Displaying items by tag: Holcim
Chinese ripples on the Pacific Rim
16 August 2017After a couple of weeks looking at the capacity-rich cement markets of Angola and Vietnam, we turn our attention this week to some of those countries on the receiving end of overcapacity.
Costa Rica is an unlikely place to start but it came to our attention this week due to a short but significant news item. In summary, the amount of cement imported into Costa Rica increased by a factor of 10 between 2014 and 2016, from around 10,000t to over 100,000t. This is around 5% of its 2Mt/yr domesitic capacity, so the change is already fairly big news. The fact that an incredible 97% of this came from just one country, China, makes the story far more interesting as it shows the effects that Chinese overcapacity can have on smaller markets.
But when we look at how the value of the cement imports has changed over time, we see an even more dynamic shift. While the amount of cement imported into the country increased by nearly 10-fold, the value of the same imports only increased by around half as much between 2014 and 2016. If these figures can be taken at face value, the implication is stark. Taking the very low base as effectively ‘zero,’ each tonne of cement imported must cost around half as much as it used to.
Digging a little deeper and the picture gets more complicated. While they have fallen, Costa Rican cement prices have not fallen by 50% and why the sudden deluge of imports anyway? In 2015 the country changed its rules on cement imports to facilitate more flexible imports and lower prices for consumers. It did this by changing a regulation relating to how long cement can be stored, previously set at just 45 days, with the aim of allowing cement to come from further afield and, crucially, in bulk rather than bags.
The effects on price were immediate. Previously as high as US$13/bag (50kg) in December 2014, fairly high by global standards, Sinocem, the first Chinese importer, immediately sold its first shipment at US$10/bag. This effect of lower prices has now forced the average sales prices down to around US$10/bag across the country by 2017. This is good for consumers but not necessarily the local plants.
Back in 2015, the two local integrated plants operated by Cemex and Holcim warned that cement quality would suffer if cement bags were not used within 45 days. This apparently self-serving ‘warning’ went unheeded by the Ministry of Economy, Industry and Trade (MEIC), which pointed out that other countries in South America, as well as the European Union and United States, had no analogous short use-by dates for cement bags.
The rule remains in place, although discontent rumbles on. Indeed LafargeHolcim noted in its third quarter results for 2016 that ‘Costa Rica was adversely affected by increased foreign imports.’ This may well be a little bit of posturing and it doesn’t square with the fact that Costa Rica exported three times more cement that it imported in 2016. Of total exports of 0.34Mt, over 95% went to neighbouring Nicaragua, which has a single 0.6Mt/yr wet process plant owned by Cemex. It seems that the two Costa Rican plants have found a way to keep a little bit of the Chinese producers’ margin for themselves.
Of course, Chinese cement overcapacity doesn’t only affect the Central American market. It has been rippling all around the Pacific Rim. In July 2017, this column looked at the decision by Cementos Bío Bío to stop making clinker at its Talcahuano plant in Chile. It now favours grinding imported clinker from Asia. Before that, Holcim New Zealand closed its Westport cement plant in 2016, finally admitting that domestic clinker was not viable.
In the grand scheme of things, this all makes sense. The market has forced those operating on thin margins to adjust. Ultimately, the end consumer is likely to benefit from lower prices, at least for as long as reliable low-cost imports can be secured. What happens, however, if China actually gets round to curtailing its rampant cement capacity, or simply decides to charge more for its cement? Flexible imports, the main aim of the Costa Rican rule change, may then prove vital, as long as there is more than one international supplier of cement.
Costa Rican cement imports soar 10-fold
15 August 2017Costa Rica: According to a report released by the government trade promotion agency Procomer, imports of cement into Costa Rica expanded from 10,418t in 2014 to 107,294t in 2016, representing a growth of 930% in only two years. Approximately 97% of the 2016 figure corresponds to cement imports from China, which is now the main origin of imported cement in the country.
In value terms, cement imports reached US$18.3m in 2016, only 5.4 times more than in 2014. Cemex and Holcim are the main cement manufacturers operating in Costa Rica. If the import volumes and prices are to be taken at face value, domestic plants would appear to be under increasing price pressure from the imported cement from China.
Holcim Russia launches Saratov upgrade
14 August 2017Russia: LafargeHolcim’s local subsidiary Holcim Russia has launched an upgrade at its cement plant in Saratov Region at a total cost of US$300m. The project to build a new dry process line began in 2012 and has increased the plant’s capacity to 4500t/day. According to local press the plant meets all modern standards and environmental safety requirements. It is expected that the line will be at full capacity by the end of 2017.
Spanish regulator issues Euro29.2m fine to cement companies
13 September 2016Spain: The National Commission for Markets and Competition (CNMC) has issued total fines of Euro29.2m to 23 cement companies for involvement in a cartel between 1999 and 2014. Among the companies are Cementos Portland Valderrivas, with a Euro10.2m fine, Cemex Spain with a Euro5.8m fine and Holcim Spain, with a Euro4.4m fine, according to the Cinco Días newspaper.
The CNMC’s investigations have shown that the companies coordinated the exchange of commercial information, market sharing and price fixing between 1999 and 2014 in three distinct geographical areas in the north, centre and south of the country. Notably, the southern region examined the companies used email and WhatsApp mobile phone application to share sensitive information.
Russia: Filaret Galchev, the owner of Eurocement, expects that demand for cement in Russia will fall by 8% - 10% in 2016 after falling 12% in 2015. The cement producer will sell about 20Mt of cement in Russia and about 3.5Mt in other regions including Uzbekistan and Ukraine in 2016. He added that average production costs at the group will produce cement at around US$25/t.
In an interview with Rossiya 24 television reported upon by Interfax, Galchev also described Eurocement’s sale of its 6.1% stake in LafargeHolcim in February 2016 as ‘unexpected’. The Russian cement producer sold its share in LafargeHolcim after they lost nearly half of their value in six months.
"No, I did not expect it. We analysed the situation for a long time, but that is the decision that was made," said Galchev. He added that he had no issues with Sberbank, the Russian bank that restructured Eurocement’s debt after the sale of the shares in LafargeHolcim.
Originally Eurocement was a shareholder in Holcim and it received a stake in LafargeHolcim after that company was formed in a merger. The stake was subsequently transferred to Sberbank of Russia in January 2016 after the shares, which Galchev had acquired with financing from Bank of America, lost over 40% of their value in half a year. At the beginning of February 2016, Sberbank sold the 6.12% LafargeHolcim stake to investors from the UK, Switzerland, the US and other countries.
Court annuls information request by European Commission into cement company competition probe
11 March 2016Europe: The European Court of Justice has annulled a request for information by the European Commission into several cement producers in a cartel probe. The judgement could restrict the competition watchdog's investigative powers, according to reporting by the Wall Street Journal.
The commission opened an antitrust investigation in late 2010 looking at the activities of Cemex, Holcim, Lafarge, HeidelbergCement and others. Originally the cement companies were suspected by the commission of colluding with rivals to fix prices and share markets in Austria, Belgium, the Czech Republic, France, Germany, Italy, Luxembourg, the Netherlands, Spain and the UK. However, the investigation was closed in mid-2015 due to insufficient evidence. Since then the cement producers have challenged the commission’s right to ask for the level of detail they requested. The ruling overturns a 2014 decision by the EU's General Court, which said the commission questionnaires were justified.
Brazil: The office of the Superintendent-general of the antitrust watchdog Cade has recommended a penalty with fines to Votorantim, Holcim and Cimento Tupi for a coordinated refusal to sell certain types of cement in São Paulo state. According to the office, these companies damaged free competition and made it hard for potential competitors to enter the market.
The office also said that there was not enough evidence against Cimentos Liz, Cibrasa, Ciplan, Cimpor, Itabira, Itaguassu, Itambe, Ibacip, Itapessoca, Itapicuru, Itapetinga, Itapicuru, Itapissuma, Itautinga, Intercement and Lafarge and that the administrative process should be dismissed. Cade's own tribunal will have the final decision on whether the cement firms will be fined or not.
Holcim plans rehabilitation of Westport cement plant
19 January 2016New Zealand: Plans for the future use of Holcim's Westport cement plant after it closes are still unknown. Holcim plans to close its Westport plant in 2016 in favour of importing cement from Japan, resulting in 105 staff and contractors losing their jobs.
The company announced in September 2015 that the Westport plant might close at the end of May 2016 and plans were under way for the plant to be demolished and the quarry site rehabilitated. Holcim owned more than 500 hectares of land around Westport, including the Cape Foulwind cement plant and quarry, 11 houses at Cape Foulwind and a rail siding near Westport.
General Manager Ross Pickworth said that no decisions had been made on the future of the company's land and assets in Westport. "The focus is on looking after our people and the work that needs to be done before plant closure. Preparatory and planning work is being carried out with a focus mainly on the plant site, quarry and houses," said Pickworth.
The company was investigating what work was needed on the 11 houses occupied by staff near Westport so that they could be sold after the plant closed. The Buller District Council was looking for new businesses to occupy the plant site and make use of the town's port. The council owned the port and transporting Holcim's cement was its main source of income. Council Business Development Facilitator, John Hill, had been investigating turning the plant into an eco-park, which could include making energy from rubbish incineration or turning waste timber into diesel.
Pickworth said that demolition work was unlikely to commence until late 2016, so any potential users had, "Quite some time to register interest in the site and any equipment that may be of use."
The council had been trying to attract new industries to Buller to increase employment opportunities in the region. "Holcim is supporting this process by promoting its Cape Foulwind site to see if there is interest from other potential users of the site," said Pickworth. "An advisor has been appointed to assist Holcim with demolition planning and project management. The cost of demolition will depend on what buildings and assets may be left on site and tenders will be called for such work closer to the time."
Italy's antitrust body opens probe into alleged cement price fixing
27 November 2015Italy: Italy's antitrust authority has opened an investigation into four cement companies for alleged price fixing and, with the tax police, has searched the offices of the companies, according to Reuters. The companies under investigation are Buzzi Unicem, Cementir Italia, Industria Cementi Giovanni Rossi and Holcim Italia.
"The case concerns the possibility of an agreement to coordinate cement sales price increases," said the authority in a statement.
Holcim Italia, part of LafargeHolcim, confirmed the inspections. It said that the company had always acted according to the law and has 'policies and procedures in place that are designed to ensure compliance with principles and rules of fair competition prohibiting anti-competitive behaviour and the abuse of a dominant market position.' Buzzi said that it is confident that it will be able to demonstrate during the investigation that it had always acted in compliance with competition law.
Agreement reached over clean-up of historic Holcim cement plant
26 November 2015US: An agreement has been reached to clean up the site of the former Holcim cement plant in Spokane Valley, Washington, where Holcim operated a cement factory until 1967. The site was then used for cement distribution for a number of years before shutting down. In 2006, storage silos were torn down, leaving behind cement kiln dust with contaminates including arsenic, lead and cadmium, as well as benzene and gasoline associated with train activity and fuel storage on the site. Neighbouring lots owned by the city of Spokane Valley and Neighborhood Inc were also contaminated.
Because the contamination was deemed a threat to human health, the Department of Ecology got involved in working out a clean-up plan. Jeremy Schmidt, Ecology's site manager, said that a consent decree has been signed by all parties and clean-up is scheduled for the summer and autumn 2016. "Work may be delayed for one year if we can't get contractors out there at the right time," said Schmidt. The work has to done when the groundwater level is low so as not to increase contamination. The kiln dust has now turned to cement and must be scraped off, piled in one place and capped with cement to stop contaminants from leaking into soil and groundwater.
Holcim still owns the site and both Schmidt and Spokane Valley Attorney Cary Driskell said that the company has been responsive and responsible. "They have been very easy to work with," said Driskell. He added that there was a range of options for the cleanup, with costs ranging from US$1.6 – 10m. "It will not cost Spokane Valley anything."