Global Cement News

Belarus: The Belarusian Cement Company increased its exports of cement by 42.6% year-on-year to 1.4Mt/yr in 2017. The exported cement had a value of US$682.m, according to the Belarusian Telegraph Agency. The company has attributed the rise on an efficiency drive that it says has reduced the cost of production by 50%. The company mainly exports to the Commonwealth of Independent States region but it has started selling its product in parts of the European Union, including Poland and Latvia. It plans to increases its exports by 4% in 2018, partly by introducing 35kg bags.

Ukraine: Cement production rose by 2.3% year-on-year to 9.3Mt in 2017. In 2016 it rose by 7.1% to 9.1Mt, according to the Ukrainian News Agency. Despite the growth in 2017 production fell slightly in December 2017. 15 companies produce cement in the country with a total production capacity of 25Mt/yr.

Spain: LafargeHolcim’s subsidiary Holcim España invested over Euro2m in its cement plant at Jerez during 2017. The work included environmental improvements, changes to the despatch areas and health and safety upgrades such as fire detection systems in its fuels storage zones. The plant also introduced a sulphate-resistant cement product (CEM IV/A (V) 42,5 R/SR) in May 2017 targeted for marine applications.

Italy: Legal firm Eversheds Sutherland has suspended a Euro1.8m fine imposed by the Italian Competition Authority on Calme. Fines were made to a number of Italian cement producers in August 2017, according to the Il Sole 24 Ore newspaper. They were in relation to allegations of price fixing and market share coordination between 2011 and 2016.

Asia Cement has completed its purchase of Halla Cement this week for US$723m. The deal has created the third largest cement producer in South Korea with a cement production capacity. This includes one integrated plant at Okgye, three slag grinding plants and a distribution network.

Graph 1: Cement producers in South Korea by cement production data from 2016. Chart includes mergers in 2017 and 2018 to represent current market share. Source: Korea Cement Association.

The Halla Cement transaction marks an on-going consolidation process in the local industry. 2017 proved a busy year with the purchase of Daehan Cement by Ssang Yong Cement and Hyundai Cement by Hanil Cement. Assuming the dust has settled this now leaves Ssang Yong Cement and its new subsidiary in the lead by cement production data from 2016 with 12.9Mt or a 23% market share, Hanil Cement next with 12.4Mt or a 22% share and Asia Cement with 10.8Mt or a 19% share. Overall the country produced 56.7Mt of cement in 2016, according to Korea Cement Association data. The remainder of production is shared between six producers.

Fears that the construction industry may have been about to slow down might have prompted Glenwood Private Equity and Baring Private Equity Asia to sell Halla Cement a little earlier than expected. However, they don’t appear to have done too badly out of this. The two private equity firms that bought Halla Cement from LafargeHolcim in 2016 seem to have made a cool US$180m on the deal. At the time it was reported in the local press that they paid US$542m for the cement producer. Glenwood Private Equity was the lead investor followed by Baring Private Equity Asia. They bought Lafarge Halla Cement in May 2016 and then were looking for buyers a year later in August 2017.

Cement consumption in South Korea has followed a rollercoaster path since 1992 hitting a high of 61.7Mt in 1997 and a low of 43.7Mt in 2014. It then rose to 55.8Mt in 2016. The consolidation behaviour by the cement producers suggests either a poor performing market or an uncertain one. Since the gap between the peak and the trough is more than Halla Cement’s production capacity no wonder its private equity owners were keen to get shot of it at the first sign of trouble. So let’s end with the words of Han Chul Kim, Managing Director of Baring Asia, from the time of the purchase from LafargeHolcim in 2016: "We couldn’t imagine a more solid platform from which to access the growth opportunities in the Korean market in the coming years.”