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Germany’s Knauf announced this week that it is set to buy North American wallboard producer USG. The news is relevant for the cement industry because both companies are prominent gypsum producers. They are leading gypsum wallboard producers, with assets around the world, including gypsum mines. Although their focus is on wallboard a significant proportion of raw gypsum ends up being used in cement production. Hence, the takeover of a major North American producer by a European one deserves attention.

First a little background on the deal between Knauf and USG. The takeover has been a particularly acrimonious one at times, with both parties throwing strong language at each other and, although it has avoided being a hostile takeover, at times it seemed close. The deal became public in March 2018 when USG publicly said that it had rejected a bid of US$5.9bn from Knauf. It described the offer at the time as ‘wholly inadequate.’ Knauf then fought back by sending a letter to USG’s shareholders urging them to vote against director nominees at the next annual general meeting. Knauf owns 10.5% of USG’s shares. Then, in April 2018, Warren Buffett, the chief executive officer of Berkshire Hathaway, USG’s largest shareholder with a 31% stake, swung behind Knauf’s scheme. At this point it was revealed that Buffett had facilitated the initial talks between USG and Knauf. He even described the investment in USG as ‘disappointing.’ Buffett’s public move against USG in April 2018 signalled the death knell to USG’s independence. The US$7bn deal between Knauf and USG was agreed and announced on 11 June 2018. The transaction is expected to complete in early 2019.

USG operates 12 mines or quarries in North America. It also has other assets around the world including three gypsum mines in Oman, Thailand and Australia respectively that it runs in conjunction with its USG Boral joint venture in the Middle East and Asia. By contrast Knauf held over 60 quarries in 2014 with a focus on Europe.

The interesting implications from the merger may arise from what Knauf plans to do in certain regions. North America for example saw a reduction in raw mined gypsum production since the financial crash in 2008 as building markets suffered. Rising levels of synthetic gypsum production from coal power plants partly compensated for this. Buying USG gives Knauf a truly global base of natural gypsum production with which it can supply both itself and any cement customers. Knauf has a real shot of cornering the market in raw gypsum production provided it can keep the price low enough to stop enough rival mines being opened. Knauf might decide, as the construction market continues to recover in the US, to bring in the extra gypsum from elsewhere if it proved cost effective. Hooking up USG-Boral gypsum resources in Asia with Knauf’s might have implications for cement producing countries that lack sufficient gypsum supplies such as India. Oman is building itself up as the major gypsum exporter to Asia and USG-Boral is a part of it, with major gypsum resources in the country.

In terms of the cement industry it seems likely that there will be no immediate shakeup of gypsum supply. Long term supply contracts with either USG or Knauf should remain as they were and will stransfer to the new enlarged company. Knauf’s main market for gypsum is to use it to make wallboard but gypsum use for cement is a significant market as well. The ‘fun’ starts when or if Knauf starts to reorganise its supply chains. As its focus is on the wallboard business there may be implications thereafter for cement users. And since Knauf’s only major competitor at scale is Saint-Gobain, the market has just shrunk.

US: Cadence Environmental Energy has promoted Ted T Reese to Executive Vice President. Cadence provides technology for waste fuel recycling and emission reduction technology to the cement industry and is the exclusive supplier of waste-derived fuels for Ash Grove Cement. As part of the company’s succession plan founder Ted J Reese plans to hand over the presidency to Ted T Reese in 2019.

Finland: Carina Geber-Teir has been appointed as Senior Vice President, Communications by Cargotec. She will take the post by September 2018 at the latest. She will be responsible for leading communications, investor relations and sustainability function. She will be a member of Cargotec's Extended Executive Board and report to chief executive officer (CEO) Mika Vehviläinen. She succeeds Leena Lie, who has taken a new job at Huhtamäki Oyj.

Geber-Teir, aged 46 years, joins Cargotec from OP Financial Group, where she has been a member of the Executive Board and Chief Communications Officer since 2009. Prior to this she was Communications Director at Varma Mutual Pension Insurance.

China: Anhui Conch has suspended production at three of its production lines at the cement plant run by its Tongling Conch subsidiary at Gusheng in Anhui province. The suspension has followed the temporary closure of a pier used by the plant in late May 2018 in accordance with new government regulations on drinking water supply and pollution.

Use of the pier has been suspended as it is close to the Tongling Water Treatment Plant. The pier is used to export cement and clinker products from the unit and bring in raw materials such as coal. The temporary suspension of the plant’s production lines will reduce its clinker production capacity by 58% to just under 9Mt/yr from 15Mt/yr.

The cement producer has defended its environmental record, pointing out that the pier was approved with all the necessary licences and environmental approvals in 1987. Construction of the water treatment plant started in 1992.

Clinker products produced by Tongling Conch are mainly sold to Anhui Conch’s subsidiaries, including cement grinding plants along the Yangtze River and on the coast. The company plans to source clinker from other plants to continue supporting the affected grinding plants.

India: My Home Industries is preparing to increase its cement production capacity by 50% to 15Mt/yr. At present the cement producer produces 10Mt/yr of cement from four plants, according to The Hindu newspaper. The company’s board is currently considering whether to build a new plant or expand an existing one. A final decision is expected in mid-June 2018.

India: JSW Cement has inaugurated a 6.5km railway siding to its 2.4Mt/yr Salboni cement grinding plant in West Bengal. The railway siding will connect the unit to the main railway line between Godapiasal and Salboni, according to the Economic Times newspaper. The new connection is expected to reduce logistics costs at the site.

The rail yard at the plant has five lines running parallel and connected to each other. Two lines are designated for receiving raw materials, two lines are dedicated for cement loading and the fifth line is reserved for engine reversal. The plant initially intends to receive two rakes of raw materials per day and one rake per day of cement for despatch.

Venezuela: The Cacique Yaracuy mini cement plant is reportedly three quarters complete. Installation of the equipment at the unit is yet to start, according to Radio Mundial. The project is being built by India’s Megatech International. The plant is expected to have a production capacity of 4 million bags of cement per year when operational.

In 2014 the governor of Yaracuy, Julio Leon said the government was developing a 600t/day cement plant in Peña under an agreement between Venezuela and India. The project was part of plans to build three mini plants in the country.

Central African Republic: Cameroon’s Quiferou has signed a deal with the government to produce cement. Quiferou plans to produce 0.35Mt/yr of cement locally, according to the African Press Agency. The project will be situated at Bomoko in the south west of the country.

Germany/Pakistan: Germany’s Loesche says it has sold over 400 vertical roller mills for cement and ground granulated blast furnace slag, following a sale to Kohat Cement. Two LM 53.3+3 CS type mills has been sold to the Pakistani cement producer. The plant will produce 210t/hr of Ordinary Portland Cement at a fineness of 9% R 45 μm. No value for the deal has been disclosed.

The first Loesche LM type mill was put into operation at Fos sur Mer in France in 1994. Sales of the mill type for cement and slag markets have accelerated since 2006. The engineering company sold 50 LM mills in the 10 years to 2004. It then sold another 50 mills to 2006. However, from 2006 to 2014 it sold 200 mills. It then sold a further 100 mills after 2014.

Oman: Suhar Cement, the Sultanate's third cement plant after Oman Cement and Raysut Cement, will come into operation later in 2018, helping add to domestic production capacity and reduce the nation's dependence on imports.

The new facility, featuring a cement-grinding unit with a capacity of around 240t/hr, is being developed by a partnership between Sohar Cement (70% of the equity) and UAE-based Fujairah Cement Company (30%). Construction work on the plant is nearing completion at a site located within Phase 7 of Suhar Industrial Estate, one of several industrial parks administered by the Public Establishment for Industrial Estates (PEIE) around Oman.

The original plans to bring the new cement plant into operation by the first quarter of 2018 have been hamstrung by two key factors: 1. The absence of a paved road to provide suitable access to the site of the plant, and; 2. A lack of power supply to the site. Both impediments are being addressed by the relevant government agencies following the intervention of the Implementation Support and Follow-up Unit (ISFU) - a special task force of the Diwan of Royal Court overseeing the timely execution of a number of proposals and initiatives designed to spur the nation's economic diversification.

Significantly, the new Suhar Cement plant, along with a flurry of other cement plant projects planned in the Special Economic Zone (SEZ) at Duqm, will go a long way in ramping up Oman's domestic cement production by 2021. By that year, and assuming all of the project proposals have progressed through to implementation and commissioning, Oman is projected to be self-sufficient in meeting its domestic cement requirements. At present, Oman is dependent on imports for just over half of its cement demand.