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India’s Economic Times (ET) has run a story today that really illustrates the heart of the current oversupply issues surrounding the cement sector in India. It reports that Binani Cement, one of the country’s many medium-sized domestic players, is circling the drain ahead of full bankruptcy proceedings. According to ‘senior officials,’ who spoke on the condition of anonymity, the company has already attracted interest from LafargeHolcim, HeidelbergCement and CRH, as well as a plethora of domestic players. There are a total of 15 interested parties so far: the three multinationals, nine domestic cement producers and three investment firms.

With 11.3Mt/yr of capacity, Binani Cement is not a small player by international standards. Unusually for an Indian producer, it even has capacity elsewhere, in China and Dubai. It is part of the larger BRAJ Binani Group, which is involved in glass fibre, energy, IT and more. The fact that the cement company is now up for sale really underscores the extent to which India doesn’t need the 100Mt/yr of extra capacity that was highlighted by the Cement Manufacturers Association in September 2017. India could lose 10 Binani Cements overnight and still have enough capacity to meet domestic demand!

Binani’s issues are, at least in part, geographic. It has assets exclusively in the north of India, which has seen weakened homebuilding and infrastructure activities since the implementation of the government’s demonetisation policy, as well as the highest impacts from rising imported fossil fuel prices. The implementation of India’s new Goods and Services Tax (GST), which has increased cement prices, has not helped. The bulk of Binani’s operations are in Rajasthan and Uttar Pradesh, both states far from the coast. When even UltraTech Cement’s profit is down, the squeeze for some smaller producers is becoming too much. On its own Binani cannot handle the heat, but its assets would certainly make a nice addition for a larger player.

In this way, the consolidating Indian cement sector represents a microcosm of the global situation. Binani’s troubles highlight how much better large companies are at spreading the risks of operating in different markets. As discussed in our forthcoming December 2017 issue, the advantages of being a multinational player with a large number of geographical markets appears to be gradually returning once again, with smaller regional players once again suffering from geographical disadvantages.

Of course, in an environment ripe for consolidation it is very interesting to note that CRH is among the international players linked to Binani. It clearly wants the benefits of being a fully-fledged multinational and is going full-steam ahead to get there. It has spent Euro1.34bn on 27 acquisitions of various sizes in 2017, most notably the on-going purchase of Ash Grove Cement in the US. It is making a strong case to purchase PPC in Africa and a larger Indian base makes sense for the company in the longer term. It lost out on Lafarge India’s assets to Nirma in 2016.

We can be sure that the pace of mergers and acquisitions will continue to grow in the rest of 2017 and into 2018 in India and elsewhere. Would you bet against CRH pulling off an Ash Grove, PPC and Binani ‘triple?’ With the group finance director Senan Murphy stating that there was additional room for expansion in 2018, its intent certainly can’t be faulted.

US: Bud Biggs, the long-term plant manager of the Mitsubishi Cement plant in Lucerne Valley, California, died at the age of 77 on 18 November 2017. It is thought that he suffered a heart attack. Biggs, who only retired in February 2017, had been manager of the plant since 1986.

Bud Biggs began his career at Kaiser Cement in Cupertino, California in 1962, first working in quality control and in concrete research. He obtained a bachelor’s degree in chemistry in 1980 while working for the company. After a period working in Texas, he returned to California in 1986 to work at Kaiser Cement’s Lucerne Valley plant. Initially working as production manager, he was promoted to plant manager shortly afterwards, retaining his role when Mitsubishi Cement acquired Kaiser Cement.

Over the years Biggs made great contributions to the local community. In 2005 he and Mitsubishi Cement’s Senior Vice President Mike Jasberg formed the Mitsubishi Cement Corporation Educational Foundation (MCCEF), which provides additional funding for local schools and scholarships for students. Biggs was also on the boards of several other local educational and professional institutes.

India: As many as 15 companies have shown interest in Binani Cement, which is facing bankruptcy proceeding from its lenders, according to senior officials quoted by India’s The Economic Times. Among them are Ireland-based CRH, Swiss-based LafargeHolcim and Germany’s HeidelbergCement, each of which have shown interest in response to initial bids called by the resolution professional. Other bidders include local firms India Cement, Orient Cement, Ramco Cement, Shree Cement, UltraTech Cement and Piramals. Senior officials said that a total of nine domestic players and three financial investors have shown interest in the company.

The bidders will provide a binding bid with a detailed resolution plan, which would involve acquiring equity and recasting the debt, by 22 December 2017. The bidders will have to provide plans to either acquire the company fully or acquire its assets only. Binani has a manufacturing capacity of 11.3Mt/yr, with integrated plants in India and China and grinding units in Dubai, UAE.

Congo: Dangote Cement will officially open its 1.5Mt/yr capacity cement plant in Congo on Thursday 23 November 2017. Constructed for around US$500m, the plant is expected to directly employ more than 1000 people, while thousands of indirect jobs will also be created. The plant, which is now the largest in Congo, rolled out its first bag of cement on 7 August 2017. The company's third quarter unaudited results showed that the Congo plant, which recently began operations, has almost doubled cement capacity of the country.

The Congo plant commissioning will bring the number of Dangote Cement’s fully operational plants across Africa to 10. The company is currently active in 17 African countries.

Kenya: The founder of Devki Group, Narendra Raval, plans to invest in the construction of a 0.75Mt/yr cement plant in Mariakani, Kilifi County, in direct competition with ARM Cement’s facility in the county. The project, which represents a US$290m investment, will be built on a 20 hectare site. “Construction of a new cement plant will further bring down prices while reducing the long distances lorries must cover to deliver cement to Kenyans on their doorstep,” said Raval, according to Business Daily Africa.

In separate news, Global Choice has concluded plans to build a grinding plant in Athi River, Machakos County. The US$48m facility has a capacity of 1Mt/yr.

Peru: A total of 925,000t of cement was sold in Peru in October 2017, an increase of 12.1% compared with sales in October 2016 and 3.3% above sales in September 2017, according to data from Asocem. Cement production stood at 922,000t, 6.3% higher than October 2016 and 4.4% higher than September 2017. Domestic sales stood at 873,000t, 5.8% higher than in October 2016 and 4.4% compared to September 2017. Cement production hit 8.19Mt in the first 10 months of 2017, 2.1% down year-on-year. Domestic cement sales reached 7.85Mt in the first 10 months of 2017, 1.5% down year-on-year. Total sales, including exports, reached 8.15Mt in the first 10 months of 2017, 1.9% down year-on-year.

Puerto Rico: Cement sales in Puerto Rico contracted by 47.1% in October 2017 compared to the same period of 2016, due to the effects Hurricanes Irma and Maria. Cement sales had been falling generally since 2013 and they fell by 12.3% in 2016. Meanwhile, cement production declined by 52.9% year-on-year in October 2017. Cement production dropped by 11.5% in 2016, representing the fourth consecutive year of decline in the commonwealth.

Ireland: CRH’s like-for-like group sales for the third quarter of 2017 rose by 3%, boosted by continued underlying growth in the Americas, although some operations were hit by adverse weather. CRH, which is in the final stages of buying US-based Ash Grove Cement for Euro2.98bn, added that it continues to expect another year of progress in 2017, with earnings before interest, taxes, depreciation and amortisation (EBITDA) of more than Euro3.2bn. This is 2.2% higher than the Euro3.13bn EBITDA it saw during 2016.

Group sales for the nine months as a whole were Euro20.7bn, an increase of 2% compared to the same period if 2016. EBITDA for the nine months was also 2% higher at Euro2.43bn.

Pakistan: Rising coal prices are presenting a risk to the profit margins of cement manufactures in Pakistan. It is expected that this sustained rise in coal prices will increase the cost of cement production in the short-term.

Major contributory factors to the higher coal prices include China’s imposition to cut production to 276 days to reduce the supply glut since October 2016, while extra safety checks are resulting in tightened domestic coal supplies in the country. Moreover, tropical storms in the Atlantic basin and floods in Australia and Indonesia are giving rise to logistical issues with coal supply. Nuclear outages in France are driving extra competition for coal.
To add to the already worsened supply situation, South Africa`s National Union of Mine workers (NUM), which represents 70% of employees in the coal mining sector, started a strike on 19 November 2017 over unresolved wage disputes.

India: The State Pollution Control Board (SPCB) has recommended that Jammu & Kashmir Cements’ plant at Khrew, Pampore for causing ‘major pollution.’ However, the state government has given the state-owned cement producer time to stay open while it installs dust control upgrades, according to the Kashmir Monitor newspaper. The company employs around 1000 workers and the government is concerned about the disruption that shutting the plant would cause.