Displaying items by tag: Indonesia

Australia/Indonesia: Semen Indonesia subsidiary Semen Padang says that it has dispatched a 25,000t batch of cement for Australia. Bisnis News Sumatra has reported that company is targeting total shipments of 1.58Mt to the country in 2020.

Senior manager of export sales Fifit Abriyanto said, “We are building connections with new customers. We already exported 35,000t of clinker to Bangladesh in September 2020.”

There’s no single theme this week, just a few news stories of note that may have wider significance.

Firstly comes the news that Semen Indonesia subsidiary Semen Padang has been exporting 25,000t of cement to Australia. This follows a consignment of 35,000t of clinker to Bangladesh. The company is hoping to hit a cement and clinker export target of 1.58Mt in 2020 in spite of the on-going coronavirus pandemic. It reached 1.09Mt (about 70%) of this by mid-September 2020 through exports to Bangladesh, Myanmar, Philippines, Australia, Sri Lanka and Maldives.

The wider picture here is that local sales in Indonesia fell by 7.7% year-on-year to 27.2Mt in the first half of 2020 from 29.4Mt in the same period in 2019, according to data from the Indonesian Cement Association (ASI). Cement and clinker exports are up by 32.8% to 3.7Mt from 2.8Mt. Semen Indonesia’s revenue is down but it has managed to hold its earnings up so far. During press rounds in late August 2020 its marketing and supply chain director, Adi Munandir, told local press that he expected domestic demand to fall by up to 15% in 2020 due to effects of coronavirus on private construction and government infrastructure plans. Analysts reckon that the worst of the demand slump hit in the second quarter of 2020 when government-related coronavirus restrictions were implemented, so Semen Indonesia’s third quarter results will closely scrutinised.

One of Semen Padang export targets is the Maldives. This chimes with another story this week because Oman-based Raysut Cement has just bought a majority stake in a cement terminal from Lafarge Maldives for US$8m. The 9000t capacity Thilafusi cement terminal is located on the island of Thilafusi, Kaafu and was expanded in 2015. Raysut Cement has tended to stick to markets in the southern Arabian Peninsula and the east coast of Africa, with projects planned in Madagascar and Somaliland. Yet expansion plans in places further away such as India and Georgia have also been mentioned publicly. A greater presence in the Maldives is a solid step towards Raysut heading eastwards. This would also mirror the plans of the country’s gypsum sector to dominate African and Asian markets and a general longer term shift in global markets from west to east.

One place west that has been doing well in cement though is Brazil. National Cement Industry Union (SNIC) data for September 2020 show a 21% year-on-year boom in cement sales to 5.8Mt and a 9.4% year-on-year increase to 44.6Mt for the first nine months of 2020. Earlier in the year the country’s limited coronavirus suppression methods were attributed for letting the recovering cement sector grow. Now, SNIC has directly thanked government support for civil construction. However, Paulo Camillo Penna, the president of SNIC said. “The results are surprising so far, but that doesn't give us security in the long run,” due to a bubble of real estate and commercial activity that already appears to be declining. Given the slump in cement demand from 2015 to 2018 it’s understandable that SNIC is taking the recovery cautiously.

And to finish we have two connected stories about Cemex. Following the release of its resilience strategy in September 2020, the company has now declared that its integrated Rüdersdorf cement plant in Germany will be the centrepiece of its CO2 reduction plans as part of ‘Vision Rüdersdorf.’ Details are light at present but we expect some kind of carbon capture and storage or usage project. An addendum to this – or perhaps it’s the other way round (!) – is that Cemex has also just announced further credit amendments but with sustainability-linked metrics. Cemex’s chief financial officer (CFO) Maher Al-Haffar said, “We are especially proud that this transaction represents one of the largest sustainability-linked loans in the world.” The teeth of this arrangement remain to be seen but the integration of finance and sustainability has serious implications generally.

Watch out for a research and development themed interview with Cemex and Synhelion in the December 2020 issue of Global Cement Magazine

Indonesia: Semen Indonesia has said that it expects a 14% year-on-year decline in domestic cement demand to 50Mt in 2020 from 58Mt in 2019. The Jakarta Post newspaper has reported that the coronavirus outbreak was the primary cause of a 7.7% first-half decline in cement consumption to 27Mt from 29Mt.

Marketing and supply chain director Adi Munandir said, “Our projection is based on the delay in private construction projects and the government’s infrastructure development as a result of the Covid-19 crisis. This has caused demand to slump by 8.8% in July 2020, and we expect this slump to continue to the end of the year.” He noted the retail housing market as a potential sales boost, saying, “We saw an uptick in cement bag sales during the first half of 2020, as home renovations rose due to the pandemic.”

Indonesia: Indocement celebrated its 45th anniversary on 4 August 2020. To mark the occasion the company held tumpeng cutting ceremonies at four of its sites, issued new staff identification cards with updated logos and organised social media dance and singing competitions between different plants and divisions. The company’s President Director Christian Kartawijaya also inaugurated an expansion to the research and training centre at the integrated Cieureup plant in West Java. The cement producer became a subsidiary of Germany-based HeidelbergCement in 2001.

Indonesia: Thailand-based Siam Cement Group (SCG) and PT Marindo Inticor have announced the launch of PT Renos Marketplace Indonesia, a digital marketplace to connect Indonesian customers with SCG’s products. Online Stock Business News has reported that ownership of the company is shared 51:49 between SCG subsidiary Better Bee Marketplace Company Limited and PT Marindo Inticor. The joint venture has registered capital of US$1.26m.

Philippines: LafargeHolcim’s sale of its 86% stake in Holcim Philippines to San Miguel Corporation for US$2.15bn has fallen through after the Philippines Competition Authority (PCC) failed to approve the deal within 12 months of its conclusion. Reuters News has reported that the agreement, dated 10 May 2020, covered the exchange of four integrated plants and one grinding plant. LafargeHolcim has been divesting assets to pay off debt. The sale of its Holcim Philippines stake would have completed its withdrawal from the South-East Asia market, where its operations across Indonesia, Malaysia, Singapore and the Philippines had been valued at US$4.90bn.

LafargeHolcim has said that three of its four integrated Philippines cement plants have been able to resume operations following the lockdown due to the coronavirus outbreak. It says that it will ‘focus on strengthening operations in the Philippines.’

Indonesia: China-based Sinoma International Engineering has completed the installation of a 10,000t/day integrated cement production line complete with raw material processing and clinker storage capacity at Gama Group subsidiary PT Cemindo Gemilang’s integrated Bayah II plant. China Daily News has reported that the Sinoma International Engineering Team worked overtime in order to complete the commission ahead of its scheduled date in May 2020. Project manager Wang Xiaojun said, “The COVID-19 outbreak had a severe impact on on-site construction.”

Indonesia: Japan-based Taiheiyo Cement has announced its acquisition of a 15% stake in state-owned Semen Indonesia subsidiary Solusi Bangun Indonesia for between US$186m and US$232m, subject to the terms of a partnership agreement with Semen Indonesia.

Under the ‘2020 Mid-Term Management Plan,’ Taiheiyo Cement says that it aims to ‘become a corporate group with a strong presence in the Pacific Rim.’ Its partnership with Semen Indonesia is part of Taiheiyo Cement’s response to a forecasted long-term decline in domestic cement demand in Japan.

In the first quarter of 2020 Semen Indonesia sold 9.36Mt of cement, up by 7.0% year-on-year from 8.74Mt in the corresponding period of 2019. InsiderStories News has reported that domestic demand in the period fell by 4.9% to 14.9Mt from 15.7Mt, while exports fell by 2.5% to 1.39Mt from 1.42Mt but rose by 6.2% on a month-by-month basis in March 2020 to 3.09Mt from 2.91Mt in February 2020. April 2020’s cement sales are expected to be lower due to the impacts of the coronavirus outbreak.

Germany: HeidelbergCement started the new year better than ever before, according to chief executive officer (CEO) Dominik von Achten. He reported that this had been mainly due to good weather before the onset of the coronavirus outbreak. Von Achten warned that the situation had already changed beyond recognition since mid-February 2020 for the multinational.

He said that the coronavirus outbreak had not only caused plants to be closed, either by enforcement or due to a lack of demand, but because migrant workers are unable to travel to construction sites. For example, workers from Eastern Europe are increasingly lacking in Western Europe. In Indonesia, a market that is important for HeidelbergCement, the lack of Chinese construction workers is stark, as they remain confined to their home country.

According to Von Achten, HeidelbergCement is now paying particular attention to its costs, has deferred all unnecessary investments and has considerable liquidity leeway. He added that the group is likely to benefit significantly from lower fuel costs as conditions improve over the course of 2020. HeidelbergCement is currently particularly affected in Lombardy, where its Italcementi subsidiary has its headquarters. HeidelbergCement has shut down its factories in Italy and imposed a freeze on hiring and non-essential spending. "You can see it's hitting the world like a wave," says Von Achten. "It's a tough test."

It’s the end of the year so it’s time to look at trends in the sector news over the last 12 months. It’s also the end of a decade, so for a wider perspective check out the feature in the December 2019 issue of Global Cement Magazine. The map of shifting production capacity and the table of falling CO₂ emissions per tonne are awesome and inspiring in their own way. They also point towards the successes and dangers facing the industry in the next decade.

Back on 2019 here are some of the main themes of the year in the industry news. This is a selective list but if we missed anything crucial let us know.

European multinationals retreat

LafargeHolcim left the Philippines, Malaysia and Indonesia, HeidelbergCement sold up in Ukraine and reduced its stake in Morocco and CRH is reportedly making plans to leave the Philippines and India, if local media speculation can be believed. To be fair to HeidelbergCement it has also instigated some key acquisitions here and there, but there definitely has been a feel of the multinationals cutting their losses in certain places and retreating that bit closer to their heartlands.

CRH’s chief executive officer Albert Manifold summed it up an earnings meeting when he said, “…you're faced with a capital allocation decision of investing in Europe or North America where you've got stability, certainty, overlap, capability, versus going for something a bit more exotic. The returns you need to generate to justify that higher level of risk are extraordinary and we just don't see it.”

The battle for the European Green Deal

One battle that’s happening right now is the lobbying behind the scenes for so-called energy-intensive industries in Europe as part of the forthcoming European Green Deal. The cement industry is very aware that it is walking a tightrope on this one. The European Union (EU) Emissions Trading Scheme (ETS) CO₂ price started to bite in 2019, hitting a high of Euro28/t in August 2019 and plant closures have been blamed on it. The rhetoric from Ursula von der Leyen, the new president of the European Commission, has been bullish on climate legislation and the agitation of Greta Thunberg internationally and groups like Extinction Rebellion has kept the issue in the press. Cembureau, the European Cement Association, is keen to promote the industry’s sustainability credentials but it is concerned that aspects of the proposed deal will create ‘uncertainty and risks.’ Get it wrong and problems like the incoming ban on refuse-derived fuel (RDF) imports into the Netherlands may proliferate. What the Green Deal ends up as could influence the European cement industry for decades.

The managed march of China

Last’s week article on a price spike in Henan province illustrated the tension in China between markets and government intervention. It looks like this was driven by an increase in infrastructure spending with cement sales starting to rise. Cement production growth has also picked up in most provinces in the first three quarters of 2019. This follows a slow fall in cement sales over the last five years as state measures such as consolidation and peak shifting have been implemented. The government dominates the Chinese market and this extends west, as waste importers have previously found out to their cost.

Meanwhile, the Chinese industry has continued to grow internationally. Rather than buying existing assets it has tended to build its own plants, often in joint ventures with junior local partners. LafargeHolcim may have left Indonesia in 2018 but perhaps the real story was Anhui Conch's becoming the country's third biggest producer by local capacity. Coupled with the Chinese dominance in the supplier market this has meant that most new plant projects around the world are either being built by a Chinese company or supplied by one.

India consolidates but watches dust levels

Consolidation has been the continued theme in the world's second largest cement industry, with the auction for Emami Cement and UltraTech Cement’s acquisition of Century Textiles and Industries. Notably, UltraTech Cement has decided to focus its attention on only India despite the overseas assets it acquired previously. Growth in cement sales in the second half of 2019 has slowed and capacity utilisation rates remain low. Indian press reports that CRH is considering selling up. Together with the country's low per capita cement consumption this suggests a continued trend for consolidation for the time being.

Environmental regulations may also play a part in rationalising the local industry, as has already happened in China. The Indian government considered banning petcoke imports in 2018 in an attempt to decrease air pollution. Later, in mid-2019, a pilot emissions trading scheme (ETS) for particulate matter (PM) was launched in Surat, Gujarat. At the same time the state pollution boards have been getting tough with producers for breaching their limits.

Steady growth in the US

The US market has been a dependable one over the last year, generally propping up the balance sheets of the multinational producers. Cement shipments grew in the first eight months of the year with increases reported in the North-Eastern and Southern regions. Imports also mounted as the US-China trade war benefitted Turkey and Mexico at the expense of China. Alongside this a modest trade in cement plants has been going on with upgrades also underway. Ed Sullivan at the Portland Cement Association forecasts slowing growth in the early 2020s but he doesn’t think a recession is coming anytime soon.

Mixed picture in Latin America

There have been winners and losers south of the Rio Grande in 2019. Mexico was struggling with lower government infrastructure spending hitting cement sales volumes in the first half of the year although US threats to block exports haven’t come to pass so far. Far to the south Argentina’s economy has been holding the cement industry back leading to a 7% fall in cement sales in the first 11 months of the year. Both of these countries’ travails pale in comparison to Venezuela’s estimated capacity utilisation of just 12.5%. There have been bright spots in the region though with Brazil’s gradual return to growth in 2019. The November 2019 figures suggest sales growth of just under 4% for the year. Peru, meanwhile, continues to shine with continued production and sales growth.

North and south divide in Africa and the Middle East

The divide between the Middle East and North African (MENA) and Sub-Saharan regions has grown starker as more MENA countries have become cement exporters, particularly in North Africa. The economy in Turkey has held back the industry there and the sector has pivoted to exports, Egypt remains beset by overcapacity and Saudi Arabian producers have continued to renew their clinker export licences.

South of the Sahara key countries, including Nigeria, Kenya and South Africa, have suffered from poor sales due to a variety of reasons, including competition and the local economies. Other countries with smaller cement industries have continued to propose and build new plants as the race to reduce the price of cement in the interior drives change.

Changes in shipping regulations

One of the warning signs that flashed up at the CemProspects conference this year was the uncertainty surrounding the new International Maritime Organistaion (IMO) 2020 environmental regulations for shipping. A meeting of commodity traders for fuels for the cement industry would be expected to be wary of this kind of thing. Their job is to minimise the risk of fluctuating fuel prices for their employers after all. Yet, given that the global cement industry produces too much cement, this has implications for the clinker and cement traders too. This could potentially affect the price of fuels, input materials and clinker if shipping patterns change. Ultimately, IMO 2020 comes down to enforcement but already ship operators have to decide whether and when to act.

Do androids dream of working in cement plants?

There’s a been a steady drip of digitisation stories in the sector news this year, from LafargeHolcim’s Industry 4.0 plan to Cemex’s various initiatives and more. At present the question appears to be: how far can Industry 4.0 / internet of things style developments go in a heavy industrial setting like cement? Will it just manage discrete parts of the process such as logistics and mills or could it end up controlling larger parts of the process? Work by companies like Petuum show that autonomous plant operation is happening but it’s still very uncertain whether the machines will replace us all in the 2020s.

On that cheery note - enjoy the winter break if you have one.

Global Cement Weekly will return on 8 January 2020