Global Cement Newsletter

Issue: GCW419 / 21 August 2019

Headlines


Predictably, the recent investigation by the Tariff Commission in the Philippines on whether to maintain duties on imported cement recommended that the safeguard duty be kept. It even suggested raising the rate to nearly US$6/t from US$4/t at present. The report has been passed to the Department of Trade and Industry (DTI), which will make the final decision on the matter.

Graph 1: Market share of the Philippines cement industry between local producers and traders, 2013 - 2018. Source: Tariff Commission of the Philippines. 

Graph 1: Market share of the Philippines cement industry between local producers and traders, 2013 - 2018. Source: Tariff Commission of the Philippines.

As the commission built its argument it released a great snapshot of the local cement industry and it’s well worth a read for anyone who is interested. One key graph here was the speed at which the market share of cement sold by local producers fell compared to importers from 2013 to 2018. As Graph 1 shows above, traders imported 0.29Mt in 2015 and this rose to 4.66Mt 2018. Imports by local producers also grew during this time but at a far slower rate. They were 0.45Mt in 2015, grew to a high of 1.65Mt in 2016 and then stabilised at around 1Mt/yr since then. Seven of the top 10 cement exporters were Vietnamese companies followed by two from China and one from Thailand. However, the local producers were importing clinker on a far larger scale during this period. 16.8Mt of clinker was imported from 2013 to 2018 led by Holcim Philippines with 5.54Mt or a 33% share. In Holcim’s case this was coming from China, Indonesia, Japan, South Korea, Malaysia, Thailand and Vietnam.

Elsewhere, the report established the various production capacity upgrades the local cement producers had invested in or were planning to in the near future. Taiheiyo Cement Philippines, for example, was reported as planning an expansion to its Cebu plant production line from 2022 to 2025. It then looked at kiln capacity utilisation rates, prices and how profits have changed amongst much else. It concluded that the import surge from 2015 to 2018 had depressed prices and decreased the profitability of the local producers. This fitted its definition of ‘serious injury’ as one reason to impose a safeguard duty on imports.

Importers presented a different scenario to the commission during its investigation and afterwards. Phinma, for example, told local press that the commission’s comparison calculation of the costs behind local and imported cement didn’t take into all the costs the importers endured such as a local distribution and handling once in the country. The Philippines Cement Importers Association reiterated the view of its members that they were simply meeting market demand, that local producers had caused their own problems through overcapacity and that profits varied considerably amongst local producers, amongst other arguments. This has been borne out by some of the half-year results amongst the local producers. Eagle Cement, for example, saw its earnings before interest, taxation, depreciation and amortisation (EBITDA) grow by 21% year-on-year to US$80.6m.

With the publication of the commission’s report the DTI has been handed the impetus to hold up or even raise the duty on imported cement. Based on its actions in recent years the ministry seems likely to do so. This presents a contrast to Trinidad & Tobago where importer Rock Hard Cement won a legal battle earlier in August 2019 against competitor and Cemex-subsidiary Trinidad Cement over the classification of imported cement products. These kinds of trade conflicts are likely to proliferate whilst global production capacity outstrips demand but the outcomes may vary.


Russia: Eurocement has appointed Stefan Noev as the chief executive officer (CEO) of its Maltsovsky Portland Cement subsidiary. The company operates a 4.2Mt/yr integrated plant in Bryansk Region. Noev is a graduate of the Technical University of Sofia in Bulgaria and he has worked for Italcementi and Suez Cement. He joined Eurocement in 2016 and managed its Sengileevsky integrated plant in Ulyanovsk region.


US: The Portland Cement Association (PCA) has appointed Libby Pritchard as Director of Construction Materials Safety & Policy in its PCA Government Affairs team. She will also hold the same position in a joint role at the National Stone, Sand and Gravel Association.

Previously, Pritchard worked as a social scientist at the National Science Foundation (NSF) responsible for writing briefs highlighting NSF-funded projects for dissemination to US Congress and conducting data analyses. She also worked as the Environmental Services & Land Use Coordinator at Wildish Sand & Gravel and was chair of Oregon Concrete & Aggregate Producers Association ESH Committee from 2017 - 2018. Pritchard holds two Masters of Science degrees in the fields of Geography and Water Resources Policy & Management from Oregon State University.


UK: Breedon Group has appointed Nigel Clamp as Group Head of Health, Safety and Environment. He will assume overall responsibility for the health and safety of Breedon’s 3000-strong workforce, as well as overseeing the group’s environmental and sustainability activities.

Clamp joins Breedon from HeidelbergCement, where he was Health & Safety Director for the company’s Africa & Eastern Mediterranean Basin Region. He was previously Senior Safety, Health & Environment (SHE) Manager at Hanson, prior to which he served as Head of Safety at National Express. He spent the earlier part of his career in a number of quarry management and SHE roles with Lafarge.


China: Tianrui Cement’s revenue rose by 27.6% year-on-year to US$778m in the first half of 2018 from US$610m in the same period in 2017. Its profit grew by 63.9% to US$131m from US$80m. Its cement sales volumes rose by 9.8% to 14.6Mt. Sales increased faster in Central China than Northeastern China. It attributed the result to its market strategy and increased prices.


Panama: Argos Panama plans to install a line for the production and storage of clinker at its plant in Buena Vista, Colón Province. In an environmental impact study submitted to Panama’s Ministry of Environment, Argos estimated the total cost of the project, called the Balboa Project, at US$168m.


Dominican Republic: Adriano Brunetti, the president of the Dominican Association of Portland Cement Producers (ADOCEM), says that local production is forecast to grow by 8% year-on-year to 4.8Mt in 2019. His prediction was based on 12.5% growth in the construction sector in the first four months of the year, according to the Acento newspaper. He added that local cement producers have a production capacity of around 8Mt/yr. The country exports around 1Mt/yr to other countries in the Caribbean.


Afghanistan: The Afghan Ministry of Mines and Petroleum has reported progress in discussions on projects totalling an investment of US$350m, including improvements to the Jabal Siraj and Samangan cement plants worth US$170m and US$136m respectively.

Wadsam reports that the Afghan Chamber of Commerce and Industries has voiced concerns as to delays caused by the lengthy approval process for the ‘much-needed projects.’ With the successful conclusion of these talks, the plans will require the ratification of the High Economic Council and subsequently the Afghan Cabinet.


Thailand: Siam Cement Group (SCG) is promoting a blockchain electronic accounting method for procurement and payment with its suppliers and partners to improve efficiency. Its Procure to Pay platform was started in 2018 and it has 240 suppliers using it at present, according to the Bangkok Post newspaper. The company aims to reach 2400 suppliers by 2020.

Thammasak Sethaudom, vice-president for finance and investment at SCG, said that the system had helped suppliers reduce processing times by 50% from 70 minutes to 35 minutes per purchase order. The platform speeds up the time required to issue invoices. The system also helps SCG’s partners to track transactions in real time.

Procure to Pay was developed with Digital Ventures, the corporate venture capital arm of Siam Commercial Bank. SCG has invested over US$0.3m on the project so far. Expansion to SCG’s subsidiaries in Indonesia, Myanmar, Laos and Vietnam is being considered.


Brazil: Votorantim Cimentos’ revenue rose by 3.8% year-on-year to US$1.44bn in the first half of 2019 from US$1.39bn in the same period in 2018. Sales growth was driven by ready-mixed concrete and the company’s other businesses as cement sales fell slightly. It reported a profit of US$29.4m compared to a loss of US$72m previously. Its cement sales volumes fell by 6% to 13.8Mt from 14.7Mt.

"In the first half of the year, we achieved net revenue growth and stability in our leverage, even though the Brazilian economy has not yet achieved the anticipated recovery and despite the impact of an atypical seasonality in North America. In this second quarter, we followed our investment plan and inaugurated a new production line of mortar, in Cuiabá, and one of agricultural solutions, in Nobres, both in the Brazilian state of Mato Grosso," said Osvaldo Ayres Filho, Global chief financial officer (CFO) of Votorantim Cimentos. The company added that higher prices in Brazil, growing sales in North America and positive currency effects successfully offset poor results in Turkey.


Australia: Wagners’ net profit fell by 49% year-on-year to US$8.66m in its financial year to 30 June 2019 from US$16.8m in the same period in 2018. It blamed lower cement sales volumes on a dispute with Boral and a delay in large infrastructure projects. It suspended its supply of cement to Boral in March 2019 when the latter company said it had found cheaper cement from a ‘long established’ supplier in South East Queensland. Wagners sales revenue grew by 2.3% to US$161m from US$157m.


South Korea: The Korea Cement Association (KCA) says its members will increase the use of coal ash from local thermal power plants or source alternative raw materials from domestic clay mines. The decision follows a trade dispute between South Korea and Japan, according to the Aju Business Daily newspaper.

The Environment Ministry started to tighten rules concerning the import of coal ashes from Japan in August 2019 citing fears of radioactive and heavy metal contamination. Importers are now required to submit an authorised radioactive inspection report and the analysis of heavy metal components. The KCA said its members use 3.15Mt/yr of coal ash and 1.28Mt/yr is imported from Japan.


Pakistan: Power Cement has shutdown the older production lines at its integrated Nooriabad plant due to falling demand and prices. Chairman Nasim Beg said that the old lines were shut because they were ‘inefficient’ and not competitive under present conditions, according to Bloomberg. The plant had a production capacity of around 3150t/day from its older lines. In July 2019 it completed the installation of a new 2.46Mt/yr clinker line supplied by Denmark’s FLSmidth.


Russia: Germany’s Gebr. Pfeiffer has opened a new subsidiary called ‘Gebr. Pfeiffer GUS’ based in Moscow. The company is led by General Director Alex Nickel and it offers new machinery as well as after sales for customers based in the Commonwealth of Independent States (CIS) region. Nickel is joined by Sales Director Svetlana Tarasova and Service Manager Alexander Zolotarev. The parent company holds long links with the region with machine and equipment sales to countries including Russia, Ukraine, Kazakhstan, Belarus and Uzbekistan.


US: Allied Minerals has completed a US$11m upgrade to its Pell City plant in Alabama. The refractories manufacturer has been working on the project since mid-2018. The company originally operated two sites in Alabama at Anniston and Pell City. After it purchased Riverside Refractories in 2017 it decided to focus on the Pell City unit.


Mexico: Installation of two Loesche petcoke grinding plants will be installed at La Cruz Azul’s cement plants Lagunas and Hidalgo later in 2019.

Both mills are LM 41.4 D type coal mills, the largest of their type. They will form part of new production lines at each of the two plants. In addition to the mills, which both have a capacity of 50-65t/hr, Loesche will also supply process gas filters, mill fans, inerting units, explosion vents, cyclone separators, conveyor augers and drag chain conveyors, as well as the complete electrotechnical equipment. The scope of supply also includes the complete detail engineering for the steel and concrete construction.

The equipment has already been fully dispatched. Installation is planned to start in December 2019 in Hidalgo. Installation of the grinding plant in Lagunas has already begun.


Egypt: Suez Cement made a loss during the first half of 2019. Its net loss reached US$17.7m over the six month period, from a profit of US$14.4m in the first six months of 2018. The company generated US$199m in revenue during the first six months of 2019, compared to US$238m a year earlier.


Brazil: Votorantim Cimentos has announced the conclusion of its acquisition of a mortar production unit from Supermassa. The plant, located in Ananindeua, Belem, in the state of Para, has capacity of 0.15Mt/yr. Votorantim Cimentos notes that the total investment, including the acquisition, modernisation of technology, installation of automation and other improvements, will total US$4.3m.

The acquisition is part of the company's growth and geographical diversification strategy. The purchase is the company's 11th mortar production unit, and brings its mortar production capacity up to 2.5Mt/yr.


Guatemala: Cementos Progreso has received the National Award for Cleaner Production and the Sello Ambiental award in recognition of meeting environmental guidelines and having effective environmental management systems. The company has implemented preventative, proactive and inclusive systems across all of its operations and business units. This includes limestone and aggregate quarries, aggregate crushing, premixed concrete production, bag factories and the Estadio Cementos Progreso multi-sports stadium.


Namibia: Employees at Cheetah Cement have expressed ‘dismay’ with the lack of Namibians in higher ranks and managerial positions at the cement producer, despite them holding the relevant qualifications. The workers claim that Cheetah Cement, located a few kilometres north of Otjiwarongo in the Otjozondjupa region, largely employs Chinese nationals.

According to a recent grievance letter seen by The Namibian newspaper, the workers claim that the company currently employ more Chinese workers than local ones, even where Namibian employees have the necessary skills for those positions.

Speaking on condition of anonymity, one employee described the workings of the company’s 'understudy programme,’ which positions a Namibian to work under a Chinese employee, supposedly to allow an exchange of skills. The source stressed that the Namibian employees are often more qualified than their Chinese counterparts.

Furthermore, the letter details complaints about poor and unfair working conditions, amongst them the absence of work contracts, lack of medical aid, plus low wages and victimisation.


Tajikistan: About 2.33Mt of cement was produced in Tajikistan over the first seven months of 2019, according to the Ministry of Industry and New Technologies. This value is 0.21Mt higher than in January-July 2018. The country produced 3.84Mt of cement in 2018, 23% more than in 2017.


Uzbekistan/Afghanistan: The Almalyk Mining and Metallurgical Combine plans to ship several batches of high-quality cement to Afghanistan by the end of 2019, according to a company press statement. It elaborated that it had signed a number of contracts for the supply of three products in mid-July 2019. Its cement will be used in the construction of infrastructure and social facilities in several regions of the country. Deliveries will be made from the group’s Jizzakh and Sherabad plants.

The company is also actively increasing exports to other neighbouring countries. The Jizzakh cement plant has already exported over 1600t of white cement to Tajikistan, 1280t to Kyrgyzstan, 512t to Kazakhstan and 147t to Turkmenistan in 2019. Over the first half of 2019, the plant exported over 28,000t of cement products at a value of more than US$1.6m.


Taiwan: Taiwan Cement Corp has reported that its net income for the first half of 2019 increased by 11.7% to US$356m. However, its cement sales were lower year-on-year compared to the first half of 2018. The income was improved by contributions from its coal-fired power plant in Hualien County.

The company said that it remains positive with regards to the second half of 2019, as the rainy season is over, which is expected to boost cement demand and prices.

Separately, Asia Cement reported that net income soared by 46.5% year-on-year in the first half of 2019, predominantly thanks to record-high profits generated by its Chinese operations.


Philippines: Trade Secretary Ramon Lopez has welcomed a Tariff Commission (TC) report that has increased the safeguard duty on imported cement, but noted that his department was still reviewing the evaluations made.

Speaking on 14 August 2019, Lopez said, "We just got the full report on cement from the TC and will study the evaluations made. We welcome the finding that there was injury to the industry and that the safeguard duty should be US$5.65/t or US$0.23/bag (40kg)." The TC report said the US$0.23/bag safeguard duty was the difference between the weighted average landed cost of imported cement and the average domestic ex-plant selling price of the local cement industry for 2018.

Lopez earlier claimed that imports of cement increased from only 3558t in 2013 to more than 3Mt in 2017. The share of imports increased from only 0.02% to 15% during the same period.