Displaying items by tag: market
Fancesa to target markets in La Paz and Cochabamba
07 February 2019Bolivia: Fábrica Nacional de Cemento (Fancesa) plans to target markets in La Paz and Cochabamba. It will open agencies in the locations in early 2019, according to the Correo del Sur newspaper. The cement producer operates a plant at Sucre in the south of the country.
Spanish cement export market expected to fall by 20% in 2019
04 December 2018Spain: Jesús Ortiz, the president of Oficemen the Spanish cement association, forecasts that exports of cement will drop by 20% year-on-year in 2019. He has blamed the situation on high electricity prices, according to the El Economista newspaper. He predicts that the local industry will have a capacity utilisation rate of 53% in 2019. He added that residential house construction was growing, but that the share of non-residential building had fallen.
India: The Cement Manufacturers Association has forecast growth above 10% in the 2019 financial year to the end of March 2019. It is expecting growth to be supported by the government's increased spending on large-scale infrastructure projects and growing residential housing, according to the Press Trust of India. It follows growth of around 13% year-on-year in the first half of the year. If growth stays at above 10% in 2019 it will be the fastest increase since the industry slowed down in 2011. The association is also attempting to lobby the government to lower the 28% tax rate applicable under the General Service Tax.
Update on Pakistan
24 October 2018As ever, there have been plenty of news stories from Pakistan recently covering the on-going fallout of the water shortage at the Katas Raj Temples in Chakwal, Punjab and an update on new production line at Maple Leaf Cement’s Iskanderabad plant. The two stories present two sides to the furious pace of the local industry and the potential price this growth might entail.
Graph 1: Cement despatches in Pakistan, 2012 - 2017. Source: All Pakistan Cement Manufacturers Association.
Graph 1 above sets the scene with an industry that has seen total despatches grow by nearly 30% to 42.8Mt in 2017 from 33.1Mt in 2012. About four-fifths of this is based in the north of the county. The big sub-story alongside this is that exports have fallen by half to 4.2Mt in 2017 from a high of 8.3Mt in 2013. The cause of this appears to be a decline in the Afghan market and a similar drop in waterborne clinker exports. Given the higher proportion of exports to the southern market this change has likely hit the industry in south harder despite overall depatches there rising. So far in 2018 similar trends are holding, except for exports, where the clinker export market has rallied significantly in the south.
The background to all this growth domestically is Chinese investment in the form of the China-Pakistan Economic Corridor (CPEC). CPEC-related project include integrated road infrastructure, the modernisation of railways and the development of the city of Gwadar and its related infrastructure. In addition the local Public Sector Development Programme (PSDP) is also having an effect and demographic pressures, such as a housing shortage, are also expected to support the construction market.
Data from the All Pakistan Cement Manufacturers Association (APCMA) placed cement production capacity at 54Mt/yr in September 2018 compared to 66Mt/yr in the Global Cement Directory 2018, which includes new capacity being built. This compares to around 10Mt/yr in the 1995 local financial year to an estimated 73Mt/yr by the State Bank of Pakistan in its third quarter report for 2017 - 2018. This rapid growth can be seen in recent stories such as the Iskanderabad plant expansion, Flying Cement’s mill order from Loesche, Kohat Cement’s mill order also from Loesche, a new solar plant at Fauji Cement at its Attock plant and the commissioning of DG Khan’s new plant at Hub. These stories are all from the last three months! The State Bank of Pakistan estimated that 11 producers hare now investing US$2.12bn on capacity expansions to add over 23Mt/yr by the end of the 2021 financial year.
One potential price for all of this growth is currently being illustrated in the ongoing legal wrangles about the use of water by cement plants near the Katas Raj Temples. What started as an investigation into why water levels were dropping at a pond at a Hindu heritage site seems to have transformed into a full scale inquiry into alleged corruption by local government around the setting up of cement plants. A report by the Punjab Anti-Corruption Establishment Lahore to the Supreme Court has found irregularities committed by government departments in connection to the setting up of cement plants by DG Khan and Bestway Cement in Chakwal. It seems unlikely at this stage that this inquiry will cause too much trouble for the local cement industry but it will certainly make it more complicated and potentially more expensive to st up new plants in the future.
Read Global Cement’s plant report from the DG Khan’s Khairpur cement plant in Chakwal
PPC makes redundancies at head office in poor market
18 October 2018South Africa: PPC has started a cost cutting campaign at its head office following poor cement sales so far in 2018. A source quoted by Business Report told the newspaper that staff redundancies had taken place already. The fall in sales has been blamed on poor local economic growth, the impact of a value added tax (VAT) increase on consumer spending and problems in the construction industry, including a fall in large infrastructure projects and private non-residential building.
Cemex to close two cement plants in Spain
17 October 2018Spain: Cemex España is preparing to close its cement plants at Gádor in Almería and Lloseta in Baleares. It has blamed reduced demand for cement and European regulations on CO2 emissions for the decision, according to the Cinco Días newspaper. The closures will affect 200 employees and the cement producer is has started to hold union discussions. Cemex will retain integrated plants at Morata de Jalón, Alicante, Alcanar, Castillejo Anover and Buñol.
Cement market in Mauritius grows by 10% so far in 2018
12 October 2018Mauritius: Dominique Billon, the general manager of Kolos, says that the local cement market has grown by 10% so far in 2018. He added that his company holds a 44% market share, according to Le Défi Plus newspaper. Local demand has risen due to infrastructure projects including the Metro Express and the Côte d'Or Smart City. Kolos operates a 60,000t cement terminal in the country. Its cement products include Kolos Plus and Kolos Classic.
Spanish ‘uncertainty and concern’ remain
11 October 2018Spain: Demand for cement in Spain in the first half of 2018 was 8% higher than in the first half of 2017, according to the national cement association Oficemen. The rate of growth was down, however. The country recorded an 11% year-on-year increase in demand between the first half of 2016 and the first half of 2017. Oficemen had expected demand to pick up by 12% for the whole of 2018 but now expects an increase of 7% instead. If realised, this would mean sales of around 13.3Mt for 2018.
“At the beginning of the year, the Department of Studies of Oficemen expected to close 2018 with a 12% increase in domestic demand. Now, with public works almost paralysed, we are talking about lowering our forecasts by 5 percentage points,” explained the president of Oficemen, Jesús Ortiz. “The weak recovery of the construction that began in Spain in 2017 depends on the building sector. Although it is growing at a good pace, it does so from absolute values that are still very low.” It is estimated that 2018 will close with around 100,000 new homes started, a figure that, while ignoring the years of the construction boom, represents less than half of the average of the homes that were built in Spain in the period 1970-1995.
“Public investment in Spain remains at 63% of the average investment of Germany, the UK, France and Italy, which takes us dangerously away from our neighbours. There is a consequent loss of competitiveness for our country, especially in the most exposed sectors: exports, tourism, treatment and prevention of environmental risks, driver safety, and so on,“ added Ortiz.
Cement exports were also down year-on-year, for the 13th month in a row. Ortiz primarily blamed this on the devaluation of the Turkish Lira, which has helped Turkish cement exports advance their competitiveness compared to Spain. He also highlighted rising electricity costs, which are expected to be 20% higher at the end of 2018 than at the start. This will make electricity 28% more expensive than for German cement producers, according to Ortiz. “What has recovered in the domestic market in these two years, is being lost abroad, with production that remains stagnant at 20Mt since 2013, a figure that accounts for half of the installed capacity of our factories. Therefore, the uncertainty and concern for our industry is maintained,” concluded Ortiz.
Votorantim Cimentos focusing on diversification strategy
10 October 2018Brazil: Walter Dissinger, the chief executive officer of Votorantim Cimentos, says that company’s diverse geographical spread and its products protected it from turbulent markets, especially at home in Brazil since 2015. Dissinger made the comments in an interview to the Valor Econômico newspaper ahead of a company meeting to plan its strategy for the next five years. He forecast that the local cement market is likely to decline for the fourth consecutive year in 2018, with a drop in consumption of 2%.
He mentioned expansion plans in the US and upgrade projects in Argentina. Six new mortar plants are also planned over the next four years with an investment of US$30m. These units will generally be built next to existing integrated cement plants. The company is expanding its limestone business with an investment of US$54m. Dissinger added that the company’s Nobres plant in Mato Grosso is making more revenue from limestone products than from cement. The company is also cutting fuel costs by replacing petcoke imports from the US with co-processing refuse derived fuels and exploring biofuel options.
Could cement fall victim to the carbon bubble?
06 June 2018CRH announced changes to its structure this week. The changes to its divisions follow the rapid growth of the company and may also anticipate the new cement assets it is about to take on-board once its acquisition of Ash Grove Cement completes in the US. Buried in one its regulatory filings covering the news were two graphs of changes in cement demand in the US and Europe through various financial depressions since the 1930s.
Graph 1: Changes in cement demand in US and Europe during financial depressions. Source: CRH with data from US Geological Survey, PCA, United Nations, Morgan Stanley etc.
The graphs serve their purpose for a public company as they show both markets in the current downturn starting to rise again. In other words it looks like the perfect time to invest in a building materials company! However, thinking more broadly the graphs give a timely reminder of how bad the last decade has been for the cement market, particularly in Europe. The period only really compares to the 1930s in decline and duration if the figures are accurate. It must be considered though that while the West has suffered, markets in the East, notably led by China and India, have boomed.
The financial crash in 2008 was precipitated by the US subprime mortgage market. Other potential market killers lie ahead no doubt. One such might be the so-called ‘Carbon Bubble.’ This idea has gained media traction this week with the publication of a paper in the Nature Climate Change journal examining the economic impact of decarbonisation, if or when it happens.
It’s not a new argument but it makes the assertion that as new technologies that replace fossil fuels start to influence the markets, traditional fuel producers like oil companies may face being stuck with ‘stranded’ assets as legislation toughens up and technology mounts. This in turn could cause a financial crash and it’s this aspect that the paper has looked at.
The ace in the hole from the Nature Climate Change paper is that the modelling here suggests a way out of the usual prisoner’s dilemma approach to climate change action. Once sufficiently-low carbon technologies hit a certain level of adoption, then any country holding out and using fossil fuels instead of taking of action may start to suffer economically. Or in other words cheating won’t pay.
The carbon bubble theory is pretty convenient for the climate change lobby as it gives it a financial reason to fight its enemies by targeting investors. One counter argument is realistically how fast and deep would the decarbonisation technologies actually have to be to cause significant financial disruption. Surely the oil producers would get out of risky assets before it was too late. Then again, maybe not.
The cement industry is in exactly the same situation as the oil producers as it too depends on carbon rich assets, in this case limestone, for its business to operate. If limestone assets become ‘stranded’ due to toughened legislation then how can production continue? In addition though, volatility in the fuels and secondary cementitious materials (SCM) markets already being observed from the cement industry may make one wonder about the existence of the carbon bubble. Markets for waste-derived fuels and granulated blast furnace slag are currently changing in the wake of the tightening of Chinese legislation both in and out of the country. In theory this could mean cheaper inputs for cement production but the market is hard to predict. The other classic recent example is how the US natural gas boom from fracking has reduced global oil prices with further effects on the coal and gas that cement producers use. This in turn has placed pressure on various countries that are reliant on their petrodollars and caused pain to their local cement industries, like Saudi Arabia for example. The price of Brent Crude may be rising at the moment but once it hits a certain threshold, the hydraulic fracking of gas wells in the US will resume pumping. Of course both waste inputs and fracking could just be attributable respectively to market distortions by a large country changing policy and a new technology finding its feet.
If the carbon bubble theory carries any weight then CRH’s cement demand graph during recessions may carry a warning to producers about what might happen if decarbonisation leaves the fossil fuel producers behind. With good timing for this theme South Korea’s Ssangyong Cement announced this week that it is close to completing a waste heat recovery (WHR) unit at its Donghae plant, one of the biggest in the world with seven production lines. The interesting detail here is that the WHR unit will work in conjunction with an energy storage system to form a microgrid. This kind of setup is well suited to using energy from renewables as well as from conventional sources like a national electricity grid. In other words, this is exactly the kind of development at a cement plant that might in a small way lessen its reliance on fossil fuels in the face of any potential supply issues.