Displaying items by tag: Sustainability

Financial results for 2020 from the major Chinese cement companies are now out, making it time for a recap. Firstly, information from the China Cement Association (CCA) is worth looking at. The country had a cement production capacity of 1.83Bnt/yr in 2020. For an idea of the current pace of industry growth, 26 new integrated production lines were built in 2020 with a clinker production capacity of just under 40Mt/yr.

This is as one might expect from the world’s biggest cement market. However, the CCA also revealed that the country has over 3400 domestic cement companies, of which two thirds are independent cement grinding companies. Most of these were reportedly created during the late 2000s as dry kilns started to predominate. The CCA is concerned with the quality of the cement some of these companies produce and the lack of order in this part of the market such as regional imbalances. This suggests that the government’s attempts to consolidate the cement industry as a whole had led to the independent companies heading down the supply chain. It also raises the possibility that the government-led consolidation drive may move to grinding next. One news story to remember here is that in February 2021 the CCA called for its industry to respect competition laws following a government investigation. Later in the month it emerged that eight cement companies in Shandong Province had been fined US$35m for price fixing in a sophisticated cartel whereby the perpetrators went as far arranging a formal price management committee to regulate the market.

The CCA described 2020 as a year of sudden decline, rapid recovery and stability. Coronavirus hit cement output in the first quarter of 2020 leading to unprecedented monthly year-on-year declines before it bounced right back in a classic ‘V’ shaped recovery pattern. Despite the pandemic and bad weather later in the year, annual output rose by 2% year-on-year to 2.37Bnt in 2020 from 2.32Bnt in 2019. This has carried on into 2021 with a 61% increase in January and February 2021 to 241Mt from 150Mt in the same period in 2020. That’s not surprising given that China was suffering from the pandemic in these months in 2020 but the growth also suggests that the industry may have gone past stability and is growing beyond simply compensating for lost ground.

Graph 1: Year-on-year change in cement output in China, January 2010 - February 2021. Source: National Bureau of Statistics of China. Note that accumulated data is issued for January and February each year so these months show a mean figure.

Chart 2: Annual cement production growth by Province in 2020. Source: China Cement Association.

Chart 2 above shows cement production in 2020 from a provincial perspective. Note the sharp decline, more than 10% year-on-year, in Hubei Province (shown in dark green). Its capital Wuhan is where the first documented outbreak of coronavirus took place followed by a severe lockdown. Zooming further out, China’s clinker imports grew by 47% year-on-year to 33.4Mt in 2020. This is the third consecutive year of import growth, according to the CCA. The leading sources were Vietnam (59%), Indonesia (10%), Thailand (10%) and Japan (8%). China has become the main export destination for South East Asian cement producers and Chinese imports are expected to continue growing in 2021.

Graph 2: Revenue of large Chinese cement producers in 2020 and 2019. Source: Company reports.

Moving to the financial figures from the larger Chinese cement producers, CNBM and Anhui Conch remain the world’s two largest cement producing companies by revenue, beating multinational peers such as CRH, LafargeHolcim and HeidelbergCement. Anhui Conch appeared to be one of the winners in 2020 and Huaxin Cement appeared to be one of the losers. This is misleading from a cement perspective because Anhui Conch’s increased revenue actually arose from its businesses selling materials other than clinker and cement products. Its cement sales and cement trading revenue remained stable. On the other hand, Huaxin Cement was based, as it describes, in the epicentre of the epidemic and it then had to contend with flooding along the Yangtze River later in the year. Under these conditions, it is unsurprising that its revenue fell.

CNBM’s cement sales revenue fell by 3% year-on-year to US$19.5bn in 2020 with sales from its new materials and engineering compensating. Anhui Conch noted falling product prices in 2020 to varying degrees in most of the different regions of China except for the south. CNBM broadly agreed with this assessment in its financial results. Anhui Conch also reported that its export sales volumes and revenue fell by 51% and 45% year-on-year respectively due to the effects of coronavirus in overseas markets. The last point is interesting given that China increasingly appears in lists of major cement and clinker exporters to different countries. This seems to be more through the sheer size of the domestic sector rather than any concerted efforts at targeting exports.

One major story on CNBM over the last 15 months has been its drive to further consolidate its subsidiaries. In early March 2021 it said it was intending to increase its stake in Tianshan Cement to 88% from 46% and other related transactions. This followed the announcement of restructuring plans in mid-2020 whereby subsidiary Tianshan Cement would take control of China United Cement, North Cement, Sinoma Cement, South Cement, Southwest Cement and CNBM Investment. The move was expected to significantly increase operational efficiency of its constituent cement companies as they would be able to start acting in a more coordinated manner and address ‘fundamental’ issues with production overcapacity nationally.

In summary, the Chinese cement market appears to have more than compensated for the shocks it faced in 2020 with growth in January and February 2021 surpassing the depression in early 2020. Market consolidation is continuing, notably with CNBM’s efforts to better control the world’s largest cement producing company. Alongside this the CCA may be starting to suggest that rationalisation efforts previously focused on integrated plants should perhaps be now looking at the more independent grinding sector. The government continues to tighten regulations on new production capacity and is in the process of introducing new rules increasing the ratio of old lines that have to be shut down before new ones can be built. Finally, China introduced its interim national emissions trading scheme in February 2021, which has large implications for the cement sector in the future, even if the current price lags well behind Europe at present.

US: The California Nevada Cement Association (CNCA) has published a plan for the Californian cement industry to meet its target of carbon neutrality by 2045. The plan consists of three pathways, namely: a reduction in process emissions including by alterations to clinker factor and type of additives; an increase in alternative fuel (AF) substitution; and a switch to renewable energy. The association said that the aims are achievable by close stakeholder coordination, constructive public policy engagement and a situational approach based on a flexible portfolio of pathways.

Australia: Calix has reported the completion of a pre-front-end engineering and design (FEED) study of its Leilac-2 carbon capture and storage (CCS) study. Germany-based HeidelbergCement, Mexico-based Cemex and Portugal-based Cimpor assessed the study. The milestone clears the technology for industrial scale implementation at HeidelbergCement’s Hannover integrated cement plant in Germany. The installation aims to capture 100,000t/yr of CO₂ at an installation cost of Euro23m (+/-30%). The final investment decision will follow after the completion of FEED in early 2022.

Mexico: Cemex has presented a comprehensive analysis of it strategic vision, operational performance, corporate governance and value creation in 2020 in its integrated report for the year. During the year, the group developed and implemented over 50 new hygiene and safety protocols against the Covid-19 outbreak, achieved zero fatalities and lost-time injuries across 96% of its operations and led remote operations with its Cemex Go digital platform, which accounted for 61% of global sales in 2020. Cemex announced its Climate Action strategy in February 2020, defining a global target of a 35% reduction of CO2 emissions per tonne of cementitious product by 2030. It also established an ambition to deliver net-zero CO2 concrete to all its customers globally by 2050.

At 31 December 2020 it had already achieved a 35% emissions reduction across its European operations and became the first cement producer to set a 55% reduction target in line with the European Commission’s new goal for member states. The group co-processed 2.7Mt of waste for use as alternative fuel (AF) across 91% of its cement plants, replacing 1.6Mt of coal at a substitution rate of 25%. The producer classified 29% of its cement business’ power consumption as ‘clean,’ with 100% renewable power supply across cement, concrete, and aggregates operations in Poland and the UK. The year also saw the global introduction of Vertua low carbon and net-zero CO2 products. Vertua Ultra Zero is the first net-zero CO2 concrete.

Cemex continues to operate under its Operation Resilience medium-term plan. The plan aims to promote growth, sustainability, and financial resilience. The company has amended its bank debt under its facilities agreement, which incorporates green metrics, and strengthened its social impact strategy to reinforce community initiatives. Group activities positively impacted more than 23 million people on an accumulated basis, contributing to the achievement of the UN Sustainable Development Goals, according to the producer.

Chief executive officer Fernando Gonzalez said, “2020 was undoubtedly a very challenging year, with Covid-19 abruptly upending every aspect of our lives and disrupting every industry worldwide.” He added, “Sustainability remains one of our top priorities, and our Climate Action strategy makes us confident in our ability to achieve our targets and aspirations.”

Denmark: FLSmidth says that it has allocated performance shares to 160 executive managers and key staff under its Long-Term Incentive programme. The shares have a three-year vesting period and are subject to fulfilment of stretched targets. Applicable targets are earnings before interest, taxation and amortisation (EBITA) margin, total shareholder return and MissionZero emissions reduction programme performance. The supplier estimated the cost of the plan as Euro6.98m assuming full vesting.

The company said, “The primary purpose of the programme is to retain key staff and to align the interests of shareholders and the incentive programme participants by rewarding performance in accordance with the company’s strategy.”

Switzerland: LafargeHolcim has expanded former chief sustainability officer Magali Anderson’s role to chief sustainability and innovation officer. The new role additionally includes leadership of the group’s research and development strategy and organisation. Anderson will also oversee external innovation collaborations with the academic world. The group says that the combination of sustainability and innovation aims to increase impact across both areas.

Chief executive officer Jan Jenisch said, “I am delighted to appoint Magali as our chief sustainability and innovation officer. Under her leadership, we opened a new chapter in our climate action with our Net Zero pledge and growing range of green building solutions, from ECOPact to Ecolabel. Sustainability is a game-changer in our industry and innovation is the most effective catalyst to scale up our impact. By aligning our sustainability and research and development organisations under Magali’s direction, I look forward to stepping up our pace and pipeline of innovation to build a net zero future.”

Anderson, a French national and mechanical engineer, holds international industry experience, acquired in a variety of general management, operational and functional roles in countries such as Brazil, Nigeria, Indonesia, Angola, Romania and China. She joined LafargeHolcim in 2016 as Head of Health & Safety before taking on the role of Chief Sustainability Officer. She is on the advisory boards of the World Green Building Council (WGBC), MIT Climate & Sustainability Consortium, LafargeHolcim Foundation for Sustainable Construction and Business for Nature, as well as co-chair of the World Business Council for Sustainable Development (WBCSD) Built Environment and the Global Concrete and Cement Association (GCCA) 2050 roadmap projects. She is also a mentor at the Creative Destruction Lab (CDL) in Paris, a nonprofit organisation that delivers an objectives-based program for massively scalable, seed-stage, science- and technology-based companies.

LafargeHolcim publishes its first Climate Transition report in 2022.

Taiwan: Taiwan Cement’s revenue fell by 7% year-on-year to US$4.02bn in 2020 from US$4.32bn in 2019. Net income grew by 4% to US$881m.

Senior vice president Edward Huang said, "In 2020, Taiwan Cement made achievements in many aspects. In additional to our sound financial performance, we also committed to the Global Cement and Concrete Association (GCCA)’s Climate Ambition aspiring to deliver carbon neutral concrete to society by 2050. Even though challenges such as Covid-19, global economic volatility and climate change remain in 2021, Taiwan Cement is well-prepared as we continue to see stable profits in the cement industry, expand our waste treatment and energy businesses and move towards our carbon emissions reduction targets."

India: The Climate Action Programme 2.0° has awarded ACC its Orientated award for efforts towards CO₂ emissions reduction. United News of India has reported that the award assesses companies on the basis of the Confederation of Indian Industry’s climate-maturity model and the Business Excellence Framework. ACC claimed the national award in the energy, mining and heavy industries category.

Managing director and chief executive officer Sridhar Balakrishnan said, "Sustainable construction and environmental conservation are our core corporate objectives. Through our consistent focus on sustainable business practices, we have emerged as one of the companies with the lowest carbon footprints in the cement industry. This award will motivate us further to continue working towards building a greener planet." He added, “As part of global cement major LafargeHolcim, the company is committed to the Net Zero vision of the group and is an industry leader in combating climate change through consistent commitment to sustainable practices. ACC's sustainability mission is defined by the Triple Bottom Line, which signifies accomplishing three interdependent and mutually reinforcing goals of economic development, social development, and environmental protection.” ACC also became a partner of the UK-based Global Cement and Concrete Association (GCCA).

Germany: Mexico-based Cemex subsidiary Cemex Zement has set up an innovation acceleration partnership called Carbon Neutral Alliance to support its work to achieve net zero CO₂ emissions at its Rüdersdorf cement plant by 2030. The association will work to develop industrial-scale demonstration projects in line with the company’s Future in Action programme. Its scope will include carbon capture and storage (CCS), the transformation of captured CO₂ into building materials, synthetic fuels and green hydrocarbons, hydrogen production and waste heat recovery (WHR). Cemex plans to share the knowledge gained by the alliance across its global cement network.

Managing director and Rüdersdorf plant manager Stefan Schmorleiz said, "It is expected that CO₂ will be further processed to convert to new forms of energy and materials for use locally by industrial, residential, and transport sectors. Together with our partners, we will take feasibility studies through to economic solutions to decarbonising cement production.”

Greece: Titan Cement group has accelerated its efforts towards sustainability with new environmental, social and governance (ESG) targets. The targets include an updated CO₂ emissions reduction target of 35% by 2030 compared to 1990 levels, zero workplace fatalities and a cement industry top-three lost time injury frequency rate, increased female leadership participation and 70% supplier sustainability in line with the producer’s own ESG standards by 2025. It also set a water consumption target of 280L/t of cementitious material produced and 50% certified Zero Waste to landfill production by 2025.

Chief sustainability officer Leonidas Canellopoulos said, “We are building on our strong track record on sustainability and aspire to increase our positive impact on people, society, and the environment. We are committing to ambitious targets that aim to generate more value for all our stakeholders and set the foundations for sustainable growth in a carbon-neutral and digitalised world.”