Global Cement Newsletter

Issue: GCW404 / 15 May 2019

Headlines


Jan Jenisch and the team at LafargeHolcim only went and bloody did it! Apologies for readers not wanting yet more column inches on LafargeHolcim but when the world’s largest cement producer leaves an entire sub-continental market it deserves mention.

First Indonesia, then Malaysia and now the Philippines. LafargeHolcim will soon no longer produce clinker in Southeast Asia. That’s a region with 651 million inhabitants or around 8% of the world’s total population. All of those people need cement and other building products as their nations build houses, infrastructure and so on. And LafargeHolcim is no longer there.

The reason, of course, is local production overcapacity in many of these countries and rampageous importers pulling in cheaper product from elsewhere. The Association of Southeast Asian Nations (ASEAN) includes Thailand and Vietnam, two of the world’s largest cement exporters. The region also borders China, the place which could produce 40% of the world’s cement if it so wanted. So, understandably, LafargeHolcim pulled the plug. Note that the recent divestments in the region didn’t include its seabourne trading wing, LafargeHolcim Trading. Oh no! Clearly, if you can’t beat them, you join them instead.

So, what to say about the Philippines sale? Unlike the divestments in Indonesia, this sale has valued the production base more highly. LafargeHolcim’s integrated production capacity, including the upgrade at its Bulacan plant, is being sold for over US$175/t with the partial share factored in. And that’s not even including the grinding plant at Mabini. The sale in Indonesia was US$120/t or lower. The Duterte administration’s infrastructure drive (Build, Build, Build) and muscular government action on imports have doubtless played their part here. Yet still LafargeHolcim sold. In the words of chief executive officer (CEO) Jan Jenisch the area was ‘hyper competitive.’

Back home at the group’s headquarters in Switzerland, the potential revenue of over US$4bn from the three ASEAN divestment is poised to trickle onto the balance sheets for 2019. If it were all to go towards debt reduction then these proceeds could pile drive the group’s net financial debt to below Euro10bn. This would be good place to be if the on-going Chinese-US trade tiffs became a little hotter, say, or in the case of a fresh banking crisis. Alternatively the group could pick a new region for development and start all over again or focus on diversifying its business along the building materials chain. And let’s not forget the potential legal bill from the on-going investigation into Lafarge Syria’s conduct during the Syrian civil war.

Throughout this whole exercise, from the outside looking in at LafargeHolcim’s actions, the thought has persistently been: what do they know that everyone else doesn’t? The answer, it may turn out to be, nothing. Yet, rightly or wrongly, we’re marvelling at the bravado of it all.


Japan: Toshihiko Onishi has been appointed as Representative Director, Executive Vice President of Sumitomo Osaka. He succeeds Yushi Suga. The final decision on the promotion will be made in late June 2019 at the company’s annual general meeting. Onishi, aged 61 years, is currently a Senior Managing Executive Office for Sumitomo Osaka. He joined the group in 1981 and became a director in 2016.


Europe/Singapore: ZAG International has appointed Daniel Ulestig as Managing Director, Head of Global Shipping and European Business operation. He will have responsibility for all of ZAG’s shipping activities around the world as well as leading the company’s business interests in Europe.

Ulestig started his career as a trainee at Holcim Trading in Madrid, Spain in 1998. In 2003, he joined Belden Shipping as a market analysts and moved to Singapore in early 2004 later becoming its Commercial Director. Belden Shipping was subsequently acquired by Kristian Gerhard Jebsen Skipsrederi of Bergen, Norway in late 2006. In 2008, Ulestig was named Assistant Vice President of KGJC Cement (Singapore), with responsibility for all chartering activities east of the Suez. In 2010, he assumed oversight of the Singapore office and was named to the entity’s board of directors in 2011. In 2014, Ulestig was made Vice President of KGJ Cement in Singapore. He moved back to Sweden in late 2017 where he continued to serve as KGJ Cement’s Vice President Chartering.


Switzerland: LafargeHolcim’s net sales grew by 2.2% year-on-year to Euro5.28bn in the first quarter of 2019 from Euro5.17bn in the same period in 2018. Its recurring earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 15.55 to Euro717m from Euro620m. Its cement sales volumes remained stable at 50Mt and sales volumes of ready-mix concrete increased by 2.1% to 11.1Mm3.

“We had a very strong start of the year and I am especially pleased to see our strong sales growth and an over-proportional increase in profitability. Our momentum is very positive and the Q1 2019 is the third consecutive quarter with recurring EBITDA growing faster than net sales,” said chief executive officer (CEO) Jan Jenisch. He added that the group’s decision to sell its Southeast Asian operations was, “executed with very attractive valuations, allowing us to achieve a new level of financial strength.”

By region the group performed poorly in Asia Pacific, Middle East Africa and Latin America, with falling net sales. Earnings also fell in Middle East Africa. However, significant sales increases in Europe and North America more than compensated for this.


Colombia: Cementos Argos’ revenue grew by 14% year-on-year to US$657m in the first quarter of 2019 from US$576m in the same period in 2018. Its operating earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 3.7% to US$94m from US$90.7m. Its cement sales volumes increased by 4.7% to 3.86Mt from 3.69Mt. Ready-mixed concrete sales volumes increased by 2.3% to 2.5Mm3. Revenue grew fastest in the US followed by Colombia but it decreased in the Caribbean and Central America.


Japan: Sumitomo Osaka has blamed falling income from its cement business on rising coal prices. Its overall net sales rose by 2.5% year-on-year US$2.92bn the year to 31 March 2019 from US$2.24bn in the same period in 2018. It net income nearly halved to US$71.2m from US$134m. Despite national exports falling in the cement sector the company said that it was focusing on an overseas cement strategy.


India: Dalmia Seven, a joint venture between Dalmia Bharat Group and Austria’s Seven Refractories, has launched a new monolithic refractory production line at its Katni plant in Madhya Pradesh. Following the upgrade the unit has a production capacity of 45,000t/yr, according to the Press Trust of India. The new production line is intended to meeting growing demand nationally from the cement, steel and iron industries.


Turkey: Aslan Cement, part of Oyak Cement Group, has placed an order with Germany’s Aumund Fördertechnik for its Darıca plant in Kocaeli Province. The order is part of a project to increase the plant’s clinker production capacity to 6600t/day. The machines are due to be dispatched in September 2019 and commissioning is planned for the beginning of 2020. No value for the order has been disclosed.

The order includes a 225t/hr bucket elevator with a BWZ-L (low capacity) central chain type and a centre distance of 27m to feed the raw meal mill as well as three different models of BWG belt bucket elevators with capacities up to 500t/hr and centre distances up to 132m. The belt bucket elevators will also be used for raw meal silo feed as well as to transport raw meal to the dosing hopper and the heat exchanger. The order also includes three KZB type pan conveyors, each with capacities of 350t/hr and centre distances of up to 77.2m to convey clinker from the cooler to the silo, as well as two LOUISE BEW type rotary discharge machines, each with a diameter of 3m and a capacity of 400 t/hr.


Egypt/Qatar/Russia/Turkey: Dal Engineering Group has released information about recent project from its Dal Teknik Makina subsidiary in Russia, Egypt and Qatar. In Russia Dal Teknik Makina is currently converting a production line at Eurocement’s Zhigulovskiye Stroymaterialy plant in Samara to manufacture white cement. The project started in November 2018.

In Egypt Dal Teknik Makina conducted a technical audit for HeidelbergCement’s Helwan Cement plant in February 2019. It was carried out on clinker production line one. In Qatar Dal Teknik Makina was awarded a contract in February 2019 to install a pilot scale plant for a calcium sulfoaluminate clinker production line. Dal’s engineers will evaluate the concept and identify the possible problems with operation, and supply the complete engineering and instrumentation for the whole project.


Germany: HeidelbergCement’s CO2 reduction targets to 2030 have been successfully assessed against the Science Based Targets initiative’s (SBTi) criteria. It says this makes it the first company in the cement sector to have approved science-based targets.

"Our goal is to realise the vision of CO2-neutral concrete by 2050 at the latest. In the coming years, we want to make significant progress in this direction, and the SBTi’s approval is a clear proof of our strong commitment," said Bernd Scheifele, the chairman of the managing board of HeidelbergCement. The group’s CO2 reduction strategy is based on measures on plant and product level. These include improving energy efficiency, and a steadily increasing use of alternative fuels and alternative raw materials.

HeidelbergCement’s SBTi target is to reduce scope 1 greenhouse gas (GHG) emissions 15% per ton of cementitious materials by 2030 from a 2016 base year. HeidelbergCement also commits to reduce scope 2 GHG emissions 65% per ton of cementitious materials within the same timeframe. The SBTi target is consistent with HeidelbergCement’s previous goal of a 30% reduction in its specific net CO2 emissions by 2030, compared with 1990. The cement and concrete producer has achieved a reduction of 20% so far.

The SBTi assesses and validates corporate emissions reduction targets against climate science research. Targets adopted by companies to reduce greenhouse gas (GHG) emissions are considered ‘science-based’ if they are in line with the goals of the Paris Agreement – to limit global warming to below 2°C above pre-industrial levels and pursue efforts to limit warming to 1.5°C.


Switzerland: LafargeHolcim reduced its net CO2 emissions per tonne of cementitious material by 1% year-on-year to 576kg CO2/t in 2018 from 582kg CO2/t in 2017. It said that the improvement was achieved by reducing the clinker-to-cement ratio and consuming less energy per tonne of cement, mostly by using alternative fuels and improving the efficiency of the company’s processes. However, data from its Sustainability Report 2018 shows that both its overall gross and net emissions grew. Its net CO2 emissions from cementitious material increased by 2.5% to 121Mt. At the same time its clinker production rose by 2.7% to 151Mt from 147Mt.

The group increased its treatment of waste-derived resources to 52Mt. its alternative raw material substitute rate grew to 11.2% from 10.7%. It established a new pre-processing facility in Madukkarai in India and upgraded its waste handling capacities in Mexico, Ecuador, Brazil, Argentina, the Czech Republic, Bulgaria, India, Canada, Spain and Germany. It also reduced its freshwater withdrawal for cement production and improved its lost time injury rates.


Japan: Taiheiyo Cement’s sales rose by 5% year-on-year to US$8.36bn in the year to 31 March 2019 from US$7.95bn in the same period in 2018. Its net income grew by 12.8% to US$397m from US$352m. The group’s cement sales volumes rose by 3.5% to 15.4Mt. However, its exports fell by 18% to 3.5Mt. It noted that infrastructure projects for high-speed railway and the Tokyo Olympics had driven local demand for cement.


Uzbekistan: Qarshi Conch Cement, a subsidiary of China’s Anhui Conch Cement, plans to commission its new 1.2Mt/yr plant at Qarshi in December 2020. The project had an investment of US$150m, according to Kun. Anhui Conch said that preliminary work had started on the plant in early 2019.


Zimbabwe: LafargeHolcim has allocated US$25m to LafargeHolcim Zimbabwe to raise its production capacity utilisation. The investment was announced following a meeting between President Emmerson Dambudzo Mnangagwa and Miljan Gutovic, the Middle East and Africa area director for LafargeHolcim, according to the Standard newspaper. The investment will also be used to create additional production capacity for agricultural lime and automation of a dry mortar plant. This latest cash injection follows a US$30m loan from LafargeHolcim.


Algeria: LafargeHolcim Algeria has made two new export shipments from the Port of Oran. The first was a consignment of 15,000t of bulk grey cement from its Oggaz cement plant to West Africa, according to the El Moudjahid newspaper. The second was a dual consignment of 5000t of white clinker and 25,000t of grey clinker from the same plant to Cameroon. The cement producer said that the white clinker export was the first of its kind from Algeria.


China/US: The Chinese Ministry of Finance has increased tariffs on selected US goods, including cement, to 25% with effect from 1 June 2019. It said it took the action in response to escalating US tariffs in May 2019. The new Chinese tariffs range from 10% to 25% and include clinker, white cement, other Portland cements, other hydraulic cement, refractory cement, additives for cement, plaster and concrete, limestone, quicklime, slaked lime, gypsum, refractory products and cement packaging machinery.


Germany: Cemex has signed the final agreement to sell its aggregates and ready-mix assets in the North and North-West regions of Germany to GP Günter Papenburg AG for around Euro87m. The divestment is expected to close during the second quarter of 2019.

The assets in Germany being divested consist of four aggregates quarries and four ready-mix facilities in North Germany, and nine aggregates quarries and 14 ready-mix facilities in North-West Germany. The proceeds expected to be obtained from this divestment will be used mainly for debt reduction and for general corporate purposes.


Peru: UNACEM has ordered a clinker cooler for its Condorcorcha cement plant from Turkey’s Fons Technology International, part of Dal Engineering Group. The cement producer will replace its existing cooler with a new FTI clinker cooler. The FTI cooler is designed so that it can reuse the existing cooler casing and refractory. It has also ordered a three-roller crusher for its 1500t/day clinker production line. Installation is scheduled for September 2019. No value for the order has been disclosed.


Liberia: President George Manneh Weah has written to the Liberian Senate to agree investment and incentive agreements between the government and Starr Cement. The cement producer intends to build a 0.6Mt/yr grinding plant, according to the New Dawn newspaper. The project will cost US$41m. The proposed plant will supply cement locally and to other countries in the Mano River Union, including Ivory Coast, Guinea and Sierra Leone.


Nigeria: Ogbonnaya Onu, the Minister of Science and Technology, has inaugurated a pozzolana cement plant at Bokkos in Plateau state. The plant is currently being commissioned, according to the News Agency of Nigeria. The 5000t/yr grinding unit is intended to produce low cost cement. It consists of six sections: materials handling; grinding; nodulisation; calcination; milling; metering; and bagging. The plant is being run in conjunction with the Nigerian Building and Road Research Institute (NBBRI).


Australia: Adelaide Brighton has signed a deal with Oz Minerals to continue supplying cement to the Oz Minerals Prominent Hill Operation. It will last five years with options to extend. In addition to the supply of cement, Adelaide Brighton will also supply aggregate and sand from its Sellicks Hill Quarry and its Price sand operation, as well as auxiliary logistics services.


Bangladesh: Premier Cement’s profits in 2018 have been reduced due to rising raw material costs. Its net profit fell by 21% year-on-year to US$5.24m in 2018 from US$6.37m in 2017. Its revenue rose by 8% to US$119m from US$110m. Kazi Md. Shafiqur Rahman, the company secretary of Premier Cement Mills, also blamed market competition for the fall in profit.


India: Mangalam Cement’s sales revenue rose by 7% year-on-year to US$170m in the year to 31 March 2019 from US$159m in the same period in 2018. It made a loss of US$1.38m compared to a profit of US$1.62m in 2018. Its power and fuel costs grew by 28% to US$54.3m.


Belarus: The government has issued a directive ordering an increase in its stake in 12 large companies including Belarusian Cement. The government’s stake will be increased by amounts equal to the financial support the companies have been given, according to the Belapan news agency. The government reportedly invested around Euro70m into the companies.


Philippines: LafargeHolcim has agreed to sell its 85.7% share in Holcim Philippines to San Miguel Corporation for US$2.15bn. Holcim Philippines operates four integrated cement plants and one grinding plant. The deal is expected to close in the fourth quarter of 2019. It will be subject to regulatory approval.

“With the divestment of our activities in the Philippines, we are completing our exit from the increasingly hyper-competitive arena in South East Asia. While this decision is based on our strategic portfolio review, we have reached very attractive valuations allowing us to achieve a new level of financial strength,” said Jan Jenisch, chief executive officer (CEO) of LafargeHolcim.


India: Dalmia Bharat’s income rose by 7% year-on-year to US$1.36bn in the year to 31 March 2019 from US$1.26bn in the same period in 2018. Its cement sales volumes grew by 10% to 18.7Mt from 17Mt. However, its earnings before interest, taxation, depreciation and amortisation (EBITDA) fell by 5% to US$278m from US$292m. The cement producer blamed mounting slag and petcoke costs for the growing production costs although it noted that the prices had started to ‘soften’ in the most recent quarter.


Ghana: The Cement Manufacturers Association of Ghana (CMAG) and representatives of other industries including steel and food have petitioned the Ghana International Trade Commission to protect them from ‘unfair’ trade practices. They have asked the government to follow World Trade Organisation (WTO) rules and match export rebates with additional tariffs, according to the Ghanaian Times newspaper. CMAG secretary said that the local cement industry had a production capacity of 11.6Mt/yr and that this was enough to meet local demand.


US: CalPortland has held the official opening of a rapid fill bulk cement loading station at the Oro Grande, California cement plant. The loading station is the final part of an upgrade project that originally started in 2008 when Riverside Cement owned the plant. This included two new cement loadout facilities, two distribution silos and a cement grinding mill. The upgrade cost US$58.5m.

“Our engineering staff and the Oro Grande operations team have developed a truck loadout system that is one of the fastest in the industry. The added rapid fill bulk loading stations will prevent long wait times for our customers by reducing the total number of trucks on each loading station, thereby further contributing to reduction of greenhouse gas emissions,” said Allen Hamblen, president and chief executive officer (CEO) of CalPortland.


Belgium: The Low Emissions Intensity Lime And Cement (LEILAC) consortium partners and its external advisory board have held a ribbon-cutting ceremony at its pilot Direct Separation Calciner unit at the HeidelbergCement cement plant in Lixhe. The project started commissioning the unit in March 2019. Testing is now set to start to validate the performance of the pilot.


Germany: Dyckerhoff is supplying 12,000t of CEM III/A 32.5 N-LH cement to Frankfurt Airport for the production of underwater concrete. The airport is building a new terminal and the construction pit for the floor slab is deeper than the groundwater level, hence the floor slab must be concreted underwater.

The construction pit has a size of almost 66,000m² with excavation carried out in dry conditions to a depth of 5.5m to the groundwater table. Then a further 8 -11m was excavated in wet conditions using industrial divers. The excavation pit has been prepared in sections and then concreted by the divers resulting in short sections. The quantities of cement to be delivered by Dyckerhoff also fluctuate considerably, with sometimes 20 silo trucks/day leaving the Dyckerhoff plant in Wiesbaden. Deliveries started in March 2019.

Around 40,000m3 of concrete has been produced by Sehring Beton, using a mobile mixing plant directly on site. The construction work is being carried out by the Arge Ingenieurbau Baugrube T3, which consists of the two companies Adam Hörnig Bau and Bickhardt Bau.


Germany: Better weather in Europe and North America has benefitted HeidelbergCement’s first quarter results. Its sales revenue rose by 16.9% year-on-year to Euro4.24bn in the first quarter of 2019 from Euro3.63bn in the same period in 2018. Its operating earnings before interest, taxation, depreciation and amortisation (EBITDA) grew by 58.6% to Euro396m from Euro250m. Cement sales volumes increased by 1.6% to 28.6Mt from 28.1Mt. Ready-mixed concrete sales volumes increased by 10.8% to 11.3Mm3 from 10.2Mm3.

“We have achieved a considerable increase in revenue and result from current operations in comparison with the same quarter of the previous year. In addition to improved weather conditions, sustained strong demand and successful price increases contributed towards this positive development,” said Bernd Scheifele, chairman of the managing board of HeidelbergCement.

The group’s Asia-Pacific region reported ‘sluggish’ sales in India and Thailand. Its cement and clinker sales fell by 1.7% to 9Mt although it managed to increase its revenue through price rises. Cement and clinker sales volumes also fell in its Africa-Eastern Mediterranean Basin region due to increased competition in Egypt.


Australia: Adelaide Brighton expects that its net profit in 2019 will fall by up to 15% year-on-year from the US$133m it reported in 2018. It forecasts that the decline will be driven by weakening demand from the residential market, increased competition from cement imports, higher competition in Queensland and rising raw material costs.


Brazil: Votorantim Cimentos plans to spend around US$50m on upgrading its 0.2Mt/yr grinding plant at Pecém in Ceará. It will increase the unit’s production capacity by 0.8Mt/yr. The official announcement was made during a meeting between Camilo Santana, the governor of Ceará, and the board of Votorantim.


Bolivia: Imports of cement fell by 30% year-on-year to 0.19Mt in 2018 from 0.27Mt in 2017. Data from the Bolivian Foreign Trade Institute and the National Institute of Statistics of Bolivia shows that cement imports were 0.51Mt in 2016, according to Hoy Bolivia. In 2018 Peru was the largest exporting country to Bolivia followed by Brazil, Argentina and Mexico. An increase in local production through the opening on new plants has contributed to the declining imports.


Uzbekistan: The Ministry of Investment and Foreign Trade of Uzbekistan has proposed abolishing cement import benefits. It wants to prioritise local production, according to Esmerk CIS News.


Namibia: The Industrial Development Corporation (IDC), a South African development finance institution, says it would like to increase its share in Ohorongo Cement. It has made the statement in response to the acquisition of a majority stake in the cement producer by Singapore’s International Cement Group in March 2019, according to the Namibian Sun newspaper.

The IDC owns a 14% stake in Ohorongo Cement. It says it is committed to Ohorongo Cement and that it wants to support Namibia's indigenisation programme through local ownership. It is talking to other shareholders including the Development Bank of Namibia (DBN), which owns an 11% stake in Ohorongo. The DBN has also expressed concerns on the takeover by International Cement Group.


Antarctica/UK: Hanson has transported 125t of bagged cement from its Ketton plant in the UK to the British Antarctic Survey’s Rothera Research Station in Antarctica. Construction company BAM Nuttall is upgrading a wharf at the site to improve ship and boating operations and allow it to accommodate the RRS Sir David Attenborough as well as to reduce manual handling cargo loading/unloading time.

The subsidiary of Germany’s HeidelbergCement worked with BAM Nuttall and civil engineering company Keyline to set the technical specification of the cement. Each of the 25kg bags were vacuum sealed and double shrink wrapped onto heat-treated pallets to reduce the risk of contaminating Antarctica’s environment with foreign organisms.