Global Cement Newsletter

Issue: GCW560 / 08 June 2022

Headlines


We return to India to discuss a potential fight that may be brewing in the cement sector. Competition between UltraTech Cement and Adani Group started when the latter won the race to buy Holcim’s cement assets in the country in May 2022. However, the rivalry stepped up a notch this week when UltraTech Cement responded by approving a US$1.7bn investment for expansion.

The leading Indian producer announced that it was committing the funds towards increasing its cement production capacity by 22.6Mt/yr. This will include a mixture of expansions to existing sites and building new plants such as new integrated units, new grinding units and new terminals. UltraTech Cement currently has a previous round of expansion that is set to be completed by the end of the 2023 financial year. Commercial production at the newly announced projects is forecast to start by the end of the 2025 financial year. The company finished off by saying that the upgrade projects would maintain its position as the third largest cement producer outside of China, with its total production capacity rising to 159Mt/yr.

Unusually for these kinds of press releases though, UltraTech Cement made of point of doing the calculation for any readers who might want to know how much this new capacity might cost. It is US$76/t. Adani Group didn’t do this when it said it had agreed to buy Ambuja Cements and ACC from Holcim but, unsurprisingly, it cost more, at least US$94/t based on the cash figure Holcim released for the deal. Note that Adani Group has valued the acquisition at US$10.5bn, which would put the capacity cost up to US$150/t. Other zingers in the press release included Kumar Mangalam Birla’s quote that his company held, “... a deep and nuanced understanding of the market dynamics of the cement industry.” Both of these additions to the statement suggest that UltraTech Cement is making a point about its new competitor.

Bloomberg has framed the actions of UltraTech Cement and Adani Group in the cement sector as a brewing corporate battle between old and new money. Both Kumar Mangalam Birla, chair of Aditya Birla Group - the owner of UltraTech Cement, and Gautam Adani were in the top 10 of the Forbes list of the richest people in India in 2021. Birla comes from inherited wealth, although he has undeniably expanded UltraTech Cement greatly during his tenure as chair. Adani is self-made. Cement is just part of the empires of both men but one risk to UltraTech Cement is just how fast an expansion-driven competitor with concerns in power generation and logistics might decide to try to shake up the cement sector.

It is interesting at this early stage to glimpse part of the potential strategies both cement companies may be employing. Adani Group is in the process of buying its way into the cement sector at a relatively high price for capacity. UltraTech Cement is responding by building new capacity at a lower price. Research by Kotak Institutional Equities cited in the Bloomberg article suggests that Adani Group could increase its 70Mt/yr capacity up to 100Mt/yr at US$80 – 90/t. This would cost up to around US$2.5bn but it’s not impossible. Kotak also reckons UltraTech Cement can eke out around US$3 – 4/t more in earnings before interest, taxation, depreciation and amortisation (EBITDA) compared to the existing Ambuja Cements and ACC assets. Adani Group might be able to cut this gap down through creating synergies by further merging the two companies.

This adds to the feeling that UltraTech Cement is in a stronger position as the incumbent market leader. Yet risks abound in the current inflationary conditions and even less is certain if Adani Group is prepared to invest heavily enough. After all, UltraTech Cement had a production capacity of only 23Mt/yr in 2010. Less than a decade later it became India’s largest cement producer. It is now Adani Group’s next move in the battle of the cement billionaires.


Australia: Boral has appointed Vik Bansal as its chief executive officer (CEO) and managing director with effect by 5 December 2022. Zlatko Todorcevski will remain as CEO until transition to Bansal is completed.

Bansal holds over 30 years of management experience with industrial organisations. He has been the CEO of steel-manufacture InfraBuild since mid-2021. Prior to this he was the head of waste management company Cleanaway from 2015 to 2021. He is currently the chairman of LGI and has volunteered as a director for organisations including the National Waste & Recycling Industry Council, Waste Management & Resource Recovery and Disability Services Australia.

Bansal is a Fellow of the Institute of Engineers Australia and the Australian Institute of Company Directors. He originally trained as an electrical engineer, holds a master of business administration (MBA) degree and has completed the Advanced Management Program from INSEAD. He has also completed a Master of Laws in Enterprise Governance.


Germany: Hengst Filtration has appointed Norbert Gregor as the group director of Hengst Group and the managing director of Industrial Air Filtration. He assumes his duties in a dual leadership role with Merete Gotfredsen, who leads the Process Air Filtration segment as its managing director. Both report directly to Peter Wink, Group Vice President for Industrial Air Filtration.

Gregor is a business economist who holds more than 25 years of management experience with a specialism in marketing and sales. From 2014, he was Vice President for DACH (Germany, Austria and Switzerland) and Eastern Europe at the Sweden-based filter specialist Camfil. In 2019, he moved to the Helsa Group as its chief executive officer, for which he was the managing director and realigned the two business units for molecular filtration (Helsatech) and elastomer technology (Helsacomp), which he sold to Mann+Hummel after a reorganisation. There, as Global Vice President, he was responsible for the post-merger integration of Helsa for two years, creating the new molecular filtration segment for the Life Science division for Mann+Hummel.


Zimbabwe: Holcim subsidiary Associated International Cement has entered into a binding agreement to sell its 76% stake in Lafarge Zimbabwe to Fossil Mines for an undisclosed amount. Five bidders were competing for the cement company, according to the Business Times newspaper. These companies included three China-based companies as well as local ones. China-based Huaxin Cement was reportedly one of the Chinese bidders.


Tanzania: ARM Cement has repaid all creditors of Tanzanian subsidiary Maweni Limestone to which it owed money. The East African newspaper has reported that the group used the proceeds from its sale of Maweni Limestone to Huaxin Cement for US$102m to pay off the debts. It paid US$74.4m to creditors and US$4.6m to the Tanzanian tax authorities.

In its native Kenya, ARM Cement sold its assets to National Cement Company (NCC) for US$42.7m. It has paid secured creditors there US$42.6m of a total US$68.7m due. It also owed unsecured creditors US$98.4m.


Ethiopia: Oromia State has signed a memorandum of understanding with the Ministry of Mining and 20 cement companies to regulate the price of cement. State Deputy President Awolu Abdi said that the price of cement products had been ‘skyrocketing’ due to international and internal factors, according to Walta Media. He partly blamed the problem on ‘illegal’ cement brokers and the inability of cement plants to produce output at their full capacity. The state government has been working with cement producers and approved distributors on the problem. The regional move follows action by the central government to cut out dealers and distributors from the market in mid-May 2022.


Mali: A foundation stone has been laid for the new Atlas 0.8Mt/yr cement plant in Dio-Gare. The project had an investment of around US$80m, according to Mali Actu. It is expected to be completed in mid-2025. The project is being financed by Papa Oumar Samake, the head of Atlas. The President of the National Transitional Council, the Prime Minister, the Minister of Territorial Administration and Decentralisation, the Minister of Industry and Trade, the Governor of the Koulikoro region and the local mayor attended the ceremony.


Russia: A study commissioned by the National Association of Manufacturers of Building Materials and the Construction Industry (NOPSM), SM PRO and Soyuzcement, the national cement manufacturing union, has found that 80% of components required for repairs and upgrades to cement plants in Russia are manufactured abroad. The research was intended to assess the sector’s requirement for foreign equipment and to determine the prospects for import substitution. The results of the survey were presented in late May 2022.

Anton Solon, the executive chair of NOPSM, noted that Russian cement sector holds a ‘critical’ dependence on imported equipment. He said that domestic analogues were either ‘significantly’ inferior to imports or simply not available. The main equipment affected included separators, burners, drives, compressors and grinding mills. Parts for packaging lines, some types of quarry equipment, grinding media, refractories, additives and linings were also negatively affected. However, he did point out that low-efficiency and large-sized gas cleaning plants (including bag and electrostatic precipitators) were produced domestically. Vyacheslav Shmatov, the chairman of Soyuzcement, called for the development of local engineering products to remedy the situation.


Germany: ThyssenKrupp Industrial Solutions’ Polysius division says that it has been commissioned by Buzzi Unicem, HeidelbergCement, Schwenk Zement and Vicat to build a pure oxyfuel kiln system at the Mergelstetten cement plant as part of the Cement Innovation for Climate (CI4C) project. No dates of the start of construction or final project commissioning of the industrial trial have been disclosed. CI4C was originally formed in 2019.

The Polysius pure oxyfuel process is a new type of clinker production process in which the otherwise normal ambient air is replaced by pure oxygen in the kiln combustion process. One advantage of the technology is that atmospheric nitrogen is eliminated from the clinker burning process leading to much higher concentrations of CO2 in the exhaust gas compared to a conventional kiln. As such the process aims to concentrate, capture and reuse almost 100% of the CO2 produced in a cost-effective manner. The medium-term goal is to further process the captured CO2 with the help of renewable energy into products such as kerosene for air traffic.


New Zealand: Golden Bay is spending US$6m on an upgrade to its Wellington cement terminal. The project will increased storage capacity, reconfigure the site for better traffic management, add new office facilities and upgrade ship discharge lines to reduce load times. Greater automation is also intended, as well as new branding for the site.

Nick Traber, Fletcher Building’s chief executive for concrete said, “Our Golden Bay Terminal has served Wellington well for many decades and has contributed to some of the region’s biggest infrastructure projects along with countless houses, driveways and other developments. The upgrade is a key part of our strategy to remove bottlenecks in our operations to drive growth and reduce costs, as well as increase the resilience of our supply chain using all modes of transport. It’s a demonstration of our commitment to local manufacturing as New Zealand's only and lowest carbon cement producer.”


Libya: The state-owned Ahlia Cement Company has launched a tender for the upgrade and restart of its lime plant at Souq Al-Khamis. It wants to run the restart as a joint-venture, according to the Libya Herald newspaper. The tender is for the renovation, operation and the marketing of the lime factory output for a renewable 10-year period. Al-Ahlia has invited interested parties to arrange for a site visit and collect the specifications sheet. The deadline for receiving tenders is 14 July 2022.


World: US-based Martin Engineering has announced the launch of its N2 remote monitoring system on European, Middle Eastern, African and South Asian markets. The system's position indicator works with any belt cleaner with a polythene blade, delivering continuous, real time feedback to the user.

Martin Engineering’s Europe, Middle East, Africa and India (EMEAI) regional vice president Robert Whetstone said “With this smart yet simple upgrade, the technology does the legwork, providing real-time data on each belt cleaner blade to give an early indication of when servicing is needed. In the meantime, plant managers can be confident that material carryback, spillage and build-up is being controlled by the belt cleaner so they can keep the plant running to maximise productivity.”


France: Logistics software provider Everysens says that its Transport & Visibility Management System (TVMS) product has helped Ciments Calcia to improve its use of railway transportation. Philippe Labbé, the logistics director for the subsidiary of Germany-based Heidelberg Cement, said that the company had been using the software for three years. During which time it increased its productivity and saved time on the operational management of rail logistics. Labbé added that he thought the product would help the company meet its decarbonisation commitments by switching more trucks to rail.

Ciments Calcia originally chose Everysens to digitise of use of railway transport, to bring all the relevant data on to one platform and to improve its management of it. The building materials manufacturer sells around 5.3Mt/yr of cement and it operates 10 production sites. It uses over 400 railway wagons in France and Belgium.


Canada: CRH has signed an agreement to acquire residential railings and fencing producer Barrette Outdoor Living. The value of the deal is US$1.9bn. CRH will finance the acquisition through its existing financial resources, and expects it to conclude in the second half of 2022.


Mexico: Holcim and Habitat for Humanity have launched a digital platform for affordable housing renovations in the states of Bajio and Veracruz. Holcim expects the software to help to develop a sustainable and healthy built environment where everyone has a decent dwelling. The partners now plan to expand the platform to cover the rest of the Americas and the Asia Pacific region.


Switzerland: Holcim has announced a partnership with Norman Foster Foundation with the aim of turning emergency housing into resilient homes. The collaboration will leverage Holcim's concrete expertise to develop reusable designs. Holcim says that it will focus on innovations such as low-carbon concrete, lightweight prefabricated support structures and green cements for soil stabilisation.

Chief executive officer Jan Jenisch said “Currently, we have over 80m people who have been forced to flee their homes around the world. Emergency shelters can be more than just a roof over their head: they should offer people the dignity and safety of a home. We are excited to collaborate with the Norman Foster Foundation to put our solutions as well as our expertise in affordable housing to work to achieve this goal.”


Sri Lanka: Tokyo Cement’s sales rose by 46% year-on-year in the 2022 financial year to US$88.5m from US$60.7m. Its net loss was US$1.66m, compared to a profit of US$4.17m in the 2021 financial year. Its cost of sales increased by 35% year-on-year during the full year and by 34% year-on-year in the fourth quarter of the 2022 financial year.


Guatemala: Cemex has secured its electricity supply for its Guatemalan operations until 2027 through the signing of a renewable power purchase agreement with Enel Green Power. Enel Green Power will supply an estimated 164GWh of renewable energy under the agreement, enabling Cemex to operate one of its Guatemalan cement facilities using 100% renewable energy.

“Transitioning to renewable energy sources is an integral part of our climate action strategy,” said Cemex South, Central America and the Caribbean president Jesús González. “We remain committed to becoming a net-zero CO2 company and are taking decisive steps to achieve this goal.”


Sweden: HeidelbergCement says that it will establish a 1.8Mt/yr carbon capture and storage (CCS) plant at its Slite cement plant in Gotland. It aims to achieve full-scale capture of the plant’s CO2 emissions by 2030. In conjunction with the CCS plant project, Cementa will increase the share of biomass in the Slite plant’s fuel mix.

Chair Dominik von Achten said “Just a few days ago, we published new sustainability targets, underlining the importance of carbon capture, utilisation and storage (CCUS) as one key lever to almost halve our CO2 footprint by 2030 compared to 1990, and achieve Net Zero by 2050 at the latest.” He continued “Slite CCS is the largest CCUS project yet in our group and the cement industry, and a model for what will be achievable with CCUS also beyond 2030. As this initiative contributes considerably to the climate ambitions of Sweden, and is a unique project for us in terms of scale, we are keen to make it happen.”


Ecuador: Holcim Ecuador has despatched its first export shipment of bulk cement to the Peruvian market. The volume of this shipment was 32,700t and it was loaded in 2t Big Bags. Holcim Ecuador says that it invested US$2.2m in establishing the infrastructure to realise this achievement.


South Korea: A total of 8200 truck drivers have gone on strike to request higher wages and an extension of the government’s freight charge system. The Korea JoongAng Daily newspaper has reported that 50% of the country’s 2700 cement truck drivers are unionised. Under the freight charge system, drivers receive minimum monthly payments in order to tackle the problem of overloading.


India: Star Cement plans to invest US$129m to establish a new 3Mt/yr clinker line. BusinessLine Online News has reported that producer currently operates 2.8Mt/yr-worth of clinker capacity across two units in Meghalaya. Star Cement says that it plans to increase its presence in the Northeast India, Bihar and West Bengal markets. It will additionally invest US$90 – 103m to establish two new grinding units with a combined capacity of 4Mt/yr at Guwahati and Silchar in Assam.

Star Cement said that projected infrastructure investment growth in Northeast India inspired its investment decision, while it opted for a 3Mt/yr kiln over a 2Mt/yr alternative due to the improved efficiencies it offers.


India: State-owned coal supplier Coal India has recorded a 17% year-on-year decline in deliveries of coal to cement plants in May 2022. Its coal supply to captive power plants also dropped in the month, by 40% year-on-year.

Coal India is the leading coal mining company globally. Its main customers are energy, cement and steel companies.


Philippines: The Philippines imported 6.47Mt of cement from Vietnam in 2021, 91% of a total 7.11Mt of cement imported in the year. The Cement Manufacturers Association of the Philippines (CeMAP) recorded that total imports increased by 14% year-on-year from 6.25Mt of cement in 2020, while imports from Vietnam increased by 20% year-on-year from 5.4Mt.

The Manila Bulletin newspaper has reported that Philippine cement producers increased their production capacity by 23% year-on-year to 35.3Mt/yr at the beginning of 2022. CeMAP projected further capacity growth of 55% to 54.8Mt/yr by the end of 2025, against a domestic demand that year of 66Mt/yr.


Germany: Fuchs Lubritech has merged into Fuchs Schmierstoffe. Following the merger, the latter also rebranded as Fuchs Lubricants Germany on 3 June 2022. Fuchs Lubricants Germany will assume all contractual responsibilities of Fuchs Lubritech.