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Predicting the future of cement markets
Written by David Perilli, Global Cement
14 December 2016
This week the US Portland Cement Association (PCA) revised down its forecast for the rise in cement consumption in 2016 to 2.7% from 4%. It also lowered its prediction for 2017, blaming political uncertainty around the presidential election, inflation and slower construction activity. Global Cement Magazine editorial director Robert McCaffrey pointed out on LinkedIn that he was surprised by the revision down in 2017 given the rhetoric by president-elect Donald Trump to invest in large infrastructure projects.
Clearly the PCA is playing it cautious as a politically unknown entity, Trump, slides from campaign trail promises to executive power delivery. Backing them up are the latest figures from the United States Geological Survey (USGS) that show that both cement production and shipments fell slightly in the third quarter of 2016. In the quarter before the election in November 2016 the cement market slowed down. The hard bit is working out why. As we pointed out in a review of the US cement industry in the May 2016 issue of Global Cement Magazine the PCA had previously downgraded its forecast in 2016 due to economic uncertainty despite strong fundamentals for the construction industry. Then, as now, the great hope for the US cement industry was infrastructure spending down the pipeline, at that time the Fixing America’s Surface Transportation Act. At this point it doesn’t seem to have had much of an effect.
Industrial and economic forecasters aren’t the only ones who have a hard time of it in 2016. Political pollsters have also been caught out. Surprises came from the UK’s decision to leave the European Union and the election of Trump. Neither result was widely expected in the media. As explained above, should Trump make good on his building plans then if any cement company based its plans on a forecast dependent on a Hilary Clinton win then it may have lost money.
The power of forecasts has even greater potential effects in developing markets where the corresponding financial risks and rewards are higher. After all, why would any cement company invest tens of millions of US dollars for a cement grinding plant or hundreds of millions for an integrated plant unless there was some whiff of a return on investment?
This then leads to the problems Dangote has reportedly been having with its plant in Tanzania. Amidst a flurry of local media speculation in late November 2016 about why its Mtwara plant had a temporary production shutdown, Dangote’s country chief clarified that it was due to technical problems. It then emerged this week that Dangote’s owner Aliko Dangote met with President John Magufuli to agree a gas supply agreement to the plant. The point here being that even if the market conditions and demographics seems conducive to profit, as is the case in Tanzania, if the local government changes any incentives agreed at the planning stage then everything can change. At this point forecasts based on data become moot.
There’s a great quote from the US pollster Nate Silver that goes, “The key to making a good forecast is not in limiting yourself to quantitative information.” In terms of election campaigns run at a time of upheaval that might mean listening to people more than looking at polling data. In terms of a cement company operating in Africa that might mean fostering links with the local government to ensure no sudden policy changes catch you off-guard. And in the US that might just mean cement company analysts have to follow Donald Trump’s Twitter account.
Aumund India wins orders in conjunction with FLSmidth projects 14 December 2016
India: Aumund India has been awarded orders for 17 bucket elevators, eight silo discharge systems and one pan conveyor in connection to orders FLSmidth has received from Tamilnadu Cement, Akij Cement and Shah Cement.
Aumund India will deliver one type BW-ZL bucket elevator, one type BWG belt bucket elevator and three type BWG-GK belt bucket elevators instead of the conventional Aumund type BWZ bucket elevator for the Akij Cement project. For the Tamilnadu Cement project FLSmidth had specific design criteria and wanted a certain safety factor for the chain. So Aumund India provided an optimised solution, which met these specific criteria. It will deliver two type BW-ZL bucket elevators, eight type BWG bucket elevators, eight type SDI silo discharge systems and one type KZB deep drawn pan conveyor. For the Shah Cement project Aumund India will deliver two type BWZ bucket elevators.
CBMI Construction wins two contracts with LafargeHolcim for grinding plants in Uganda and Kenya 14 December 2016
Kenya/Uganda: CBMI Construction has signed two contracts with LafargeHolcim in Kampala for cement grinding plant projects in Uganda and Kenya. Bamburi Cement, LafargeHolcim’s subsidiary in Kenya, has ordered a 1Mt/yr grinding plant from CBMI. The plant will be located in Nairobi. Hima Cement, a joint venture LafargeHolcim is part of in Uganda, has ordered a 0.8Mt/yr grinding plant. It will be located in Tororo in the east of the country.
The scope of the projects covers clinker feeding to cement packing and shipping. These contracts will come into force after being signed, receiving of guarantees and CBMI’s receiving advance payments. Contract periods are 17.5 months after contracts coming into force to complete industrial tests, and 19 months to commissioning.
Attendees of the signing ceremony included the CEO of Bamburi Cement Bruno Pescheux, the CEO of Hima Cement Daniel Pettersson and the Regional Manager of CBMI Li Ming.
European Bank for Reconstruction and Development grants Salonit Euro15m loan towards alternative fuels improvement 14 December 2016
Slovenia: The European Bank for Reconstruction and Development (EBRD) has awarded Salonit Anhovo (Salonit) a Euro15m loan to be used for energy and resource efficiency improvements and to restructure the company’s balance sheet. The building materials producer has a substitution rate of 64% for alternative fuels at its Anhovo cement plant. The EBRD loan will be invested to increase this ratio further to improve the company’s profitability and reduce CO2 emissions. A precondition for increasing the ratio of alternative fuels is the installation of state-of-the-art equipment. The investment will also have a beneficial effect on operational costs, which are expected to decline thanks to the adjusted fuel ratios.
Deputy general manager of Cement Corporation of India killed in car crash
Written by Global Cement staff
14 December 2016
India: Manoj Kumar Sinha, a deputy general manager of the Cement Corporation of India has died in a car crash. Sinha and three other persons were killed in an accident on the Yamuna Expressway, according to the Times of India.