Global Cement News

Ireland: The chief executive of Ecocem, which has 'green' cement plants in Ireland, France and the Netherlands, has called for an 80% windfall tax on cement manufacturers in Ireland, which are currently making profits from the EU Emissions Trading Scheme (ETS). Donal O'Riain says that the Irish cement sector has lost 75% of the demand seen during the boom years of the mid-2000s and that 'anomalies' between its current output and the ETS mean that the Irish economy is losing out.

It is thought that the over-allocation of carbon credits, which now far exceed production requirements, have cost the Irish exchequer Euro120m since 2005 and could cost double that in the seven years to 2020. The Irish cement industry currently gets tens of millions of Euros every year in 'profits' as a result of the scheme.

Previously, the Irish Department of Finance increased the tax on profits from the sale of the credits, from 12.5% to 30%, by ruling that they have to be taxed as a capital gain rather than at the corporation tax rate. O'Riain said they should be taxed at up to 80%. He said that a system that was designed to encourage cement producers to reduce their CO2 emissions was instead incentivising them to produce CO2 at the public's expense.

O'Riain has called on the Irish government, while it holds the European presidency, to change the rules governing the ETS system. He said one of the effects of the way the system operated was to subsidise those plants using environmentally unfriendly practices. "Every 1t of polluting cement in Ireland is sold with a taxpayer subsidy of 17% of the selling price," said O'Riain.

Brazil: The French building materials giant Lafarge has announced a US$500m investment plan in Brazil. On 11 January 2013 Bruno Lafont, group CEO, announced the five year investment in a civil construction research centre in the country at a meeting with the Brazilian President Dilma Rousseff. The move follows a number of asset sales by the group.

The Brazilian research centre will be the group's fifth outside France. The others are in the Netherlands, China, Algeria and India. In the past five years Lafarge has invested US$1bn in Brazil.

Nigeria: The people of Benue State have protested against the continued closure of Dangote Cement's Gboko plant. The plant has been temporary shut down as a result of an alleged cement 'glut,' which cement producers say is being caused by massive cement imports.

A statement from Dangote Group said that the chairman, Gboko Local Government, Nahan Zinda decried the continued closure of the Dangote plant, saying that his local government is losing vast sums of revenue and that the closure was having knock-on effects in other areas of the economy, including trading stalls outside the factory. Zinda called on the federal government to expedite action by doing all it takes for the factory to reopen.

"Since the company was closed, cement prices have risen," said Zinda. "Our people have been jobless and suffering. It may also lead to anti-social behaviours. Our women, who have petty businesses outside the gate, are also complaining bitterly," he said.

Grace John, who spoke on behalf of women traders in Gboko, said that social and commercial activities have virtually come to a halt and that life was becoming difficult. She appealed for the quick reopening of the plant in the interest of women traders.

Benue State Commissioner of Finance Conrad Werbga said, "Importation impacts negatively on the economy. It causes lots of ripples. It comes with attendant negative consequences for our nation. The federal government must do all it could to reverse the trend."

All parties will be keen to keep disruption caused by the plant closure to a minimum. On 17 August 2011, a dispute between a trader and cement plant worker rapidly escalated to a full-scale riot, with 20 deaths and widespread looting in Gboko.

Vietnam: Vietnam's cement sales in 2012 reportedly fell by 3.5% to 54Mt due to low demand in the domestic market, according to the Vietnam Cement Association (VNCA). The country's cement sales in its domestic market fell by 7.71% year-on-year to 45.5Mt. Cement and clinker exports rose by 30% to 8.5Mt.

In 2012 local cement makers faced many difficulties such as large inventories and low domestic demand created by a static real estate market. High production costs, high lending interest rates and high input costs for materials such as fuel, power and coal all adversely affected local cement producers. Cement and clinker exports have also been disrupted due to some firms 'unfairly' cutting their export prices.

For 2013 the VNCA has predicted that local cement producers will continue to face difficulties. However the government has approved spending of US$480m on new rural constructions and will encourage the use of local cement for transportation infrastructure projects. Vietnam's domestic cement sales are predicted to rise by 5-8% year-on-year to 48-49Mt in 2013, equal to the total sales seen in 2011.

Deputy Minister of Construction Nguyen Tran Nam said that the local cement sector must focus on dealing with three main problems: export promotion, production cost reduction and enterprise restructure. He also called on local cement companies to cooperate on exports instead of undercutting each other.

Nigeria's Minister of Trade and Investment, Olusegun Aganga brought together warring parties from Dangote and Ibeto Cement this week to discuss their very public spat about the state of the country's cement industry.

Claims that Nigeria is facing a 'glut' of cement have been building since the Cement Manufacturing Association of Nigeria (CMAN) declared that Nigeria was 'self-sufficient' in cement in late 2012. So when leading cement importer Ibeto Cement questioned this narrative, leading cement producers Dangote and Lafarge hit back. Aganga then announced a review of the country's industry.

Despite Nigeria's potential to consume cement, something is stopping it. Yet, as Ibeto Cement rightly asked, if Nigeria is producing too much cement why isn't the price falling?

Hard facts about the Nigerian cement industry are elusive. This is what we know. Nigeria's population is apparently 170m. Its cement industry has the capacity to produce 28Mt/yr (Global Cement Directory 2013). Its production level was 18.5Mt/yr in 2012 according to CMAN. However figures compiled by the United States Geological Survey placed production much lower at 11.6Mt in 2011. Consumption is believed to be 17-20Mt/yr. In 2011 it was 17Mt. Ibete Cement, the sole importer into the country, is allowed to import up to 1.5Mt/yr.

Nigeria's main producers include Dangote (19Mt/yr capacity, 70% of the market), Lafarge WAPCO (4.6Mt/yr, 17%), Unicem (2.5Mt/yr, 9%) and Ashaka Cement (2Mt/yr, 7%).

Hype about Nigeria's potential as a cement-producing nation hinges upon its low per capita consumption (110kg) compared to some of its African neighbours and indicators of expected growth such as a housing deficit of 16 million homes.

CMAN boss Joseph Makoju addressed this head-on, blaming the high cost of haulage and energy. He said that the energy cost accounts for over 35% of the production cost and that the price of low pour fuel oil (LPFO) had risen by over 300% from US$0.16/l in 2009 to US$0.69/l in November 2012. It should be pointed out that Makoju is also the special adviser to the president of Dangote Group, Aliko Dangote. Unsurprisingly he has advised the Federal Government to impose higher taxes on imported cement to discourage imports.

The production boom of recent years has been threatened by a weakening increase in demand. The gap between production and lower consumption estimates is around 1.5Mt. Dangote and Lafarge WAPCO's combined unsold stock at the end of 2012 was also just below 1.5Mt. Both figures are suspiciously close to the amount Ibeto is allowed to import annually. As usual, the easiest target is the cement importer. Dangote's political clout as a key Nigerian company, large-scale employer and all round African success-story will doubtless help its argument.

Yet if imports are really more competitive than Nigeria's domestic product how can the country possibly hope to export cement? Also this week Liberia announced it has relaxed its tariffs on cement. As luck would have it Dangote is building a new cement plant in the country. Sounds ideal for tricky import negotiations.