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There have been sounds of discontent coming out of South Africa this week, as AfriSam and PPC continue to (apparently) fail to come to an agreement on the terms of their long-discussed proposed merger. The pair have formally been in discussion since February 2017 but the situation now looks precarious. AfriSam has cancelled the heads of terms that had stood since that month. PPC has now hit back by giving AfriSam until this Friday (1 September 2017) to come up with a new and ‘sufficiently interesting’ deal for it and its shareholders. AfriSam’s acting Chief Executive Rob Wessels said, "AfriSam remains firm that a transaction between AfriSam and PPC will greatly benefit the stakeholders of both companies.” However, PPC’s chairperson Peter Nelson said that his shareholders were ‘frightened about the prospect’ of the merger.

If you think all of this to-and-fro sounds a bit familiar, that’s because it should. AfriSam and PPC have been courting not just since February 2017, but since December 2014. At that time, following the surprise resignation of CEO Ketso Gordhan, discussions lasted until the end of March 2015 before fizzling out. PPC’s (then) new CEO Daryll Castle confirmed that neither party could agree on terms. The two parties were also able to save some face by pointing out that the merged entity would have had around 60% of all South African cement capacity. While this is a pretty big potential stumbling block, it would been pretty obvious before discussions started and is by no means insurmountable. One gets the feeling that, given more enthusiastic partners, the discussions might have found a way forward.

At the time PPC and AfriSam played their cards close to their chests and we can’t be sure quite why the discussions really broke down. However, regardless of what happened last time, there do appear to be a lot of parallels with the current situation.

Firstly, PPC is, once again, in a state of transition. CEO Darryll Castle announced in July 2017 that he would be leaving to ‘pursue other interests,’ although neither an exact departure date nor destination was provided. Johan Claassen, the current managing director of PPC, has been appointed to the role, but only on an interim basis, presumably in anticipation for the expected merger. Other positions in the group’s executive team were reshuffled in the past couple of weeks and there was also the resignation of Tito Mboweni, a non-executive director, rumoured to be over a difference of opinion regarding the merger. On top of this, AfriSam’s CEO Wessels is also on a short-term contract. Could all of these pre-merger moves now be in vain?

Secondly, PPC continues to suffer from a combination of a poor domestic construction market and increasing competition and from imports coming in from rampantly over-productive markets across the Indian Ocean. Arguably both of these effects are now worse than they were in 2015, although PPC did recently say that the second quarter of 2017 had been a lot better across South Africa than the first. However, PPC saw its full-year earnings collapse by 93% year-on-year in the first quarter of 2017, after it was awarded ‘junk’ status in May 2016 by credit-rating agencies. Is it this result alone that has gotten AfriSam thinking? Despite this, PPC remains the larger of the two parties. It certainly wants to be seen to be calling the shots with its 1 September ultimatum.

However, the two producers now share less than 50% of the integrated cement capacity in South Africa, not 60% as in 2015. According to the Global Cement Directory 2017 they share around 7.8Mt/yr of integrated capacity against 8Mt/yr in the hands of others. This is due to the commissioning of the monster 3.5Mt/yr Anganang clinker plant and associated Delmas grinding plant by Sephaku Cement (Dangote Cement) and the full commissioning of Mamba Cement, part of Jidong Development. Could this smaller combined market share make it easier for PPC and AfriSam to identify those assets that can be sold to appease the competition authorities? Could this yet save the discussions?

Whatever happens after Friday, it is apparent that some form of consolidation is essential for PPC (and the wider southern African market) if the industry is to ‘right-size’ for the future. The region is awash with cement. News from PPC Zimbabwe this week even hinted that the effects of imports are now so strong in that country that it is considering shutting down clinker production at its Colleen Bawn plant, which has operated for more than 70 years. This effect is in play all the way down the coast from the Horn of Africa to Capetown and has been discussed previously with reference to Kenya, Tanzania and Mozambique.

Even if it doesn’t get the ‘right answer’ from AfriSam this week, PPC may still stand to gain from the merger, even if it’s only in the short term. In March 2015 its shares jumped up 5% on the news that the merger talks had collapsed. Given its recent performance, another 5% boost would probably not be turned down.

UK: Hanson Cement has made two senior appointments within its bulk division as part of the company’s drive to improve customer service. Phil Matthew has joined as field sales manager and John Doolan has been promoted to key account manager. Phil and John will work together to strengthen new and existing customer relationships, reporting to Mark Hickingbottom, national commercial director – bulk products.

Phil Matthew was previously at AB InBev, where he held account and sales management roles. He will manage a team of six district sales managers and carry out internal training sessions in order to enhance customer service.

John Doolan, who has 27 years’ experience in the construction industry, will work in conjunction with Hanson’s key account customers to set and deliver strategic plans.

Commenting on the appointments, Mark Hickingbottom, said, “Phil and John’s combined experience and knowledge of the company will allow them to place Hanson’s values at the core of their work, helping to deliver our goals of being the most customer focused, responsible and reliable construction products supplier in the UK.”

Canada: A man has died after falling nearly 10m from a catwalk at Lafarge Canada’s Beachville limestone quarry near Woodstock, Ontario on 23 August 2017. Walter Nuvoloni, 47, was a long-standing purchasing manager at the company. He had been in the position since 2001.

"This is a very difficult and tragic incident and we are deeply saddened at the loss of our colleague,” said Karine Cousineau, Lafarge spokesperson, in a statement. “Our thoughts are with our colleague's friends and family. Lafarge is providing the support of our employee assistance program to help co-workers cope with the loss." Cousineau added that Lafarge Canada would not be commenting further on Nuvoloni's death.

Police initially held the scene before turning over the investigation to the Ontario Ministry of Labour, which is investigating the death. Ontario Provincial Police Constable Stacey Culbert told local press that the ministry will re-contact police if the investigation deems any action to be criminal.

Ireland: On 29 August 2017 an oral hearing began to hear submissions regarding plans by Irish Cement to use alternative fuels for energy in its plant in Limerick. The company is seeking to move away from using fossil fuels as a main source of material in its cement kiln in Mungret and to use recovered waste and tyres instead.

A number of local residents and members from action group Limerick Against Pollution (LAP) held a protest outside the hearing. LAP spokesperson Tim Hourigan said that residents were concerned about the possible release of toxins from the proposed process and that they were opposed to it going ahead. The hearing was also attended by local businessman and racehorse owner JP McManus, who said he was ‘concerned’ about the plans.

Representatives from Irish Cement told the hearing that the proposal would improve the long-term viability of the plant as well as help to reduce CO2 emissions and the plant’s reliance on imported fossil fuels. The hearing is expected to last until Friday 1 September 2017.

Egypt/Saudi Arabia: The Saudi Arabian Al Sharbatly Group is reported to be looking to invest up to US$3bn in Egyptian interests, including setting up a second clinker line at its South Valley Cement plant. Egypt’s Minister of Investment and International Cooperation Sahar Nasr said that he welcomed all investors in Egypt after meeting with Sheikh Abdel Rahman al Sharbatly and Sheikh Fahd Al Shobokshy to discuss ways to increase their investments in Egypt.

South Africa: Negotiations between PPC and AfriSam, two of South Africa's biggest cement producers, about a potential merger have reached a make-or-break stage, according to local press, after AfriSam cancelled the heads of terms it had entered into with PPC back in February 2017.

Despite the cancellation of the heads of terms, AfriSam acting chief executive Rob Wessels said the company remained committed to pursuing a transaction and intended to submit a new proposal regarding a possible merger to PPC.

"AfriSam remains firm that a transaction between AfriSam and PPC will greatly benefit the stakeholders of both companies. For this reason, we continue discussions with PPC and will explore other alternatives available to us,” said Wessels. "It remains our belief that a transaction between the two companies offers the local cement industry an opportunity to develop a champion with the required scale, operational efficiency and balance sheet to enable further investment opportunities in South Africa and the rest of the continent."

However, PPC chairperson Peter Nelson said they had been involved in the negotiations for six months and there came a time when it was necessary to halt them. Nelson added that the negotiations would only continue beyond 1 September 2017 if the new proposal tabled by AfriSam was ‘of sufficient interest and attraction and fair to shareholders and warranted extending’ the negotiations. "We can't carry on forever,” said Nelson. “A lot of shareholders are frightened about the prospect.”

Malaysia: Cahya Mata Sarawak's (CMS) net profit jumped more than eight times to US$15.2m in the second quarter of 2017, from US$1.8m in the same quarter of 2016. The positive result was mainly due to lower handling costs, cheaper imported clinker and lower clinker production costs brought about by stable production and lower coal prices. The net profit for the six-month period was also higher by more than nine times at US$20.5m from US$2.1m in the first half of 2016. Total first half revenue decreased by 10% year-on-year to US$157.1m from US$174.7m.

Philippines: Three of the Philippines' largest cement manufacturers have offered to waive their exemption from inspection procedures for cement imports, which are currently required only from companies that just import cement. They sent a joint letter to the Trade and Industry Secretary Ramon Lopez via Ernesto Ordonez, president of the Cement Manufacturers Association of the Philippines on 24 August 2017. In the letter, Taiheiyo Cement, Cemex and Republic Cement state that they are willing to undergo the same shipment inspection procedures as the traders. Ordonez said the offer was aimed at fostering industry harmony and ensuring adequate supply for the Duterte government's infrastructure push.

However, Atty Vic Dimagiba, president of consumer group Laban Konsyumer, said it was misleading for Ordonez to say that the cement firms have offered to waive their import shipment privilege because the Bureau of Product Standards of the DTI has already come up with a draft Department Administrative Order that will require all cement importers to undergo inspection procedures regardless of the company’s status. Existing legislation had come under fire as it allowed double standards.

Philippines: The National Coalition of Filipino Consumers (NCFC) has asked the Department of Trade and Industry (DTI) to investigate alleged sales of substandard cement. The NCFC ran its own investigation and conducted test purchases, according to the Manila Bulletin newspaper, after receiving reports that substandard cement was being sold in La Union, Davao and in Caloocan City. It found expired, mislabelled and unlabelled products.

Turkey: Soma Cimento has ordered a 4000t/day clinker production line from KHD for its plant at Soma near Manisa. The contract includes engineering, equipment supply, and supervision of erection and commissioning, including KHD’s Simulex plant simulation system, which will simulate the operation of the plant. Commissioning of the plant is scheduled for the spring of 2018.

The core components of KHD’s new line are: a five-stage KHD Preheater with Pyroclon-R LowNO_x AF calciner, equipped with Pyrotop compact mixing chamber, tertiary air duct and Pyrobox calciner firing system; a Pyrorapid two-tire rotary kiln, with a diameter of 4.6m; a Pyro-jet kiln burner; and a Pyrofloor clinker cooler equipped with a Pyrocrusher System.

This project will be the third commissioning of KHD’s Low-NOx calciner with Pyroloop Technology in Turkey. It will be KHD’s 51st kiln line in Turkey. No value for the order has bee disclosed.