Displaying items by tag: GCW232

We're going to start 2016 with a list of some of the worst things that could happen to the global cement industry this year. The idea is taken from Bloomberg Business who ran 'A Pessimist's Guide to the World in 2016' in mid-December 2015. For some of these suggestions there will be both winners and losers. Remember: forewarned is forearmed.

Continuing low oil prices hit Russia and other petro-propped economies
Cheaper fossil fuels should mean cheaper energy bills for cement producers. However, that saving must be compared to the overall cost to the global cement industry of poor construction markets in Russia and other economies that rely on oil. For example, Russian construction output fell by 4.5% to US$81bn in 2014 according to PMR. It is possible that the fuels bill saving worldwide is greater than the contraction of certain construction markets. If it is though, is this a price that the cement industry is willing to pay?

China enters a recession
The long-expected Chinese 'hard landing' seems closer than ever, as economic growth slows. It hasn't happened yet (according to official figures at least) but the 7% drop in Chinese markets on 4 January 2015 gives observers the jitters. The financial reverberations from a full Chinese financial crash would be felt around the world, derailing emerging economies due to reducing demand for exports and commodities. Naturally, construction markets would suffer. This would add to the woes currently being experienced by Brazil, Russia and South Africa. The other worry for the cement industry specifically might be the complications from a desperate Chinese industry trying to flood the outside world with even more of its products and services, including lots of cement.

Climate change impacts cement plants
Normally when it comes to climate change the cement industry worries about the effects of carbon taxation and pollution controls. However, media reporting about flooding in the UK in late December 2015 and strong El Niño effects elsewhere makes a pessimist wonder about the effects of hotter and wetter weather upon the infrastructure of the industry. The cost to repair the flooded Cemex UK South Ferriby cement plant in 2014 was rumoured to run to Euro14m and production stopped for a whole year. Costs like these are something the industry could do without.

International sanctions remain in place for Iran
Hoping that lifting economic sanctions from Iran will boost the fortunes of multinational cement producers and equipment manufacturers may be wishful thinking. Yet if the sanctions stay in place due to deteriorating relations between Iran and Saudi Arabia then nobody can discover what opportunities there might be in the world's fourth largest cement producing nation. Of course Iran's geographical neighbours across the Gulf (and in Pakistan) might be hoping that the sanctions stay in place for a very long time indeed.

Sub-Saharan Africa builds production capacity too fast
Multinationals and local cement producers alike are scrambling to build cement plants in sub-Saharan Africa. Demand for cement and low per capita consumption suggest that it is a clear investment opportunity as development kicks in. However, we have already reported on scraps between local cement associations and importers from other continents. If the cement producers build capacity faster than these countries develop, then a crash can't be too far fround the corner and everybody loses.

The UK leads an exodus from the European Union
For the cement industry a UK exit, to be voted on later in 2016, from the European Union (EU) isn't necessarily a bad things. What would be negative though is a badly handled exit process as vast swathes of trade legislation is renegotiated. What a 'Brexit' might initiate are further exits from the EU, leading to further trade disruption on a larger scale. None of this would aid Europe's economic recovery in the short term.

US Presidential elections slow the construction market
Irish bookmaker Paddy Power is currently placing odds of 9/2 for Donald Trump to be elected the next US president in late 2016. He's the second favourite candidate after Hillary Clinton despite not even having been nominated as the Republican party's presidential candidate yet. Whoever becomes the next president, the political uncertainty that occurs as the election progresses may impact upon the US construction market. It would be unfortunate to discover that the sector is weaker than expected if, say, the election rhetoric turns nasty.

Next week: reasons to be cheerful.

Happy New Year from Global Cement!

India: UltraTech Cement has appointed K K Maheshwari as Managing Director and Additional Director for a period of four years with effect from 1 April 2016. Maheshwari is a chartered accountant with over 38 years of experience.

The post was previously held by O P Puranmalka, who will cease to be the company's Managing Director on 31 March 2016, but will continue as a Non-executive Director from 1 April 2016.

India: Prism Cement Limited has appointed Joydeep Mukherjee as its Chief Executive Officer - HRJ (designate) and Key Managerial Personnel with effect from 16 December 2015. HRJ or H R Jhonson is a division of Prism Cement.

Saudi Arabia: Estanda has successfully completed the commissioning of a cement ball mill for a cement manufacturing company in Saudi Arabia.

The project was carried out on cement mill line 2, which operates in parallel with the cement mill line 1, which had already been renovated and updated by Estanda in 2013.

The renovation of the cement mill affected all interior steel components of the mill involved in the grinding process; inlet headwall liners, lifting liners of the 1st ball mill chamber, the intermediate diaphragm, the 2nd chamber classifying liners and the outlet diaphragm. The designs and materials were according to Estanda technical specifications. An improvement in productivity of more than 15%, wearing reduction on the steel components prompting less maintenance and greater profitability were achieved.

India: Lafarge India has submitted a revised proposal to the Competition Commission of India (CCI) to sell its entire 11Mt/yr assets in India.

The decision comes after the company's plan to sell its 5.15Mt/yr cement capacity in Chhattisgarh and Jharkhand to Birla Corporation for US$749m ran into trouble. Investment bankers said that Birla Corporation was facing challenges in securing limestone mining rights for the two units.

In order to approve the LafargeHolcim merger in India, the CCI had asked Lafarge India to sell its 5.15Mt/yr of capacity in eastern India by 31 December 2015. In August 2015, Birla Corporation agreed to buy the proposed assets along with brands Concreto and PSC and mineral rights over adequate reserves of limestone. The deal was conditional on Birla Corp being able to secure mining rights that Lafarge had.

"Lafarge India has sought an extension of its deadline from the CCI to complete its divestment," said an unnamed investment banker. "Lafarge India has now put the entire company on the block, as the sale of the entire company will include transfer of mining rights."

Indonesia: Tianjin Cement Industry Design & Research Institute Co., Ltd. has placed an order for two type LM 53.3+3 CS LOESCHE mills for clinker grinding for PT Semen Baturaja. Each of the clinker grinding mills has a designed a capacity of 175t/hr and material is ground to a fineness of 3400 Blaine. Each mill is fitted with a gearbox with a power of 4200kW.

The lead time for the main components of the mill is nine months and the gearboxes are supplied within 12 months.

Peru: The Peruvian division of Mexican cement company Cemex has received approval from the Ministry of Production for the environmental impact assessment (EIA) requested for the development of a cement grinding and packaging plant in Ventanilla, Callao.

Egypt: Minister of Industry and Foreign Trade Tarek Qabil announced that the ministry would issue conditions for tender documents and requirement specifications of cement production in the coming days to meet the future needs of the local market.

The Minister said that the Cabinet has recently approved defining a fixed value for the cement licences paid to the government based on economic feasibility. The government will also be accepting qualified applicants. Qabil added that issuing new cement licenses would contribute to filling future demand, which is expected to reach 90.4Mt by 2022.

Qabil also noted the importance of the cement plants' compliance with the environmental standards and requirements set by the Ministry of Environment, especially in light of the plants dependence on coal.

South Korea: South Korea's antitrust watchdog has fined six local cement makers a combined US$168m for fixing the prices of cement products and divvying up the market, according to Dow Jones.

According to the Fair Trade Commission (FTC), cement companies have allegedly colluded to rig the prices of cement products by controlling output and market share in 2011. The suspected companies are Ssangyong Cement Industry Co., Tongyang Cement & Energy Corp., Hanil Cement Co., Sungshin Cement Co., Hyundai Cement Co. and Asia Cement Co. Ssangyong was set to take 22.9% of the total market share, while Tongyang and Hanil were in charge of 15.1% and 14.9%, respectively.

"Managers of the six companies had regular monthly meetings to oversee whether or not the members had complied with the arranged shipments," said the FTC. The prices of cements surged by 43% year-on-year in April 2012.

Industry leader Ssangyong was slapped with US$73.6m of fines, followed by Hanil with US$34.5m and Sungshin with US$36.7m. Tongyang was exempted from the penalty, as the cement maker has been under court receivership since October 2013.

The FTC said that it will strictly crack down on price-rigging practices in backbone industries to build sound market order and fair competition.

China: Shanshui Cement's largest shareholder, Tianrui Group, has provided a US$9.3m loan to the company for interest repayment of the onshore bond of its Shandong subsidiary, Shandong Shanshui Cement Group, which defaulted in November 2015.

The loan facility is unsecured, interest free and has no fixed repayment terms, and has been remitted to the bank account designated for the bond's repayment, according to Shanshui. It didn't mention when the company could also repay the principal of the bonds, which amounted to US$307m, or whether Tianrui will provide further funding. Shanshui defaulted on the bond payment and triggered a cross default of the company's other debt after a shareholder struggle. Shanshui's board, which is now controlled by Tianrui, still faces a mounting management dispute over its Shandong subsidiary with Shanshui's founder and second-largest shareholder, the Zhang family.