Global Cement News

Ireland: Quinn Building Products and Lagan Cement Group have signed a memorandum of understanding that could lead to a joint venture (JV) between the two groups.

The businesses, which will become part of the proposed JV, are the combined cement and building products businesses based in Ballyconnell, Derrylin, Kinnegad, Belfast, Cork and Benelux. Quinn Therm, Quinn Litepac, Quinn Tarmac and Lagan Sand are not included in this proposal.

Commenting on the proposed JV, the CEO of Quinn Manufacturing Group, Paul O'Brien, and the CEO of Lagan Cement Group, Jude Lagan, said, "By combining two stable Irish businesses the proposed JV will create a sustainable independent cement manufacturer that can continue to support its customers on a competitive basis."

The joint venture discussions are likely to take up to three months to complete and will involve the development of a business plan to combine the Quinn/Lagan cement and building products operations.

"While it is the intention of both parties to conclude a JV Agreement, no certainty can be assumed prior to the completion of these discussions and the relevant Competition Authority approvals," said a joint statement.

In a separate development, Quinn Manufacturing has also announced a Euro15m investment to upgrade its Ballyconnell cement plant, which, when completed, will facilitate the use of alternative fuels. The plant will be adapted to use solid recovered fuel (SRF), a move that will help to bring Quinn Cement's cost of production more into line with its Irish and European competitors.

For the last Global Cement Weekly of 2012 we look at the big stories in the cement industry from over the last year. As usual we'll be posting this in our LinkedIn group. Given the scope we're bound to have missed some themes – for example we haven't mentioned the continued growth in Indonesia - so let us know your additions, comments and responses.

Bad news from Europe
With stories this week of layoffs at Italcementi and Oficemen confirming that Spanish cement consumption has fallen by a third in 2012, our first theme of the year has been the continued decline of the western European cement industry. Given that no western European countries even made the top 10 list of cement producing countries in 2011, readers might be forgiven for asking why this is news. The reason is because many of the multinational cement producers are still based in Europe. Although fears of financial meltdown following a Greek exit from the European Monetary Union have receded, Titan's crashing profits still present a stark warning.

Multinational debt reduction
This leads us to the next point: several of the global cement majors have been pursuing aggressive debt reduction schemes over the last year. Holcim's 'Leadership Journey' saw it announce cost-cutting measures designed to save Euro99m this week. This is part of an overall series of personnel changes to save at least Euro1.25bn by 2014. Lafarge has sold plants in the United States and the UK whilst cutting its debts. How much longer will these schemes go on for?

Recovery in the Americas
Across the Atlantic in the Americas the cement industry has been quietly growing in confidence in 2013. In the United States a forecast from the Portland Cement Association (PCA) expects a 7.5% rise in cement consumption in 2012. Brazil's Camargo Corrêa acquired the controlling stake in Portugal's Cimpor over the summer, with Votorantim picking up Cimpor's overseas assets as part of the deal. As a whole demand for cement in Brazil rose by 8.5% in the first eight months of 2012.

Yet hurdles still remain for the US industry. The US Fiscal Cliff now seems unlikely to wreck the recovering US economy but EPA regulations may still stall the US cement industry. The weakened maximum achievable control technology (MACT) standards for air toxics emissions were received at the White House Office of Management and Budget earlier in December 2012 for pre-publication review. If there are any surprises here US producers need only look at Australia for what might happen next, where carbon legislation may be crippling the industry.

Managing the African boom
After all the gloom above at least Africa's growth remains spectacular, particularly as east Africa continues to develop. Here the challenges have been more about fighting off the competition. On the east coast of the continent this has meant coping with cheap exports from Pakistan and Vietnam flooding the market, Currently poor infrastructure links are preventing the exports reaching much beyond the immediate coast. With Nigeria declaring itself 'self-sufficient' in cement in October 2012 and Dangote planning to shut a plant, infrastructure building and intra-continental exports seem set to rise massively. Fortunes will be made and lost in the business melee.

Mixed demand in the Middle East
Saudi Arabia's decision to lift its import ban in March 2012 indicate that the Middle East's biggest player demands significant amounts of cement. Yet across the border the United Arab Emirates is massively overproducing which in turn is wrecking the industry in Oman. Egypt remains riddled by industrial disputes that have reduced production by 50%. Iran continues to promote its growing production capacity but the international economic sanctions enforced upon the country can only lead to overcapacity.

Where next for India and China?
This leaves the world's biggest cement producing nations: India and China. India's promise remains immense yet so too does speculation regarding its growth. Indian capacity utilisation looks set to stick at 76% in 2012. UltraTech nearly doubled its profit in the second quarter of the 2012 fiscal year and many projects have been announced in recent months, yet India's power grid collapse over the summer is just one of many endemic problems facing the industry.

China remains the world's biggest producer of cement by a gargantuan margin but halfway through the year profits from Chinese cement producers took a nasty knock. Since then it's got worse. Chinese officials have spent the year stating publicly that their country is producing too much cement.

Whilst it's hard to tell what will happen next, China's state-owned approach to capitalism could allow positive change to the industry on a massive scale, from even more infrastructure spending to further tightening of environmental regulations. Or it could just carry on as before as the risk of a 'hard' economic landing looms. One consequence might be Vietnam-style overcapacity creating mass exports forced through by China's global political power. Nowhere would be safe!

Global Cement Weekly will return in 2013

Oman: Mohammed Ahmed Al Dheeb has agreed to go back on his resignation and continue working for Raysut Cement Company as the Group CEO following an unanimous decision by the company's board of directors to ask him to remain in his position.

India: PC Abraham has been appointed as the managing director of Loesche India. He took the post at the start of October 2012.

Abraham joined Loesche India in 1995 and has been working as executive director of the technical department. Under his leadership, Loesche India established a technical field service department. He was also responsible growth in the after sales business of the company.

Vietnam: Vietnam's Finance Ministry has announced that it will spend US$30-40m/yr on settling foreign debts for local cement producers until 2018. State-owned producers Dong Banh, Thai Nguyen, Tam Diep and Hoang Mai all receive preferential interest rates for domestic loans and guarantees for foreign loans. The total debt of these four projects is US$229m.

According to the ministry's recent report to the prime minister, the total amount of government-guaranteed loans reached US$1.37bn in 2011. Hoang Mai and Tam Diep have been given capital to pay back their loans. However, Tam Diep has had difficulties paying back its debts. Dong Banh and Thai Nguyen, which have been advanced capital for their first period of payment, still have troubles dealing with their foreign debt.

The Dong Banh cement plant, which has a total investment of US$61.4m, was forced to close in the first quarter of 2012 after two years in operation and a loss of US$9.44m. By 2018 the plant's debts with interest could reach US$28.8m. The Thai Nguyen cement plant suffered a loss of US$3.69m after one year and was still running at below 60% of its capacity. It must operate from 80% capacity to earn a profit. As of March 2012 Ha Long cement plant had incurred debts of about US$58.3m. Although the company borrowed US$96m to pay its debts, the company's liabilities for the period of 2012-15 still amounted to US$57.5m.

According to the Vietnam National Cement Association, local cement makers are predicted to continue facing a lot of difficulties as the real estate market remained gloomy with few signs for recovery. Exports are not seen as an effective solution to the problem as local cement producers cannot lower prices of their products any more to compete with foreign rivals. Analysts predict that a cement surplus will persist if the government does not take drastic measures including a demand stimulus and a review of current cement projects.