Displaying items by tag: China

Namibia/China: Sinoma Energy Conservation has signed a contract with China’s Asia-Africa Business Management (AABM) to build a 4.5MW waste heat power plant. The power unit will support a 2500t/day cement production plant that AABM and local company Whale Rock Cement plan to build as a joint venture. The cement plant project was first announced in 2015.

China: China Resources Cement has started a production line at a subsidiary in Hepu County in the Guangxi Zhuang Autonomous Region. The new line has a clinker production capacity of 1.6Mt/yr and a cement production capacity of 2Mt/yr. At present the company has a clinker and cement production capacity of 26.6Mt/yr and 33.2Mt/yr respectively in the region.

To mark the end of the calendar year we’re going to round up some of the major news stories from the cement industry in 2017. Like last year this piece also complements the corresponding article ‘The global cement industry in 2017’ in the December 2017 issue of Global Cement Magazine. Remember, this is just one view of the year's events. If you think we've missed anything important let us know via LinkedIn, Twitter or This email address is being protected from spambots. You need JavaScript enabled to view it..

Recovery in Europe
2017 was the year that the European cement industry finally had something to shout about after a lost decade since the financial crash of 2007. The good news was led by a revival in cement consumption in 2016 that looks set to have continued in 2017. Prospects in Germany and Spain feel similar and a series of mergers and acquisitions have taken place in Italy suggesting that investors believe that the market is about to recover there too. Sure, Brexit is looming but as contacts have told Global Cement staff throughout the year, if the British want to damage their economy, that’s their business.

Renewal and recrimination at LafargeHolcim
Lafarge’s conduct in Syria during the civil war has cost its successor company LafargeHolcim dear, with the loss of its chief executive officer (CEO) Eric Olsen and potential reputational damage if the on-going investigation in Paris finds fault. At the time of writing Olsen, former Lafarge CEO Bruno Lafont and the former deputy managing director for operations Christian Herraul are all being questioned by the inquiry into the affair as it attempts to determine who knew what and when. LafargeHolcim has drawn a line under the debacle by appointing outsider Jan Jenisch as its new CEO in mid-2017. He has made changes to the group’s management structure that were announced this week but has he done enough? If anything truly ‘explosive’ emerges from the investigation, the question for anyone across the world buying LafargeHolcim’s products may be whether or not they want to finance extremism through their purchase.

US doesn’t build wall but does okay anyway
The US Portland Cement Association (PCA) may keep downgrading its forecasts of cement consumption growth but the local industry is doing fairly well anyway. All sorts of cement producers with a presence in the US have benefited from the market, despite extreme weather events like Hurricane Irma. President Donald Trump may not have delivered on his infrastructure development promises or built his fabled wall yet but his recently-approved tax reforms are likely to benefit the profits of cement producers. The decision by Ireland’s CRH to buy Ash Grove Cement in September 2017 may remove the largest domestically-owned producer from US hands but it shows confidence in the market and heralds the continued creeping growth of the building materials company into an international empire.

South America shows promise… just don’t mention Brazil
Countries like Brazil, Colombia and Venezuela may not be performing to expectations but other countries south of the Darian Gap, have been growing their respective cement industries. The leader here is Argentina that is riding a full-scale construction boom with capital investment chasing it from the producers. Bolivia is following a decade of growth although this may be starting to slow somewhat. Chile appears to be realigning itself to take in more exports. And finally, Brazil may also be starting to return to growth too. Although cement sales were continuing to fall year-on-year in the first nine months of 2017 the rate has been slowing. Local producer Votorantim also reported improved market conditions at home.

India stares into the demand gap
UltraTech Cement finally managed to buy six cement plants and five grinding plants from Jaiprakash Associates for US$2.5bn in 2017. The acquisition marked the end of the long-running deal between the companies and what may be a new phase in further integration in the Indian industry. In September 2017 the Cement Manufacturers Association (CMA) complained that the sector had 100Mt/yr of excess production capacity out of a total 425Mt/yr. The government’s demonetisation policy sank cement production growth in late 2016 and production has struggled to improve since then. Some estimates expect growth to return in around 2020 as the demand gap shrivels. Further merger and acquisition activity can only help until then, although the current government flip-flopping over a petcoke ban and import duties may get in the way.

China restructures with an eye on overseas market
As discussed last week the mind-bogglingly massive merger between China National Building Material (CNBM) and China National Materials (Sinoma) is proceeding with the press equivalent of radio silence. If one trusts the company figures then the largest cement producer in the world will get even bigger following completion. Once the big Chinese producers start building lots of overseas plants then the implications of combining a major producer with a major plant builder may become clear outside of China. Alongside this the buzzword on the Chinese cement company balance sheets this year have been a major rollout of co-processing at plants and a policy of ‘peak shifting’ or simply shutting off production at selected plants in the winter months. Somehow despite all of this the official figures suggest that cement production is still growing in China.

The African mega deal that wasn’t
The prospective bidding war for South Africa’s PPC has turned out to be a bust. A low offer was made in September 2017 by a Canadian investment firm with the aim of merging PPC with local rival AfriSam. Vague expressions of interest from the usual suspects followed over the following months before everything fizzled out. What the dickens was going on? A difference of opinion between the board and shareholders? A poor market in South Africa giving everyone the jitters? If any readers know, please get in touch. PPC’s poor showing at home mirrors Dangote Cement’s travails. Both companies have suffered domestically whilst going full tilt elsewhere in Sub-Saharan Africa.

Indonesia about to pick up?
And finally, a report from Fitch Ratings this week suggests that growth in Indonesia is set to pick up once again. The market dragged down HeidelbergCement’s mid-year financial results as cement consumption dropped in the same period. Like India, Indonesia faces a consumption-capacity mismatch. However, with annual consumption poised to grow at over 6%, the time to close that gap will narrow. Some good news to end the year with.

Global Cement Weekly will return on 3 January 2018. In the meantime Merry Christmas and a have Happy New Year!

A member of the Global Cement LinkedIn Group commented this week on the merger between China National Building Material (CNBM) and China National Materials (Sinoma).

“Has the cement world got used to gigantic mergers or have we failed to understand how big this thing is locally, regionally and globally? It is shocking to see how little publicity and media attention is paid to this merger in comparison to the past ones. I find this to be potentially a game changer for the industry. This time, the game will be drawn from a single corner with less integration pains and much more alignment. A big wave coming…”

The comment was posted by Pavel Cech, a managing director of ResourceCo Asia based in Kuala Lumpur. This company is a waste recycling and waste management concern that specialises in alternative fuels for the cement industry. So a focus on the potentially massive drive for co-processing by the Chinese industry is understandable compared to, say, other companies in other continents. However, Cech’s point is valid: why isn’t this merger being talked about more?

CNBM is the largest cement company in the country with a reported total production capacity of around 406Mt/yr. Sinoma is a cement engineering company and the fourth largest cement producer in China with a total production capacity of approximately 112Mt/yr. The companies formally agreed to merge in September 2017 as part of a state-mandated industry consolidation. If these figures are taken at face value then the merger should increase the lead of the self-declared world’s biggest cement producer.

In non-Chinese terms this would be like HeidelbergCement merging with a major equipment manufacturer like ThyssenKrupp or FLSmidth. For these kind of companies, industry commentators and press, such as a Global Cement Magazine, would spend many column inches discussing the twists and turns of the merger as it played out. Just compare the Chinese merger to the debacle that has played out with the proposed acquisition of South Africa’s PPC by Fairfax, where seemingly every development was expounded upon both by PPC and the press.

For Global Cement’s reporting and coverage on China, problems arise from language difficulties, differences with the way Chinese media covers industry, the state-controlled aspect of many of the larger producers, issues obtaining accurate industry data and the sheer size of the sector. All of these impediments make it harder to cover the Chinese market. Add the relative insularity of the sector and it’s often easy to give the Chinese cement industry a special label, separating it out when talking about the global cement industry as a whole.

All this may be about to change as Chinese cement producers start firing up their own kilns outside of the motherland as part of the ‘One Belt, One Road’ initiative, making it easier to see what Chinese companies are doing. Except that Sinoma has already been out there in the rest of world building cement plants in many developing markets and creating competition for the Europe-based equipment manufacturers.

There has been little attention from competition bodies outside of China about the merger. The South Korean Fair Trade Commission approved the deal in November 2017 and that’s been about it. Combining a cement plant builder with a cement producer is a clear example of vertical integration in the cement industry. There is nothing necessarily anti-competitive about this but it could change the market dynamic where non-Chinese multinational and Chinese cement producers compete. If both CNBM and a rival wanted to open build a plant in the same area, then the competitor to CNBM might have less choice when it came to picking their equipment supplier. In addition, news stories such as the alleged pressure by the Chinese embassy in Sri Lanka to try and force a local development agency to choose Sinoma to build a grinding plant doesn’t instil confidence that a merged CNBM-Sinoma would play nice. Although, as today’s fine by the Colombian competition body to Cementos Argos, Cemex and Holcim for price fixing shows, non-Chinese cement producers are just as prone to malpractice.

The merger of CNBM and Sinoma is undeniably big news in the industry. Both within and outside China it is likely to have a pronounced effect. As explained above, for various reasons, the western press can’t cover China in the same way it does other countries. Once the Chinese producers start building more plants outside of China then this is likely to change significantly. Until then we’ll do our best to keep track of this and other Chinese news stories.

China: Anhui Conch Cement has appointed Yu Shui and Wu Tiejun as assistants to the general manager of the company. The postings have been made to strengthen training of junior management. They will replace Chen Yongbo in the role.

Yu graduated from Anhui University with a bachelor degree in economics. He joined the company in 1997 and has held various positions such as deputy director of the control room of the company’s sales department, assistant to director, deputy director and executive deputy director of the sales department, and in some of the company’s subsidiaries, such as executive deputy general manager of Bengbu Conch Cement, Huainan Conch Cement and Anhui Changfeng Conch Cement, general manager of Conch South Kalimantan Cement and deputy director of Wanbei Regional Management Committee. Yu is currently a director of the company’s sales department.

Wu graduated from Wuhan University of Technology with a bachelor degree in inorganic non-metallic materials. He joined the company in 2001 and has held various positions such as director of the production branch of the subsidiary, Anhui Chizhou Conch Cement, assistant to general manager, deputy general manager, executive deputy general manager and general manager of Chizhou Conch, general manager of Yingde Conch Cement and executive deputy director of the Guangdong Regional Management Committee. Wu is currently a director of the Guangdong Regional Management Committee and officer of the production control and craft management centre of the Company.

China: Huang Ting has been appointed as the chief financial officer (CFO) of China Resources Cement. He succeeds Lau Chung Kwok Robert who departed from the post on 20 October 2017. Lau will remain as an executive director of the company.

Huang, aged 48 years, joined the group in July 2003 and has held various management positions with the company, including financial controller since May 2012, general manager of the finance department in 2011 and 2012 and Deputy General Manager (Guangdong) from 2008 to 2011. He graduated from Xiamen University with a bachelors degree in economics in 1992.

There is plenty to mull over on the Chinese cement market at the moment as the half-year reports for the major cement producers are being published. Anhui Conch revealed this week a glowing balance sheet with a 33% jump in its sales revenue to US$4.79bn. It attributed the boost to a ‘significant’ increase in prices and continued discipline with production and operation costs. Although CNBM is scheduled to release its results at the end of August 2017, Anhui Conch appear to be well ahead of its next largest rivals locally as can be seen in Graph 1.

Graph 1: Sales revenue of major selected Chinese cement producers. Sources: Company financial results.

Beyond the headline figures it is interesting to pinpoint the areas in China where Anhui Conch says it isn’t doing as well. Its South China region, comprising Guangdong and Guangxi provinces, suffered from competition in the form of new production capacity, which also in turn dented prices. Despite this ‘black spot’ in the company’s regional revenue still grew its sales in double-digits by 14%.

The other point to note is the growing number of overseas projects with the completion of a cement grinding plant in Indonesia, new plants being built in Indonesia, Cambodia and Laos, and projects being actively planned in Russia, Laos and Myanmar. The cement producer also opened seven grinding plants at home in China during the reporting period. It’s not there yet but it will mark a serious tipping point when the company starts to open more plants outside of China than within it. With the government still pushing for production capacity reduction it can only be a matter of time. On that last point China Resources Cement (CRC) reckoned in its half-year results that only four new clinker production lines, with a production capacity of 5.1Mt/yr, were opened in China in the first half of 2017.

After a testing year in 2016 CRC’s turnover has picked up so far in the first-half of 2017 as its sales revenue for the period rose by 17% to US$1.67bn. Despite its cement sales volumes falling by 9% to 33.6Mt, its price increased. Given that over two thirds of its cement sales arose from Guangdong and Guangxi it seems likely that CRC suffered from the same competition issues that Anhui Conch complained about.

Graph 2: Chinese cement production by half year, 2014 – 2017. Source: National Bureau of Statistics of China.

Graph 2 adds to the picture of a resurgent local cement industry suggesting that the Chinese government’s response to the overcapacity crisis may be starting to deliver growth again. After cement production hit a high in 2014 in fell in 2015 and started to revive in 2016. So far 2017 seems to be following this trend.

Returning to the foreign ambitions of China’s cement producers brings up another story from this week with news about the Nepalese government’s decision to delay signed an investment agreement with a Chinese joint venture that is currently building a cement plant in the country. With the prime minister visiting India the local press is painting it as a face-saving move by the Nepalese to avoid antagonising either of the country’s main infrastructure partners. This is relevant because the cement industries of both China and India are starting look abroad as they consolidate and rationalise. Once China’s cement producer start building more capacity overseas than at home, conflicts with Indian producers are likely to grow and present more awkward situations for states caught in the middle.

After a couple of weeks looking at the capacity-rich cement markets of Angola and Vietnam, we turn our attention this week to some of those countries on the receiving end of overcapacity.

Costa Rica is an unlikely place to start but it came to our attention this week due to a short but significant news item. In summary, the amount of cement imported into Costa Rica increased by a factor of 10 between 2014 and 2016, from around 10,000t to over 100,000t. This is around 5% of its 2Mt/yr domesitic capacity, so the change is already fairly big news. The fact that an incredible 97% of this came from just one country, China, makes the story far more interesting as it shows the effects that Chinese overcapacity can have on smaller markets.

But when we look at how the value of the cement imports has changed over time, we see an even more dynamic shift. While the amount of cement imported into the country increased by nearly 10-fold, the value of the same imports only increased by around half as much between 2014 and 2016. If these figures can be taken at face value, the implication is stark. Taking the very low base as effectively ‘zero,’ each tonne of cement imported must cost around half as much as it used to.

Digging a little deeper and the picture gets more complicated. While they have fallen, Costa Rican cement prices have not fallen by 50% and why the sudden deluge of imports anyway? In 2015 the country changed its rules on cement imports to facilitate more flexible imports and lower prices for consumers. It did this by changing a regulation relating to how long cement can be stored, previously set at just 45 days, with the aim of allowing cement to come from further afield and, crucially, in bulk rather than bags.

The effects on price were immediate. Previously as high as US$13/bag (50kg) in December 2014, fairly high by global standards, Sinocem, the first Chinese importer, immediately sold its first shipment at US$10/bag. This effect of lower prices has now forced the average sales prices down to around US$10/bag across the country by 2017. This is good for consumers but not necessarily the local plants.

Back in 2015, the two local integrated plants operated by Cemex and Holcim warned that cement quality would suffer if cement bags were not used within 45 days. This apparently self-serving ‘warning’ went unheeded by the Ministry of Economy, Industry and Trade (MEIC), which pointed out that other countries in South America, as well as the European Union and United States, had no analogous short use-by dates for cement bags.

The rule remains in place, although discontent rumbles on. Indeed LafargeHolcim noted in its third quarter results for 2016 that ‘Costa Rica was adversely affected by increased foreign imports.’  This may well be a little bit of posturing and it doesn’t square with the fact that Costa Rica exported three times more cement that it imported in 2016. Of total exports of 0.34Mt, over 95% went to neighbouring Nicaragua, which has a single 0.6Mt/yr wet process plant owned by Cemex. It seems that the two Costa Rican plants have found a way to keep a little bit of the Chinese producers’ margin for themselves.

Of course, Chinese cement overcapacity doesn’t only affect the Central American market. It has been rippling all around the Pacific Rim. In July 2017, this column looked at the decision by Cementos Bío Bío to stop making clinker at its Talcahuano plant in Chile. It now favours grinding imported clinker from Asia. Before that, Holcim New Zealand closed its Westport cement plant in 2016, finally admitting that domestic clinker was not viable.

In the grand scheme of things, this all makes sense. The market has forced those operating on thin margins to adjust. Ultimately, the end consumer is likely to benefit from lower prices, at least for as long as reliable low-cost imports can be secured. What happens, however, if China actually gets round to curtailing its rampant cement capacity, or simply decides to charge more for its cement? Flexible imports, the main aim of the Costa Rican rule change, may then prove vital, as long as there is more than one international supplier of cement.

China: Qi Shengli has resigned as a supervisor and the chairman of the supervisory committee from Anhui Conch Cement. His resignation will take effect upon the appointment of a successor. The recruitment process is continuing at present.

Yang Kaifa has resigned as a company secretary. Chiu Pak Yue Leo remains a company secretary. Zhou Bo, an executive director and chief accountant, will aid him. A new company sectary to replace Yang is being recruited.

China: Chong Cha Hwa has resigned as a non-executive director from China Shanshui Cement due to physical trauma suffered during the ‘illegal’ occupation of the Jinan properties of its Shandong Shanshui in early April 2017. Chong said that the occupation had impeded him from carrying out his duties.