Displaying items by tag: Dispute

India: A Telangana court has blocked Southern Power Distribution Company of Telangana from disconnecting the power supply to some of Anjani Portland Cement’s cement operations in the state. The power supply is seeking to take the measure among other ‘coercive steps’ in an on-going dispute with the producer. Reuters News has reported that Southern Power Distribution Company of Telangana has issued a demand letter for alleged breach of obligations by Anjani Portland Cement.

India: JK Lakshmi Cement resumed dispatches of cement as usual from its Durg cement plant in Chhattisgarh on 19 October 2021. India InfoLine News has reported that this followed the ending of a strike by the Chhattisgarh Cement Transport Association (CTA) on 18 October 2021.

The company said “The illegal strike called by the CTA has since been called off by them. It is hoped that normality will be restored shortly.”

Malaysia: Buddhist monks at the Dhamma Sakyamuni Caves Monastery have filed a petition to the state government of Perak to have the site recognised as a place of worship and the local Mount Kanthan area approved as a national heritage site. Mongabay has reported that the caves lie in YTL Cement’s Mount Kanthan quarry. The religious site is located on the still unquarried southern face of Mount Kanthan.

YTL Cement started eviction proceedings at the site in late 2020. It said, “Contrary to what has been claimed by irresponsible parties, we have co-existed harmoniously with the local community. The real issues at hand are safety and the sanctity of the law.” It added with regard to the safety issue, “As the rightful owner of the land, we are responsible for all that occurs on it. We cannot stand by the misleading of the public nor allow such negligence.”

A predecessor company of YTL Cement leased the site in the 1960s. However, the monks allege that they were using the area several decades prior to this. The relationship between both parties broke down in 2013 when the cement company started to ask the monks to leave the monastery during rock blasting.

Laos: Workers at the Guestown-Lao cement plant have been paid back wages in a dispute. All 170 employees owed money by the Guestown-Lao company plant in Luang Prabang province’s Nam Bak district have now received US$42,000 from the plant’s new owner, according to Radio Free Asia. Some of the former employees of the plant have also returned to work under the new management.

Provincial authorities detained the Chinese owner of the Guestown-Lao plant in April 2021, accused him of failing to pay wages to his Lao workers in November 2020 and subsequently filed criminal charges against him. He is now awaiting trial on the charges. The company has since been taken over by China-based Jian Qe.

Egypt: The US-based International Centre for Settlement of Investment Disputes (ICSID) has ruled in favour of the Egyptian government in a compensation case raised by Spain-based Cementos La Unión concerning its Arabian Cement Company (ACC) subsidiary. The El Economista newspaper has reported that the company sought US$286m in compensation, due to the Egyptian government’s decision to retroactively impose new activity and electricity licences shortly after ACC built a new integrated cement plant in Suez Governorate. Cementos La Unión argued that the additional licences breached a bilateral agreement between Spain and Egypt covering investments that were already in place.

The company said that it will continue to pursue its claim, which is also progressing in Egypt.

Argentina: A dispute between a supplier and its union has caused Loma Negra to switch off two kilns at its Olavarría cement plant. The Clarín newspaper has reported that the argument is between Minerar, which provides the plant’s raw limestone, and the Asociación Minera Obrera Argentina (AOMA), which represents miners’ interests. The union says that miners are underpaid. They receive US$245/yr less than cement plant workers.

The producer said, “It is the leading Argentine cement company, with approximately 45% of total sales in the country. This shortage will impact the country's economy, which had been recovering after the pandemic." The union rejected a mandatory conciliation on 3 December 2020. Negotiations began in October 2020.

Kenya: East African Portland Cement Company (EAPCC) has threatened “recovery proceedings” in relation to the alleged unlawful extraction of building materials on the producer’s land in Mavoko County by China Road and Bridges Corporation (CRBC). EAPCC says that it has twice contacted the construction company, which is engaged in building the Nairobi Expressway toll road, to order it to desist, according to the Business Daily newspaper.

Acting managing director Stephen Nthei said, “The company cannot violate the country’s laws when constructing a commercial road. Any mining activities will devalue our land when we are eyeing prospective buyers. We might be forced to institute recovery proceedings against this company.”

The cement producer is seeking a buyer for the parcels of land, which are also home to illegal squatters.

Myanmar: Thailand-based Siam Cement Group (SCG) and Pacific Link Cement Industries (PLCI) joint-venture Mawlamyine Cement has suspended production at its integrated cement plant in Kyaikmayaw, Mon State amidst a dispute between its owners. SCG says it has resorted to arbitration to resolve the matter and that PLCA has filed a lawsuit against it. In a statement SCG said that, “MCL continues to work with distributors and customers to alleviate the supply shortage due to the temporary suspension.”

The Australian cement supply spat calmed down a little this week with the announcement that Wagners Holdings has agreed to resume the supply of cement products from its Pinkenba grinding plant in Brisbane to Boral. Legal proceedings are still on-going with a trial date set at the Supreme Court of Queensland in late November 2019.

The argument blew up publicly in March 2019, when Wagners said it had suspended its cement supply to Boral for six months. Wagners has a cement supply agreement with Boral whereby it supplies cement on an annual basis for a fixed price. However, Boral informed Wagners that it had found cheaper cement from a ‘long established’ supplier in South East Queensland. Local press speculated that this ‘long established’ supplier was Cement Australia, the joint venture between LafargeHolcim and HeidelbergCement. Wagners then had the choice to either match the lower price or suspend its supply. The disagreement took the legal route as the parties failed to reach an agreement. Wagner says that its cement supply agreement with Boral ‘remains binding on both parties’ until 2031.

Wagners later reported that it expected the suspension to cost it around US$7m in 2019. The deal with Boral constituted about 40% of its cement sales volumes. Its overall revenue grew year-on-year in its 2019 business year to the end of June 2019 but its cement sales volumes fell. Its earnings also fell. This was blamed on higher activity in lower margin areas such as contract haulage and fixed plant concrete, and delays in major infrastructure project work in South-East Queensland.

Boral, meanwhile, suffered from falling revenue and earnings from its Boral Australia subsidiary in its financial year to June 2019 due to a slowing construction market. Notably, its cement sales revenue rose by 7% due to ‘favourable’ pricing, higher volumes and cost-saving programs. It didn’t say whether the cost cutting included sourcing cement from a different supplier! All of this though was counteracted by lower contributions from its Sunstate joint venture (JV) with Adelaide Brighton and higher fuel and clinker costs.

All of this is fascinating because these kinds of disputes usually remain out of the public eye. The large size of Wagners’ cement supply deal with Boral meant that when it was threatened it likely had to tell its shareholders due to the potential financial impact. Whether Boral can wriggle out of the contract is now a matter for the courts.

The broader picture is that even though Boral Australia’s cement division seemed to be growing in its 2019 financial year it was still trying to reduce its costs in the face of a decelerating construction market. Added to this, the companies hold both a supplier and a competitor relationship. On the production side Boral operates an integrated plant at Berrima in New South Wales (NSW), a grinding plant at Maldon, NSW and another grinding plant in its Sunstate JV at Brisbane, Queensland. Wagners runs its own grinding plant at Pinkenba, Queensland. Both companies operate concrete plants. This is not unusual for a concentrated industrial sector like cement but it creates problems for the regulators. Note that, also this week, the Australian Competition and Consumer Commission was reportedly paying attention to the links between Barro Group and Adelaide Brighton. Barro owns a 43% stake in Adelaide Brighton but the authorities are concerned about a possible overlap in the two companies’ roles as suppliers of cement, concrete and aggregates. Any slowdown in construction in Australia seems likely to heighten these kinds of issues.

In the UK there is an expression, coined by former Prime Minister Harold Wilson, that a 'week is a long time in politics.' While the week he was referring to has long since been forgotten, this refrain has since been repeated to the point of cliché by the mainstream media and is often used in the context of rapidly-changing political news stories. Regardless of its origin, this expression could well be used to accurately describe the current situation in France and Switzerland, where the past week has seen a number of serious and unpredictable developments in the preparation of the anticipated LafargeHolcim mega-merger.

Disgruntlement from 'those close to the deal' first surfaced as a 'wild rumour' a few weeks back but, in the past seven days, several of Holcim's shareholders, including the influential Thomas Schmidheiny, have questioned the contribution that can now be made by Lafarge. Holcim shareholders claim that the group has out-performed Lafarge in the 12 months since the deal was announced and they feel that this should be recognised financially. The abandonment of the Euro1.20 cap on the Swiss Franc by the Swiss National Bank (SNB) on 15 January 2015 has loaded the dice even further in Holcim's favour.

This is how the situation has deteriorated in the past seven days. Late last week, we had confirmation that Holcim was seeking to renegotiate the terms of the merger. On Monday we heard what at least part of those terms were, including an assertion that each Lafarge share was now worth just 0.875 of a Holcim share. Lafarge's main shareholders, accepting that their position was compromised to an extent, suggested that each Lafarge share was worth 0.93 of a Holcim share. Since then, it has become apparent that Bruno Lafont, the proposed leader of LafargeHolcim, has also put Holcim in a spin, as he is perceived to have presided over Lafarge's poorer performance.

Then, just yesterday, it was announced that the two current group boards had met separately in an attempt to arrive at new conditions with which to re-start negotiations. Commentators think that Holcim is holding all of the Aces but Lafarge has made it clear that it cannot accept a lower valuation and a CEO from Holcim. Discussions that take place 'in the dark' like this will do little to build confidence between the merging parties and infers that communication has become strained. There are twinges of antagonism in the releases that are not going to be solved by the boards sitting in separate rooms and whipping themselves into a frenzy.

Also caught up in this, like the child of a divorcing couple, is CRH. It only announced its purchase of Holcim and Lafarge divestments in February 2015. It stands to gain a joint Euro158m from Lafarge and Holcim if they fail to merge, but this will not make up for the loss of the many high-quality cement assets it otherwise stands to gain.

What will happen in the coming weeks? You have to be brave to predict how this will turn out, but our LinkedIn Group is a great place to discuss this rapidly-changing story. One thing we can be sure of is that there will be a lot to write about in another seven days. After all, a week is a long time in the cement industry!