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Cembureau called for urgent action on electricity prices from European governments this week to protect cement plants. Its maths was crushingly simple. One tonne of cement takes around 110kWh of electricity to produce. Electricity prices started to top Euro700mWh in some European Union (EU) countries at the end of August 2022. The association says that this represents added costs of Euro70/t of cement and a tripling of the total cost of production. This kind of sudden extra cost to cement production could lead to the widespread closure of cement plants and lead to chaos in the construction supply chain.

Previously, Cembureau reported in 2020 that electricity accounts for about 12% of a cement plant’s energy mix. In a dry production process plant 43% of this is used for cement grinding, 25% goes into raw material preparation, another 25% on clinker production and the final portion is typically used for raw material extraction, fuel grinding and for packing and loading. However, the cost of the electricity can make a big difference to the overall energy bill for a cement plant. When a report by the European Commission’s (EC) Joint Research Centre (JRC) modelled a reference northern European cement plant with a production capacity of 1.0Mt/yr back in 2016, it concluded that the EU cement industry was spending around half of its energy costs on electricity compared to smaller ratios at plants in China, Egypt, Algeria and... Ukraine. That last country in the list is poignant given its unwitting participation in the current energy crisis. One other thing to note is that cement producers, as large scale users, may well be paying less than the wholesale prices Cembureau appears to be quoting.

The timing of Cembureau’s proclamation is pertinent because the EU and individual states have mostly been waiting until the autumn before revealing their energy support plans. However, the dilemma for Cembureau, and other industry lobbying groups, is how to protect their sectors whilst domestic consumers are threatened. The aftermath of the coronavirus lockdowns has shown what can happen when production of key commodities stops: supply chain disruption, shortages and price rises. One ironic shortage in the UK during the lockdown periods was that of CO₂, as high gas prices forced the main producer to shut down, leading to unexpected knock-on problems along the supply chain in areas such as food production. The same situation is reportedly at risk of happening again now too.

Cembureau’s wider solution is to link domestic and industrial consumers of electricity. So, some of its suggestions to policymakers are to use all available means of power generation, implement emergency measures such as price caps immediately, change the rules of the electricity market more generally to prevent future price shocks and to promote large scale renewable power source development. These are all things that could help both individual and industrial users of electricity.

Compare and contrast, then, with the MPA’s (Mineral Products Association) approach to the same problem in the UK. Its strategy instead has been to ask the UK government for tax cuts and freezes and to hurry along the forthcoming policy on support for Energy Intensive Industries. That’s not to say that Cembureau’s suggestions don’t also include some sector specific requests. It has asked that the EU temporary state aid framework adopted in late March 2022 should allow all energy intensive industries to have access to state aid covering 70 - 80% of eligible costs. It has also encouraged the wider use of alternative fuels, although it doesn’t link the reason why beyond reducing imports of fossil fuels. Lastly, it bangs the drum for its recent preoccupation, the EU Carbon Border Adjustment Mechanism, this time adding electro-intensity as a main criterion for eligibility for compensation under EU emission trading scheme (ETS) indirect state aid guidelines.

Government support packages for the energy crisis are starting to be announced in European countries but the question for everyone is whether they and other actions will be enough. One problem for the cement industry will be simply staying on the radar of policy makers facing a crisis looming over their citizens. Yet if there is not enough energy to go around then rationing of some kind will be inevitable and heavy industrial users will be the first obvious targets to be told to cut back. Some months later building material supply shortages will hit. One national cement sector to watch in the coming months may be the Spanish one as it has long warned of the risks of high electricity prices.

UK: Tarmac has appointed Craig Kirkland as the plant manager of Tarmac’s integrated Dunbar plant in Scotland. Kirkland first started working for the subsidiary of Ireland-based CRH in the mid-1990s as its Landfill & Recycling Manager. He later became its Commercial Manager in 2015 before becoming the Head of Transformation at the Dunbar plant in 2021.

Finland: Coolbrook, the manufacturer of electrically-powered gas heating technologies, has announced the appointment of Mikko Jaatinen as its first chief financial officer (CFO). Jaatinen was previously heading the Group Treasury's Funding & Markets team at Neste, a renewable fuels and circular solution company.

In his role as CFO at Coolbrook, Jaatinen will ensure that the company’s financial strategies and policies support its growing global partnerships and commercial relationships, including those with Cemex and UltraTech Cement. He will support Coolbrook’s ambitions of international expansion and scaling up its operations, and lead the development of sustainable financial strategies.

Coolbrook’s chief executive officer Joonas Rauramo said, “The appointment of a CFO is the next logical step in the growth and development of Coolbrook. Mikko’s experience and expertise in a wide range of finance functions and new business development combined with his leadership qualities make him ideally suited to the role.”

Read Global Cement’s interview with Joonas Rauramo in its September 2022 issue

Brazil: Holcim has closed the sale of its business in Brazil to Companhia Siderúrgica Nacional (CSN) for an enterprise value of US$1.025bn. The deal was closed following approvals from the Brazilian authorities. This transaction includes Holcim’s five integrated cement plants, four grinding units, six aggregates sites and 19 ready-mix concrete facilities.

Holcim said that Latin America remains a core strategic growth region for the group. In the first half of 2022 it completed a new cement production line in El Salvador and significantly expanded its aggregates operations in El Salvador, Ecuador and Colombia. The company also continued to expand its Disensa retail network across the region with over 2000 stores now open across eight countries.

Kyrgyzstan: A new cement plant project has been announced for Kyrgyzstan’s Chuy region. The country’s Ministry of Economy and Commerce said that a signing ceremony for an Investment Agreement to implement the project was held between the Cabinet of Ministers of Kyrgyzstan and a consortium comprising representatives from Terek-Tash and ZENIT on 6 September 2022. When built, the plant will have a capacity of 1.5Mt/yr with a total investment cost of around US$150m.

Philippines: Republic Cement has announced that it has become plastic neutral, thanks to the continued efforts of its Ecoloop subsidiary. By collecting and co-processing the equivalent volume of residual plastic waste as it has used in the packaging and transport of its cement products, Republic Cement was able to offset its plastic packaging footprint for 2020, 2021 and so far in 2022. This is equivalent to over 890 dump trucks filled with plastic waste. Ecoloop has already helped a number of other companies to reach plastic neutrality.

Pakistan: Cement sales fell by 24% year-on-year in Pakistan in August 2022, due to increased energy, fuel and transport costs. Total despatches for the month came to 3.3Mt, against 4.3Mt a year earlier, according to data from the All Pakistan Cement Manufacturers Association (APCMA). Local shipments for August 2022 came to 2.9Mt against 3.8Mt in August 2021, a fall of 24%. Exports fell by 26% to 0.39Mt from 0.52Mt in August 2021.

APCMA officials are of the view that the government needs to generate a viable policy for the construction industry, keeping in view the huge damage to national infrastructure after unprecedented recent flooding.

Senegal: Data from the National Agency for Statistics and Demography (ANSD) indicates that cement exports fell by 34% month-on-month in June 2022, although local sales rose by 4%. Overall cement production fell by 2% as manufacturers battle the economic impacts of the war in Ukraine.

Saudi Arabia: Riyadh Cement Company’s net profit after Zakat and tax shrank by almost 47% to US$22.6m in the first half of 2022, compared to US$42.7m in the same period in 2021. The firm ascribed the drop earnings to lower sales, with its revenues standing at US$68.8m in the first six months of 2022, compared to US$107m in the first six month of 2021, a 36% drop year-on-year.

Belgium: Cembureau, the European Cement Association, has called for urgent action to be taken to support cement production due to large increases in the cost of electricity. It said that, if no measures were taken at both the European and national level, the current energy prices would lead to widespread plant closures across the European Union (EU). This in turn could create a crisis in the construction supply chain. It explained that one tonne of cement normally takes around 110kWh of electricity to produce. Therefore, with electricity prices now between Euro700 - 1000mWh, as observed in several EU member states, electricity costs amount to Euro70 – 110/t of cement, tripling the total cost of production.

The association has called for: all available sources of electricity generation to be used to boost power supplies; the immediate introduction of emergency measures, such as price caps; that the EU temporary state aid framework adopted in late March 2022 should allow all energy-intensive industries to have access to state aid covering 70 - 80% of eligible costs; and that co-processing in cement kilns should be actively encouraged and promoted at EU, state and local levels.

It added that further measures should also be considered, including: the electricity market design rules, including the marginal price setting mechanism, should be changed to prevent further electricity price hikes in the future; the cement sector should be made eligible for financial compensation under the EU emission trading scheme indirect state aid guidelines and that indirect emissions should be included in the EU Carbon Border Adjustment Mechanism (CBAM); the large-scale deployment of renewable energy should be supported across the EU; and that the pace of the EU climate agenda ('Fit for 55') should be maintained, and the CBAM should be implemented in a timely manner.