Displaying items by tag: Government

Pakistan: Mian Saqib Nisar, the Chief Justice of Pakistan, has said that the Supreme Court will prevent the construction of any new cement plants or upgrades to existing plants near Katas Raj Temples in Punjab. However, he said that no existing plants in the area would be shut down, according to the Business Recorder newspaper. The investigation by the court had been taken in response to media reports that the pond at the Hindu heritage site was drying out due to water consumption by nearby cement plants. The local government has also been taking steps to stop new cement plants being built in parts of the province.

Philippines: Big Boss Cement has appealed against a decision by the Board of Investment (BOI) denying its application for registration because it lacked ‘proof of concept’. Big Boss’ president Gilbert Cruz said that the new cement company’s application was turned down in 2017 because it was not producing clinker, according to the Manila Bulletin newspaper. It plans to open a cement grinding plant in Pampanga in March 2018.

Egypt: The Industrial Development Authority (IDA) has not received any requests for 11 cement plants licenses offered since early 2017. Sources quoted by the Al-Mal newspaper reveal that despite eight local and foreign companies purchasing statements of work by the end of 2017, there has been little interest in the licences.

The IDA offered 14 cement licenses in 2016 to build plants or expand operations in nine governorates. Three licences were sold to SVC, Elsewedy Cement and Egyptian Cement respectively for US$28m in 2016. The remaining licences for Minya, Sohag, Qena, Aswan, New Valley, Matrouh, Suez and South Sinai were re-offered in 2017. Oversupply of cement in the country is estimated to be 30Mt/yr.

Pakistan: Shahbaz Sharif, the chief minister of Punjb, has approved summary legislation banning the installation of new cement plants in the province on environmental grounds. The summary will be passed to standing committees on legislation for deliberation and recommendations, according to the Nation newspaper. The region has 12 cement plants, of which eight are located in the Salt Range of hills, where local residents have become increasingly intolerant of new industrial plants due to damage to underground water tables and increased air pollution.

The summary will also examine expansion plans by existing cement plants in the province and it has hired a consultancy, Artelia, to study the situation. The Supreme Court of Pakistan also being looking at the issue separately. However, the local cement industry is in an expansion mode as it copes with resident and public sector construction markets and large-scale infrastructure projects driven by the China-Pakistan Economic Corridor initiative.

Indonesia: Semen Indonesia forecasts that domestic cement consumption will grow at a rate of 5 – 7% year-on-year in 2018, a lower rate than the level of 7.8% recorded for the first 11 months of 2017. Semen Indonesia corporate secretary Agung Wiharto said that the prediction was based on continued demand for cement from government infrastructure projects, according to the Jakarta Post. The company also took other factors - such as inflation, political stability and market confidence - into account in its sales projection. Indocement has also forecast a cement consumption growth rate of 5 – 6% in 2018. Both companies reported reduced earnings in the third quarter of 2017.

Nepal: The Department of Mines and Geology has technically disqualified Nigeria’s Dangote Cement from applying for three limestone mine licences in an open bidding process. The Investment Board Nepal (IBN) had approved the investment in 2013 before passing the application to the mining department, according to the Republica newspaper. Department deputy director general Ram Prasad Ghimire claimed that Dangote's proposals lacked essential documents on the required skilled manpower and it was not considered qualified for the next financial proposal.

Dangote Cement had applied for three mines: two in Dhading and one in Palpa. However, China’s Huaxin and United Cements recently won two limestone mining licences. Previously, Dangote Cement purchased a limestone mine in Makawanpur that was later found to be a substandard. The Nigerian company has also faced opposition from local producers who have described the country as being self-sufficient in cement.

Egypt: Khaled Fahmy, the Minister of Environment, has recognised the work by subsidiaries of Suez Cement to reduce air pollution and so called ‘black cloud’ periods. The minister presented certificates of appreciation to the manager of Helwan cement plant, Ahmad Ragae, the manager of Tourah cement plant, Omar Khorshid, the manager of the Environment Department at Helwan cement plant, Ragheb Hammouda and the manager of Environment Department at the Tourah cement plant, Badry Ibrahim.

Congratulations are due to India’s UltraTech Cement this week for finally completing its US$2.5bn asset purchase from Jaiprakash Associates. The deal has been around in some form or another since at least 2014 when UltraTech arranged to buy two cement plants in Madhya Pradesh for around US$750m. That deal, publicly at least, became a victim of the 2015 amendment to India’s Mines and Minerals (Development and Regulation) (MMDR) Act. The Bombay High Court eventually rejected it in early 2016 after a period of delays. However, the deal bounced back in a much larger form around the same time and since then everything has gone relatively smoothly.

As chairman Kumar Mangalam Birla put it in his letter to shareholders in the company’s 2016 – 2017 annual report the, “move is essentially for geographic market expansion.” He then went on to mention all the usual keywords like ‘synergy’ and ‘economies of scale’ that you expect from an acquisition. Quite rightly he finished with, “It is with great pride that I record, that UltraTech is the largest cement player in India and the fifth largest on the world stage.” On that last point he meant outside of China but UltraTech does have a small number of assets outside of India, notably in the UAE, Bahrain, Oman and Bangladesh, hinting at an international future for the cement producer.

Map 1: UltraTech Cement’s plants in India. Source: UltraTech Cement Corporate Dossier, January 2017.

To give a scale of the deal, UltraTech has increased its number of integrated cement plants in India to 18 from 12 and its cement grinding plants to 21 from 16. Its overall cement production capacity will increase by nearly 40% to 91.4Mt/yr from 66.3Mt/yr. The new assets are in Himachal Pradesh, Uttar Pradesh, Uttarakhand, Madhya Pradesh and Andhra Pradesh. The main regions that will benefit are the North, Central and South zones. In particular the Central Zone will see its capacity jump to 21.1Mt/yr from 6.2Mt/yr. This area also includes a new 3.5Mt/yr plant at Dhar in Madhya Pradesh that is scheduled for commercial production in late 2019.

The completion of the Jaiprakash Associates deal was followed by the introduction at the start of July 2017 of the Goods and Services Tax (GST), a rationalisation of some of the country’s central and state taxes. UltraTech promptly said it had reduced its product prices by 2 – 3% in light of tax reductions under the new regime. Some producers were warning of a rise in cement prices in the run-up to the introduction of the GST and the Cement Manufactures’ Association said that the new tax rate was insufficient. However, UltraTech said that the new tax rate of 28% was better than 30 – 31% previously. Other Indian producers also reduced their prices this week following the introduction of the GST.

UltraTech’s expansion and the start of the new tax scheme auger well for the Indian cement industry in 2017. Demonetisation knocked cement production at the start of the year and it may have lowered UltraTech’s capacity utilisation rate as well as reducing domestic sales by cutting housing demand. However, sector rationalisation and a simpler tax approach should help to remedy this. Not all government interaction has been helpful to the cement industry in recent years as the MMDR amendment and demonetisation show but the signs are promising.
Roll on the next set of financial reports.

2017 has started more uncertainly for the US cement industry than 2016 did according to the latest data from the United States Geological Survey (USGS). Cement shipment data from just two months, January and February 2017, can only present a limited impression of the state of the industry. Yet the key trend to look for in Graph 1 is the growth in Midwestern US states against a decline in the Western ones. Previously in 2016 this region’s shipments sunk below those in the West in December and didn’t overtake them until the spring. This time round they’ve stuck closely and overtaken them already in February 2017.

Graph 1: Portland and blended cement shipments by US Census Bureau region for 2016 to February 2017. Source: USGS.

The Midwest’s cement shipments jumped by 21% year-on-year to 2.2Mt for those first two months. Buzzi Unicem concurred with this picture in the Midwest with its first quarter financial results this week, reporting a boost in deliveries in the region. HeidelbergCement agreed, reporting sales volumes increases in the north of the country and a decrease in the West. In that region the USGS data shows an 8% fall in shipments to 2.2Mt. HeidelbergCement blamed heavy rain and flooding in California and Oregon as the cause of the problems. Another potential reason that the USGS hints at are increasing imports of cement that it says have been rising faster than sales. For example, imports of cement to the US as a whole grew by 23.9% year-on-year to 0.81Mt in February 2017.

Overall though the situation for the larger cement producers has been subdued. Many of them blamed good weather in the first quarter of 2016 giving them a hard quarter to measure against in 2017. For example, LafargeHolcim’s sales volumes of cement fell by 4.5% in North America although it did report sales growth off the back of cement pricing and cost controls. HeidelbergCement may have looked good on paper following its integration of the Italcementi/Essroc assets but its cement volumes only grew by 1% in the period. Cemex too reported a similar scenario with falling sales volumes of 5% but growing sales revenue.

To put this in perspective, as the Portland Cement Association’s (PCA) chief economist Ed Sullivan says in the May 2017 issue of Global Cement Magazine, cement production in the US grew in 2016 and it is expected to continue growing in 2017 and 2018. Just like the start of 2016 (see GCW251) the potential for US construction growth in the year ahead is a quietly confident one but it isn’t assured.

Cemex points out that housing starts rose by 8% in the first quarter of 2017, as did construction spending in the industrial and commercial sector. However, it says that infrastructure spending fell by 9% in February 2017. Indeed this last point is an important one given that one of the major Trump campaign pledges in the 2016 presidential campaign was to build more infrastructure. As commentators in Washington DC including the PCA have asked: where is the Bill? Rightly, the PCA are not letting the lawmakers forget this during ‘Infrastructure week’ as the issue is discussed. The US cement industry needs this.

For further information on the US cement industry take a look at the May 2017 issue of Global Cement Magazine

Check out this great graph that the UK Mineral Products Association (MPA) released in its latest sustainable development report this week. It lays out where the MPA says the various direct and indirect costs come from climate change policies per tonne of cement.

Graph 1: The cumulative burden of direct and indirect cost of climate change policies on the cement sector (per tonne of cement). GBP£1 = Euro0.94 at time of writing. Source: MPA. 

If it’s correct then the two biggest contributors from carbon taxes on the price of cement in the UK arise from the Carbon Price Support (CPS) mechanism and the Renewable Obligation (RO). Between them the two policies account for around two-thirds of the carbon tax burden on the price of cement. Of note to an industry advocacy body like the MPA, both of these derive from local legislation and they could be changed or dispensed with separate to the Brexit negotiations to extricate the UK from the European Union that have just officially started.

The MPA then goes on to warn that these added costs could rise from GBP£3.24/t at present to GBP£4/t in 2020 and then the truly terrifying (to energy intensive manufacturers at least) GBP£17/t. Subsequently the MPA has flagged these potentially mounting costs as the biggest threat to the UK cement industry in the near future. Failure to act could mean more foreign imports, loss of jobs and damage to the security of supply. All very heavy stuff. The MPA’s warning was nicely timed to precede the UK government’s response to a consultation on another decarbonisation scheme, the Contracts for Difference (CfD) scheme. Here, the government is about to exempt high-energy users, including cement producers.

Essentially, the key message from the MPA’s report is that the cement sector is picking up but it is still below sales levels in 2007. At the same time it has made all these environmental improvements and, now, steadily tightening regulations threaten its future. Just compare this with the situation in the US where the Portland Cement Association (PCA) recently applauded President Donald Trump’s executive order to roll back environmental legislation from the Obama administration. Despite this it insisted that its members were committed to manufacturing products with a ‘minimal’ environmental footprint.

Funnily enough the MPA didn’t mention environmental issues when it released its updated Brexit priorities for the UK government. This is understandable given the graph above that suggests that the majority of the carbon costs on cement production come from UK legislation. However, sharing a land border with the EU south of Northern Ireland may give rise to all sorts of market skulduggery once any sort of post-Brexit deal becomes clear. And this doesn’t even take into account moving secondary cementitious materials about, like slag, or the UK’s international market in solid recovered fuels (SRF) and the like. Differences in UK and EU overall carbon costs on cement may start to have acute implications for producers in both jurisdictions as the negotiations build. In this atmosphere moves like Ireland’s Quinn Cement’s last month, to build a terminal on the UK side of the Irish border, make a lot of sense.