Displaying items by tag: China

China: Ron Wirahadiraksa and Hu Chao have resigned from Huaxin Cement. Wirahadiraksa has resigned as a director of the company citing other commitments. Chao has resigned as he has left the company. Both departures take immediate effect.

Wirahadiraksa, the current chief financial offer of LafargeHolcim, was proposed as a director of Huaxin Cement in September 2016. Huaxin Cement is an association company of LafargeHolcim. As of 31 December 2015, the group held 41.8 % of the voting rights in the associate company.

The All Pakistan Cement Manufacturers Association (APCMA) struck a triumphant note this week as it announced that its industry has over 26Mt/yr of capacity upgrades in the pipeline. Its chairman Sayeed Saigol concluded in a press release that the country’s growth trend required ‘massive’ investment and that its producers were working on it.

Graph 1 – Local and export cement despatches in Pakistan, 2008 – 2016. Data source: APCMA.

Graph 1 shows how the local industry has changed since 2009. At this time exports hit a high of over 11Mt, constituting 34% of all cement despatches at the time. Since then though exports have fallen to below 6Mt or 14% of despatches, as local despatches have started to increase. Although local despatches have risen each year, the growth rate was below 1% in 2011. In 2016 it was over 14%.

Much has changed since 2010. At this time production capacity hit a high of 45Mt/yr in the 2009 – 2010 Pakistan financial year, according to APCMA data, but then utilisation sunk to below 73%, its lowest rate in over a decade. Pakistan’s cement producers sought a way out by exporting their cement. Export volumes subsequently exploded to a high of nearly 11Mt in 2008 – 2009 from next to nothing at the turn of the millennium.

The effects of this had particular repercussions in eastern and southern Africa as local producers suffered against seaborne imports. In 2012 the outgoing chief of South Africa’s PPC summarised the problem by saying that imports were not a threat to African expansion, provided that a cement plant was not built within 200km of a port. Rightly or wrongly cement from Pakistan was vilified by the African press and then legislated against. South Africa even implementing anti-dumping duties to howls of derision from Pakistan.

Funnily enough though the APCMA has recommended that Pakistan’s government do exactly the same thing against imports of cement from Iran. Industry scare stories about Iranian cement being sold illegally in Pakistan have circulated since at least 2012. Iran’s nuclear deal in 2015 must have worried the local industry, as the prize for Iran was the lifting of international sanctions making it easier for one of the world’s largest cement producers to start exporting its product. However, president-elect Trump’s disdain for the Iran deal may put those worries to rest if the deal is ‘cancelled’.

Back to the present, the Pakistan cement industry appears to be booming. One motor is the China–Pakistan Economic Corridor, a collection of infrastructure projects worth US$54bn. There is some disagreement at this point about how the usage levels of cement breakdown, with the chief executive of Thatta Cement placing it at 60% for infrastructure and 40% for housing but with other commentators placing it at 70% for housing and 30% for infrastructure. If the latter is true then Pakistan’s cement producers may receive an even bigger payday. The emphasis on housing shouldn’t be underestimated though as the country’s production capacity per capita, below 200kg/capita, is low by international standards. Either way, things are looking good for the local producers.

As a companion to the trends based article in the December 2016 issue of Global Cement Magazine, here are some of the major news stories from the industry in 2016. 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..

HeidelbergCement buys Italcementi
Undeniably the big story of the year, HeidelbergCement has gradually acquired Italcementi throughout 2016. Notably, unlike the merger of Lafarge and Holcim, the cement producer has not held a party to mark the occasion. Instead each major step of the process has been reported upon incrementally in press releases and other sources throughout the year. The enlarged HeidelbergCement appears to be in a better market position than LafargeHolcim but it will be watched carefully in 2017 for signs of weakness.

LafargeHolcim faces accusations over conduct in Syria
The general theme for LafargeHolcim in 2016 has been one of divestments to shore up its balance sheet. However, one news story could potentially sum up its decline for the wider public. In June 2016 French newspaper Le Monde alleged that Lafarge had struck deals with armed groups in Syria, including so-called Islamic State (IS), to protect its assets in 2013 and 2014. LafargeHolcim didn’t deny the claims directly in June. Then in response to a legal challenge on the issue mounted in November 2016 its language tightened to statements condoning terrorism whilst still allowing some wriggle room. As almost all of the international groups in Syria are opposed to IS, should these allegations prove to be true it will not look good for the world’s largest cement producer.

China and India balance sector restructuring with production growth
Both China and India seem to have turned a corner in 2016 with growing cement production and a generally more upbeat feeling for the industries. Both have also seen some high profile consolidations or mergers underway which will hopefully cut inefficiencies. China’s focus on its ‘One Belt, One Road’ appears to be delivering foreign contracts as CBMI’s recent flurry of orders in Africa attests although Sinoma’s equipment arm was losing money in the first half of 2016. Meanwhile, India may have damaged its own growth in the short term through its demonetisation policy to take high value Indian rupee currency notes out of circulation. In November 2016 cement demand was believed to have dropped by up to half as the real estate sector struggled to adapt. The pain is anticipated to carry on until the end of March 2017.

US industry growth stuck in the slow lane
The US cement industry has failed to take off yet again in 2016 with growth lagging below 5%. The United States Geological Survey (USGS) has reported that clinker production has risen by 1% in the first ten months of 2016 and that it fell in the third quarter of the year. In response, the Portland Cement Association (PCA) lowered its forecasts for both 2016 and 2017. One unknown here has been the election of President-elect Donald Trump and the uncertainty over what his policies might bring. If he ‘goes large,’ as he said he wants to, on infrastructure then the cement industry will benefit. Yet, knock-on effects from other potential policies like restricting migrant labour might have unpredictable consequences upon the general construction industry.

African expansion follows the money
International cement producers have prospered at the expense of local ones in 2016. The big shock this year was when Nigeria’s Dangote announced that it was scaling back its expansion plans in response to problems in Nigeria principally with the devaluation of the Naira. Since then it has also faced local problems in Ghana, Ethiopia and Tanzania. Its sub-Saharan competitor PPC has also had problems too. By contrast, foreign investors from outside the continent, led by China, have scented opportunity and opened their wallets.

Changes in store for the European Union Emissions Trading Scheme
A late entry to this roundup is the proposed amendment to the European Union (EU) Emissions Trading Scheme (ETS). This may entail the introduction of a Border Adjustment Measure (BAM) with the loss of free allowances for the cement sector in Phase IV. Cembureau, the European Cement Association, has slammed the changes as ‘discriminatory’ and raised concerns over how this would affect competitiveness. In opposition the environmental campaign group Sandbag has defended the changes as ones that could put a stop to the ‘cement sector’s windfall profits from the ETS.’

High growth shifts to Philippines and other territories
Indonesia may be lurching towards production overcapacity, but fear not, the Philippines have arrived on the scene to provide high double-digit growth on the back of the Duterte Infrastructure Plan. The Cement Manufacturers Association of the Philippines (CEMAP) has said that cement sales have risen by 10.1% year-on-year to 20.1Mt in the first three quarters of 2016 and lots of new plants and upgrade projects are underway. The other place drawing attention in the second half of the year has been Pakistan with cement sales jumping in response to projects being built by the China-Pakistan Economic Corridor.

Global Cement Weekly will return on 4 January 2016

China: JI Youhong has been appointed as the executive director, chief executive officer and a member of the executive committee of China Resources Cement with effect from 22 September 2016. He succeeds Pan Yonghong who has resigned from each of these roles.

Ji, aged 51 years, joined the group in October 2003 and has served various managerial positions of the company, including the general manager of various cement and concrete subsidiaries, the Marketing Controller from November 2008 to December 2012 and the Regional General Manager (Guangxi) from April 2012 to September 2016. He currently serves as the director of various subsidiaries of the company.

Ji is a senior engineer of building materials accredited by the Private Enterprise Senior Engineer Panel of Guangxi Zhuang Autonomous Region. He graduated from the Nanjing Industrial College (currently known as Southeast University), China with a bachelor’s degree in engineering in 1985 and a master’s degree in inorganic and non-metallic materials in 1988. He has over 28 years of experience in construction materials engineering and marketing. He is currently the Chairman of the Guangxi Cement Association.

Tensions have boiled over regarding imports of cement to Kenya in recent weeks as different importers have received opprobrium in the local press. Last week Dangote Cement was attacked for importing cheap cement into the country from Ethiopia, allegedly off the back of a cheap electricity deal. This week, Chinese imports have been in the firing line, following data reportedly seen by the Business Daily newspaper that showed that the value of Chinese cement imports rose tenfold year-on-year in the first half of 2016.

At the heart of these rows lies a strong demand for cement: Kenya had a cement production utilisation rate of 90% in 2015 according to Kenya National Bureau of Statistics (KNBS) data. It produced 6.35Mt in that year and used 5.71Mt for consumption and stocks. Its utilisation rate has been rising steadily since 2012. It was 93% for the first six months of 2016.

Unfortunately for the local producers this kind of demand attracts competition from within and without. Nigeria’s Dangote Cement is planning to build a 3Mt/yr plant at Kitui and Cemtech Kenya, a subsidiary of India’s Sanghi Group, is planning to build a 1.2Mt/yr plant at Pakot.

Local producer ARM Cement reported both falling turnover and a loss for the first half of 2016. It blamed this on increased competition in Tanzania. However, in 2015 it increased its turnover in Kenya by importing clinker over the border from its new Tanga plant in Tanzania. It also noted a ‘competitive landscape’ in Kenya and lamented the effects of currency devaluation on its financies as a whole. East African Portland Cement had a tougher time of it for its half-year that ended on 31 December 2015, issuing a profit warning of a loss and expected reduced profits despite a rise of 12% in sales revenue. By contrast, Bamburi Cement, LafargeHolcim’s subsidiary, reported both increases in revenue and operating profit in 2015. Although it too noted problems with interest rates and currency depreciation in the country during this period.

The focus on Chinese imports follows Chinese contractors winning some of the biggest infrastructure projects in the country. The China Rail & Bridge Corporation (CRBC), for example, is building a railway between Mombasa and Nairobi. The Business Daily newspaper has found data showing that Chinese cement imports worth US$19.8m to Kenya in the first half of 2016 compared to US$1.99m in the same period of 2015. The background to this is that China has more than doubled the value of all of its imports to Kenya since 2011 according to the KNBS. Total import volumes of clinker from all foreign countries increased by 51% in 2015 from 1.31Mt in 2014, the largest increase in at least five years.

If local cement producers are being locked out of supplying these kind of deals no wonder they are getting angry. However, another angle on what’s happening here might be that local producers who are suffering from increased competition, falling prices and a precarious national financial situation are lashing out at the easiest target. The local press doesn’t appear to have criticised ARM Cement for moving its Tanzanian clinker north of the border for example. Likewise, a Bamburi Cement spokesperson previously said that the producer had supplied 300,000t of cement to the rail project since September 2014, earning it nearly US$10m. Kenya needs cement as it builds its infrastructure. Fortunes will be made and tempers will be lost as it does so.

China: Huaxin Cement has proposed Ron Wirahadiraksa and Daniel Bach as candidates for its board of directors. The proposals will be submitted to the shareholders general meeting for approval.

Ron Wirahadiraksa, a Dutch national born in 1960, has been the chief financial officers of LafargeHolcim since 1 December 2015. He graduated with a Doctoral in Business Economics from the Free University of Amsterdam, the Netherlands. He also graduated as a Certified Registered Controller from the Free University of Amsterdam. Wirahadiraksa joined the Philips group in 1987. He became Chief Financial Officer at LG Philips LCD in South Korea in 1999, during which time he shared operating leadership with the Korean CEO. He became Chief Financial Officer at Philips Healthcare in 2008 and in 2011 he took over as CFO for the Philips Group.

Daniel Bach, a Swiss national born in 1963, has been the Area Manager South East Asia and China (Huaxin) for LafargeHolcim since July 2016. He joined Holcim as project engineer and manager in 1994. In 1998, he moved to Corporate Business Risk Management and in 2002 was made Technical Director for Holcim Indonesia. From 2004 – 2007, Bach acted as assistant to a member of the Holcim Executive Committee before being appointed Senior VP Manufacturing for Holcim Philippines. He became the Area Manager for South East Asia in 2011. He holds a PhD in Mechanical Engineering from the Swiss Federal Institute of Technology (ETH) in Zürich.

Huaxin Cement is an association company of LafargeHolcim. As of 31 December 2015, the group held 41.8 % of the voting rights in the associate company.

Check out this graph of Chinese cement prices from September 2015. An author at Business Insider attributes it to Larry Hu, the Chief China Economist for Macquarie. It pretty much sums up the mood analysts have at the moment regarding the Chinese cement industry.

Figure 1: China cement prices, 2012 – 2015. Source: CEIC, Bloomberg, Macquarie Research September 2015.

The recent announcement by the Assets Supervision and Administration Commission regarding the merger of China National Building Materials Group Corporation (CNBM) and China National Materials Group Corporation (Sinoma) comes hot on the heels of a series of poor half-year financial returns from China’s major cement producers. Attempts to tackle overcapacity in its local cement industry have been underway for a few years now. Actions taken include demolishing outmoded capacity, merging companies and expanding overseas. However as the construction markets have cooled in the country the scope of what the cement industry is facing has become clear, as revenues and profits have tumbled.

Now that the first half cement sales volume data has become available from the National Bureau of Statistics of China (NBSC) the response of the cement industry to its predicament has emerged. As can be seen in Figure 2 there has been a rough trend of sales decline throughout 2014 and 2015. The first half of 2016 has started to buck this trend as sales volumes have risen year-on-year for both quarters.

Figure 2 – Chinese cement production by quarter, 2014 – 2016. Source: National Bureau of Statistics of China.

Sales revenues have dropped for most of the major companies that have publicly released their results for the first half of the year. The exception is Taiwan Cement, which makes a large proportion of its sales revenue outside of China (People’s Republic of China). Its sales revenue in China barely rose year-on-year in the first half of 2016. However, the cement sales volumes for all these companies have started to show what is happening. They have risen for most of the producers examined. Essentially, each of these producers is producing more cement but making less money. As Digital Cement puts it, the industry is in a 'low-profit position.' Increased market competition and endemic industry overcapacity are causing this.

Mergers and acquisitions have been the big story for the European multinational producers following the economic crash in 2007. Returns from low growth markets have been substituted for efficiencies of scale, knowledge sharing and greater international reach. Lafarge and Holcim merged in 2015 and HeidelbergCement is due to complete its acquisition of Italcementi later this year. However, as LafargeHolcim's disappointing financial returns and its continued slew of divestments show so far, the merger has not worked as well as may have been hoped… yet.

Whether China's version of this works with its large state owned enterprises is uncertain. Mergers are meant to cut out inefficiencies through economies of scale. Yet the question remains: can even larger Chinese cement producers do this when they are state controlled and harangued by pressures outside the normal market, particularly when local regions try to preserve their industries. The last such big deal, between Anhui Conch and China Resources Cement, fell apart in July 2016. The plans for CNBM and Sinoma may fare better but if the price of cement keeps falling then the market may have other ideas.

For more information see the China country report in the September 2016 issue of Global Cement Magazine

China: Li Quanhua has resigned as the vice president of Huaxin Cement due to personal reasons. His letter of resignation was submitted on 18 June 2016 and has immediate effect. The board of directors have expressed their thanks to Li Quanhua for his contribution to the company.

A Sinoma subsidiary was raking in the big bucks this week with the announcement that it had booked a Euro1.05bn order with the Egyptian government. The order was for six 6000t/day cement production lines plus assorted maintenance contracts from Chengdu Design and Research Institute of Building Materials Industry (CDI).

The order caps a busy month for Sinoma. At the start of June, another subsidiary, CBMI, said that it had picked up deals to build two new lines in Algeria for Groupe des Ciments d’Algérie. Around the same time another project in the country, a joint venture between Lafarge Algeria and Souakri Group, revealed that it had started commissioning its mill. Other assorted cement projects announced so far in 2016 include a waste heat recovery unit for Thai Pride Cement in Thailand, a conversion to coal burning at South Valley Cement in Egypt and various orders for mills via Loesche for Sinoma projects in Vietnam.

The scale of that latest Egyptian order becomes apparent when one looks at Sinoma, or China National Materials Group Corporation’s, annual results. It reported revenue of US$8.08bn in 2015, a slight decrease from US$8.38bn in 2014. Those six lines represent 13% of the group’s entire turnover in 2015. That’s one humongous order. The last time Sinoma signed a cement deal on this magnitude was in August 2015 when Nigerai’s Dangote placed an order at a value of US$1.49bn.

Elsewhere on the balance sheet for 2015, its profit fell markedly by 25% year-on-year to US$150m from US$200m. However, its new order intake grew by 14% to US$5.1bn. Overseas orders accounted for over three quarters of this or US$4.32bn, its highest level on record. This compares to its rival FLSmidth’s new order intake of US$2.8bn in 2015. It declared that it would continue to seek business outside of China in line with the country’s ‘One belt, one road’ policy focusing on Central Asia and South America.

This growth by Chinese engineering companies on the world stage may have been stymied in 2015. The Verband Deutscher Maschinen- und Anlagenbau (VDMA) in Germany reported in April 2016 that the members of its Industrial Plant Manufacturers’ Group (AGAB) had booked orders of Euro19.5bn in 2015, a similar figure to its orders in 2014. This compared to a drop of 63% of large plant orders (not just cement) in 2014 from Euro5.29bn in 2013. AGAB saw opportunity in service industries for its German members as markets stalled in Russia and Brazil, and China’s property market faced its own problems. Research by UBS Evidence Lab, as reported by the Financial Times in May 2016, has taken a different view, suggesting that Chinese construction quarry equipment manufacturers such as Sany, Zoomlion and XCMG were likely to expand their market share outside of China to 15% by 2025. At present the research pegged them at 7%.

Expansion comes with its risks though. In late May 2016 Sinoma International Engineering reported details of a tax dispute it was suffering in Saudi Arabia. The Saudi subsidiary of the company was levelled with a request for unpaid back taxes from 2006 and 2008. At the time it was appealing against a bill of US$18m. In a changing global marketplace some things never change. Global success it seems is taxed.

China: Wang Shizhong has resigned as an executive director and a member of the Strategic Committee of BBMG Corporation with immediate effect. He resigned due to the re-designation of his work. The board of BBMG expressed its appreciation for Wang’s contribution to the company development in a statement.