Global Cement Newsletter

Issue: GCW445 / 04 March 2020

Headlines


The Coronavirus Disease 2019 (COVID-19) took on direct implications for the international cement industry this week when an Italian vendor infected with the virus visited Lafarge Africa in Ogun state, Nigeria. The cement producer said that it had ‘immediately’ started contact tracing and started isolation, quarantine and disinfection protocols. This included initiating medical protocols at its Ewekoro integrated plant, although local press reported the unit’s production lines were still open. Around 100 people were thought to have had contact with the man.

Global Cement has been covering the epidemic since early February 2020 when the virus’ effect on the construction industry in China started to become evident. First, an industry event CementTech was postponed, financial analysts started forecasting negative financial consequences for producers and plants started going into coronavirus-related maintenance or suspension cycles. Then at least one plant started to dispose of clinical waste and now China National Building Material Group (CNBM) is considering how to restart operations at scale. Also, this week Hong Kong construction companies reportedly laid off 50,00 builders due to a lack of cement due to the on-going production suspension in China.

The major cement companies have identified that their first business risk from coronavirus comes from simply not having the staff to make building materials. LafargeHolcim’s chief executive officer Jan Jenisch summed up the group’s action in its annual financial results for 2020 this week when he said, “We are taking all necessary measures to protect the health of our employees and their families.” Other major cement producers that Global Cement has contacted have placed travel restrictions for staff and reduced access to production facilities.

The next risk for cement companies comes from a drop in economic activity. The Organisation for Economic Co-operation and Development (OECD) forecasts a global 0.5% year-on-year fall in real gross domestic product (GDP) growth to 2.4%, with China and India suffering the worst declines in GDP growth at around 1%. The global figure is the worst since the -0.1% rate reported by the International Monetary Fund (IMF) in 2009. The OECD blamed the disease control measures in China, as well as the direct disruption to global supply chains, weaker final demand for imported goods and services and regional declines in international tourism and business travel. This forecast is contingent on the epidemic peaking in China in the first quarter of 2020 and new cases of the virus in other countries being sporadic and contained. So far the latter does not seem to have happened and the OECD’s ‘domino’ scenario predicts a GDP reduction of 1.5%. All of this is likely to drag on construction activity and demand for cement and concrete for some time to come.

Moving to cement markets and production, demand is likely to be slowed as countries implement various levels of isolation and quarantine leading to reduced residential demand for buildings directly and as workforces are restricted. Business and infrastructure projects may follow as economies slow and governments refocus spending respectively.

The UK government, for example, is basing its coronavirus action plan on an outbreak lasting four to six months. This could potentially happen in many countries throughout 2020. This has the potential to create a rolling effect of disruption as different nations are hit. Assuming China has passed the peak of its local epidemic then its producers are likely to report reduced income in the first quarter of 2020. The effect may even be reduced somewhat due to the existing winter peak shifting measures, whereby production is shut down to reduce pollution. Elsewhere, cement companies in the northern hemisphere may see their busy summer months affected if the virus spreads. The effect on balance sheets may be visible with indebted companies and/or those with more exposure to affected areas disproportionately affected. The wildcard here is whether coronavirus transmits as easily in warmer weather as it does in the cooler winter months. In this case there may be a difference, generally speaking, between the global north and south. Exceptions to watch could be cooler southern places such as New Zealand, Argentina and Chile. Shortages, as mentioned above in Taiwan, potentially should be short term, owing to global overcapacity of cement production, as end users find supplies from elsewhere.

The cement industry is also likely to encounter disruption to its supply chains. Major construction projects in South Asia are already reporting delays as Chinese workers have failed to return following quarantine restrictions after the Chinese New Year celebrations. As other countries suffer uncontrolled outbreaks then similar travel restrictions may follow. Global Cement has yet to see any examples of materials in the cement industry supply chain being affected. On the production side, raw mineral supply tends to be local but fuels, like coal, often travel further. Fuel markets may prove erratic as larger consumers cut back and suppliers like the Organisation of the Petroleum Exporting Countries (OPEC) react by restricting production.

On the maintenance side cement plants need a wide array of parts such as refractories, motors, lubricants, gears, wear parts for mills, ball bearings and so forth. Some of these may have more complicated supply chain routes than they used to have 30 years ago. On the supplier side any new or upgrade plant project is vulnerable if necessary parts are delayed by a production halt, logistics delayed and/or staff are prevented from visiting work sites. Chinese suppliers’ reliance on using their own workers, for example, might well be a hindrance here until (or if) international quarantine rules are normalised. Other suppliers’ weak points in their supply chains may become exposed in turn. This would benefit suppliers with sufficiently robust chains.

Chinese reductions in NO2 emissions in relation to the coronavirus industrial shutdown have been noted in the press. A wider global effect could well be seen too. This could potentially pose problems to CO2 emissions trading schemes around the world as CO2 prices fall and carbon credits abound. This might also have deleterious effects on carbon capture and storage (CCS) development if it becomes redundant due to low CO2 pricing. In the longer-term this might undesirable, as by the time the CO2 prices pick up again we will be that much nearer to the 2050 sustainability deadlines.

COVID-19 is a new pandemic in all but name with major secondary outbreaks in South Korea, Iran and Italy growing fast and cases being reported in many other countries. The bad news though is that individual countries and international bodies have to decide how to balance the economic damage disease control will cause, versus the effects of letting the disease run unchecked. Yet as more information emerges on how to tackle coronavirus, the good news is that most people will experience flu-like symptoms and nothing more. Chinese action shows that it can be controlled through public health measures while a vaccine is being developed.

Until then, frequent handwashing is a ‘given’ and many people and organisations are running risk calculations on aspects of what they do. It may seem flippant but even basic human interaction such as the handshake needs to be reconsidered for the time being.


Zimbabwe: Lafarge Zimbabwe has appointed Precious Murena-Nyika as its chief executive officer (CEO). She succeeds Siame Kaulule, who left the post in February 2020 for a new role with LafargeHolcim in South Africa, according to the News Day newspaper.

Murena-Nyika was previously director for human resources and communications at Lafarge Cement Zimbabwe. She is the immediate past president for the Institute of People Management of Zimbabwe. She holds a degree in Psychology and Masters in Business Administration from the University of Zimbabwe and a postgraduate diploma in leadership from the Harvard Business School.


UK: Lafarge Cement has appointed Stuart Hutchings as the new plant manager of its Cauldon integrated cement plant in Staffordshire. He holds over 20 years of experience in the cement industry and is a qualified chemical engineer with a master’s degree in business.

The plant produces around 1Mt/yr of cement and employs around 150 staff. LafargeHolcim’s local subsidiary Aggregate Industries is currently planning a potential investment project to develop an additional chloride bypass and a new pre-processing plant for the storage of solid and liquid alternative fuels at the plant.


Italy: Gambarotta Gschwendt has appointed Davide Gambarotta as its chief executive officer (CEO) with immediate effect. He is also its sole owner designate. Gambarotta will maintain his position as CEO and sole director of MDG Handling Solutions.

Both companies will operate jointly, under the holding company Gambarotta Group. MDG Handling Solutions will offer complete engineering and procurement (EP) and engineering, procurement and construction (EPC) projects. Gambarotta Gschwendt will design and produce equipment for bulk material handling.


UK: The Materials Handling Engineers Association (MHEA) has appointed James Bullock as its vice-president. He has been a member of the MHEA’s executive committee for several years. He succeeds Linda White, who has held the post since late 2019. White is taking the post of secretariat from 1 March 2020.


China: China National Building Material Group (CNBM) has started to resume its operations in various sectors following the outbreak of the novel coronavirus. Priority has been given to activities related to epidemic control, according to the China Daily newspaper. Its plans are aligned with instructions from the Assets Supervision and Administration Commission of the State Council to ensure stable production and operations to back the country's economic development while preventing the virus from spreading further.

Zhou Yuxian, chairman of CNBM, said that the company is aiming at grasping ‘the first market share’ after the epidemic. The state-owned company intends to watch market demand and the reactions of companies from the upstream and downstream supply chain. CNBM also released guidelines of resuming work and epidemic prevention for different sectors earlier this month.

For its cement business, CNBM has urged the resumption of full production by subsidiaries related to life and medical waste handling. CNBM has asked its other subsidiaries to restart work gradually in different batches based on market demand.


India: Production capacity utilisation in the cement industry is expected to remain below 70% in the 2020 – 2021 financial year due to new plant projects in the next two years. Credit ratings agencies ICRA, India Ratings and Crisil all forecast relatively low demand for cement compared to a decade-high of 13% in the 2019 – 2020 period, according to the Press Trust of India. Cement production rose by 0.7% year-on-year in the first nine months of 2019 – 2020 period. However, production growth has hastened since then. The ratings agencies offer different outlooks on anticipated profits look forward.


Netherlands: Royal Cement Benelux, part of Royal El Minya Cement and the Sesco Group, has acquired a new 18,500m2 facility in the port of Schiedam near Rotterdam. The new facility, which includes 13,500m2 combined office, storage and operating space will be the company’s second European location. Available on the premises is 160 M1 Quay, which can receive ships up to 15,000dwt.

“The opening of Royal Cement Benelux’s new Schiedam facility is an important step towards the ambition to develop the European market,” said Martin Bakker, general manager of Royal Cement Benelux. The company intends to target its white cement products from the terminal to Germany by barge, to several locations in Belgium and the Netherlands by inland rivers and to the UK by sea.

The new location is intended to be first of several expansions for the company in 2020. Royal Cement Benelux says it wants to take former business in Western Europe from CBR since it stopped white cement production. The group is also opening an Italian terminal.


Vietnam: Xuan Thanh Cement has ordered seven liquid starters from AKA. The plant in Ha Nam Province has a cement production capacity of 5.5Mt/yr from two production lines. The most recent production line was supplied by Denmark’s FLSmidth. France’s AKA supplies a variety of liquid starters, electronic starters and power controllers for industrial end users.


India: A worker has been killed after becoming trapped in a crusher at the Bhavya Cement plant in Andhra Pradesh. The incident took place when the 28-year old worker was cleaning the belt of the crusher, according to the New Indian Express newspaper. The local authorities have inspected the plant


US: Oldcastle APG, a subsidiary of CRH, has acquired dry mix manufacturer US MIX. The purchase adds to APG's dry mix manufacturing footprint and expands its network of facilities to the Denver, Colorado market. In addition, the acquisition provides APG with materials science expertise and adds another brand, US SPEC, to its existing dry mix product portfolio of Sakrete and Amerimix. No value for the acquisition has been disclosed.

US MIX primarily operates out of a manufacturing facility in Denver, with a secondary specialty bagging location in Fontana, California. Founded in 1968, US MIX has been privately owned by the Peterson family for over 50 years. Its products include bagged concretes, mortars and specialty cement mixes, in addition to liquid repair products.

US MIX currently operates as a Sakrete and Amerimix licensee and offers a variety of specialty products under the well-known US SPEC brand. US SPEC products are professionally engineered concrete and masonry repair products used in a variety of applications, formulated and tested in laboratory conditions under ASTM testing methods and specifications.


Mexico: Cemex has worked with AES Mexico, the Mexican Fund for the Conservation of Nature (FMCN), the Mexican Ministry of Environment and Natural Resources (SEMARNAT) through the General Wildlife Direction, and the National Commission of Natural Protected Areas (CONANP) to successfully reintroduce 19 American bison specimens (Bison bison) in El Carmen Nature Reserve, in Coahuila, to establish the second conservation herd of this species in Mexico.

“For almost two decades, we have carried out different alliances with companies and conservation organisations to protect and increase biodiversity in El Carmen. Examples of this include the reintroduction of the American bison, the bighorn sheep, and the pronghorn, as well as the increase in the populations of desert mule deer, white-tailed deer, and black bear,” said Vicente Saisó, director of sustainability at Cemex.

El Carmen Nature Reserve is a private cross-border conservation area in Mexico and the US that contains five different ecosystems and habitats to diverse species of plants, birds, mammals, reptiles, and amphibians over more than 140,000 hectares.

The American bison is the largest land mammal in North America and was present in the plains of Canada, the US and Mexico. In Mexico, American bison lived in the states of Sonora, Chihuahua, Coahuila, Nuevo León, and Durango; however, it the species was depleted in the second half of the 19th century. Currently, it is a species that is in danger of extinction in Mexico.

Prior to this collaboration, the only herd of bison considered genetically pure was at Rancho El Uno, owned by FMCN, located within the Janos Biosphere Reserve, Chihuahua. 19 specimens from this herd were moved to El Carmen, located in Maderas del Carmen Flora and Fauna Protection Area by a team of wildlife management specialists. The plan to reintroduce the American bison in El Carmen Nature Reserve was launched in April of 2019, and it will continue until 2021 with the translocation of additional specimens.


India: ACC Limited has announced that it will open a 2.5Mt/yr integrated cement plant with ‘state-of-the-art pollution control technology,’ along with a 25MW coal-fired power plant that will serve the plant in addition to an existing 15MW coal-fired power plant on the site in Chandrapur, Maharashtra. The opening in March 2020 will follow the expiry of a period of respite for continued operation of ACC’s 0.9Mt/yr integrated Cement Nagar plant on the same site.

The Times of India has reported that the plant, the company’s oldest, first shut on 30 November 2010 due to repeat violation of pollution standards, and was permitted to reopen in January 2011 up until 28 February 2020, subject to its adherence to strict conditions imposed by the Maharashtra Pollution Control Board (PCB). The company says that it is investigating the use of cladding in the old power plant to bring noise pollution down to 55dB.


Madagascar: Oman-based Raysut Cement has shared plans for a US$30m, 0.75Mt/yr clinker grinding plant in Toamasina, Madagascar. L’Express de Madagascar newspaper has reported that Raysut Cement will begin construction in June 2020 and enter production at the facility in mid-2022 at the latest. Raysut Cement Indian Ocean regional director Pascal Naud said, “Madagascar’s pre-capita cement consumption is around 22kg/yr, compared to 125kg/yr on average in sub-Saharan countries. It is therefore a market with high potential for this investment.”

On 2 February 2020 Raysut Cement entered into talks with Switzerland-based Cementia for acquisition of the latter’s 75% stake in the latter’s LH Maldives cement terminal. The group said it is currently ‘developing an external growth strategy by investing in several African countries such as Kenya and Uganda.’


Congo: Nigeria-based Dangote Cement has announced that it will begin shipping cement produced at its 1.5Mt/yr integrated Mfila plant in Bouenza region, Congo, to other African countries.

Reuters News has reported that Dangote Cement’s Nigerian exports fell by 41% to 0.5Mt in 2019 from 0.8Mt in 2018. Dangote Cement CEO Joseph Makoju attributed the flop to the government’s closure of Nigeria’s border with Benin, part of a crackdown on smuggling and the illegal weapons trade.


Germany: Switzerland-based LafargeHolcim subsidiary Holcim Deutschland has publicised further details of its plan to make its low-CO2 concrete, EcoPact Zero, carbon neutral. It has partnered with German bog rewetting specialist MoorFutures to offset the remaining CO2 from the reduced-emissions production process of EcoPact Zero concrete. LafargeHolcim has purchased a climate protection certificate from the company, which in return is restoring enough peatland in Königsmoor, Schleswig-Holstein, to capture 1t of CO2 for every Euro64 it receives. MoorFutures says “Peatlands are the most effective CO2 stores on Earth.”


Ireland/UK: Quinn Building Products has launched ‘Self Build with Quinn,’ an initiative aimed at promoting thermal efficiency and sustainability in self-builders’ product choices with a range of bundles and discounts on Quinn building products and technical support with dedicated account management. Quinn Building Products Product and Specification Manager Jason Martin said, “Self Build with Quinn can help self builders achieve the balance between their hopes for a high-performance home which is better for the environment and provides comfortable, economical living with their budget.”


Gabon: Dangote Cement has shared plans for the construction of a 1.1Mt/yr grinding plant on a greenfield site near the New Owendo Internation Port in Owendo, Komo-Mondah department. Dangote Cement has stated that the US$75m facility, scheduled for completion in early-2021, will ‘close the cement production gap in this emerging country.’ It will supply cement to Gabon and the central African region.


Philippines: Holcim Philippines has recorded a profit of US$70.9m in 2019, up by 41% from US$50.3m in 2018. This was in spite of a 5.9% year-on-year sales fall to US$660m from US$701m in 2018. The Philippines Star newspaper has reported that a more favourable product mix and the steady contribution of its aggregates unit helped Holcim Philippines to offset the effects of slowing construction activity throughout the year. Holcim Philippines president and CEO John Stull said that the company is ‘well-positioned to deliver sustainable and healthy growth to shareholders and continue support to the country’s development.’

In 2019 Holcim Philippines brought its total production capacity to 10Mt/yr with the completion of upgrades at its integrated Bulacan, Davao and La Union plants. In March 2019 it launched Solido, a blended cement suited to use in road and infrastructure construction.


Vietnam: Vietnamese cement production rose by 0.1% year-on-year to 13.0Mt in January and February 2019 from 12.9Mt in the opening two months of 2018. Vietnam Daily News has reported that February was an especially voluminous month for production. The country produced 6.7Mt of cement over its 29 days, up by 18.6% year-on-year from 5.6Mt in February 2018.

Two new plants, with a shared capacity of 7.1Mt/yr, are due in 2020.


Algeria: Public Industrial Cement Group of Algeria (GICA) subsidiary Beni Saf has announced a target of 45,000t in 2020 of clinker exported to Africa. Algérie Presse Service has reported that the recipient countries include those in the sub-Saharan region.


Nigeria: The Lagos State Commissioner for Health Akin Abayomi has said that an Italian national employed as a consultant by Lafarge Africa was Nigeria’s ‘patient zero’ in the international coronavirus outbreak. No further cases have yet been recorded. Vanguard newspaper has reported that the consultant, who flew in to the country from Milan via Istanbul and attended a meeting in Ewekoro, Ogun State, before staying at a guesthouse there, has been confined to a treatment facility in Yaba, Lagos State. Abayomi praised the astuteness of medical staff in Yaba for isolating the patient overnight after he began to show symptoms after his second day in the country.


Ireland: The Irish Environmental Protection Agency (EPA) has won its case against Quinn Cement over the latter’s violation of emissions laws. The Impartial Reporter newspaper has reported that an EPA monitor recorded 36 breaches at Quinn Cement’s Ballyconnell plant between 5 October 2018 and 7 October 2018. The plant was also emitting four times the legal hydrogen chloride on 5 February 2019. Following its subsidiary company’s guilty plea, Quinn Industrial Holdings said via a spokesperson, “Though independent assessment confirmed there were no material environmental impacts arising, best practice environmental safety procedures were followed and production ceased on each occasion. Since then significant work and expenditure has been completed to prevent a recurrence.” The Cavan district court fined Quinn Cement Euro2000.


Australia: The New South Wales Environment Protection Authority (EPA) has issued a US$9800 fine and a clean-up order to Boral for damage caused by a discharge of slurry from its Maclean concrete plant. The Daily Examiner newspaper has reported that a member of the public alerted the body to the spill, which issued from a storm drain into the Clarence River, on 15 October 2019. EPA north regulatory operations director Karen Marler said that the slurry ‘appeared to have been discharging from the Boral plant for some time prior.’ She said, “Subsequent EPA inspections confirm the clean-up and actions taken to improve plant operation were effective.”


Ireland: CRH recorded sales of Euro28.3bn in 2019, up by 6% year-on-year from Euro26.7bn in 2018. Earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 25% year-on-year to Euro4.20bn from Euro3.36bn. The company said that the results were supported by a positive demand backdrop in the Americas and in key regions in Europe. It also set out a new CO2 emissions roadmap with target of 520kg/t of cement by 2030, a 33% reduction compared to 1990 levels.


China: Hong Kong construction companies have laid off 50,000 workers and reduced the hours of a further 80,000 because of a shortage of cement, with production still suspended in China due to the coronavirus epidemic. New World Construction co-managing director David Kwok Chun-wai said the company’s supply chain had been disrupted, adding, “It is still too early to predict the impact.”

The Hong Kong Construction Industry Employees General Union chairman Wong Ping said, “Workers can nail boards, however without cement, they cannot proceed to laying floors.”


Poland: Belarusian Cement Company (BCC) says that it has responded to ‘increased demand for Belarusian cement in Central Europe in 2019’ by opening an office in Warsaw, Poland. Belarus Daily News has reported that one purported aim of the office is to court supply contracts with ‘European, Polish, German and other partners.’

Both Krichevtsementnoshifer and Krasnoselskstrojmaterialy, the remaining two of Belarus’s three cement producers, have reportedly concluded preliminary agreements for export of their cement to Poland in 2020.


India: The state government of Odisha has leased an area of limestone-bearing land that includes the Asura Vihara Gumphas, a first century BC Jain religious centre with significance in local mythology. The Blink newspaper reported that the site, consisting of three caves, is ‘covered by thick vegetation’ and in need of ‘proper conservation and preservation.’ Indian National Trust for Art and Cultural Heritage (INTACH) Odisha state curator Anil Tripathy said, ‘the caves should be retrieved from the company and the allotment of the site cancelled.’ Toshali Cements is reportedly carrying out limestone surveys on an area, including the caves.

INTACH is in the process of conducting a comprehensive survey of the Mahandi Valley, in which the land lies, and has identified over 1000 monuments of ‘tangible heritage.’


Cyprus: Vassiliko Cement has bagged the Environmental Protector gold award for the second consecutive year at the Pancyprian Environmental Awards for Organizations and Businesses 2019. The event was held at the Cypriot Presidential Palace by the Cyprus Centre for Environmental Research and Education (CyCERE), the Environment Commissioner’s Office, the Cyprus University of Technology (CUT) Agricultural Faculty, the Employers and Industrialists Federation (OEB), the Association of Cyprus Tourist Enterprises (ACTE), the Business and Professional Women of Limassol (BPW) and the volunteers’ network Together Cyprus. The company said that its “key aim is to promote environmental practices across all aspects of its activities, in order to protect the communities where it operates, achieving sustainable development.”


Switzerland: LafargeHolcim has announced a Euro1.95bn profit in 2019, up by 32% from Euro1.48bn in 2018. The profit was a company record, made possible by ‘lower restructuring costs and financial expenses,’ according to LafargeHolcim CEO Jan Jenisch. Sales were Euro25.1bn, up by 3.1% from Euro24.4bn, ‘driven by good growth in Europe and North America, good price dynamics across all business segments and higher prices in most markets,’ according to Jenisch. “We have achieved all our targets for 2019 and have moved our company to a new level of performance,” he said.


Nigeria: Dangote Cement’s profit in 2019 was US$685m, down by 17% from US$822m in 2018. Sales were US$2.46bn, down by 1.1% year-on-year from US$2.49bn in 2018. “Export sales were affected by the Nigeria-Benin border closure in the second half of 2019. Looking ahead, I expect an increase in volumes in 2020 as we commence clinker exports via shipping from Nigeria,” said Dangote Cement CEO Joe Makoju. The group reported pan-African volume growth to 9.4Mt/yr, noting a 94% growth in Tanzanian volumes, aided by the commencement of operations at a temporary gas power plant in the East African country.

Retiring from the company, Makoju said, “I am proud to have watched Dangote Cement grow from a local producer back in 2007 to a major force in global cement production. Dangote Cement has eliminated Nigeria's dependence on imported cement.” He wished his successor Michel Puchercos all the best in his new role.


Australia: Adelaide Brighton’s profit in 2019 was US$31.1m, down by 74% from US$122m in 2018. Sales were down by 7% to US$997m from US$1.07bn. Adelaide Brighton chairman Raymond Barro explained that ‘increased competition and softer demand for construction materials’ locally impacted revenue and earnings. He said that ‘cost pressures across sea freight, transport and raw materials’ caused the dive in profit.


EU: Cembureau has responded to the European standardisation organisation Cenelec’s CEN/TC 350 ‘sustainability of construction works’ rules by amending its European Environmental Product Declarations (EPDs) for CEM I, CEM II and CEM III, corresponding to Portland cement, Portland-composite cement and blast furnace cement respectively. It says the update brings the three main cement types into ‘full alignment with the EU Commission strategy for a sustainable built environment.’


US: Charah Solutions has secured a contract with energy supplier Entergy for provision of environmental services to three coal-fired power plants in Louisiana and Arkansas. The gives Charah Solutions the right to dispose of or market 0.9Mt/yr of coal combustion residuals (CCR), including to cement producers in the region for use as a cement additive.