Displaying items by tag: Government
Australia: Adelaide Brighton says its sites in Victoria can continue to operate during coronavirus-related lockdown measures that have been implemented until mid-September 2020. It said it would work with its customers, “to assess their requirements for construction materials and modify production levels in response to demand.” The company operates a jointly-owned cement grinding plant in Melbourne as well as concrete and aggregate units in the state.
Half-year cement producers update
05 August 2020Building materials manufacturer Saint-Gobain summed up the situation large companies face due to coronavirus in its second quarter results when it said that it faced, “very different situations from one country and market to the next.” Financial results are in from many of the largest multinational cement producers outside of China and the basic picture is as Saint-Gobain describes.
Sales revenue for LafargeHolcim, HeidelbergCement and Cemex are all down by around 10% year-on-year for the first half of the year. The variation between different geographical regions is large with some reporting sales declines of up to 20% and others noting rising sales, with one above 5%. Generally, recoveries were reported in June 2020 or when governments relaxed their lockdowns. There’s more variation with earnings figures although this may be down partly to the different figures each company likes to use. Around this is plenty of talk about liquidity and cost cutting programmes to sooth investors.
Figure 1: Sales of selected major multinational cement producers in first half of 2020. Source: Company financial reports.
Figure 2: Cement sales volumes of selected major multinational cement producers in first half of 2020. Source: Company financial reports.
Where it starts to become more interesting is when the companies talk about what they think will happen next. As Robert McCaffrey picked up upon in last week’s Global Cement Live there was a divergence between LafargeHolcim’s optimism for the second half of the year and HeidelbergCement’s caution. LafargeHolcim said it expected a, “Fast demand recovery with an encouraging outlook for the second half of 2020.” Instead, HeidelbergCement said, “A further wave of infections may occur at any time, which would have an impact on construction projects already started or announced in the individual countries. Against this backdrop, it is still not possible to estimate the full effect of the corona crisis on the company results for 2020.” Cemex sat on the fence with, “We expect that Covid-19 will continue to challenge our operations in new ways over the next few quarters.” Contrast this with Buzzi Unicem’s prediction, “Visibility for the second half of the year continues to be very limited and our forecasts are based on a scenario of gradual mitigation of the infections and related restrictions on economic activity.”
This difference in outlook may be subjective. Both LafargeHolcim and HeidelbergCement only had one geographical region each that reported growing sales in the first half of 2020 but LafargeHolcim’s ‘positive’ region represented a larger share of the group’s revenue. Alternatively, it may just be that the companies have different characters and this is reflected in their forecasts. Humans can be either be pessimistic or optimistic and so too can companies.
Of the large regional players, most of the Chinese cement producers are yet to release results for the second quarter of 2020 so there is little to say. Data out this week from China’s Ministry of Industry and Information Technology shows that cement output fell by 4.8% year-on-year to 1Bnt in the first half of 2020. UltraTech Cement, India’s largest producer, saw its revenue fall by 22.5% year-on-year to US$2.34bn for the first half of 2020. The worst of this was in the first quarter of the Indian financial year to 30 June 2020 with revenue falling by 33% with consolidated sales volumes down by 22% year-on-year to 14.7Mt. This coincided with the country’s ‘total’ lockdown period from late-March 2020 to 1 May 2020. Dangote Cement, a large African producer, reported growth in both sales and earnings with full or partial lockdown implemented in South Africa, Congo and Ghana in April 2020 before reopening in May 2020.
This is just a snapshot of what’s been happening with mid-year results awaited from the likes of CRH, Votorantim and, as mentioned above, the Chinese producers. Blanket lockdowns clearly damage construction markets, so future government strategies in tackling the ongoing wave of the pandemic or future waves will have consequences for the financial performance of construction material companies. In the meantime, in Europe at least at the moment, targeted regional lockdowns seem to be the public health measure of choice when outbreaks get out of control. How this translates to balance sheets will be revealed later in the year. In the meantime, while the world works out how to cope with coronavirus, expect more uncertainty.
Kao Cement to invest US$287m on plant in Niger
05 August 2020Niger: The government has approved a project by Kao Cement to spend US$287m on a plant in the Tahoua region. The scheme is expected to create over 300 jobs, according to Agence Ecofin. Kao Cement is based in Niamey. A previous government scheme in 2017 looked for investors to build a 0.95Mt/yr cement plant in Kao.
Japan: A proposal by Mitsubishi Group on researching CO2 injection into concrete has been approved for a grant from the New Energy and Industrial Technology Development Organisation (NEDO). This joint project between Mitsubishi Group, Kajima Corporation, and Chugoku Electric Power aims to improve the existing technology so that it can be applied to the reinforced and cast-in-place concretes used in building construction. At present the group said that current carbon-recycling techniques are mainly used for unreinforced concretes, such as concrete blocks.
Mitsubishi Group has already been involved in the development of concrete projects that take advantage of carbon-recycling, including a zero-emission concrete called CO2-SUICOM. It added that carbon capture, utilisation and storage (CCUS) technologies, including carbon-recycling, are an excellent opportunity for the company to use its strengths between industries that both emit and use CO2.
Germany: The Westküste100 green hydrogen project has received funding approval from the Federal Ministry of Economic Affairs. The plan is backed by an investment of Euro89m, with Euro30m of this total approved for the project’s launch in August 2020. The initiative intends to produce green hydrogen, transport it in the gas network, use it in industrial processes and to interlink different material cycles within the existing infrastructure. The consortium brings together ten partners: EDF Deutschland, Holcim Deutschland, OGE, Ørsted Deutschland, Raffinerie Heide, Heide’s municipal utility, Thüga and ThyssenKrupp Industrial Solutions, along with the Region Heide development agency and the Westküste University of Applied Sciences.
“An electrolysis plant with a capacity of 700MW - this is our vision and the next milestone in implementing the development targets laid down in the national hydrogen strategy by 2030,” said Jürgen Wollschläger, managing director of Raffinerie Heide and coordinator of the Westküste100 project.
The funding approval enables work to begin on the first phase of the project, which is set to run for five years. A newly formed joint venture, H2 Westküste, comprising EDF Deutschland, Ørsted and Raffinerie Heide, is to build a 30MW electrolyser which will produce green hydrogen from offshore wind energy and provide information on the operation, maintenance, control and grid compatibility of the equipment.
In a later stage of the project hydrogen from both electrolysis and CO2 from a cement plant in Schleswig-Holstein will be used in the process. During the initial phase of the Westküste100 project preparations will be made for converting the Lägerdorf cement plant to an oxyfuel combustion process.
Thorsten Hahn, chief executive officer (CEO) and chairman of Holcim (Deutschland) said, “For us, as a manufacturer of building materials, the funding approval is a key milestone on the way to decarbonising cement production. Now all of us involved in Westküste100 must move forward quickly, decisively and dynamically in order to achieve our ultimate goal of cross-sectoral coupling on a large industrial scale in the coming years.”
Indian cement production falls by 85% in first half of 2020
03 August 2020India: Data from the Commerce and Industry Ministry shows that cement production fell by 85% year-on-year to 26.3Mt in the first six months of 2020 from 178Mt in the same period in 2019. Cement production in June 2020 fell by 7% year-on-year in June 2020 to 26.3Mt from 28.0Mt. India implemented a coronavirus-related lockdown that shut down industrial plants from late-March 2020 to early May 2020.
Chinese cement output falls by 4.8% to 1Bnt so far in 2020
03 August 2020China: Data from the Ministry of Industry and Information Technology shows that cement output fell by 4.8% year-on-year to 1Bnt in the first half of 2020. Output from the building materials sector as a whole decreased by 2.2%, according to the Xinhua News Agency. Overall, the sector’s sales revenue and profits decreased by 4.8% to US$344bn and 8.2% to US$26.8bn respectively.
Dust emissions reported at McInnis Cement plant
03 August 2020Canada: Residents at Port-Daniel-Gascons in Quebec reported dust emissions from the McInnis Cement plant in June and July 2020. This has been blamed on mechanical breakdowns and a computer failure, according to the Journal de Québec newspaper. The cement producer says it has reported the situation to the local authorities. Commercial production at the plant started in mid-2017. The incidents reportedly took place as the plant reached its maximum production capacity.
INC distributors waiting up to a month for orders
31 July 2020Paraguay: Distributors of cement supplied by Industria Nacional del Cemento (INC) are reportedly waiting up to a month for their orders to be delivered, even if they pay in advance. The state-run cement company’s two plants are delivering around 40,000 bags/day despite a production capacity of up to 100,000 bags/day, according the ABC Color newspaper. INC inaugurated a new mill at its Villeta cement grinding plant in 2018 and has invested US$80m in its last set of upgrade projects.
CNBM consolidates its cement businesses
29 July 2020Consolidation of the Chinese cement industry looks set to take a major step forward this week. China National Building Material Company (CNBM) announced that it is restructuring its cement production assets and companies under one subsidiary, Tianshan Cement. The move is significant since CNBM is the world’s largest cement producer, with a production capacity of over 500Mt/yr. That’s more than the total output of any single country except China. It’s also between a quarter and a third of national capacity domestically.
Little information has been revealed except that it concerns most of CNBM’s cement producing subsidiaries. Namely: China United Cement, South Cement, North Cement, Southwest Cement and Sinoma Cement. Note that this leaves out Ningxia Building Materials and Qilianshan Holdings, although some commentators have suggested that they may be merged in later on. It was announced to stock markets as a proposal with a ‘letter of intent of cooperation’ exchanged between CNBM and Tianshan Cement. CNBM will remain the controlling shareholder of Tianshan Cement after the restructuring. However, the assets concerned - the cement companies are still being discussed and considered. The aim of the reorganisation is to ‘facilitate resolving industry competition’ among the subsidiaries of CNBM.
The move is expected to significantly increase operational efficiency at the cement companies as they start to act in a more coordinated manner. It also fits the government-requested drive for the industry as a whole to consolidate and follow supply-side reform initiatives by, hopefully, eliminating old production assets and other measures. Indeed as CNBM’s president Peng Shou said in the company’s report for 2019, “Production overcapacity of the industry has not been fundamentally resolved. The task of cutting production overcapacity was arduous, and the supply-side structural reform remains the major task.” The company says it is committed to building a three-pillar development platform of cement, new materials and engineering services.
How much more operational efficiency the world’s largest cement producer will need to do this is a key question. In 2019 the sales revenue from its cement business rose by 12% year-on-year to US$18.7bn and its earnings before interest, taxation, depreciation and amortisation (EBITDA) increased by 19% to US$5bn. Growth at this level is novel to western-based multinational cement producers! So the implication might be that CNBM is hoping to turbo-charge its financial performance before (or if) the serious government-forced supply side cuts occur or a general economic slowdown happens so that it can return to ‘normal’ Chinese performance afterwards.
The Chinese Cement Association presented a good overview of the history of CNBM that you can read here. The quick version is that it’s the embodiment of the Chinese government’s desire to build and merge its cement industry since 2005. The latest restructuring with Tianshan Cement is the latest chapter in this 15 year story. What the reorganisation means internationally is ‘probably not much’ in the short term. Better coordination between CNBM’s cement companies could have implications in the longer term if they acted together on an international strategy, such as a strategy on exports for example, or if group-wide suppliers were agreed upon.
That’s all on China but finally if readers were not able to join us for Global Cement Live last week on 23 July 2020, we recommend watching the playback of Arif Bashir, Director (Technical/Operations) of DG Khan Cement Nishat Group Pakistan. He gave a great overview of Pakistan’s cement industry and the challenges it is facing and overcoming. Be sure to tune in for this week’s guest speaker, Regina Krammer from Loesche who will be discussing how the coronavirus crisis will change communications in the sector.
To register for Global Cement Live visit: www.globalcement.com/live