Displaying items by tag: Türkiye
Energy costs mounting for the cement sector
20 October 2021UltraTech Cement, Taiheiyo Cement, Cimtogo and the Chinese Cement Association (CCA) have all been talking about the same thing recently: energy prices.
India-based UtraTech Cement reported this week that coal and petcoke prices nearly doubled in the second quarter of its current financial year, leading to a 17% rise year-on-year in energy costs. Japan-based Taiheiyo Cement released a statement earlier in October 2021 saying that due to mounting coal prices it was planning to raise the price of its cement from the start of 2022. It principally blamed this on increased demand in China and a stagnant export market. It added that it was ‘inevitable’ that prices would rise further in the future. Meanwhile in West Africa, Eric Goulignac, the chief executive officer of Cimtogo, complained to the local press that the reason the company’s cement prices were going up was due to a 250% increase in the cost of fuels for the Scantogo plant and an increase in the price of sea freight of over US$35/t for transporting gypsum and coal.
Other places where the cost of energy has been biting cement producers include Turkey and Serbia. In the former, Türk Çimento, the Turkish Cement Manufacturers' Association, warned in June 2021 that the price of petcoke had nearly tripled over the previous year. Whether it was connected or not, the Turkish Building Contractors Confederation (IMKON) organised a strike in September 2021 due to high costs. The confederation claimed that the price of cement had tripled over the last year. In Serbia electricity prices have risen sharply in recent months in common with much of Europe. Local press reported comments last month from President Aleksandar Vučić saying that an unnamed cement producer had warned of a 25% rise in the price of cement if electricity prices remained high. In the UK the Energy Intensive Users Group (EIUG), a network of lobbying groups for heavy industry including cement, has been holding talks with the government on how to cope with growing energy costs. Finally, in the US, Lhoist warned in September 2021 that is was going to increase the cost of all of its lime products from the start of November 2021 due to increasing gas prices. These are just some of the reactions by cement and lime producers to the current global energy market. No doubt there are many more.
The current global energy crunch has widely been attributed to the waking up of economies following coronavirus-related dormancy in 2020 with supply failing to meet demand. Gas prices have risen to record highs and this has promoted electricity producers to switch to coal in the US, Europe and Asia. This in turn has put pressure on industrial users as both electricity and coal prices have grown and governments have taken action in some cases to protect domestic users. In Europe price pressure has lead to reductions in ammonia and fertiliser production. Power cuts have been reported in China and India.
In China a variety of factors have converged to create a crisis. These include shutting down coal mines on environmental and safety grounds, anti-corruption measures and even promoting mine closures to facilitate clean skies for national events such as the Communist party’s 100th anniversary. Disruption to import sources such as a ban on Australian coal on political grounds, flooding in Indonesia and a renewed coronavirus outbreak in Mongolia can’t have helped either. Thermal coal futures traded on the Zhengzhou Commodity Exchange hit a high of US$263/t on 15 October 2021 marking a 34% rise through the week and the largest weekly growth since trading started in 2013. The International Energy Agency estimates that coal demand in China grew by over 10% year-on-year in the first half of 2021 but coal production increased by just over 5%.
Industrial users have suffered as energy supplies have been rationed and producers asked to cut output. In September 2021 cement output fell by 12% year-on-year to 205Mt from 233Mt in September 2020. This is the lowest monthly figure for September since 2011. It’s also not the usual direction of double-digit rate of change that the Chinese cement sector is used to. The CCA attributed this mainly to energy controls, power shortages and high coal prices in Jiangsu, Hunan, Zhejiang, Guangdong, Guangxi, Yunnan, Shandong and elsewhere. Cement output for the first nine months of 2021 is still ahead of 2020 at 1.77Bnt compared to 1.67Bnt but it’s been slipping noticeably since July 2021.
This will leave energy users, including cement producers, watching the weather forecasts rather closely this winter. Should the Northern Hemisphere suffer a cold one then energy prices such as coal will reflect it. Industrial users may also become subject to energy rationing in many places. The knock-on effect of this then will be higher cement prices. However bad the winter does turn out to be though we can expect more cement companies trying to explain bashfully why their prices are going up. On the plus side any producer that can diversify its energy mix through solar, alternative fuels or whatever else is likely to be doing so soon if they are not already.
Growth Tech Special Projects receives licence to import 50,000t of Turkish cement into Jamaica
13 October 2021Jamaica: The Ministry of Industry, Investment and Commerce has granted Growth Tech Special Projects a licence to import 50,000t of cement from Turkey before 31 December 2021. The Gleaner newspaper has reported that the nation's other cement importer, Buying House, holds a licence to import 120,000t/yr. Sole producer Caribbean Cement is in the process of expanding its 1Mt/yr Rockfort cement plant's capacity to 1.4Mt/yr.
Update on Turkey, October 2021
06 October 2021There have been a couple of news stories worth noting in the Turkish market this week. First, it was revealed that Medcem had chosen Sintek Group to build a new production line at its integrated plant in Mersin. Second, Çimko Çimento agreed to buy two integrated plants and a grinding plant from Çimsa.
The Medcem upgrade project will see the subsidiary of Eren Holding add a second production line, with a clinker capacity of 9000t/day. Sintek Group reportedly has agreed to do this for US$128m. This follows an announcement from Medcem in late May 2021 that it was intending to invest over US$200m towards increasing its plant’s overall production capacity to 6.5Mt/yr from 3.5Mt/yr. The plan at this point was to start construction work in August 2021 with eventual commissioning of the second line in the first quarter of 2023. In addition the cement producer said at the time that it was going to open a new terminal in the US shortly. This was intended to join the company’s existing grinding plants in Cameroon and Tunisia and terminals in Russia and Northern Cyprus. On a side note, Medcem likes to point out that the 11,500t/day clinker production capacity on its existing line at its plant is the biggest in Turkey and Europe.
The Çimko Çimento deal with Çimsa was for US$127m. It includes the Nigde Kayseri integrated plants, the Ankara grinding plant and seven ready-mix concrete plants. As would be expected, the transaction is subject to the approval of the local competition authority.
Graph 1: Domestic and export cement sales in Turkey, January – June 2017 – 2021. Source: Türk Çimento.
Graph 1 above gives an idea why some cement producers might have decided that it’s time to expand either through upgrades or acquisitions. The general Turkish economy suffered a jolt in mid-2018 when the value of the Turkish Lira dropped and interest rates rose. The coronavirus pandemic hit in 2020 but after a slowdown at the start of that year the economy managed to grow. The growth has continued so far in 2021 but inflation rates have also soared. In the cement sector, annual domestic sales fell consecutively from 2017 to 2019. They started to recover in 2020 and so far in 2021 it looks like they are continuing to grow. As domestic sales fell the sector focused on exports and they have grown steadily on an annual and half-year basis since 2018. Annual exports hit a high of 16Mt in 2020 or 23% of total sales.
Despite this, in June 2021 the Turkish Cement Manufacturers' Association, Türk Çimento, was warning that input costs were mounting, particularly in the last year. It reported that the price of petcoke had nearly tripled in this period. It also warned of mounting production overcapacity, estimated at over 20Mt/yr in 2019 although down to 7Mt/yr in 2020. Coupled with a fall in annual domestic sales from 2017 to 2019, in its words, “The contraction in domestic consumption during that period steered our companies toward exports.” Some of the larger cement producers, including Oyak, Akçansa and Çimsa all reported healthy rises year-on-year in revenue and operating profit in the first half of 2021. They also reported mounting costs which have risen by 35 – 80%.
The other recent stories from Turkey to note are a two week strike organised by the Building Contractors Confederation (IMKON) in September 2021 due to high costs, particularly cement. The confederation claimed that the price of cement had tripled over the last year. Earlier, in late April 2021, the Turkish competition authority Rekabat Kurumu launched a probe into alleged collusion by nine cement producers including Oyak, Çimsa and Limak. We are not saying these two stories are connected. The current state of the Turkish economy is more than enough to cause input costs for cement producers to spike. Yet headlines like this cannot be reassuring to builders wondering why the cost of cement is going up.
In summary, it’s an uncertain time for the Turkish cement industry. Sales are recovering but this has been achieved by pushing exports more than a rally at home. Alongside this, currency instability and high inflation rates are raising costs for cement producers and end-users. This hasn’t been enough though to stop growth activity from a couple of producers in the last week.
For more on the Turkish cement sector read ‘Cement in Turkey’ in the October 2021 issue of Global Cement Magazine
Turkey: Medcem has chosen Sintek Group to build a new 9000t/day production line at its integrated Mersin cement plant. Sintek Group’s part of project has a budget of US$128m, according to CemenTürk magazine. The supplier will provide civil works, mechanical equipment manufacturing, supply and assembly, technological manufacturing and assembly, structural steel manufacturing and assembly, auxiliary equipment supply and commissioning services. Medcem, a subsidiary of Eren Holdings, previously said that the overall project to upgrade its Mersin plant has a budget of over US$200m. It originally intended to start construction work in mid-2021, with commissioning scheduled for early 2023.
Çimko Çimento to acquire Çimsa assets for US$127m
29 September 2021Turkey: Sanko Holding subsidiary Çimko Çimento has agreed to acquire several assets from Sabanci Holding subsidiary Çimsafor US$127m. The Dünya newspaper has reported that the deal covers two cement plants – the Nigde plant and Kayseri plant – the Ankara grinding plant and seven ready-mix concrete plants.
Aşkale Cimento launches new logo
20 September 2021Turkey: Aşkale Cimento has launched new branding including an updated logo. The company said that the rebrand signifies its transition from a local to a global cement company.
CEO Fatih Yücelik said “We took a big step to be an international player with innovator and sustainable solutions, on our new journey to build the future.” He added “We are determined to do our part to build a better future for both our country and the world. Our new corporate identity is our first step, showing that we are fully committed to our goal of being the pioneer of change and transformation in the industry.”
Ukraine introduces anti-dumping duties on cement from Turkey
15 September 2021Ukraine: The Interdepartmental Commission on International Trade (ICIT) has introduced anti-dumping duties of 33 - 51% on cement imports from Turkey for five years. The rates are variable depending on the specific manufacturer and exporter, according to the Ukrainian News Agency. This follows an investigation that was launched in September 2020 following complaints by local producers including Buzzi-Unicem subsidiary Dyckerhoff, HeidelbergCement subsidiary Kryvyi Rih Cement and CRH subsidiary Podilsky Cement. ICIT concluded that there was the threat of causing ‘significant’ harm to local cement producers due to growing exports from Turkey, large amounts of idle production capacity in Turkey, lowered domestic consumption in Turkey and a pivot of Turkish manufacturers towards export markets.
Turkey: 120,000 members of the Construction Contractors Confederation (IMKON) downed tools on 9 September 2021 in protest against high cement prices. Emerging Market Watch News has reported that the strike will last until 21 September 2021 or until ‘satisfactory developments.’
The Ministry of Trade has tightened procedural restrictions on exporting clinker. Trade Minister Mehmet Mus is in talks with construction and cement industry representatives.
US cement shipments rise to 50.4Mt in first half of 2021
08 September 2021US: The US Geological Survey (USGS) recorded a 0.8% year-on-year increase in total US cement shipments in the first half of 2021 to 50.4Mt from 50.0Mt in the first half of 2021. Domestic deliveries constituted 85% of the total at 42.6Mt, against 7.75Mt of imports (15%). Clinker imports were 1.23Mt, with a total value of US$81.6m. Turkey was the lead exporter of clinker to the US in 2020 at 470,000t (38%), followed by Saudi Arabia with 466,000t (38%) and Canada with 276,000t (22%).
Turkish builders down tools in protest against high cement prices
02 September 2021Turkey: Builders have declared a one-day ‘strike’ on 2 September 2021 to protest against high cement prices. The Turkish Builders Confederation (IMKON) told the government that, though the prices of all commodities rose following the onset of the Covid-19 pandemic, the cement price rise is disproportionate, according to the Dünya newspaper. Producers responded that they have recorded sharp increases in input prices. Electricity costs rose by 64% year-on-year in July 2021, while coal costs more than doubled over the same period.