Displaying items by tag: Production
Poland: Poland produced 9.3Mt of cement in the first half of 2022, up by 8.6% year-on-year from the same period in 2021. The Polish Association of Cement Manufacturers (SPC) recorded an 11% increase in national cement consumption to 6.8Mt during the reporting period. The Institute of Economic Forecasts and Analyses has estimated that full-year demand will reach 20Mt in 2022.
India: Gujarat Sidhee Cement has stopped production at its Sidheegram cement plant in Gujarat for at least one week. The producer will use the suspension for repair and maintenance of the plant.
Turkmenistan: Turkmencement’s integrated Lebap plant has increased its production of cement to 0.47Mt in the first half of 2022. This is an improvement over the 0.45Mt level reported in the same period in 2021, according to Jeyhun News. The plant was originally built in 2013. A new production line at the site was reportedly ordered from Germany-based Thyssenkrupp Industrial Solutions in mid-2021.
Peru: Cement production grew by 7% year-on-year to 6.4Mt in the first half of 2022 from 6Mt in the same period in 2020. Data from the Association of Cement Producers (ASOCEM) shows that cement exports rose by 15% to 98,000t and clinker exports fell by 8% to 289,000t. Cement and clinker imports fell by 69% to 150,000t and 40% to 549,000t respectively.
Pakistan: All Pakistan Cement Manufacturers Association (APCMA) members despatched 52.9Mt of cement in the 2022 financial year, down by 7.9% year-on-year from 57.4Mt in the 2021 financial year. The News International newspaper has reported that exports fell by 44% year-on-year to 5.25Mt from 9.31Mt. In June 2022, despatches rose by 1% year-on-year to 5.26Mt from 5.21Mt. Exports declined by 48% to 284,000t from 543,000t. APCMA said that high costs caused the decline, which continues into the current 2023 financial year (which begun on 1 July 2022).
An association spokesperson said “The export of cement has declined massively during the ongoing financial year due to the high cost of production.”
Vietnam: Vietnam National Cement Association (VNCA) members increased their cement production to 59.8Mt in the first half of 2022, up by 6.9% year-on-year from 55.9Mt in the first half of 2021. Vietnam News Brief Service has reported that producers’ June 2022 volumes were 11Mt, up by 13% year-on-year from 9.76Mt in June 2021. Full-year production was 101Mt in 2021.
Pakistan: The Federal Board of Revenue (FBR) has ordered cement producers to ensure that all cement bags that leave manufacturing sites include a tax stamp or unique identification marking from October 2022. The new requirement is intended to allow for the electronic monitoring of production and sales of goods, according to the Pakistan Today newspaper. This is part of a set of measures designed to increase tax revenue, reduce counterfeit products and stop smuggling.
India: Gujarat Sidhee Cement has stopped its kiln for a temporary period of 15 – 20 days due to high clinker inventory levels. Cement grinding and despatch will continue unabated. The cement producer operates an integrated plant at Sidheegram in Gujarat.
Energy costs in Australia and beyond
21 June 2022Boral admitted this week that high energy costs in Australia had forced it to reduce production levels. Chief executive officer Zlatko Todorcevski revealed to Reuters that the company was temporarily cutting back some unspecified areas of its operations. He also said that it was going to have to pass on growing energy prices directly on its customers.
This has followed mounting alarm at fuel prices in successive financial reports by the building materials company leading to revised earnings guidance being issued in May 2022. Bad weather was responsible for the larger share of the expected additional adverse impact to underlying earnings in its 2022 financial year but around US$10m was anticipated from rising fuel prices. Growing coal and electricity prices were said to be impacting its production and logistics costs, with price rises in January and February 2022 having proved insufficient to keep up with inflation. In a trading update in March 2022 the company said that its exposure to coal prices was unhedged for the second half of its 2022 financial year, to June 2022.
An energy crisis in Australia may seem hard to understand given that the country is one of the world’s biggest exporters of coal and gas. Yet, the country has faced a number of problems with its electricity generation sector in 2022 with disruptions to coal supplies to power stations, outages, ongoing maintenance and a cold winter that adversely affected the market. This led the Australian Energy Market Operator to suspend the country’s main wholesale market on 15 June 2022 in an attempt to stabilise the supply of electricity. New South Wales has also reportedly forced coal mines to prioritise the local market over exports. Energy minister Chris Bowen even asked the residents of New South Wales to try and reduce electricity use in the evenings in an attempt to prevent blackouts. However, with the consumer electricity market now looking more stable, attention has turned to industrial users such as Boral.
Global Cement Weekly has covered energy costs for cement producers a couple of times in the last year. There has been plenty of angst about growing energy costs on cement company balance sheets since mid-2021 as the logistics problems following the lifting of the coronavirus-lockdowns became clear. The biggest story at this time was an energy crisis in China that caused supplies to be rationed to industrial users. This then intensified with the start of the war in Ukraine in February 2022 and energy prices went up everywhere as economic sanctions were imposed upon Russia. One standout was Turkey where cement producers publicly raised the alarm about jumps in coal prices.
Recently, some North American lime producers such as Lhoist North America and the Mississippi Lime Company have been notably bold in announcing price rises due to energy costs and other factors. This week, for example, Lhoist North America said it had raised the price of its lime products by up to 45%. It cited the ‘challenging circumstance’ for all parties at an ‘unprecedented’ time. One alternative to the direct approach of simply putting up prices has been the use of energy surcharges. Japan-based Taiheiyo Cement announced earlier in June 2022 that it was going to introduce a coal surcharge for its cementitious products in September 2022 due to rising energy prices. Its system is based on the coal price with revisions planned every two months. The scheme will run for one year in the first instance. How customers will react to this remains to be seen.
We have looked above at a few disparate examples of the problems that energy costs have been causing cement and lime producers over the last month. These issues look set to continue in an acute phase while the war in Ukraine rages on, but the longer term trends from the economic recovery from coronavirus will undoubtedly last for longer. As examples in Australia and China have shown, local energy crises can easily spill over into the industrial sector as domestic users are prioritised. So, even if cement companies source their supplies carefully, they may face issues if the wider market struggles. Meanwhile, cement producers face the dilemma of justifying price rises to customers adapting to mounting inflation. Taiheiyo Cement has shown one way of doing this. The problems caused by surging energy prices to other cement companies look set to become more apparent in the next few months as reporting of the first half of the year emerges.
Update on India, June 2022
01 June 2022One big story in India in recent weeks has been the start of action by the central government to tackle rising cement prices. First it reduced tax duties on petrol and diesel in late May 2022. Finance minister Nirmala Sitharaman also said that they were looking at ways of improving the availability of cement in the country, including better logistics, to help lower its cost. A delay to a change in the Goods and Services Tax (GST) rate structure is also being considered to slow inflation generally. Local press then reported a few days later that the government had set up a panel to explore ways of reducing the price of cement by distributing supplies better around the country. Specifically, it was talking to the South India Cement Manufacturers’ Association to work out ways for their members to meet the rising demand in other parts of the country. Reported options included looking at better use of rail and sea connections.
Chart 1: Map of Indian regions showing integrated/clinker production capacity per capita. Note: the chart does not include standalone grinding plant capacity. Source: Global Cement Directory, Indian census data. Map image adapted from Filpro CC BY-SA 4.0.
The map above (Chart 1) summarises the general problem the country faces from a clinker production point of view. More clinker can be produced in the south of the country than elsewhere. This map is partly a reflection where the limestone reserves are. However, it does not show that the East region of India has a higher concentration of cement grinding plants than elsewhere. Additionally, a number of new integrated/clinker plants have been built in the East and more have been proposed. The data in Chart 1 suggests that India has an integrated production capacity of 312kg/capita nationally. This compares to a cement consumption of 200 – 250kg/capita as reported by the ratings agency Crisil.
Data from Crisil indicates that cement prices grew by 9% from the start of 2021 to March 2022. A similar rise of 8.1% month-on-month was reported in April 2022. It is not a direct comparison but retail inflation in India was reported as being 7.8% in April 2022. The cause of this has been blamed on a general tightening in energy supplies in the autumn of 2021 followed by the effects of the war in Ukraine that started in early 2022. Rising international coal and petcoke prices have made manufacturing cement more expensive. Growing petrol and diesel prices have made moving it around costlier still. Looking at the cement market generally, Crisil noted that demand for cement grew sharply in the first half of the 2022 financial year but then slowed in the second half due to poor weather, issues with sand supply and a labour shortage. The ratings agency has forecast stable growth in the 2023 financial year but with the caveat that the mounting costs of construction, including building materials, could dent this.
The fundamentals for the world’s second largest cement market look good as Adani Group’s recent deal to buy Holcim’s Indian assets for US$6.34bn attests. This won’t be much comfort for end-users though who are watching the price of cement rocket upwards. Yet how far the central government will be able to help the southern cement producers move their wares around more easily remain to be seen. If it succeeds, it may slow the rise in prices but it seems unlikely to halt it. The reaction of the more northerly producers is also key, since one option they have is to slacken their own price increases by just enough to fight off the new competition. Already they are facing the dilemma of raising their prices to cover input costs versus the effect this may have on overall demand. All of this looks set to put pressure on the producers’ margins. Indian cement prices look set to go up whatever happens next, making everyone unhappy. Some may be more unhappy than others.