Global Cement News

Kenya: Bamburi Cement has appointed three women to its board of directors. Alice Owuor, Rita Kavashe and Hellen Gichohi have been appointed to the board, according to the Business Daily newspaper. Two female directors Sheila M’Mbijjewe and Catherine Langreney, resigned from the board in 2016 leaving it with an all-male composition and no female representation.

Owuor was the former Kenya Revenue Authority Commissioner for Domestic Taxes until she retired in 2016. Kavashe has been the chief executive of General Motors East Africa since 2011 and has worked for the motor vehicle dealer for more than two decades.

Gichohi is the managing director of the Equity Bank’s social arm, the Equity Group Foundation. She joined the Equity Group Foundation in 2012 from the African Wildlife Foundation (AWF) where she served for 11 years from 2001, as the President from 2007, Vice President from 2002 and Director of the Conservation Program from 2001 when she joined AWF. She holds a PhD in Ecology from the University of Leicester in the UK, a Master of Science degree in Biology of Conservation, and a BSc in Zoology from the University of Nairobi and Kenyatta University respectively.

South Africa: AfriSam is preparing to replace its chief executive officer (CEO) to aid its merger discussions with PPC. Rob Wessels, a former chief investment officer at AfriSam’s black empowerment partner Phembani Group, is set to replace current Stephan Olivier on a short-term contract, according to sources quoted by Boomberg. The personnel manoeuvring would also potentially place PPC’s current CEO Darryll Castle in a strong position to become the merged company’s new leader. PPC and AfriSam announced that they had resumed merger talks in February 2017 after a previous attempt stalled in 2015.

The Global Cement Weekly column of 22 February 2017 entitled ‘European Union (very) slowly tightens the screws on its Emissions Trading Scheme,’¹ bears witness to the misconception that we must choose between protecting the cement industry OR the climate. Quite the opposite is true: the objective is the cohesion between economic prosperity, meeting cement market demand AND lowering CO₂ emissions.

It is undisputed that, if climate protection is aspired to, there needs to be an adequate regulatory incentive that supports, perhaps even strengthens, industry’s profitability when companies act to lower their CO₂ emission. Some companies have tried selling low CO₂-cement at a price premium, marketing their lower embedded carbon. In a commodity market of a grey powder where low prices are a decisive purchasing point, this obviously doesn’t fly.

The only sustainable business incentive is to pass on the full cost of CO₂ not only in production but also in consumption of products. This would effectively result in higher cement sales prices for high-CO₂ cement and lower prices but higher margins for low-CO₂ cement, without losing competitiveness to producers that do not face regulatory CO₂ constraints. Hence, a win-win-win situation for low carbon cement producers, consumers and the environment. This is after all the purpose of the sectoral ETS mechanism with inclusion of importers and no free allowance allocation.

The studies undertaken by Boston Consulting Group (BCG) for CEMBUREAU simulated the potential gross margin for the domestic cement industry in case of different leakage prevention mechanisms. While this may sound shocking for some, there is nothing wrong with aiming at maximisation of gross margin. Quite the opposite, gross margin maximisation is absolutely necessary for the cohesion between economic prosperity and climate protection and the effectiveness of an ETS.

The BCG studies led to the conclusion that in case of a tightening CO₂ allowance cap and under certain market conditions the importers’ inclusion mechanism can yield the best margin for the industry. Since however, as the Global Cement Weekly column mentions, the EU only very slowly tightens the screws on the supply of emission allowances, there will be sufficient free allocation for industry and there remains little need to lower emissions and thus little need for an importers’ inclusion mechanism.

CEMBUREAU called into doubt the representativeness of the technology penetration reported by the Cement Sustainability Initiative’s Getting the Numbers Right database. It is a well-established fact that the penetration of modern preheater precalciner kilns in most emerging countries is higher than in Europe, because the industry is younger outside of Europe and hence most installations have been built with more recent, more energy-efficient technology. Besides the CSI database, cement CO₂ inventories exist for about 10 emerging countries. They all confirm the same.

Beyond the comparison with other regions however, an emissions trading system that after 12 years still enables one fifth of production being made using the most energy-intensive technologies objectively misses its purpose.

Despite consuming up to 50% more energy than the Best Available Technology, such installations can survive thanks to free allocation and the revenues from waste derived fuels. The industry legitimately highlights the environmental benefits of using waste as a fuel. However, it is questionable whether keeping energy-intensive installations alive thanks to cheap energy from waste is consistent with this environmental narrative.

The proposed changes to the EU ETS will not improve its effectiveness for the cement industry. Quite the opposite, it will make it even less effective because the introduction of a dynamic allocation based on a clinker benchmark completely nullifies the need for the industry to lower the clinker content in cement.

CEMBUREAU indeed has the right to protect the industry it represents, but is probably short sighted and ill informed when it does so to the detriment of society’s necessity to mitigate climate change. The rejection of the importers’ inclusion mechanism is a missed opportunity for the European Union to make the ETS effective and for the cement industry to maintain its competitiveness in a carbon constrained world.

Eric Olsen, CEO of LafargeHolcim, the largest global cement company, and chairman of the Cement Sustainability Initiative, has called for a meaningful and increasing carbon price that can be passed through the whole product value chain and for trade policy to be included in the ETS.²

Lakshmi Mittal, Chairman of ArcelorMittal, the largest global steel company, has also called for a border adjustment measure and inclusion of consumption in climate policies.³ High quality research by leading economists exists on this topic.⁴ Now that the reform of the EU ETS enters the trilogue negotiation between European Council, Commission and Parliament, these industry leaders should step forward with a concrete and workable solution to combine industrial, trade and climate policies by 2020.

1. http://www.globalcement.com/news/item/5836-european-union-very-slowly-tightens-the-screws-on-its-emissions-trading-scheme
2. WEF, Davos: https://www.youtube.com/watch?v=O_mhqcNR0uA
3. Financial Times: https://www.ft.com/content/8341b644-ef95-11e6-ba01-119a44939bb6
4. Climate Strategies, UK: http://climatestrategies.org/?s=consumption

Sri Lanka: Nandana Ekanayake has been appointed as the chief executive officer of Siam City Cement Lanka. Previously Ekanayake was the Finance Director at Holcim Vietnam and was the Vice President of Holcim Lanka, according to the Daily News newspaper. Thailand’s Siam City Cement purchased Holcim Lanka in mid-2016.

China: China Pioneer Cement, the sole shareholder of Shandong Shanshui Cement, has removed Li Maohuan, Yu Yuchuan, Zhao Liping and Chen Zhongsheng as directors of Shandong Shanshui. In their place Liu Yiu Keung, Stephen, Yen Ching Wai, Chong Cha Hwa and Liu Dequan have been appointed as directors.