Displaying items by tag: China
China: According to Reuters, cement producers participating in the carbon market in China's Hubei Province have told the local government that they cannot afford the millions of Chinese Yuan required to buy permits to cover mitigation obligations for 2014 and may default. Refusal to pay would test China's ability to force companies to comply with carbon targets and undermine efforts to curb greenhouse gas emissions, in which a planned national carbon market would have a central role.
The 138 companies covered by the Hubei exchange have to hand over carbon permits in June 2015 to settle their obligations for 2014. Around a quarter are cement firms, which have complained that they were not allocated enough credits. "They are in talks with the government to gain immunity from non-compliance penalties and are asking to borrow some permits from next year's quota," said an unnamed broker.
The companies are facing high environmental compliance costs at the worst possible time, as the economy slows and the construction sector struggles. Chinese cement production fell by 4.8% in the first four months of 2015.
Huaxin Cement, the biggest local producer, is 1.15 million permits short of meeting its mitigation targets, according to a document seen by Reuters. Carbon permits in Hubei are trading at US$4.43 so it could cost the company US$5.1m to cover its shortfall.
"Hubei is generally oversupplied, but the distribution is not balanced. Most of the power sector is over-allocated, but the cement and chemical sectors are short," said another unnamed broker. "Those facing a big gap are not attempting to buy from the market. They are pushing the government for a compromise." Penalties for non-compliance could include a deduction in permits for 2015 plus a fine of up to three times the value of the obligations in default, although that is capped at US$24,176.
China: Profits made by the cement industry have fallen by 67.6% year-on-year to US$521m for the first quarter of 2015 according to statistics released by the National Development and Reform Commission (NDRC). Cement output fell slightly by 3.4% year-on-year to 428Mt in the same period.
China: Anhui Conch has reported that its net profit fell by 30.7% year-on-year to US$276m for the first quarter of 2015 from US$399m for the same period in 2014. Revenue fell by 11.1% to US$1.81bn from US$2.04bn. The major Chinese cement producer attributed to the fall in profit to a drop in product prices.
Chinese firm keen to invest in Andhra Pradesh
13 April 2015India/China: China's Sinoma International Engineering Co Ltd is keen to invest in cement and wind energy projects in Andhra Pradesh. Song Shoushan, Sinoma's chairman, told the delegation that it sees India as a potential market for the cement industry and that Sinoma sees Andhra Pradesh as a potential state for their biggest manufacturing facility in India.
Anhui Conch to build cement plant in Chelyabinsk
10 April 2015Russia: The government of Chelyabinsk and China's Anhui Conch Cement Company Limited are negotiating the construction of a cement plant. Anhui Conch has been provided several plots for assessment. According to general manager Wang Jianchao, a project scheme will be determined in the near future and will either consist of the modernisation of existing facilities or the construction of a new cement plant at undeveloped limestone deposits.
Waste incinerator cancelled after violent protests
09 April 2015China: Luoding City, a western Guangdong city, has cancelled a plan to build an incinerator that prompted a protest of up to 10,000 people, during which three police cars were flipped over and a duty office was vandalised.
The Luoding city government posted two letters on its website announcing the decision. One informed the Langtang township government that it had decided to cancel the project, which Langtang had brokered with China Resources Cement Holdings. The second letter urged residents to stop blocking roads, vandalising property or disturbing public order.
The decision came after residents of the town engaged in a stand-off with police on 7 April 2015 in protest against what they said was the violent handling of a peaceful sit-in against the incinerator on 6 April 2015. "People are angry with the site selection of the incinerator as it is within a 1km radius of their homes," said one resident. "The cement plant is producing enough pollution, we don't need another polluter."
Residents said that about 1000 locals turned up to the sit-in on 6 April 2015, which took place outside a cement plant owned by China Resources. They have claimed that more than 100 men dressed in black and armed with batons, helmets and shields beat demonstrators. They said that the men were a mix of policemen and security guards. "My nephew is only 14 and is suffering from concussion after he was beaten by the men with batons," said one resident. "It was very brutal and totally unnecessary to use such force against unarmed civilians during a peaceful and rational demonstration, especially as they attacked children too."
Luoding city government claimed that 400 residents had taken part in the 7 April 2015 stand-off and denied that any had been injured. It said that "A small number of troublemakers instigated the crowd," to block roads and throw rocks at plant staff. Police arrested the 'troublemakers,' but 400 others gathered the next day, with some throwing rocks and glass bottles and vandalising police cars and the duty office, according to the Luoding city government.
Indian inefficiency and China running out of options
08 April 2015The news this week that construction companies in the Indian state of Telengana are considering cement imports from China in order to circumvent a local dispute over cement prices highlights several issues. Firstly, state politics in India can create some interesting and not altogether logical situations. Secondly, it throws the spotlight on the changing situation in China, where the cement industry will be increasingly squeezed from all sides in the coming years. Thirdly, it shows that the global cement industry is exactly that – Global.
The first reaction when hearing of Chinese imports into India might reasonably be one of shock. How can it be that it is cheaper (21% less by local estimates) to import cement from 5500km away, into the world's second-largest cement producer, than it is to send it down the road from Andhra Pradesh? Overall, India is 'swimming in' excess cement capacity, which should make it cheap across the board. Large, well-run and efficient plants, coupled to current low diesel (transport) prices, should give the industry significant advantages on the international stage. So what's going on?
Poor local and national infrastructure is the 'obvious' culprit here, but it is only part of the story. The Telengana state government has imposed extra taxes on trucks bringing cement into the state from neighbouring Andhra Pradesh. By suggesting imports from China, it is possible that the Real Estate Developers' Associations of India (CREDAI) wants to make a point to the state government. Spotting a local imbalance of cement supply and demand, Telengana appears, in this instance, to have acted to make a quick buck. However, it has done so to the detriment of many other stakeholders. The extra tax deprives cement producers of higher sales, robs hauliers of business and stops the public getting a fair market price for cement. This highlights that India has not only physical infrastructure to build (in terms of highways and new railways), but also a more effective political infrastructure that can put aside state-on-state one-upmanship. This is a long-term task and not straightforward when you consider India's 1.25 billion inhabitants.
Of course the fact that China has been mentioned by CREDAI as a likely source of cement is far less surprising. The largest cement producer in the world has had excess capacity for several years now (regardless of who is supplying the statistics) and takes the opportunity to export whenever it can.
However, the sands are shifting under China at the moment. The country has not been able to rely on domestic demand to keep its over-inflated cement industry in business for many years now. It is indeed highly questionable whether it ever needed a cement industry the size of the one that it built.
Indeed, economic growth is slowing for the economy as a whole and this week there were even calls for the national housing bank to reduce interest rates for lower and middle income earners, effectively propping the sector up. This comes on top of tax breaks for home-buyers, which came in at the end of March 2015. Falling house prices have bred uncertainty and a lack of demand for new constructions and hence cement. Could China's absurd cement demand bubble finally be about to pop?
Whether or not the bubble pops next week or in a couple of years, the government has long been making preparations, in the cement sector at least. It has started to aggressively remove older and inefficient capacity, encourage cement exports and helped finance new plants overseas. China is changing its emphasis from cement production to cement plant project management. This is a good move, especially as there will be fewer opportunities for conventional exports in the coming years. Neighbouring Vietnam expects to have an incredible 20Mt of cement for export at less than US$50/t in 2015, flooding China's traditional sphere of influence. At the same time, the number of countries that are self-sufficient in terms of cement production are on the rise, meaning fewer importers.
Even opportunities for Chinese firms to build cement plants outside China are likely to become fewer and further between in the future. The most promising markets in Africa already have Chinese cement plants or cement plant projects, joined this week by Zambia. Chinese cement and cement engineering firms also have interests in Central Asia, Nepal, Mongolia and elsewhere. These markets, while promising, will have nothing like the potential to consume cement like China did in the recent past. As China reduces its capacity, its growing cement plant engineering sector may well find it hard to do enough business to survive...
Bank may step in to prop up Chinese property market
07 April 2015China: China's national housing bank could offer low interest rate housing loans to help middle and low income home buyers, bolstering demand in a sluggish real estate market and reducing risks for commercial banks, according to the Xinhua News Agency.
Zhang Qiguang, head of the ministry's housing provident fund supervision department, also proposed the housing fund include rural workers who seek jobs in urban areas and offer government support to help them buy homes.
At the end of March 2015, China offered tax breaks to home buyers and reduced deposit requirements for the second time in six months in a bid to halt a slide in house prices that threatens to undermine the world's second-largest economy.
The housing market is worth the equivalent of around 15% of China's economy and its sluggish performance has held back economic growth and subdued activity in an array of sectors from cement to steel to glass making. Prices fell at a record annual pace in February 2015.
Zambia/China: Chinese firms have made a commitment to accelerate investment in Zambia under agreements valued at a combined US$800m. The deal was signed by the Zambia-China Economic and Trade Cooperation Zone and 11 companies in Beijing. One of the 11 Chinese firms is West China Cement Ltd, which will set up a cement plant in the zone.
"Zambia hopes to attract more Chinese investors and tourists to improve economic development," said Zambian president Edgar Lungu, adding that his government will provide 'strong support' to Chinese companies. Zan Baosen, general manager of the zone, said that Zambia offers many incentives to Chinese companies. "We are eager to cooperate with Chinese entrepreneurs to explore the market potential in Zambia," he said.
This week Beijing announced that it would close the last of its four largest coal-fired power plants, the China Huaneng Group Corp's 845MW power plant, in 2016. The four coal-fired plants will be replaced by four gas-fired plants with 2.6 times more electricity capacity than the former coal plants. China's policy makers are also encouraging increased use of hydroelectric power, solar and wind and is trying to restart its nuclear power programme.
In the same week, the Independent reported that Costa Rica had achieved a renewable energy milestone, having used 100% renewable energy for the preceding 75 days. The achievement was reportedly made possible by heavy rainfall, which powered four hydroelectric plants. Costa Rica has an impressive track record when it comes to energy sources. In 2014, 80% of its energy came from hydropower and 10% came from geothermal energy. In total, 94% of its energy requirements were met by renewable energy.
However, this week we also heard that Dangote is building the world's biggest oil refinery, which will process 650,000b/day. It will also be Nigeria's first oil refinery. Aliko Dangote, owner of Dangote Group, decided to up the initial design from 450,000b/day because he believes that Nigeria, as a leading producer of crude oil, should also be credited with local refining capacity. Currently, Nigeria produces crude oil, but has to buy refined products from abroad. The refinery is expected to be fully operational by 2017.
Efforts to increase renewable energy should be strongly encouraged - the benefits to the planet and its population are undeniable. However, renewable energy technology has a way to go (if ever) before it can entirely replace fossil fuel-derived energy, which makes Dangote's investment a safe bet. As renewable energy like solar and wind power is entirely reliant on nature, supplies can never be assured.
While sporadic supplies to houses and small businesses may be part of the price we eventually have to pay for a greener world, larger businesses like supermarkets and cement plants, which could lose millions (or billions) from power outages, will surely have something to say, and a lot of sway, when it comes to relying completely on renewable energy. In addition, power outages to essential services like hospitals are unthinkable when it comes to the health of our loved ones. Ultimately, the argument for relying on renewable energy may well be won by utilitarians' 'greater good' argument, but how would it feel to know that your sick child could have been saved by fossil fuel-derived energy?