Displaying items by tag: South Africa

Argentina: South Africa-based Pro-Op Industries has announced the shipment of a set of ceramic rotary valves produced by Germany-based Kreisel to Argentina. The product is to be installed at Loma Negra’s 1.5Mt/yr integrated Catamarca plant in Catamarca province. The rotary valves will replace two screw pumps with the aim of ‘substantially reducing energy consumption and maintenance costs’ at the plant. Pro-Op Industries said, ‘We are excited and honoured to be working with the Loma Negra team and to be introducing Kreisel technology to the South American region.’

South Africa: PPC has reported a predicted 95% year-on-year decline in its sales of cement in South Africa in April 2020 due to the impacts of the coronavirus. Sales in Rwanda and Zimbabwe, where production resumed in mid-late April 2020, are expected to decrease in the month by 80-85% year-on-year.

PPC says that PPC South Africa is preparing to resume production in line with the government’s risk-based regulations announced on 25 April 2020. The group said, “The uncertainty around the further development of the containment of the coronavirus makes it necessary for PPC to work with various scenarios.”

South Africa: PPC has reported that it has invested US$548,000 in the construction and installation of a pneumatic offloading facility including a 250t silo at its George Depot cement terminal in the Western Cape. The company said that this ‘allows the business to receive cement by rail, improving its turnaround to customers without compromising quality.’

There have been rumours in the press this week that LafargeHolcim is weighing up its options in South Africa. Reports in the local press allege that the building materials company has tasked Credit Suisse Group with finding a buyer for its business. This may or may not be true, only time will tell, but South Africa certainly feels like a market where LafargeHolcim should be considering its future.

As a prominent but smaller producer in the country, Lafarge South Africa is behind PPC and AfriSam in terms of clinker production capacity. InterCement’s subsidiary Natal Portland Cement and Dangote’s subsidiary Sephaku Cement have a similar production base with an integrated plant each and one or two grinding plants. Halfway through 2019 LafargeHolcim was describing market conditions as ‘difficult’ in the country with it being the sole Sub-Saharan market holding back regional growth for the group. By the third quarter the situation had reportedly improved but net sales and cement sales volumes were flat for the year to date. A clearer picture should emerge when LafargeHolcim publishes its fourth quarter results at the end of February 2020.

PPC provided its view of the market in its half-year results to 30 September 2019. Its estimate was that the South African cement industry declined by 10 - 15% for the period, creating a competitive environment. It added that the situation had been, ‘exacerbated by imports and blender activity.’ Both its revenue and earnings fell year-on-year, although a 30% rise in fuel costs didn’t help either. Sephaku Cement suffered a similar time of it, with a 19% fall in cement sales volumes during the first half, although it reported improvement in the subsequent quarter. Overall, it blamed falling infrastructure investment for pressurising the market and allowing blending activity to mount. Sephaku Cement was also wary of the local carbon tax that started in June 2019 warning of a potential US$2.8m/yr bill.

PPC noted that cement imports had risen by 5% to 0.85Mt in the year to August 2019. This followed a lobbying effort by The Concrete Institute (TCI) in mid-2019 to implore the International Trade Administration Commission (ITAC) to look into rising imports levels. At the time the TCI’s managing director Brian Perrie expressed incomprehension that a country with six different cement production companies with an over-capacity rate of 30% could be facing this problem. This latest broadside tails South Africa’s previous attempt to fend off imports when it instituted anti-dumping duties of 17 – 70% against importers from Pakistan in 2015. Imports duly fell in 2016 but rose again in 2017 and 2018, mainly from Vietnam and China.

All of this sounds familiar following LafargeHolcim’s departure from the ‘hyper-competitive’ South-East Asian countries in 2019. Those countries also suffered from competition and raging imports. Bloomberg pointed out in a report on the local industry in 2016 that PPC’s, AfriSam’s and LafargeHolcim’s kilns had an average age of 32 years, suggesting that efficiency and maintenance were going to be concerns in the future. Also of note is LargeHolcim’s decision to move its South African operations from one subsidiary, Lafarge Africa, to another, Caricement, in mid-2019.

Some level of market consolidation would certainly help local overcapacity. Plus, surely, LafargeHolcim’s mix of inland integrated capacity and a grinding plant near the coast could prove enticing to some of the Asian companies pumping out all of those imports. The thought on the minds of potential buyers everywhere must be, if LafargeHolcim chief Jan Jenisch was bold enough to sell up in South-East Asia, how can he not in South Africa?!”

South Africa: LafargeHolcim is planning to sell its South African operations as the world's largest building material maker continues to streamline its portfolio, according to sources close to a deal who spoke to Bloomberg. The Swiss company is working with adviser Credit Suisse Group to seek a buyer for the business. It has apparently already reached out to local competitors, Chinese cement producers and buyout firms, but may struggle to attract interest for the unit due to challenging dynamics in the country's cement industry. South Africa is Africa’s most mature cement market but it is hampered by decreasing demand, old production facilities, tight domestic competition and cheap imports from the Middle East. A representative for LafargeHolcim declined to comment.

South Africa: Morag Evans, the chief executive officer (CEO) of Databuild, says that local cement manufacturers are being ‘severely’ undermined by cheap imports from countries such as China, Vietnam and Pakistan. She adds that the government’s failure to stem the influx of these products could have a severe detrimental impact on an already struggling industry.

“In an industry already in the grips of a severe downturn owing to the decline in infrastructure development, not only are these imports negatively impacting the competitiveness of our local manufacturers, but independent studies have shown the quality of these international products to be inferior,” said Evans.

She also cited quality concerns with imported cement mentioning a study conducted by local manufacturer PPC. It found that, from 14 products tested from 10 different producers, most were either over or underweight and were also of inconsistent quality.

Evans has supported the Concrete Institute’s lobbying for a 45% import tariff on cement imports. However, she acknowledges that such a move could raise the price of cement and increase inflation in the general economy.

Databuild provides information about the construction industry in South Africa.

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

Nigeria: Dangote Cement’s non-executive director Fideli Madavo has resigned from his position on the company’s board. Madavo represented the stakeholder Public Investment Corporation (PIC), South Africa’s state pension fund, where he is head of resources and portfolio manager for strategic and African listed investments. The company has not stated a reason for the change.

South Africa: PPC’s sales have fallen due to poor sales volumes in South Africa and Zimbabwe. Its results were also negatively affected by ‘significant’ currency exchange effects between the South African Rand and the Zimbabwean Dollar. Its revenue decreased by 12% year-on-year to US$334m in the six months to 30 September 2019 from US$378m in the same period in 2018. Sales volumes fell by 17% to 2.6Mt. Earnings before interest, taxation, depreciation and amortisation (EBITDA) dropped by 20% to US$58.6m from US$70.2m.

“The positive operational results in Rwanda and the Democratic Republic of the Congo have partially offset difficult and competitive market conditions in South Africa and Zimbabwe,” said chief executive officer (CEO) Roland Van Wijnen. “PPC has continued its efforts to implement necessary price increases to lay the basis for a sustainable domestic cement industry in South Africa.” In South Africa PPC blamed imports and blender activity for exacerbating a poor local market. It also noted that its fuel costs grew by 30% in the reporting period.

Zimbabwe: PPC Zimbabwe is looking to enter into a partnership with investors to build a solar energy plant of up to 16MW to supply its two plants in Bulawayo and Colleen Bawn. It also intends to have a 28hr battery back-up facility.

The company said that the move to solar would ensure uninterrupted power supplies to its plants, which have been badly affected by the prevailing power shortages in the country. Power utility Zesa Holdings has been forced to ration power in mid 2019 as production at its main hydro-power plant dwindled due to water shortages. Its main thermal power station experiences constant breakdowns due to its old age.