Displaying items by tag: GCW43

Friday saw the news that many have long suspected: China is producing too much cement. Liu Ming, an official with the department of industry within the National Development and Reform Commission, announced that China faces national overcapacity in the next five years.

For anyone used to reading the permanently good news from China's cement industry this is a massive jolt. The natural reaction to dealing with industrial news from a command-style economy is to assume that everything is 'airbrushed'. This then demands the question: how much trouble is the Chinese cement industry really in?

Despite persistent rumours querying how long China's unparallelled growth could last, official responses have only appeared in the last two months. First the environment ministry announced stricter rules regarding nitrogen oxide emissions from cement plants in February 2012. Commentators suggested that the move could wipe out a third of the industry's profits. Shortly afterwards FLSmidth, entered the Chinese environmental control technology market.

In early March 2012 Premier Wen Jiabao lowered China's growth target for 2012, signalling public political acceptance of an inevitable economic 'soft landing'. Then in late March 2012 analysts' reports emerged predicting that each of China's main producers would suffer weakened profits in 2012. Only CNBM, China's biggest producer, appears to have bucked this trend. It announced that it expected its net profit to jump more than 100% compared to 2011. However the general uncertainty regarding statistics from China throws doubt on how realistic this forecast may be.

Yet before we give up hope it's worth remembering that opportunity abounds in a market as gargantuan as China. The rest of 2012 will be an interesting period for the Chinese cement industry.

Canada: René Thibault and Bob Cartmel have been appointed by the Lafarge Group as its senior leaders for all markets and product lines in Canada. Thibault will oversee the four western Provinces and three Territories as well as the Pacific north west and the Dakotas in the US. Cartmel will oversee the six Eastern Provinces.

Thibault has over 20 years of experience with Lafarge in Canada, which has included an assignment at the Lafarge group headquarters in Paris, France. He has an Engineering degree from Queen's University in Ontario and has completed executive studies at Harvard Business School in the US.

Cartmel has over 25 years of experience with Lafarge spanning Canada, the United States and Latin America. He has a Bachelor of Business Administration degree from Wilfrid Laurier University in Ontario.

Lafarge said that the appointments, which are part of its wider geographical restructuring programme to bring all of Lafarge's businesses together under a single leader in each geographical area, would provide further career development opportunities for employees, strengthen the company's customer approach as it delivers sustainable solutions to the construction industry and allow its community investment projects to be more focused.

Yemen: It is being reported that large quantities of Saudi Arabian cement are being smuggled to Yemeni markets due to the decline of local supply and an increase in cement demand in Yemen. The head of the financial sector of the Public Cement Corporation, Abdul-Malik Al-Qirshi, told Yemeni press that the trucks that transfer Yemeni salt to the Saudi town of Jazan, return to Hodeida in Yemen carrying Saudi cement. Exports from Saudi Arabia have recently been blocked by the government there.

Al-Qirshi explained that Saudi cement increasingly flows to Yemeni markets due to the suspension of production at some Yemeni factories. He made it clear that the Saudi cement is largely purchased in Hodeida and on the Yemeni-Saudi border, going on to add that Saudi cement is sold at nearly twice the price that it is in Saudi Arabia.

"Despite the fact that Saudi cement is smuggled to the Yemeni markets, there is impure cement of unknown-origin that is packed in Saudi-made bags" he added. "This occurs due to weak control on the Yemeni market." With the exception of Amran and Al-Watania cement factories, all the other five cement factories in Yemen have halted production.

China: China National Building Material (CNBM) hopes to list in Shanghai in 2012 and be one of the biggest mainland initial public offerings of 2012. The Hong Kong-listed firm hopes to raise US$2.38bn from its Shanghai A-share listing according to Nomura analyst Luo Yang. Yang cautioned however, saying, "It is too optimistic. US$1.58bn should be the maximum, given the market."

The state-owned firm has applied to the China Securities Regulatory Commission for an A-share listing in Shanghai and is awaiting its approval, said CNBM chairman Song Zhiping. "If there is a good window, we hope to list this year," said Song.

Meanwhile, CNBM aims to increase cement sales by 40% in 2012. It hopes to achieve 30% profit growth across all of its businesses. Cement accounted for three-quarters of CNBM's revenue in 2011 and demand is expected to increase by 5-6% in 2012, a massive 100Mt. Again, Nomura's Luo cautioned the speculation, saying that, "This year demand is slowing down. Prices are under downward pressure due to overcapacity."

India: Associated Cement Companies Ltd (ACC) is reportedly planning to boost its capacity by 16% to 35Mt/yr from existing 30Mt/yr at present. The expansion will entail an investment of around US$650m, which would be funded entirely from internal accruals.

To achieve this, ACC plans to set up a 4Mt/yr cement unit and a 2.79Mt/yr clinker unit at Jamul in Chattisgarh. The company will also stop its existing production line at Jamul. Grinding units are also planned at Sindri in Jharkhand and Kharagpur in West Bengal. The company also proposes to develop four coal blocks in Madhya Pradesh and one in West Bengal for its raw material requirements.

Poland: Gorazdze Cement is set to become the largest cement production site in Europe thanks to the installation of a new mill. The new investment will see the company's production capacity grow by 25% to 5.5Mt/yr. Company president Andrzej Balcerek said that within three or four years cement demand in Poland will exceed 20Mt/yr.

Bulgaria: Devnya Cement has announced that it has officially launched the construction phase of a Euro160m project to upgrade its production facilities. The company has signed up Chinese turnkey cement plant builder CBMI, a subsidiary of Sinoma International Engineering, as a general contractor for a new 1.5Mt/yr cement production line, which is set to begin operation in early 2015.

The upgrade represents a significant step up for the company, a subsidiary of Italy's Italcementi, which currently has a capacity of just 2Mt/yr.

Lithuania/Japan: Japan's Shimizu Corporation, seen as a prospective general contractor of Lithuania's planned new nuclear power plant, has shown interest in Akmenes Cementas, the only cement manufacturer in the Baltics.

Akmenes reported that representatives from the Japanese corporation were informed about the types and quality of cement, as well as delivery methods and supply terms, during their visit to the Akmenes factory in north west Lithuania on 28 March 2012.

South Africa: The French multinational Lafarge will pay US$19.3m after it was found guilty of involvement in a cement cartel in South Africa. The Competition Tribunal confirmed that the settlement represented 6% of Lafarge's 2010 turnover in the Southern African Customs Union countries (South Africa, Botswana, Lesotho, Swaziland and Namibia). AfriSam, another of the cartel participants, previously agreed to pay an 'administrative penalty' of US$16.1m.

Brazil: Brazil's Camargo Corrêa has launched a bid for the 68.1% stake in Portugal's Cimpor that it does not already own. Camargo Corrêa Cimentos, the Brazil-based cement unit of which is that nation's fifth-largest cement producer, currently controls 32.9% of Cimpor.

It is thought that Camargo Corrêa may be taking advantage of depressed valuations in the troubled Portuguese economy to win control of the company. Cimpor is itself the fourth-largest cement producer in Brazil. In 2010, Camargo Corrêa teamed up with industrial conglomerate Grupo Votorantim to thwart Brazilian steelmaker CSN's bid for full control of Cimpor. Votorantim holds 21% of Cimpor.

This new move may open up the spectre of a lengthly and interesting anti-trust approval if the deal is accepted by Cimpor, especially given that Camargo Corrêa, Votorantim and four other producers were accused of price-fixing in the Brazilian cement market in November 2011.

At the end of 2011 Portuguese media reported that both Camargo Corrêa and Votorantim were preparing to buy Cimpor minority shareholders out. It has now been reported that Votorantim is looking to make use of its option to buy bank Caixa Geral de Depositos SA's 9.6% in Cimpor and thus reach a stake in Cimpor similar in size to that owned by Camargo Corrêa.