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Cemento Yura said it was considering expanding cement and lime production this week. The announcement, made in an interview to business newspaper Gestión, follows a strong second quarter for the subsidiary of Grupo Gloria with clinker production volumes jumping up by 36% year-on-year to 0.51Mt. Overall for the half-year its clinker and cement production rose by 12.8% year-on-year to 0.86Mt and 12.7% to 1.47Mt. The success was attributed to consistent demand from the domestic sector as well as various large-scale mining projects. Julio Cáceres, the commercial director for its Cement, Concrete and Lime Division in Peru, Chile and Bolivia, wouldn’t say where the company was considering heading next, other than that remarking that it was attentive to new markets.

As Cáceres’ job title implies Cemento Yura also operates cement plants outside of Peru. At home it runs one integrated plant in the south of the country near to Arequipa as well as a lime plant at Juliaca. Outside of Peru though it also runs two integrated plants and a grinding unit in Bolivia, via its Sociedad Boliviana de Cemento (SOBOCE) subsidiary, and two integrated plants in Ecuador, via its Union Cementera Nacional (UCEM) subsidiary. The company also has assorted concrete assets. The international aspect to Cemento Yura’s business is interesting given that the larger cement producers in Peru are dominant in different parts of the country with Cementos Pacasmayo in the north, UNACEM (Unión Andina de Cementos) in the centre around Lima and Cemento Yura in the south. Notably, UNACEM also runs a plant in Ecuador and one in Arizona, US. It is also worth mentioning that competition issues have been reported in the local market previously. In mid-2021 Peru’s competition authority, the National Institute of the Defense of Competition and Intellectual Property Protection (INDECOPI), investigated Cemento Yura.

Cemento Yura’s rise in clinker production in the second quarter of 2022 is worth considering because in a previous interview with the local press Humberto Nadal, the chief executive officer of Cementos Pacasmayo, said that importing clinker had become more expensive in 2021. Subsequently, the company started a US$70m upgrade at its Pacasmayo plant to increase its production capacity by 0.6Mt/yr. In its second quarter financial results for 2022 Cementos Pacasmayo directly credited a 27% increase in its earnings on higher operating profits arising from decreasing costs by using less imported clinker. Sure enough data from Association of Cement Producers (ASOCEM) shows that both cement and clinker imports started to fall in October 2021 and have mostly followed a downward trend since then. Clinker imports fell by 41% year-on-year to 0.66Mt from January to August 2022 compared to the same period in 2021.

Graph 1: Cement production in Peru, 2014 – present. Source. Association of Cement Producers (ASOCEM).

Looking at the wider picture in Peru, cement production has stayed fairly consistent since 2014 at around 10Mt/yr. An upward trend probably started in 2019 but then the Covid-19 pandemic cut it off in the first half of 2022 before the market surged back in the second half of that year. 2021 was a good year with production peaking at 12.9Mt. So far the first eight months of 2022 have seen production rise by 5.3% year-on-year to 8.64Mt.

In summary, cement production is rising in Peru, importing clinker appears to have become more expensive for at least one of the producers and some of the larger local companies are investing in new production capacity, considering it or thinking about acquisitions elsewhere. Local clinker producers appear to be in a good place; clinker importers, or those reliant on it, not so much.

Nigerian billionaire Aliko Dangote was spotted attending the inauguration ceremony of Kenyan President William Ruto earlier in September 2022. This is relevant because Dangote’s cement company previously announced plans in 2016 to build two 1.5Mt/yr plants in Kenya, near Nairobi and Mombasa respectively. They were intended to become operational by 2021. Unfortunately, Dangote himself allegedly described Kenya as being more corrupt than Nigeria to Kenyan broadcast journalist Jeff Koinange a few years later and nothing more happened. Back in 2014 Ruto visited Dangote Cement’s Obajana plant in Kogi state in Nigeria when the politician was the Deputy President of Kenya. Dangote’s attendance at the presidential inauguration this month suggests at the very least that his relationship with Ruto remains active. Maybe more news on those planned plants will follow.

Graph 1: Cement in Kenya, 2018 – June 2022. Source: Kenya National Bureau of Statistics (KNBS).

The reason why the owner of Africa’s largest cement company might be interested in the Kenyan market can be seen in its latest cement production figures. Data from the Kenya National Bureau of Statistics (KNBS) shows that production for the first half of 2022 grew by 20% year-on-year to 4.95Mt in the first half of 2022, from 4.12Mt in the same period in 2021. Cement production was broadly similar in 2018 and 2019 at around 6Mt. It then increased by 25% to 9.25Mt in 2021 from 7.41Mt in 2020. On a rolling annual basis, production picked up at the start of 2020 and has risen consistently since then each month, peaking at over 10Mt in May 2022.

However, the elections in August 2022 probably slowed this growth trend, despite being much more peaceful than those in 2007, although the KNBS is yet to release the data. Bamburi Cement said in its outlook for the second half of 2022 that it expected markets to recover after the ballot. The subsidiary of Holcim reported increasing turnover in the first half of 2022, due to mounting sales volumes and price rises, but its profit fell sharply. It blamed this on fuel and logistics inflation, growing clinker import costs as well as negative currency exchange effects.

That last point about imported clinker is worth noting given that a government report in late 2021 found that the country had a clinker shortage of up to 3.3Mt/yr. Yet, the KNBS data in recent years shows that cement production and consumption are broadly similar, suggesting that the shortfall in clinker is being imported. The report added that 59% of the imported clinker originated from Egypt, tariff free, due to a free trade agreement. Local producers were reported to have been operating at a 65% capacity utilisation rate. Egypt and the UAE accounted for most of the imported clinker followed by Saudi Arabia. An interview in the Standard newspaper at this time with Bamburi Cement’s managing director Seddiq Hassani revealed that, despite locally produced clinker being cheaper than imported clinker, some producers were reluctant to hand control of a key input material over to their local competitors. Other producers, predictably, were trying to persuade the government to raise the duty on imports of clinker from 10% to 25%. Tariff discussions have continued in 2022.

So far in 2022 the other big stories in the sector have included Bamburi Cement’s plans to build two solar power plants and a major repair to the kiln shell at East Africa Portland Cement’s (EAPCC) Athi River cement plant. The solar plants will be built next to Bamburi Cement’s integrated Mombasa plant and its Nairobi grinding plant. Once operational in 2023 they are anticipated to supply up to 40% of the cement producer’s total power supply. Devki Group, the owner of National Cement, also announced plans in August 2022 to set up a wind farm near Mombasa. However, this seems more like an attempt to diversify the group into electricity production rather than to supply its own plant near Nairobi. EAPCC’s upgrade project has completed this week after about a month and half of work. It is intended to increase the plant’s cement production by 50%.

Cement production started in rise in 2020 but the Covid-19 pandemic may have constrained this. Production (and consumption) then jumped up in 2021 and looks set to do similar in 2022 bar a possible blip from the elections in August 2022. This is despite the global market issues arising from the end of Covid-19 and the war in Ukraine. These may be uncertain times but the fundamentals for the Kenyan cement market look positive despite rising end prices. Unsurprisingly, it looks likely that Dangote Cement remains keen to extend its business to Kenya.

Spain: Sustainability Observatory's Decarbonisation 2022 report has named FCC, Cemex and Holcim on a list of Spain's top 10 CO₂ emitters. Construction conglomerate FCC, parent company of Cementos Portland Valderrivas, was the seventh largest contributor the country's CO₂ emissions during the year. Mexico-based Cemex placed joint eighth with energy provider Iberdrola at 2.4Mt-worth of CO₂ emissions in 2021, followed by Switzerland-based Holcim with 2Mt.

Spanish CO₂ emissions grew by 5.1% year-on-year in 2021, and by 3% across industries subject to emissions credit trading, which include the cement sector. Together, the top 10 emitters accounted for 57% of these industries' emissions, and 19% of total national emissions.

Spain: Oficemen has blamed falling exports of cement on high electricity prices. The cement association reports that exports fell by around 25% year-on-year to 3.76Mt for the first eight months of 2022 from over 5Mt in the same period in 2021. Local consumption of cement slowed to an increase of just 0.2% to 9.88Mt from 9.86Mt.

Aniceto Zaragoza, the general director of Oficemen, said “Electricity costs in our sector have increased by 400% in the last two years, a situation that worsens every day due to the energy crisis we are suffering. Without competitive electricity costs, it is impossible for our industry, which for many years has led the cement export market, to continue competing with other producers in the Mediterranean area that pay much less for their energy inputs, such as Algeria, Turkey or Egypt.”

Argentina: Total despatches of cement grew by 11% year-on-year to 8.54Mt in the first eight months of 2022 from 7.67Mt in the same period of 2021. Data from the Asociación de Fabricantes de Cemento Portland (AFCP) shows that local despatches increased by 11.5% to 8.47Mt but exports fell by 10% to 67,800t.

Chile: Despatches of cement fell by 10% year-on-year to 2.25Mt in the first seven months of 2022 from 2.51Mt in the same period in 2021. Data from the Cámara Chilena de la Construcción (CCHC) shows that cumulative annual despatches have been falling month-on-month since January 2022.

US: Total US cement shipments grew by 4% to 52.4Mt in the first half of 2022 from 50.4Mt in the same period in 2021. Data from the United States Geological Survey (USGS) shows that local shipments and imports rose by 3.5% to 44.1Mt and 7% to 8.31Mt respectively. The largest sources of imports of cement and clinker were Turkey at 4.57Mt, Canada at 2.19Mt, Mexico at 1.28Mt, Greece at 1.23Mt and Vietnam at 0.94Mt. The largest cement producing states in the reporting period, in descending order, were Texas, California and Missouri.

Pakistan: Cement sales fell by 24% year-on-year in Pakistan in August 2022, due to increased energy, fuel and transport costs. Total despatches for the month came to 3.3Mt, against 4.3Mt a year earlier, according to data from the All Pakistan Cement Manufacturers Association (APCMA). Local shipments for August 2022 came to 2.9Mt against 3.8Mt in August 2021, a fall of 24%. Exports fell by 26% to 0.39Mt from 0.52Mt in August 2021.

APCMA officials are of the view that the government needs to generate a viable policy for the construction industry, keeping in view the huge damage to national infrastructure after unprecedented recent flooding.

Senegal: Data from the National Agency for Statistics and Demography (ANSD) indicates that cement exports fell by 34% month-on-month in June 2022, although local sales rose by 4%. Overall cement production fell by 2% as manufacturers battle the economic impacts of the war in Ukraine.

Tajikistan: Cement production fell by 7% year-on-year to 2Mt in the first half of 2022 from 2.16Mt in the same period in 2021. The Avesta News Agency reports no reason for the decline but it noted that the construction sector had grown so far in 2022. The country’s cement industry exports around 1.5Mt/yr to neighbouring countries including Afghanistan, Uzbekistan and Kyrgyzstan.