Global Cement Newsletter

Issue: GCW348 / 11 April 2018

Headlines


Two reports out this week have looked at the carbon footprint of the cement industry. The first, a technology roadmap by the Cement Sustainability Initiative (CSI) and the International Energy Agency (IEA), laid out a technology pathway for the sector to reduce its direct CO2 by 24% from current levels by 2050 to meet the IEA’s 2°C scenario (2DS). The second, a report by the CDP (formerly the Carbon Disclosure Project) on the progress of 13 major cement producers to reduce their emissions, was a progress report on the business readiness for a low carbon economy transition.

 Graph 1: European Union industry emissions by sector, 2013 - 2017. Source: Sandbag, European Commission

Graph 1: European Union industry emissions by sector, 2013 - 2017. Source: Sandbag, European Commission.

The scene was set last week when the environmental campaign group Sandbag picked up on the latest emission data from the European Union (EU) Emissions Trading Scheme (ETS). Industrial emissions as a whole rose by 2% year-on-year to 743Mt in 2017. The cement and lime industry reported a rise of 3% to 148Mt in 2017 from 144Mt in 2016. As Sandbag reported, industrial emissions have remained ‘stubbornly high’ for the duration of the ETS. It then went on to say that, “the EU urgently needs a new industrial strategy to bring about radical industrial process changes and/or carbon capture and storage, especially for the high-emitting steel and cement sectors.”

The CDP’s report provided a global scorecard on the readiness of the cement industry to adapt to a low-carbon future. Unfortunately, the report used data from self-reporting questionnaires and it lacked data from the two largest Chinese cement producers, Anhui Conch and China National Building Materials (CNBM), although it did try to compensate for this. The CDP assessed companies across four key areas aligned with the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD).

 Graph 2: Opportunity vs. risk for low-carbon transition. Source: Building Pressure report, CDP.

Graph 2: Opportunity vs. risk for low-carbon transition. Source: Building Pressure report, CDP.

Surprisingly, the study, even with its limitations, found regional variation. As can be seen in Graph 2, the Indian cement producers came out on top from the criteria used: transition risks, physical risks, transition opportunities and climate governance and strategy. CDP pinned this on better access to alternative materials such as fly ash and slag coming from other carbon intensive sectors, such as thermal power generation and steel production. Reported process emissions measured by the clinker ratio for the Indian companies was 69% versus 78% for the other companies. They also benefited from newer cement plants driven by high market growth in the region compared to older plants in Europe.

The technology roadmap from the CSI and the IEA set out key actions for the industry to take by 2030 to have at least a 50% chance of achieving the 2°C 2DS scenario followed by a possible transition pathway that could be achieved through technology, legislation and investment. The key actions are protecting carbon pricing mechanisms from carbon leakage, putting new technology into action and supporting it by legislation, and greater government support for products with a lower clinker factor.

The CSI’s and IEA’s targets for 2030 included reaching a clinker to cement ratio of 0.64 in 2030 from 0.65 in 2014, a thermal energy intensity of clinker of 3.3GJ/t from 3.5GJ/t, an electricity intensity of cement of 87kWh/t from 91kWh/t and a alternative fuel co-processing rate of 17.5% from 5.6%. Perhaps the most optimistic is a CO2 capture and storage amount of 14MtCO2/yr in 2030 from nothing at the moment. This last target seems unlikely to be achieved given the lack of projects outside of the pilot stage, but it’s not impossible.

This column barely touches on the detail within either report or even the latest data from the EU ETS. Both reports offer ways forward to meet the 2°C global warming target outlined in the Paris Agreement. It’s easy to be pessimistic given the on-going clash between environmental optimism and business logic but both reports offer a way forward. The CDP report sets out a baseline with a look to the future, whilst the CSI/IEA roadmap offers what it says is a realistic route to reach that 2DS target. Lastly, if the CDP’s assessment is correct about the Indian producers then it’s possible that other developing cement industries may inherently be cleaner due to their use of newer plants and equipment. If worldwide government support can be provided for use of alternative fuels and materials on a much larger scale, as well as all the other recommendations, then meeting the Paris agreement may be easier than expected as new markets build new production capacity.

Two examples of carbon capture utilisation and sequestration projects will be covered in the May 2018 issue of Global Cement Magazine


Poland: Lafarge Poland has appointed Xavier Guesnu as the president of its management board. He succeeded Federico Tonettiego in March 2018. Tonettiego had held the role since 2014.

Guesnu has worked for LafargeHolcim for eight years. In 2010 he was responsible for Lafarge's strategy and development in global markets, acting as the Vice President for Strategy, Development, Acquisitions & Mergers. From 2013 he was the General Director of the aggregate business in eastern Canada. Previously he worked as a business consultant for Bain & Company. He is a graduate of Mines ParisTech engineering school in Paris, France.


US: Plibrico has appointed Norm Phelps as its new Vice President of Sales. Phelps will be responsible for aligning sales strategy and objectives with Plibrico's long term vision and corporate goals. He will be based in Atlanta, Georgia and will report to Plibrico president and chief executive officer Brad Taylor.

Phelps has worked in the refractory industry for 18 years, holding sales and marketing positions at Vesuvius and Zampell in the US. Later he moved to Europe to join Calderys as Global Market Manager responsible for the aluminum and boiler segments in 2011. In 2014, he took on the role of Business Development Manager, leading the Calderys expansion into North America, including the purchase and integration of Spar and the creation of Calderys USA. Most recently, he served as General Manager for Calderys North America.

Phelps holds a degree in Materials Science and Engineering from Pennsylvania State University and is a graduate of the Executive Development Program at the University of Chicago Booth School of Business.


India: The Supreme Court has been informed that the government is considering a ban on the use of petcoke by various industries. Additional Solicitor General A N S Nadkarni, representing the Ministry of Environment, Forest and Climate Change, told the court that a decision on the matter could be made within one month, according to the New Indian Express newspaper.

At present it is unclear whether the cement industry would be affected. However, if it was included in the ban, this potentially could be a problem for Shree Cement, which uses 100% petcoke in its fuels mix, according to India Infoline News Service. Additionally, UltraTech Cement, JK Cement, JK Lakshmi Cement and Mangalam Cement have petcoke usages in the range of 75 - 85% and would also be negatively affected.


India: Dalmia Bharat has sought intervention by the Central Vigilance Commission (CVC) in the insolvency proceedings of Binani Cement. It argues that the lenders’ reported move to allow owner Binani Industries to seek an out of court settlement violates CVC guidelines and circumvents the dedicated insolvency process, according to the Economic Times newspaper.

A consortium led by Dalmia Bharat won an auction for Binani Cement with a bid of US$974m in early March 2018. However, UltraTech Cement then made a direct bid to Binani Cement a few weeks later. In a letter to the CVC Dalmia Bharat alleged that UltraTech Cement’s direct offer was a revised bid in an auction that forbade them.


India: Wonder Cement has ordered two vertical mills from Germany’s Gebr. Pfeiffer for its Nardana plant in Rajasthan. The order includes a MVR 6000 C-6 mill for grinding slag cement and a MPS 3070 BK mill for grinding fuel. Delivery is scheduled for early 2019 and mid-2019 respectively.

The MVR mill will feature a total drive power of 5820kW. Mixed cements will be be ground to a fineness of up to 5% R 45µm. The grinding plant will be designed to process granulated blast-furnace slag with a target fineness of approximately 4500 cm²/g Blaine and blast-furnace cements with different proportions of granulated blast-furnace slag, fly ash and gypsum and different product fineness degree. Wonder Cement has requested the option to grind relatively hot clinker in the mill while at the same time being able to reduce the cement temperature, and alternatively to use cold clinker from stockpiles.

The core components such as the tension system and the grinding rollers will come from Gebr. Pfeiffer in Germany. The grinding bowl and the gearboxes for the mill and classifier will also be delivered from Europe. Gebr. Pfeiffer’s subsidiary, Gebr. Pfeiffer India, will provide the housing parts, the foundation parts and supports of the rollers as well as almost the entire high-efficiency classifier type SLS 5600 BC. Gebr. Pfeiffer India scope of supply will incorporate most of the equipment to complete the grinding plant including the plant fan.

The MPS mill will grind petcoke with a capacity of 40t/hr to a product fineness of 2% R 90µm. It will come with a SLS BK classifier, allowing both coal and petcoke to be ground in the mill, dried with process gases and then classified in the integrated classifier. Due to the high abrasiveness of Indian coal, the mill will be designed with appropriate wear protection.

Most components of the coal mill will be supplied by Gebr. Pfeiffer India. The housing and foundation parts, the grinding bowl and a large part of the power-transmitting parts will be manufactured in India. Setting up the new MPS mill is planned to coincide with the commissioning of the entire kin line.


Vietnam: Fico Tay Ninh Cement (Tafico) plans to start building a new production line at its plant Tan Hoa, Tan Chau District in mid-April 2018. The US$212m project will have a clinker production capacity of 4000t/day, according to the Viet Nam News newspaper. The project is scheduled to be completed in 2020.


Nigeria: Lafarge Africa’s sales rose by 36% year-on-year to US$835m in 2017 from US$613m in 2016. Its recurring earnings before interest, taxation, depreciation and amortisation (EBITDA) nearly doubled to US$161m from US$81m. Michel Puchercos, the chief executive officer of Lafarge Africa, attributed the strong margins in its Nigerian business to cost initiatives and higher prices. He added that the company’s increased use of alternative fuels and coal to offset gas shortages in the west of Nigeria and a focus on coal and gas in the east and north of the country aided market share.

However, the cement producer reported a ‘challenging’ business environment in South Africa, where operations are expected to ‘stabilise’ in 2018. Its Lichtenburg cement plant returned to normal operations during the course of the year and a turnaround plan was initiated in order to transform the company’s operations.


Uganda: Trade minister Amelia Kyambadde has given local cement producers three weeks to lower cement prices otherwise. If they do not cooperate she will allow cheaper exports of cement into the country, according to the Daily Monitor newspaper. A recent surge in the price of cement has led to a crisis in the construction industry with panic buying, hoarding and rationing reported by retailers and consumers.


Egypt: Khaled Fahmy, the Minister of Environment, has opened a new production line at Arabian Cement Company’s Ain Sokhna plant in Suez. The line uses FLSmidth’s Hotdisc combustion device to allow it to use high levels of alternative fuels, according to the Watani newspaper. The opening was attended by Muhammad Shehab Abdel-Wahab, chief executive of the Egyptian Environmental Affairs Agency, Nahed Youssef, head of waste management organisation, as well as a number of representatives of the financiers, and director of the European Investment Bank.

In 2015 Arabian Cement Company commissioned another Hotdisc installation. At the time is said it had a designed fuel mix of 70% coal and 30% alternative fuels, using a mixture of agricultural wastes, municipal sludge, and refuse-derived fuel (RDF).


UK: A report by the CDP looking at some of the largest multinational cement producers says that they need to double their emissions reductions in order to meet the 2°C global warming target outlined in the Paris Agreement. The report, entitled ‘Building Pressure,’ analysed 13 large cement companies including LafargeHolcim, HeidelbergCement and Cemex from data in a questionnaire. However, two major Chinese cement producers, Anhui Conch and China National Building Materials, and other producers including Siam Cement and Dangote Cement did not respond.

The report argues that regulation is the key driver to helping the cement industry reduce its emissions, through tightening building regulation and a rise in low carbon cities. However, it concedes that the sector faces a technology barrier, as ‘significant innovation’ is still required. “With potential pressure coming from multiple sources, including down the value chain in the form of building and city regulation, cement companies need to invest and innovate in order to avoid impending risks to their operations and the wider world. This may see m challenging at first, but every year it is delayed, the cost becomes greater, so management teams, regulators and investors need to think long term. There is a solution - cement companies just need to invest properly in finding it,” said Paul Simpson, the chief executive officer of CDP. The CDP report assessed companies across four key areas aligned with the recommendations from the Task Force on Climate-related Financial Disclosures (TCFD). Indian companies toped its league table in part due to better access to alternative materials from other carbon-intensive sectors. They also benefited from

newer cement plants driven by high market growth in the region compared to older plants in Europe. Dalmia Bharat, Ambuja Cement and Cementos Argos were the best performing companies on climate-related metrics and Taiheiyo Cement, Cementir Holding and Asia Cement Corporation ranked lowest.


Algeria: China’s CBMI has signed a contract with ASEC Cement to build a 4500t/day clinker production line at ASEC Cement’s Djelfa plant. The unit was originally partially built by ASEC Egypt in 2008 and had completed 90% of civil work before it was suspended due to the financial crash. Local company ETRHB Haddad and the Algerian subsidiary of China State Construction Engineering Corporation (CSCEC) took control of ASEC Cement in 2017 allowing the Djelfa project to continue.

The engineering, procurement and construction contract covers limestone crushing to cement packaging and delivery. It includes engineering, equipment and steel structure procurement, civil construction, erection, training and commissioning. Construction is scheduled to take 19 months from the contract’s activation date. As such the plant could be operational by the end of 2019.


Zambia: Weye Construction Materials has submitted plans to the Zambia Environmental Management Agency to build a 1Mt/yr cement plant in Chilanga district. The investment for the proposed project, including quarry and full clinker production line, has been set at the low value of US$45m.

According to the application the project will build a raw material mill single–stage cyclone pre-heater, a coal-fired rotary kiln and a packaging unit. Bag filters will be used for dust recovery at the bagging facility and material transfer points. Electrostatic precipitators will be installed for gas cleaning to avert nuisances from the kiln. WEYE added that the project would also create 555 jobs.

WEYE Construction Materials is owned by two Chinese shareholders: Zhang Yiwei and Lu Qiang. It is a subsidiary of China’s Weye Construction Group, based in Jiangsu province and established in 1999.


Brazil: Votorantim’s cement division’s sales fell by 7% year-on-year to US$3.24bn in 2017 from US$3.48bn in 2016. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 26% to US$515m from US$693m. The company blamed the continued decline on the poor market in Brazil. Outside of Brazil, Votorantim Cimentos reported positive markets in most territories, apart from Tunisia. Overall the group’s sales rose by 5% to US$7.95bn from US$7.59bn.


Democratic Republic of Congo: South Africa’s PPC says it is talks with China National Materials (Sinoma) over selling a majority stake in its operations in the country. In an interview with Bloomberg chief executive officer Johann Claassen said that deal would depend on the price and implications on the on-going merger between Sinoma and China National Building Material (CNBM). He added that the PPC’s cement plant in the Democratic Republic of Congo had proven ‘challenging’ and that the company had arranged a ‘debt holiday’ with lenders after the market ‘didn’t pan out as envisaged.’


France/Switzerland: A technology roadmap by the Cement Sustainability Initiative (CSI) and the International Energy Agency (IEA) sets out a combination of technology and policy solutions that could reduce CO2 emission from the cement industry by 24% by 2050. The Low-Carbon Transition in the Cement Industry report updates the first global sectoral roadmap produced in 2009. It aims to identify and develop international collaborative efforts and provide evidence for public and private sector decision-makers to move towards a more sustainable cement sector that can contribute to long-term climate goals.

“The first exercise carried out in 2009 had demonstrated its added value to help the sector identify solutions and enablers to reduce its CO2 emissions and it was essential to adjust this projection with the latest robust emissions data from the CSI’s Getting The Numbers right (GNR) database and the potential of latest technologies developed by the European Cement Research Academy (ECRA),” said Philippe Fonta, managing director, CSI of World Business Council for Sustainable

Development (WBCSD).The report aims to present a way to help the cement industry play its part it meeting the IEA’s 2°C Scenario (2DS) by 2050, which seeks to limit average global temperature increases to 2°C. The report forecasts that global cement production is set to increase between 12 - 23% by 2050 due to rising global population and urbanisation. Despite increasing efficiencies, direct carbon emissions from the cement industry are expected to rise by 4% globally by 2050 under the IEA Reference Technology Scenario (RTS), a base case scenario that takes into account existing energy and climate commitments under the Paris Agreement. The CSI and IEA argue that the low-carbon transition of the cement industry can only be reached with a supportive regulatory framework as well as effective and sustained investments. They say that meeting the RSI requires more investment, with a

potential doubling to meeting the 2DS. Governments, in collaboration with industry, can play a determinant role in developing policy and regulatory mechanisms that unlock the private finance necessary for such a boost in investment.The roadmap uses a bottom-up approach to explore a possible transition pathway based on least-cost technology analysis for the cement industry to reduce its direct CO2 emissions in line with the IEA’s 2DS. Reaching this goal, the CSI and IEA say, would require a combination of technology solutions, supportive policy, public-private collaboration, financing mechanisms and social acceptance.

Improving energy efficiency and switching to alternative fuels, in combination with reducing the clinker content in cement and deploying emerging and innovative technologies like carbon capture and the use of alternative binding materials are the main carbon-mitigation methods available in cement manufacturing. Further emissions savings can be achieved by taking into account the overall life cycle of cement, concrete and the built environment. The roadmap outlines policy priorities and regulatory recommendations, discusses investment stimulating mechanisms and describes technical challenges with regard to research, development and demonstration.


Spain: Cementos Alfa, part of Cementos Portland Valderrivas Group, has received permission from the Ministry of Environment to expand its quarry. The approval also allows the cement producer to expand the area of its quarry, according to the El Diario Montañés newspaper. The quarry currently produces 0.6Mt/yr of limestone and marl that are used for clinker production at the neighbouring plant.


Australia: Adelaide Brighton has publicly dismissed media speculation about its alleged plans to purchase Barro Group. The building materials producer said that whilst it had proposed transaction plans to Barro at ‘various times’ no agreement has been reached on any such deal.
Analysts at the investment bank Citi said that Adelaide Brighton’s management were keen to buy the US$384m cement business owned by its major shareholder, the Barro Group, according to the Australian newspaper. However, the analysts said they believed the complex shareholding structure could pose problems.


Paraguay: Industria Nacional del Cemento’s (INC) Vallemi cement plant has suffered damage to its equipment due to problems with the local electricity supply from state energy company ANDE. Issues including low voltage that damaged the main electric motor of the plant’s cement mill and other equipment at the site, according to the ABC newspaper. Consequently, cement is not being despatched from the Vallemi plant. Normal production is expected to resume in mid-April 2018. INC’s Villeta cement grinding plant has increased its dispatches to compensate increasing its deliveries to 80,000bags/day of cement from its normal level of 50,000bags/day.


Ireland: The Institutional Shareholder Services (ISS) recommends that investors vote against a proposed Euro10m pay rise for executives at CRH. The building materials company is set to increase executive pay at its annual general meeting in late April 2018, according to the Irish Times newspaper. ISS recommends that shareholders vote against a remuneration report for several reasons including CRH's failure to set out targets for its managers and the group's proposal to give its finance director a 10% rise.

In 2017, CRH paid its chief executive officer Albert Manifold a Euro3.12m bonus, Euro2.15m salary and pension and Euro3.4m in share options. His pay was 13% less than in 2016. Finance director Senan Murphy's salary and pension was Euro0.91m and he received a Euro1m bonus. Former group transformation director Maeve Carton, who left the role in August 2017, was paid Euro2.67m.

CRH’s remuneration report says the annual bonus payments are based on a combination of financial targets and ‘personal strategic goals.’ It plans to reveal more details in 2019 once it is no longer commercially sensitive. It defended Murphy's proposed pay rise as he was paid below the market rate when he became financial director in 2016.


US: The Portland Cement Association (PCA) predicts growth of 2.8% in cement consumption in 2018 and 2019 in its Spring Forecast. Growth is then expected to climb to 4% in 2020 as impacts from potential federal infrastructure spending are likely to take effect. The analysis estimates cement consumption at 99.3Mt in 2018, 102.1Mt in 2019 and 106Mt in 2020.

Ed Sullivan, PCA senior vice president and chief economist, has attributed the forecast growth to a variety of positive economic factors including a strong economy, job market and anticipated increase in infrastructure spending. He said that in combination these factors, “suggest a modest acceleration in real GDP, construction markets and cement consumptions.”

However, the PCA projects that ‘robust’ infrastructure spending isn’t likely to occur until the fourth quarter of 2019, given the key steps that must occur, including passage of an infrastructure bill, federal and state paperwork, bid letting and review and finally contract awards leading to construction.


Pakistan: The All Pakistan Cement Manufacturers Association (APCMA) says that the capacity utilisation of the local cement industry reached 94% in the nine months of the local financial year to March 2018. Demand for cement has been bolstered by local demand and growing exports so far in 2018, according to the Business Recorder newspaper. Cement despatches grew by 14.7% year-on-year to 34.8Mt in the first nine months of the 2017 – 2018 year from 30.3Mt in the same period in the previous period. Despatches grew faster in the north of the country than the south.


Vietnam: Mai Tien Dung, the Minister and Head of the Government Office, has identified ways for the Vietnam Cement Industry Corporation (VICEM) to improve its operations. The measures were drawn up at a meeting with the cement producer, according to the Viet Nam News newspaper. The minister wanted ways to increase Vicem’s local market share, improve corporate governance, streamline its organisational structure, make environmental improvements and increase the quality and competitiveness of its products. He also emphasised the need for the company to coordinate with the transport sector to reduce its logistics costs.


France: Cem'In'Eu is preparing to open a 0.24Mt/yr cement grinding plant at Montreuil-Bellay in Maine-et-Loire in 2021. The aspiring cement producer submitted planning and environmental permit applications in March 2018, according to the Le Moniteur des travaux publics et du bâtiment magazine. The company hopes to obtain authorisation for the project in the first half of 2019 and start construction work in 2020. Cement from the plant will be marketed under the ‘Val de Loire Ciments’ brand and targeted to central and western France.


Tunisia: Ciments de Bizerte has restarted exports of clinker and cement after a hiatus of ten years. A shipment of 25,000t of clinker disembarked from the cement producer’s port to Cameroon in early April 2018, according to La Presse de Tunisie newspaper. The local cement industry has an overcapcty of 1Mt/yr.


Kenya: The International Finance Corporation (IFC) has committed US$96m to invest in National Cement towards upgrading a cement plant and building new grinding plants. National Cement’s chairman and chief shareholder Narendra Raval is also expected to invest US$102m into the expansion project, according to the Daily Nation newspaper. The company intends to build two grinding plants in Kenya and Uganda and a new 5500t/day clinker production line at its existing integrated plant in Merrueshi in Kenya. It also plans to build a 8MW captive power plant at Merrueshi.


New Zealand: Golden Bay Cement plans to start shipping cement directly from its integrated plant at Whangarei, Northland in the North Island. Previously, cement from the plant was being shipped to the South Island via Auckland, according to the New Zealand Herald newspaper. Once the logistic change is completed around 11% of Whangarei’s output will be shipped to the South Island.