Displaying items by tag: Egypt

Egypt: Egyptian President Abdel-Fattah al-Sisi inaugurated a cement and marble production complex worth US$1.1bn to the south of Cairo on 15 August 2018. The 500-hectare industrial complex is located 12km north of the Upper Egyptian governorate of Beni Suef.

It took 21 months to complete the complex, which includes three cement plants with a combined annual production capacity of 12Mt/yr. Egypt, through the Armed Forces Engineering Authority, worked together with 20 local and international companies on the project.
During the unveiling ceremony, Sisi said that such industrial projects would help reduce imports, while saving foreign currency and offering thousands of job opportunities to local people.

Cemex joined the divestment party this week with the news that it plans to sell up to US$2bn worth of assets by the end of 2020. Put that together with LafargeHolcim’s own divestment plan of selected assets worth up to US$2bn as part of its Strategy 2022 and there is potentially a lot of cement production infrastructure going on sale over the next few years.

Both companies say that they will start announcing the latest round of divestments in the second half of 2018. Prices vary considerably around the world - and remember this is not only cement - but at, say, US$250m per integrated plant that could amount to 16 units. That’s a big enough manufacturing base to build your very own cement production empire! So, which markets might the two companies be considering leaving?

Cemex’s weaker areas in its half-year report were its South, Central America and the Caribbean region and, to a lesser extent, its European region. The former reported falling sales, cement volumes and earnings. The latter reported falling earnings on a like-for-like basis with issues noted across cement, ready-mix concrete and aggregate business lines in the UK. Back in Central and South America, problems were noted in Colombia due to a 10% fall in cement sales in the first half. An important point to make here is that despatch figures from the National Administrative Department of Statistics (DANE) out this week suggest that Colombia’s overall cement market has picked up since April 2018 (see Graph 1), in contrast to Cemex’s experience. Panama, meanwhile, saw cement volumes wither by 22% due to the 30-day strike by construction workers. Other operations to consider for the chop might include Cemex Croatia, which the company attempted to sell to HeidelbergCement and Schwenk Zement in 2017, before the European Commission put an end to that idea.

Graph 1: Annual change of cement despatches in Columbia in 2017 and 2018. Source: DANE.

When asked directly during its second quarter results call which assets it was intending to sell, chief executive officer (CEO) Fernando Gonzalez didn’t answer on commercial grounds. What he did say though was that the company had faced ‘headwinds’ in the Philippines, Egypt and Colombia, particularly in relation to fuel prices. He also said that Cemex had finished its market analysis, that it knew exactly which assets it would like to sell already and that it was in ‘execution’ mode. In Gonzalez’s own words, “we do have a number of assets to be divested, either because they are low growth, or because they are not necessarily integrated to other business lines.”

As covered a couple of week ago, the obvious location for LafargeHolcim to exit is Indonesia. CEO Jan Jenisch continued to refuse to comment on rumours that the company was leaving the country during its second quarter results call. Yet, local production overcapacity, falling earnings and profits and an underperforming but still sparky market make it the ideal candidate. What Jenisch did reveal was that the country had ‘positive momentum.’ Perhaps more importantly he added, “We are not selling because we want to sell. We are selling for high valuations only.”

Other potential locations for LafargeHolcim to leave might include Brazil and parts of the Middle East and Africa. Brazil’s cement market recovery has been a few years coming and was delayed again by a truck drivers’ strike in May 2018. The Middle East Africa area was the worst performing region in LafargeHolcim’s mid-year results with problems noted in South Africa.

With all of this in mind we have a rough idea of what Cemex and LafargeHolcim might be considering selling. The obvious candidates for both companies seem to be solid markets that promise growth after a period of underperformance. Just like Colombia and Indonesia in fact. Looking at the track record for both of them in recent years Cemex has seemed to be more ready to sell individual plants such as the Odessa and Fairborn plants in the US to different buyers. LafargeHolcim for its part has generally gone for larger more complete sales of regional or country-based chunks of its business such as in Chile or Sri Lanka.

Finally, don’t forget that Cemex’s Fernando Gonzalez said in March 2018 that the company was considering acquisitions again after a decade of austerity. He mentioned an interest in India and in Brazil. If he meant that last one then maybe he should give LafargeHolcim’s Jan Jenisch a call.

Egypt: Helwan Cement has received several preliminary non-bidding offers for its white cement plant located in Minya Governorate. The subsidiary of Suez Cement and HeidelbergCement is now conducting financial, legal and technical due-diligence on the offers, according to Reuters. No values or timescale for the sale have been disclosed.

Egypt: Cemex is supplying around 0.76Mt of cement to build tunnels underneath the Suez Canal. It is also providing over 0.5Mm³ of concrete for the projects that will link the mainland to the Sinai Peninsula and the development of a commercial seaport. The work is being managed by a joint venture with Orascom Construction and Saudi Arabia’s Osman Ahmed Osman. The two tunnels will extend from the outskirts of Port-Said to the Sinai Peninsula, passing under the Suez Canal. The construction of the two 4km tunnels required the installation of three ready-mix batch plants on site to fulfil the project’s concrete demands.

France: Vicat’s sales in Turkey, the US and Kazakhstan have driven its growth in the first quarter of 2018. Its sales revenue for its cement business rose by 10.9% year-on-year at constant scope and exchange rates to Euro290m in the first quarter of 2018. Its cement sales volumes rose by 6.5% to 5.2Mt from 4.9Mt.

“We posted significant business growth in Turkey, the US and Kazakhstan, excluding currency effects. The gradual recovery continued in France and India was boosted by the start-up of new infrastructure projects. Conversely, we recorded a business contraction in Switzerland during the first quarter as a result of adverse weather conditions, especially in March 2018, and the completion of a number of major projects. The group’s business trends in Egypt were hampered by the military operations underway to restore security in its production area,” said group chairman and chief executive officer (CEO) Guy Sidos.

Egypt: A Saudi Arabian company plans to build a US$28m paper bag plant at Borg El-Arab in Alexandria. The plant will have three production lines including one exclusively for manufacturing cement bags, according to the Daily News Egypt newspaper. Ahmed Abdel Razek, head of the Industrial Development Authority (IDA), said that the company plans to start production a year-and-a half after land for the unit is allocated.

Egypt: Khaled Fahmy, the Minister of Environment, has opened a new production line at Arabian Cement Company’s Ain Sokhna plant in Suez. The line uses FLSmidth’s Hotdisc combustion device to allow it to use high levels of alternative fuels, according to the Watani newspaper. The opening was attended by Muhammad Shehab Abdel-Wahab, chief executive of the Egyptian Environmental Affairs Agency, Nahed Youssef, head of waste management organisation, as well as a number of representatives of the financiers, and director of the European Investment Bank.

In 2015 Arabian Cement Company commissioned another Hotdisc installation. At the time is said it had a designed fuel mix of 70% coal and 30% alternative fuels, using a mixture of agricultural wastes, municipal sludge, and refuse-derived fuel (RDF).

Greece: Titan Group’s turnover fell slightly to Euro1.51bn in 2017. Bad weather, the devaluation of the Egyptian Pound and weakening of the US Dollar affected its operating results despite a buoyant US market. Its earnings before interest, taxation, depreciation and amortisation (EBTIDA) fell by 1.9% year-on-year to Euro273m in 2017 from Euro279m in 2016. Its net profit fell by 66.5% to Euro42.7m from Euro127m.

The cement producer’s turnover grew by 9.9% to Euro873m in the US despite Hurricane Irma in September 2017 and other poor weather effects. In Greece it reported that build activity weakened further in 2017. It said that although export volumes remained high, its profit margins were hit by the lowering value of the US Dollar and increased fuel prices. Overall, the turnover of its Greece and Western Europe region fell by 4.8% to Euro249m. In Southeastern Europe turnover rose by 10.5% to Euro226m due to increased demand for building materials. Turnover in the Eastern Mediterranean region fell by 36.5% to Euro158m due to negative currency effects in Egypt and a fall in cement demand.

Egypt: Titan Cement Egypt is planning to spend US$8m towards building a 8MW solar power plant next to its Beni Suef cement plant. Surplus energy from the unit will be sold to the national grid, according to the Al Borsa newspaper. The project is at the bidding stage with contractors but the cement producer is believed to be in ‘advanced talks’ KarmSolar.

Lots of facts stuck out from the inaugural Global GypSupply Conference that took place in Brussels last week. One was that Spain exported 1.49Mt of raw gypsum to West Africa in 2016. The data point from Spanish customs popped up in a presentation by Mohamed El Moustapha, the managing director of a gypsum mining company based in Mauritania. He was using the figures to reinforce the opportunities for his company to supply the growing cement industry in West Africa. Yet the size of the market has implications for the oft-repeated claims of cement sector self-sufficiency that various countries in the region have cried out for.

Gypsum is used as a retarding agent to control the setting time of cement. It gets added whilst clinker is ground into cement. Roughly speaking, cement production requires about 5% of gypsum. So a 1Mt/yr cement plant would require around 50,000t/yr of gypsum. The crucial question for cement producers in West Africa is where is this gypsum coming from. Given that the Global Cement Directory 2018 places cement production capacity at just under 100Mt/yr in the region, this requires around just under 5Mt/yr of gypsum.

El Moustapha made out that there were no gypsum deposits in West Africa. This contradicts a study on Nigerian gypsum mining published in Global Gypsum Magazine in March 2016 estimated local reserves to be around 150Mt although to be fair to El Moustapha these appear to be relatively underused. This also doesn’t take into account sources of synthetic gypsum produced at coal-power plants although this is likely to be negligible at present.

Reserves in Mauritania appear to be much larger at 1.7Bnt. Instead, the problem here appears to be assisting the exploitation of mined gypsum by improving infrastructure and supply chain issues. El Moustapha’s company Samia reported that it exported 170,00t of gypsum to cement plants in West Africa, mainly via ship, but with a significant minority via truck overland to Mali. Another speaker at the conference from the Moroccan gypsum trader Cultura presented a snapshot of a more mature market with exports of 210,000t in 2017. However, similar issues with port infrastructure were also present. To this end the company was keenly looking forward to an upgrade project the Port of Safi due for commissioning in 2020 – 2022 that would allow larger ships to berth.

A market report on the gypsum and anhydrite market by Roskill in 2014 placed Egypt, Algeria and South Africa as Africa’s leading gypsum producers. In particular it singled out South Africa as the only sub-Saharan country producing more than 100,000t/yr of gypsum. In terms of usage of gypsum Roskill estimated that just over half of the world’s gypsum was used to make cement, followed by 38% for wallboard and plaster production and then 18% for agricultural usage. Although this compares to just over a quarter for cement production and most of the rest for wallboard production in the US, with its more developed wallboard market than the rest of the world, according to recent United States Geological Survey (USGS) data.

As the Global GypSupply Conference demonstrated plenty of raw gypsum is available around the world. However, since supply and price can vary considerably in the short term, cement producers are keen to secure steady sources. Developing gypsum sources in northern Africa are necessary to help build the West African cement industry, but the regions need to work together.

The 2nd Global GypSupply Conference will take place in spring 2020