Displaying items by tag: Government
Malaysian cement producers agree not to raise prices
20 June 2019Malaysia: Cement producers have agreed not to raise their prices after a meeting with the Domestic Trade and Consumer Affairs Ministry, despite mounting raw material costs and negative currency exchange issues. Minister Saifuddin Nasution Ismail said that the producers were also asked to ‘discuss’ any future prices rises with the ministry first, according to the Malaysian National News Agency (BERNAMA). He added that cement is a controlled item and action under the Control Of Supplies Act could be taken against producers found to increase the price without the government’s approval. The government is also working on a target-based petrol subsidy, although further work is required on this.
Earlier in June 2019 the Cement and Concrete Association of Malaysia has defended a reported 40% rise in the price of cement due to unsustainable mounting input costs. It said that over the last few years the cement industry had suffered from increased costs for electricity, packing materials, imported fuels, raw materials and equipment.
Burkina Faso: Harouna Kaboré, the Minister of Commerce, Industry and Handicraft, has inaugurated a new mill at Cimburkina’s cement grinding plant at Kossodo in Ouagadougou. By installing the new mill the unit has doubled it production capacity to 2Mt/yr, according to the Sidwaya newspaper. The upgrade cost US$25m.
François Sangline, the director general of the subsidiary of Germany’s HeidelbergCement, said that the 2000t limestone silo feeds the production line consisting of two 150t/hr cement grinding mills. This is followed by a 120t/hr bagging unit. Sangline noted that the country’s cement consumption of 2.5Mt/yr is below the domestic cement production capacity of 6Mt/yr. Due to this he lobbied the government to protect local production against imports and fraud.
Update on Egypt
19 June 2019Tourah Cement in Egypt took the tough decision last week to temporarily stop production. It blamed this on an acute financial crisis rendering it unable to pay its running costs. The subsidiary of Germany’s HeidelbergCement was reported in the Global Cement Directory 2019 as already being partly closed. This latest news is regrettable but not surprising.
Graph 1: Cement consumption and production in Egypt. Sources: Industrial Development Agency, Global Cement Directory 2019, Cement division of the Building Materials Chamber of the Federation of Egyptian Industries.
As Graph 1 shows that the backdrop here is of a local cement sector rife with overcapacity. Capacity utilisation rates have hovered around 70% in recent years. The sector breaks down into about a quarter of production capacity under state control and the remainder owned by private companies. Overall, about half of the production capacity is run by multinational companies like Greece’s Titan, France’s Vicat and Germany’s HeidelbergCement.
The country hosts some of the largest cement plants in the world as well as several very big plants by European or North American standards anyway. The whopping 13Mt/yr government/army-run El-Arish Cement plant at Beni Suef opened fully in 2018. It seemed likely that there were going to be losers in the industry following that kind of disruption from a state-owned player. Indeed, Medhat Istvanos, head of the cement division of the Building Materials Chamber of the Federation of Egyptian Industries, explicitly blamed the El-Arish Cement plant for making the situation worse in September 2018. He said that the decision to build the plant was ‘not based on precise information’ and that it had harmed local production.
In the wider picture, the cement sector started to move away from subsidised natural gas and heavy fuel oil to coal instead in the mid-2010s. Tourah Cement mentioned this in its statement about halting production. The government has supported the cement industry through large-scale infrastructure projects and a state-sponsored compensation system under the Contractors Compensation Act that offset the loss prompted by the Egyptian pound’s floatation in 2017.
However, overcapacity has consistently been a problem and this was clear when the El-Arish Cement plant was approved. Exports of cement crept up to 1Mt/yr in 2017 from 0.1Mt/yr in 2015. Yet, as the Low-Carbon Roadmap for the Egyptian Cement Industry pointed out, Egyptian FOB exports of cement cost US$20/t higher than regional competitors such as Turkey. At this kind of disadvantage Egypt lacks the traditional escape route for an overproducing cement sector.
In these kinds of conditions, consolidation appears to be crucial while organic or government-backed demand plays catch-up with the production base. Certainly Egypt has the population and the development potential as its economy grows in the medium to long term. The government stabilising the economy after recent troubles is crucial for the construction industry. In the meantime all is not lost as the focus is on efficiency gains and cost cutting. The growth of alternative fuels as the sector’s fuel mix continues to adjust to the new normal following the abolition of subsidies on natural gas is one example of this.
Rwandan government puts stake in Cimerwa on sale
19 June 2019Rwanda: The Rwandan government has started to sell its stake in Cimerwa. It holds a 16.5% stake in the cement producer via the Agaciro Development Fund, Rwanda's Sovereign Wealth Fund, according to the New Times newspaper. Other shareholders, including SORAS Group, Rwanda Social Security Board (RSSB), and Rwanda Investment Group (RIG), have also expressed interest in selling their shares, making a total of 49% of shares available. The government originally intended to start the sale in March 2019. Potential buyers have until 5 July 2019 to register their interest.
Cimerwa produced 0.36Mt of cement in 2018, a figure well below its production capacity of 0.6Mt/yr. However, the country imported 0.32Mt of cement in 2018 to meet local demand. The company has also made a loss in recent years. The integrated plant is run by South Africa’s PPC, which has a majority stake in the firm.
Ethiopia: Electricity rationing has been restricting the production of cement companies since it started in April 2019. Under a program implemented by Ethiopian Electric and the Ministry of Water and Energy, cement producers are only allowed to operate for 15 days per month, according to the Reporter newspaper. They say this has increased their production costs because cement production is a continuous process that requires start up and stoppage time. The Ministry of Trade has asked that cement producers do raise the price of cement despite the increase in production cost. Input and transport costs have also risen.
“There is a huge waste of resources when we start up and stop running our plant. Continuous production has cost benefits. We spend 24 hours warming up the plant. There is wastage of coal and electric power,” said Mesfine Abi, the chief executive officer (CEO) of Habesha Cement. He added that the company is facing growing maintenance costs as its machines fail to cope with repeated power cuts.
The national electricity power restrictions have been caused by water shortages at hydroelectric dams. Rainwater has started flowing back in the dam reservoirs but power rationing is not expected to be rescinded until early July 2019.
Tourah Cement stops production due to oversupply
18 June 2019Egypt: Tourah Cement says it has stopped production due to a financial crisis caused by oversupply in the local market. Jose Maria Magrina, the managing director of Tourah Cement, told employees in mid-June 2019 that production would be stopped temporarily as it couldn’t cover its costs, according to Mist News. Estimated national cement consumption is 50Mt/yr but total production capcaity is 85Mt/yr.
In a statement the subsidiary of Germany’s HeidelbergCement said that new plants had forced producers to lower prices below the cost of production. It has also blamed higher fuel prices due to a cut in government subsidies.
Malaysia: The Cement and Concrete Association of Malaysia has defended a reported 40% rise in the price of cement due to unsustainable mounting input costs. It said that over the last few years the cement industry had suffered from an increase in cost of electricity, packing materials, imported fuels, raw materials and equipment, according to the Star newspaper. It added that jobs in the sector would be at risk if it did not pass on its costs adequately.
Business representatives have complained about the sudden hike in cement prices. Penang Master Builders and Building Materials Dealers Association adviser Datuk Lim Kai Seng described the sudden increase as ‘unfair.’ Finance Minister Lim Guan Eng also described the situation as unprecedented. He said he would refer the matter to the Domestic Trade, Consumerism and Cooperatives Affairs Minister Datuk Seri Saifuddin Nation Ismail.
Bolivia: The Bolivian parliament has approved draft legislation prioritising the use of locally produced cement by local government and state-owned companies for infrastructure projects and road construction. The law will support the opening of two new cement plants at Potosí and Oruro in late 2019, according to El Potosi. The new rules further extend a decree announced in March 2019.
CSN planning US$390m cement plant in Paraná
13 June 2019Brazil: CSN Cimentos is planning to spend around US$390m on building a new 3Mt/yr cement plant in Paraná. Eduardo Bekin, president of the Paraná State Development Agency, said that the company already had the authorisation to conduct economic viability studies and should confirm the plant by late August 2019, according to the Valor Econômico newspaper. CSN is also considering building the plant in Sergipe state, where it operates a limestone mine. The final decision will depend on the best tax environment for the cement producer.
Dust matters in India
12 June 2019There was a glimmer of good news visible through the Delhi smog this week with the launch of a market-based emissions trading scheme (ETS) for particulate matter (PM). A pilot has started at Surat in Gujarat. The scheme will apply to 350 industries in the locality and it will be scrutinised for wider rollout in the country.
China robustly started to tackle its industrial PM emitters a few years ago although the work remains on-going. In its wake India has increasingly made the wrong sort of headlines with horrifically high dust emissions. Delhi, for example, reportedly had PM2.5 emissions of over 440µg/m3 in January 2019. To give this some context, the World Health Organisation’s (WHO) annual upper guideline figure for safe human exposure is 10µg/m3. Research by the Financial Times newspaper suggested that more than 40% of the Indian population is subject to annual PM2.5 emissions of over 50µg/m3.
Air Quality Life Index (AQLI) research reckons that if India were able to meet its national PM2.5 standard of 40µg/m3 then its population would live 1.8 years longer or 4.3 years longer if it met the WHO guideline level. The current situation is an unnecessary tragedy. In strictly structural terms the country’s productivity is being thrown away by damaging the health of its workforce. For comparison amongst other major cement producing countries, AQLI data placed China’s PM2.5 emissions at 39µg/m3, Indonesia at 22µg/m3, Vietnam at 20µg/m3 the US at 9µg/m3. These figures cover all industries in different conditions and climates. If the US can do it, why not the others?
Back on trading schemes, the famous ETS at the moment is the European one for CO2 emissions. Similar schemes are slowly appearing around the world as governments look at what the European Union (EU) did right and wrong. For example, South Africa started up a carbon tax in early June 2019. Yet as the supporting documents by the Gujarat Pollution Control Board (GPCB) point out there have been a variety of ETS systems’ over the years. The US’s Acid Rain Program is generally seen to have achieved significant reductions in SO2 and NOx emissions although the National Emission Standards for Hazardous Air Pollutants (NESHAP) has continued this work. Chile even ran its own PM ETS in the 1990s although the outcomes have been disputed.
One problem with a CO2 ETS, and anthropomorphic or man-made climate change in general, is that it is intangible. Even if sea levels deluge major coastal cities, rising mean temperatures reduce agricultural yields and human populations contract sharply, people will still be arguing over the research and the causes. The beauty of a PM ETS is that if it works you can literally see and feel the results. A famous example here is the UK’s Clean Air Act in the 1950s that banished the fog/smog that London used to be famous for.
The Gujarat PM ETS is a pilot, the results of which will be considered by researchers from a number of US-based universities and the Abdul Latif Jameel Poverty Action Lab. Explicitly, the study plans to use a randomised control trial to compares its results against the command and control style approach used in the rest of the country. On the cement-side various Indian news stories have emerged as state pollution boards have increasingly started fining producers for emission limit breaches. Clearly the government is taking dust emissions seriously. Reduction is long overdue.