Cement’s Djelfa plant. The unit was originally partially built by ASEC Egypt in 2008 and had completed 90% of civil work before it was suspended due to the financial crash. Local company ETRHB Haddad and the Algerian subsidiary of China State Construction Engineering Corporation (CSCEC) took control of ASEC Cement in 2017 allowing the Djelfa project to continue.
The engineering, procurement and construction contract covers limestone crushing to cement packaging and delivery. It includes engineering, equipment and steel structure procurement, civil construction, erection, training and commissioning. Construction is scheduled to take 19 months from the contract’s activation date. As such the plant could be operational by the end of 2019.
Zambia: Weye Construction Materials has submitted plans to the Zambia Environmental Management Agency to build a 1Mt/yr cement plant in Chilanga district. The investment for the proposed project, including quarry and full clinker production line, has been set at the low value of US$45m.
According to the application the project will build a raw material mill single–stage cyclone pre-heater, a coal-fired rotary kiln and a packaging unit. Bag filters will be used for dust recovery at the bagging facility and material transfer points. Electrostatic precipitators will be installed for gas cleaning to avert nuisances from the kiln. WEYE added that the project would also create 555 jobs.
WEYE Construction Materials is owned by two Chinese shareholders: Zhang Yiwei and Lu Qiang. It is a subsidiary of China’s Weye Construction Group, based in Jiangsu province and established in 1999.
PPC in talks with Sinoma to sell majority stake in operations in Democratic Republic of Congo
09 April 2018Democratic Republic of Congo: South Africa’s PPC says it is talks with China National Materials (Sinoma) over selling a majority stake in its operations in the country. In an interview with Bloomberg chief executive officer Johann Claassen said that deal would depend on the price and implications on the on-going merger between Sinoma and China National Building Material (CNBM). He added that the PPC’s cement plant in the Democratic Republic of Congo had proven ‘challenging’ and that the company had arranged a ‘debt holiday’ with lenders after the market ‘didn’t pan out as envisaged.’
The battle for Binani Cement
04 April 2018Persistence has paid off for UltraTech Cement this week. Although the deal is not complete, all the signs are pointing towards India’s largest cement producer buying Binani Cement despite losing an auction for it last month. Here’s a recap of what has happened so far.
In July 2017 the National Company Law Tribunal (NCLT) in Kolkata, a semi-judicial body that rules on issues relating to companies, started insolvency proceedings for Binani Cement. It followed a plea by one of the cement company’s creditors, the Bank of Baroda, that had an outstanding claim of around US$15m. The Kolkata bench of the NCLT rejected Binani Cement’s argument that the debt was tiny compared to the assets of its parent company Binani Industries of US$2.15bn. It then appointed an administrator, or resolution professional, called Vijaykumar Iyer, a partner at Deloitte Touche Tohmatsu India. More on him later on.
The subsequent auction of Binani Cement raised lots of interest both internationally and locally due to its production base. The company operates a 4.9Mt/yr plant at Binanigram in Rajasthan with two kilns and four mills. It also runs a 1.4Mt/yr cement grinding plant at Sirohi in the same state. Unusually though for an Indian producer it also runs a 2Mt/yr grinding plant at Jebel Ali, Dubai in the UAE and a 0.5Mt/yr integrated plant, Shandong Cement, in China.
Its products domestically in India include 43 and 53 grades Ordinary Portland Cement and Portland Pozzolana Cement, with the Bollywood film star Amitabh Bachchan as its brand ambassador. On that last point the Indian Supreme Court chastised Binani Cement in 2014 for not paying sales tax in Rajasthan whilst being able to hire Bachchan! However, given the ferocity of the struggle to buy Binani Cement maybe all that marketing of the brand paid off, giving the producer a much higher profile than it might otherwise have had.
Anyway, lots of companies showed interest in Binani Cement in the first round of bidding in late 2017. CRH, LafargeHolcim, HeidelbergCement, India Cement, Orient Cement, Ramco Cement, Shree Cement, UltraTech Cement and Piramal Group were all linked to the auction. Eventually UltraTech Cement, JSW Cement, Ramco Cement, HeidelbergCement India, Dalmia Bharat and a pair of Indian investors all submitted bids and JSW Cement emerged as the winner with a bid of US$919m. However the emergence of an additional liability of around US$250m scuppered that auction when it turned out that Binani Cement had offered a corporate guarantee for the acquisition of a fibreglass asset in Europe known as 3B in 2012 by Binani Industries. By February 2018 the next auction was in progress and this time Dalmia Bharat Cement and UltraTech Cement led the race. Dalmia Bharat won the second auction with a bid of around US$1.03bn made in a consortium with Bain Capital’s India Resurgent Fund and Piramal Enterprises.
At this point the situation might have conceivably slowed down. Instead, UltraTech Cement kept on fighting and queried the entire bidding process. It then made a direct offer of US$1.11bn to Binani Cement in the form of a so-called ‘comfort letter’ that Binani Industries used to stop the insolvency process. At the same time it received approval from the Competition Commission of India in its bid for Binani Cement, the previous absence of which was one of the reasons its bid against Dalmia Bharat was rejected.
Indian company law now faced a dilemma over how a bankruptcy works given that the NCLT was meant to be in charge. A way out was found though when the NCLT in Kolkata and the National Company Law Appellate Tribunal both allowed the bidders to settle the dispute ‘amicably.’ To add further confusion the administrator Vijaykumar Iyer also alleged right in the middle of the final tussle between Dalmia Bharat and UltraTech Cement that fraudulent transactions had been made by Binani Cement! Whether this has any further implications remains to be seen.
At this stage nobody is likely to declare UltraTech Cement the winner of Binani Cement until it actually picks up the keys to the cement plants. Perhaps not even then in case of any lingering legal issues! UltraTech Cement clearly views Rajasthan as a growth area given the tenacity with which it has gone after Binani Cement. It operates two integrated plants in the state and is building two more of its own. After its long journey in buying plants from Jaiprakash Associates in 2017, UltraTech Cement is starting to look like the cement producer that simply won’t take no for an answer.
CNBM and Sinoma merger set to complete in May 2018
03 April 2018China: The merger between China National Building Material (CNBM) and China National Materials (Sinoma) is looking likely to be completed in early May 2018. The companies have issued a scheduled timeline for key events of the withdrawal of Sinoma shares and the implementation of a share exchange. This process is expected to be completed on or around 3 May 2018 with CNBM updating its business registration at the Beijing Municipal Administration of Industry and Commerce as soon as possible thereafter. The merger marks the conglomeration of the leading Chinese cement producer and equipment manufacturer.
Anhui Conch to open office in Tunis
03 April 2018Tunisia: China’s Anhui Conch plans to open an office in Tunis to explore investment opportunities. A delegation from the cement producer met with Slim Feriani, the Minister of Industry and Small and Medium Enterprises, according to African Manager.
Update on China in 2017
28 March 2018Many of the Chinese cement producers have released their annual results for 2017 over the last week, giving us plenty to consider. The first takeaway is the stabilisation of cement sales since 2014. As can be seen in Graph 1, National Bureau of Statistics data shows that cement sales grew year-on-year from 2008 to 2014. This trend stopped in 2015 and then government mandated measures to control production overcapacity kicked-in such as a industry consolidation, shutting ‘obsolete’ plants and seasonal closures. Although it’s not shown here, that last measure, also known as peak shifting, cans be seen in quarterly sales data, with an 8% year-on-year fall in cement sales to 578Mt in the fourth quarter of 2017.
Graph 1: Cement sales in China, 2007 – 2017. Source: National Bureau of Statistics.
Looking at the sales revenue from the larger producers in 2017 doesn’t show a great deal except for the massive lead the two largest producers – CNBM and Anhui Conch – hold over their rivals. CNBM reported sales roughly twice as large as Anhui Conch, which in turn reported sales twice as large as China Resources Cement (CRC). With everything set for the merger between CNBM and Sinoma to complete at some point in the second quarter of 2018, that leader’s advantage can only get bigger.
Graph 2: Sales revenue of selected Chinese cement producers. Source: Company reports.
What’s more interesting here is how all of these companies are growing their sales at over 15% in a market where cement sales volumes appear to have fallen by 1.67% to 2.31Bnt in 2017. CNBM explained that its sale growth arose from improving cement prices in the wake of the government’s supply side changes. It added that national cement production fell by 3.1% to 2.34Bnt. CNBM’s annual results also suggested that the cement production capacity utilisation rate was 63% in 2017.
Anhui Conch’s results were notable for its large number of overseas projects as it followed the state’s ‘One Belt, One Road’ overseas industrial expansion strategy. Projects in Indonesia and Cambodia were finished in 2017 with production set for 2018. Further plants are in various states of development in Laos, Russia and Myanmar. The other point of interest was that Anhui Conch is developing a 50,000t CO2 capture and purification pilot project at its Baimashan cement plant. Given the way the Chinese government has been able to direct the local industry, should it decide to promote CO2 capture at cement plants in the way it has pushed for waste heat recovery units or co-processing, then the results could be enormous.
CRC reported its continued focus on alternative fuels. Municipal waste co-processing projects in Tianyang County, Guangxi and Midu County, Yunnan are under construction and are expected to be completed in the first half of 2018. Construction of its hazardous waste co-processing project in Changjiang, Hainan was completed in February 2018.
As ever with the Chinese cement industry, the worry is what happens once the production overcapacity kicks in. The state–published figures and state-owned cement companies suggest that the industry is in the early stages of coping with this. In February 2018 Reuters reported that the Ministry of Industry and Information Technology (MIIT) had banned new cement production capacity in 2018. The detail here is that new capacity is allowed but that it has to follow specific rules designed to decrease capacity overall. This followed an announcement by the China Cement Association that it would eliminate 393Mt of capacity and shut down 540 cement grinding companies by 2020. The aim here is to hold capacity utilisation rates at 80% and 70% for clinker and cement respectively and to consolidate clinker and cement production within the top ten producers by 70% and 60%. If the utilisation rate from CNBM is accurate then the industry has a way to go yet.
Huaxin Cement grows revenue by 54% to US$3.33bn in 2017
27 March 2018China: Huaxin Cement’s sales revenue grew by 54% year-on-year to US$3.33bn in 2017 from US$2.15bn in 2016. Its net profit more than tripled to US$331m from US$72m. Cement production rose by 33% to 66.1Mt from 50Mt.
In 2017 Huaxin Cement obtained permission for upgrade projects including 3000t/day at Tibet Shannan, 3000t/day at Shigatse, 4000t/day at Yunnan Luquan and 2.85Mt/yr at Huangshi. Work at Tibet Shannan and Shigatse started in 2017. Construction at Yunnan Luquan and Huangshi is due to start in 2018.
The cement producer reported that an unnamed pilot plant was the first to adopt a co-processing rate of 100% of alternative fuels at the ‘head and end’ of the kiln. It also said that all of its domestic cement plants have been licenced for pollution discharge.
China National Building Material’s cement sales up in 2017 despite production overcapacity
26 March 2018China: China National Building Material’s (CNBM) revenue from its cement operations rose by 22% year-on-year to US$12.4bn in 2017 from US$10.1bn in 2016. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBTIDA) rose by 27% to US$2.94bn from US$2.32bn.
Cement production volumes from the group’s four main divisions – China United, South Cement, North Cement and Southwest Cement – remained stagnant at 258Mt in 2017. However, the group’s cement production capacity for the four divisions was 411Mt/yr giving it a capacity utilisation rate of 63%. Overall the group said it had a cement production capacity of 525Mt/yr.
As well as following government-mandated structural reforms, including environmental changes and production peak shifting, CNBM said that China United started production at a new plant in Mongolia. North Cement completed a merger between its Harbin and Longbei subsidiaries. Southwest Cement completed a merger between Southwest Sichuan Cement and Chongqing Southwest Cement to form Chuanyu Southwest Cement.