Displaying items by tag: GCW396

There was lots to mull over in the latest Committee for European Construction Equipment (CECE) Annual Economic Report. The headlines were that the construction industry market peaked in 2017 and that the mining industry was still recovering, but maybe slowing, in 2018.

For the construction industry the CECE reported that a growth period from 2008 to 2018 reached a high level of growth of 4.1% in 2017. This fell to 2.8% growth in 2018 and is forecast to drop to 2% growth in 2019. It put this in terms of the sector having a cyclical nature, normally of around eight years. This means it believes a downturn is overdue. Slowing gross domestic product (GDP) growth and tighter financial and monetary conditions are expected to drag on the residential sector. The non-residential side is growing by more than 1.5% in Europe but it has started to following the residential sector. It also noted the ‘very poor’ performance of the infrastructure sector due to government under-investment.

Graph 1: GDP vs Construction Output, year-on-year change (%). Source: Euroconstruct & CECE.

The construction equipment sector saw sales rise by 11% in 2018, bringing it to only 10% below the high recorded in 2007. The CECE reported that the rate of growth for concrete equipment was becoming ‘less dynamic’ after four years of growth. Sales in Europe grew by 17% in 2018 but there was a wide difference between northern and southern countries. France and Germany had 9% and 14% growth respectively but Italy and Spain had 23% and 60% growth respectively. Looking at product groups, truck mixer sales and batching plant sales were particularly strong, with growth rates over 10%. Overall, most countries experienced growth, with the exception of Turkey.

Graph 2: Growth rates in construction equipment sales by product groups in Europe, year-on-year change (%). Source: CECE.

Looking globally, the CECE said that Europe ‘slightly underperformed’ in 2018 as worldwide equipment sales grew by a fifth. It attributed this to the return of emerging markets, led by China and India. Sales in Latin America recovered with a rise of 15% but Brazil, notably, was not part of this trend. North America and Oceania had growth rates of around 20% but the Middle East and Africa saw declining sales. The CECE forecasts global equipment sales growth of 5 – 10% in 2019 subject to there being no trade wars.

Tying into this, the German Mechanical Engineering Industry Association (VDMA) said today that Sebastian Popp, its Deputy Managing Director, described cement plant equipment manufacturers as a ‘drag’ on the rest of the building materials plant sector. His words were from an event that took place earlier in March 2019. Overall incoming order and turnover fell in 2018. He blamed this on a cement market characterised by overcapacity. However, if cement plant engineering was removed from the calculations then the incoming orders of German building material plant manufacturers would have risen by 17% year-on-year and turnover by 16%.

None of this is encouraging for the European cement equipment manufacturers. However, as we said in February 2019 (GCW 390), the market is changing and so too are the suppliers. A period of transition is to be expected. Recent good news from Denmark’s FLSmidth include an order for a new plant in Paraguay and sales figures for its vertical roller mills in 2018. Russia’s Eurocement ordered three mills from Germany’s Gebr. Pfeiffer just last week.

Malaysia: Lafarge Malaysia has appointed Yeoh Khoon Cheng as its chief executive officer (CEO). He has held the role of interim CEO since late 2018 and was also the company’s chief financial officer (CFO), according to the New Vision newspaper. Edward James Coultrup will succeed Yeoh as CFO.

Yeoh, aged 60 years, holds over 30 years of experience in the cement industry and 18 years of experience as a CFO. He has worked for LafargeHolcim’s subsidiaries and predecessor companies since 1999. He first held the CFO post in Malayan Cement Berhad, now Lafarge Malaysia, from 1999 until 2011. He has since been CFO at Lafarge Cement China and Huaxin Cement. He is a Certified Public Accountant and is a member of the Malaysian Institute of Certified Public Accountants (MICPA) and Malaysian Institute of Accountants (MIA).

US: The Portland Cement Association (PCA) forecasts that cement consumption will grow by 2.3% year-on-year in 2019. It is a slight drop from the rate of 2.6% it previously forecast in November 2018.

“While there are several phenomena that confront the economy in the next two years, the PCA believes the economy is strong,” said Ed Sullivan, PCA Senior Vice President and Chief Economist. He added that rising interest rates are expected to drag on economic growth, leading to a slowdown in private construction. Cement consumption is expected to slow as a result.

The PCA also said in its Spring Forecast that rising state deficits had forced many states to adjust budgets, reduce costs, and re-prioritise spending. Infrastructure spending had been falling in priority as a consequence. In the medium term the PCA expects cement consumption growth to soften until 2021. It then thinks that President Donald Trump’s supplemental infrastructure initiative will arrive in 2022 leading back to increased cement consumption.

Italy: The Legislative Assembly of Umbria has approved a motion to preserve Cemitaly’s Spoleto cement plant. Guidelines presented by various political parties have also called on the Ministry of Economic Development to help cordinate the relaunch of the plant, according to the La Nazione newspaper. HeidelbergCement’s subsidiary Italcementi acquired Cementir and the Spoleto plant in 2017. In February 2019 unions at the unit were told that the cement producer was selling the plant to the newly created company Spoleto Cementir.

Germany: Cemex has reached a binding agreement to sell its aggregates and ready-mix concrete assets in the north and northwest regions of Germany to GP Günter Papenburg for around Euro87m. It expects to sign the final agreement in April 2019 and close the divestment during the second quarter of 2019.

The assets in Germany being divested consist of four aggregates quarries and four ready-mix concrete (RMX) plants in north Germany, and nine aggregates quarries and fourteen RMX plants in northwest Germany.

The proceeds expected to be obtained from this divestment will be used mainly for debt reduction and for general corporate purposes. The transaction is subject to standard regulatory approval.

Kenya: The Competition Authority of Kenya (CAK) has approved the acquisition of Cemtech by Simba Cement. CAK said that, as Cemtech had been dormant for a decade, its purchase would revive the company, create jobs and improve the economy in West Pokot County.

Simba Cement is a subsidiary of Devki Group and it trades under the National Cement brand. Cemtech is a subsidiary of India’s Sanghi Group. It has been attempting to build a cement plant in West Pokot since 2010. The acquisition includes Cemtech’s land, business intellectual property, business records, equipment, goodwill, licenses, stock and third party rights.

Data from the Kenya National Bureau of Statistics used by CAK showed the leading companies in the country’s cement sector by market share were: Bamburi Cement (33%), Mombasa Cement (16%), East African Portland Cement (15%), Savannah Cement (15%), National Cement (8%) and Athi River Mining Africa (13%).

Niger: President Issoufou Mahamadou has inaugurated Malbaza Cement Company’s plant at Malbaza. The US$83m plant has a production capacity of 0.65Mt/yr, according to the Le Sahel newspaper. It produced its first cement in late December 2018. It has 347 employees.

World: FCT Combustion has released details on new burner projects it is involved with. Selected projects include a new contract in the US to convert both kilns to natural gas firing at Ash Grove Cement’s Louisville plant in Nebraska. The order includes Gyro-Therm MKII Burners, Natural Valve Trains and NFPA 86 BMS for both kilns.

Nova Cimangola in Angola has contracted FCT to convert its 5000t/day kiln to fuel oil firing. The order includes a multi fuel main burner, calciner burners, oil heating units, oil pumping and filtering units and control panels.

FCT also provided details about a low NO_x kiln conversion for an undisclosed client. Other selected cement sector projects include the commissioning of Turbu-Flex burner systems for clinker kilns at Finnsementti’s Parainen and Lappeenranta plants in Finland. These are scheduled for commissioning in March 2019 and April 2019 respectively. Baumit’s Wopfing plant in Austria is due for a natural has lance for kiln preheating to be delivered later in March 2019.

It also plans to deliver a Turbu-Flex burner system for a clinker kiln to an undisclosed client in China later in March 2019. It is based on a computational fluid dynamics (CFD) study undertaken by FCT is to allow for the firing of natural gas and to modernise the plant. Commissioning is scheduled for March 2019.

US: Brazil’s Votorantim Cimentos has acquied United Materials, a producer of aggregates, concrete and building materials, for an undisclosed amount. The purchase was conducted by its subsidiary Votorantim Cimentos North America. United Materials operates four ready-mix concrete plants, one aggregate quarry and two building materials units in the western part of New York state. It has around 140 employees.

US: Apparent cement consumption grew by 3% year-on-year to 100Mt in 2018 from 97.4Mt in 2017, according to estimates from the United States Geological Survey (USGS). Production of Ordinary Portland Cement and masonry cement rose by 2% to 87.8Mt from 86.1Mt. Imports of cement increased by 14% to 14Mt from 12.3Mt. Texas, California, Missouri, Florida, and Alabama were, in descending order of production, the five leading cement-producing states and accounted for nearly 50% of US production.

The USGS said that construction spending increased ‘modestly’ during the year, largely owing to somewhat higher spending in the residential and public construction sectors. The non-residential private building sector declined slightly. The leading cement-consuming states continued to be Texas, California, and Florida. Production of cement remained below capacity, in part reflecting both the technical and environmental issues in returning long-idle kilns to full production at some plants, and the availability of imported cement in coastal markets.