Global Cement Newsletter

Issue: GCW433 / 27 November 2019

Headlines


Cemex pushed ahead yesterday and announced that it had sold the Kosmos Cement Company to Eagle Materials for around US$665m. It owns a 75% stake in the company, with Italy’s Buzzi Unicem owning the remaining share, giving it roughly US$449m once the deal completes. Proceeds from the sale will go towards debt reduction and general corporate purposes. The sale inventory includes a 1.7Mt/yr integrated cement plant in Louisville, Kentucky as well as seven distribution terminals and raw material reserves.

The decision to sell assets makes sense given Cemex’s financial results so far in 2019. It reported falling sales, cement volumes and earnings in the first nine months of the year although much of this was down to poor market conditions in Mexico. However, the US, along with Europe, was one of its stronger territories with rising sales. Earnings were impaired in the US, possibly due to bad weather in the southeast and competition in Florida, but infrastructure and residential development were reported to be promising.

Graph 1: Portland & Blended Cement shipments in 2018 and 2019. Source: United States Geological Survey (USGS). 

Graph 1: Portland & Blended Cement shipments in 2018 and 2019. Source: United States Geological Survey (USGS).

Graph 2: Change in imports of hydraulic cement & clinker to the US in 2018 and 2019 from selected countries. Source: USGS. 

Graph 2: Change in imports of hydraulic cement & clinker to the US in 2018 and 2019 from selected countries. Source: USGS.

United States Geological Survey (USGS) data also supports a picture of a growing US market. Shipments of Ordinary Portland Cement and blended cements grew by 2.4% year-on-year to 66.9Mt for the first eight months of 2019 from 65.4Mt in the same period in 2018. By region growth can be seen in the North-East, South and imports. Declines were reported in the West and Midwest. The states of Alabama, Kentucky, Tennessee – the area where the Kosmos plant is located – saw shipments grow by 4% to 4.77Mt from 4.58Mt. It is worth noting that Louisville is in the north of Kentucky near the border with Indiana, where shipments also grew.

The Portland Cement Association’s (PCA) fall forecast may also have helped Cemex’s decision. Ed Sullivan, PCA Senior Vice President and Chief Economist, said that he expected cement consumption in the US to continue growing in 2019 and 2020 but with a slowing trend into 2021 following general gross domestic product (GDP) predictions. The PCA’s view is that pent-up demand following the recession in 2008 was gone and the economy was gradually weakening. Crucially though it didn’t think a recession was impending. In this scenario Cemex might be taking a medium-term view with regards to the Kosmos Cement Company.

Another more general interesting data point from the USGS was the change in import origins to the US. Imports grew by 11.3% to 66.9Mt in January to August 2019. The top five importing countries and their overall share remained the same but there was some movement between them. Turkish and Mexican imports surged at the expensive of Chinese ones as can be seen in Graph 2. The go-to explanation for this would be the on-going US - China trade war. Cemex is a Mexican company with a strong presence in both the US and Mexico. This change in the make-up of the import market in the US may also have informed its decision to sell Kosmos Cement as it looked at the macro scale.

More generally the US market is looking buoyant in the short to medium term. Plants are being sold like Kosmos Cement to Eagle Cement and the Keystone cement plant in Bath, Pennsylvania to HeidelbergCement and a major upgrade project is underway on the new production line at the Mitchell plant in Indiana. In Cemex’s case, as ever with asset sales, the seller sometimes has to make the hard decision of whether to divest a plant in a growing region to help the business in other places that might not be doing so well. The growth of America’s largest locally owned producer, Eagle Cement, may also give cheer to the US’ current ‘America First’ administration.


Oman: Oman Cement Company has appointed Fatick Hussain Al Balushi as its chief financial officer (CFO). Fatick holds over 15 years of experience in the oil and gas and petrochemical industries. He worked for the Oman Oil Company and its subsidiary, the Salalah Methanol Company, in a variety of roles including financing manager for the ammonia project, head of finance and information technology (IT) and finance director. He is an alumni of the Sultan Qaboos University in Oman and the University of Leicester in the UK.


Bangladesh: Metrocem Cement has appointed Khandakar Ataur Rahman Rifat appointed as its chief marketing officer. He holds 25 years experience in the cement industry working for Aman Cement, Holcim Cement, Unique Cement, Cemex Cement, Hyundai Cement amongst other companies. He earned a BSS and a MSS from the University of Dhaka, an MBA in marketing from the World University of Bangladesh and a PhD in marketing from the same institution.


US: Cemex says it has agreed to sell the Kosmos Cement Company to Eagle Materials for around US$665m. The Mexican company owns a 75% stake in the company and Italy’s Buzzi Unicem manages the remainder. It expects to receive US$499m from the transaction. This will be spent on debt reduction and for general corporate purposes. The sale includes the 1.7Mt/yr Kosmos integrated cement plant in Louisville, Kentucky as well as seven distribution terminals and raw material reserves.

“This is another key milestone in achieving our ‘A Stronger Cemex’ objectives. Now, closed or announced asset sales are in excess of US$1.3bn under this program. We are pleased with the continued favourable asset-divestment dynamics in our industry,” said Fernando A Gonzalez, chief executive officer (CEO) of Cemex.

Completion of the deal is subject to regulatory approval. It is expected to complete in the first quarter of 2020.


Ireland: CRH’s sales revenue grew by 4% on a like-for-like basis to Euro21.8bn in the first nine months of 2019. Its earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 7% to Euro3.2bn. Sales grew fastest in its European and American heavy materials divisions with earnings growth more pronounced in North America than in Europe. The group reported growth in ready-mixed concrete and cement sales in North America as it continued to consolidate Ash Grove into the business. Sales in Europe were generally good, although declining construction activity in the UK was noted due to market uncertainty related to the country’s attempt to leave the European Union. CRH also reported falling sales volumes in the Philippines due to a slowdown in infrastructure spending.


Uzbekistan: The State Committee for Ecology and Environmental Protection plans to ask cement plants to establish sampling and analysis stations for sources of air pollution by the start of 2022. If they don’t the government will take measures up to and including suspension of production, according to the Trend News Agency. Uzbekistan was ranked in 16th place by AirVisual in a listing of the countries with the most air pollution in 2018.


Belarus: Cement producers plan to switch imports from Ukraine to the European Union (EU). Architecture and Construction Minister Dmitry Mikulenok said that the decision was made due to tariffs in Ukraine, according to the Belarusian Telegraph Agency (BELTA). He said that the industry had moved away from exporting to Russia and that exports from Ukraine stopped in July 2019. He added that exports grew through the Belarusian Universal Commodity Exchange (BUCE) in 2018.

Prime minister Sergei Rumas also noted that the government was watching local cement companies to make sure they were meeting their state support provision terms. He cited falling exports, low production capacity utilisation and market inefficiencies as issues facing the sector. The government has proposed restructuring the debts held by cement companies.


Russia: Eurocement’s Maltsovsky integrated plant in Bryansk Region has gained European certification for its CEMI 52.5N, CEMI 42.5R and CEMII / A-S 42.5N products. Local testing and independent certification confirmed the new designation. Following an earlier certification for CEMI 42.5N the plant now hopes to grow its exports to the European Union.


Iraq: Iran’s Khuzestan province plans to invest in a US$35m cement plant project in Al-Emareh. Deputy Governor General for Coordinating Economic Affairs Nourollah Hassanzadeh said it was a joint initiative with Iraq, according to the Islamic Republic News Agency (IRNA). The project was launched in the mid-2010s and is reported to be in its ‘final’ stages. The Iranian province borders Iraq and it hopes to increase its international investment profile.


Saudi Arabia: The Saudi Industrial Exports Company (SIEC) has signed a one-year sales and marketing contract extension with Al Jouf Cement. It previously agreed with Al Jouf in November 2017 to sell 72,000t/yr to Jordan.


Nigeria: The Senate of Nigeria has urged the Federal Ministry of Transportation to complete the construction of the Ajaokuta - Otukpo railway line. The legislative chamber also advised the ministry to include a siding at Okaba to Ankpa as part of the project to make coal transportation easier, according to the Vanguard newspaper. Cement companies, including Dangote Cement’s Obajana plant and the Kogi State Super Cement Company at Allo-Itobe, would benefit from reduced coal prices. At present their coal is delivered by road. The railway project would also aid the Ajaokuta Steel Company.


Cuba: Following 18 months of reduced operations in which time maintenance and repairs on its grey cement kilns were carried out, Corporacion Cementos Cubanos’ 0.7Mt/yr Siguaney plant is once more fully operational across its four wet lines. Esmerk has reported that the company hopes to re-open its white cement kiln at the nearest possible date.


Bangladesh: Confidence Cement’s power supply subsidiary Confidence Power Bogra has entered operation at its new 113MW heavy fuel oil (HFO)-fired power plant at Birgram. The Financial Express has reported that it utilises Germany-based MAN’s generators and a substation manufactured by China’s XD. The Indian boilermaker ME provided the boiler. The power station will supply Confidence Cement’s operations via repurchase from the Bangladesh Power Development Board.


Kenya: Mombasa Cement has completed construction of a 36MW wind farm consisting of 12 3MW turbines in Vipingo. Bahrain News Agency has reported that the plant will power Mombasa Cement’s 1.6Mt/yr integrated Vipingo cement plant, with surplus to be sold to the state-owned power provider Kenya Power. The power plant will supply electricity for the completion of Mombasa Cement’s planned US$73m upgrade to its grey cement clinker production process at the Vipingo plant.


Egypt: Greek-owned Titan Cement has made a major acquisition in buying the International Finance Corporation (IFC)’s 17.3% stake in Alexandria Development Ltd. Alexandria Development Ltd is 82.7% indirectly held by Titan Cement. It is the 88.9% owner of Alexandria Portland Cement, according to Mubasher. Alexandria Portland Cement made losses of US$4.56m in the nine months to 30 September 2019.


Nigeria: Dangote Cement’s non-executive director Fideli Madavo has resigned from his position on the company’s board. Madavo represented the stakeholder Public Investment Corporation (PIC), South Africa’s state pension fund, where he is head of resources and portfolio manager for strategic and African listed investments. The company has not stated a reason for the change.


India: The Union Council of India has approved a US$1.4bn distress fund to help developers finish partially completed residential developments. Business Today has suggested that the financing, which prioritises affordable and middle-income housing projects, will bolster demand for cement producers. The launch of the scheme follows India’s decision not to join the Regional Comprehensive Economic Partnership on 4 November 2019, for which it stated reasons of a trade deficit with 11 of the 15 other signatories and the rejection of its proposed three-tier structure for phasing out tariffs.


US: The Portland Cement Association (PCA) has releases a two-year forecast of moderate growth in cement consumption between 1 January 2020 and 31 December 2021. It projected growth of 1.7% in 2020, slowing slightly to 1.4% in 2021, corresponding to 2.1% and 1.7% GDP growth annually. Speaking at the 38th International Cement Seminar in Atlanta, PCA senior vice president and chief economist Ed Sullivan projected consumption growth of 1.6% - 2.3% in 2019 against GDP growth of 2.4% over the period, with consumption bolstered by the 2018 Federal Budget, which allowed for US$20bn in infrastructure investments in 2018 and 2019. He noted growing uncertainty (21% in 2019) with the expiry of the ‘pent-up demand zip that invigorates the initial stages of economic recovery long past.’

Rising house prices and mild inflation signify the continuation of the US economy’s longest expansion post-World War Two, with 161,000 net new jobs generated so far in 2019. With a forecasted population increase of 60m by 2040, US cement producers appears still have their work cut out in keeping up with demand.


Turkmenistan: Iron ore reserves of between 70Mt and 75Mt of around 20% iron recently discovered in the Turkmenbeshi district of western Turkmenistan could replace other ingredients in ordinary Portland cement (OPC) clinker production in the region, resulting in savings of US$10m/yr for producers. Trend News has reported that the deposits, located near Turkmencement’s 1.3Mt/yr integrated Kelete plant and Polimeks’ 1.0Mt/yr integrated Jebel plant, could sustain production for a century.


Uzbekistan: Construction has begun at Russia’s Eurocement’s 2.0Mt/yr integrated Ankhangarancement plant in the Tashkent region of a facility to house the limestone and clay used in cement production. When the installation is operational, the materials will be relayed from it to the plant’s four wet lines by a conveyor belt and 1400t/hr stacker, whence the mixture is conveyed by 600t/hr-capacity truck to one of the vertical roller mills.


US: The National Stone, Sand and Gravel Association (NSSGA) has honoured Cemex USA’s ‘exemplary use of environmental controls and systems’ at two quarries with its Environmental Excellence Gold Award. Its Center Hill quarry in Florida won a Community Relations Gold Award. Ten further aggregates operations won Silver or Bronze Awards in the Environmental Excellence or Community Relations categories. “We take pride in stewardship and serving as good neighbours in communities in which we operate and as examples others can emulate,” said Jaime Muguiro, Cemex USA president.


Uganda: LafargeHolcim subsidiary Hima Cement has revealed its new dark-coloured Supaset, which it says provides a higher early strength (32.5R) with lower shrinkage than previous Supaset products, ‘promoting faster working, enhanced productivity and cost optimisation,’ according to Hima Cement marketing director Allan Ssemakula. “We shall see our customers enjoying the fast, more consistent, cost effective results synonymous with using Supaset,” he added.


Panama: Guatemala’s Cementos Progreso has acquired a full stake in Cemento Interoceanico. The latter company informed its staff that working conditions would remain unchanged, according to the Panamá América newspaper. Panama consumed 1.67Mt of cement in 2018. Imports increased by 2% year-on-year to 32,900t.


Chile: Data from the Chilean Construction Chamber shows that cement despatches grew by 5% year-on-year to 3.06Mt in the nine months to the end of September 2019 from 2.91Mt in the same period in 2018. The country reported annual cement despatches of 3.99Mt in 2018, a similar figure to 2017.


UK: Breedon Southern, part of Breedon Group, plans to form a joint venture in London trading as Capital Concrete with Robert Brett and the Capital Concrete senior management. Three of Breedon’s existing ready-mixed concrete assets will be combined with those of Capital Concrete, Brett’s established ready-mixed concrete operation in London.

Capital Concrete currently operates seven ready-mixed concrete plants in Bow, Croydon, Romford, Rainham, Wembley, Silvertown and Staines. Breedon will contribute its plants in Cricklewood, Feltham and Enfield, together with Euro3.6m in cash, in return for a 43% interest in the joint venture. The remainder will be owned by Brett (43%) and management (14%).

“We have had a longstanding ambition to expand our footprint in the UK’s largest construction materials market. This joint venture enables us to secure immediate critical mass in Greater London, in collaboration with an experienced local partner, with the potential to develop a business of significant scale in the capital over the next few years,” said Pat Ward, group chief executive of Breedon.

Completion of the transaction is expected to take place on 1 December 2019.


Egypt: Wikov hosted its Wikov Gear Technology Conference in Cairo in late October 2019 to promote its products to cement producers in the Middle East. The focus was on the historical presence of Wikov in the market under the former brand Škoda, and later the product highlights and innovations like Side Drive gearboxes with Separate Lubrication System and shock-load-resistant planetary gearboxes Orbi-fleX with flexible pin. The conference also included a demonstration of Wikov’s new online gearbox configurator. This platform enables users to configure and select a planetary gearbox, generate technical data, a 3D model and send a request for quotation. Around 70 industry delegates attended the event.


Turkmenistan: President Gurbanguly Berdimuhamedov has instructed the Türkmensenagat State Agency to build three new plants using foreign investment. During a working meeting with the management of industrial and communication sectors he said that the new plants were required to satisfy local demand and increases exports, according to the Central Asian News Service.


Nepal: Construction of the Huaxin Cement Narayani plant being built at Benighat Rorang Rural Municipality in Dhading has resumed following a flood in July 2019. The deluge damaged worker dormitories, plant structures being built and an access road to the site, according to the Republica newspaper. 400 Chinese workers and 300 local workers are working on the site. Another 600 Chinese workers will be added soon. The company aims to start production at the unit from June 2020.


Spain: LafargeHolcim Spain plans to spend around Euro20m to reduce its CO2 emissions. The funding will be used to upgrade its plants from 2019 to 2022 with the aim of reducing its emissions by 90,000t/yr. It plans to increase its usage of alternative fuels and reduce its clinker ratio in its products. It follows European funding of Euro145m by LafargeHolcim across 80 projects in 19 European countries to reduce its annual CO2 emissions by 15%. Overall the group hopes to reach by 2030 an average content of 520kg of CO2 per ton of cement.