Global Cement News

China: China intends to implement strict restrictions on the increase of new cement production capacity in 2012 to deal with a capacity surplus, said Liu Ming, an official with the department of industry within the National Development and Reform Commission.

Speaking at an industrial meeting, Liu said the main task for the time being is to contain the rapid increase of capacity. Currently China faces national overcapacity during the period of 2011-2015. Liu said the government will encourage mergers and acquisitions in the national industry, and increase financial support.

China's cement output increased by 11% to 2.09Bt in 2011 with an annual capacity of 2.9Bt. Liu added that China would roughly complete its task of phasing out out-dated capacity by the end of 2012. However, domestic producers remain optimistic about the growth of national consumption in 2012. The performance of China's cement industry will remain optimistic and annual output will reach new high with around 8% of growth, predicted Kong Xiangzhong, secretary general of the China Cement Association.

China's cement industry will see around 5% of growth in 2012 and 2013, said Cui Xingtai, chairman of the China United Cement Corporation. Cui said that the Chinese cement market will shake off its current weak performance from the second half of 2012 with the annual peak season. The decrease of cement demand in the first quarter of 2012 was directly related to the slowdown of construction projects in the railway, road and airport sectors and cement demand would have good performance in the second half, said Cui.

Philippines: Cement producers in the Philippines are raising their prices, as increases in fuel prices have not shown any sign of abating and the peak of the construction season is starting.

Trade and Industry Undersecretary for Consumer Welfare Zenaida C Maglaya said, that based on the Price Monitoring report released on Friday 23 March 2012, prices of two brands of cement Republic (Lafarge) and Rizal (Cemex) had increased. However, the price of Holcim Philippines Inc. dropped by 2.5% from February to March 2012. In June 2011 Holcim raised its prices by 6% in Luzon. The three global firms dominate the Philippine industry.

Cost of power and coal accounts for 40% of a cement company's total production expenses in the Philippines. Most of the cement firms source their coal supply from Semirara Coal Corp. Construction activities are higher during the summer months, normally starting early in the year and peaking in May.

Construction activity was fuelled by private sector spending in 2011, as the government did not spend much on infrastructure projects. However the Aquino administration has started accelerating investments and implementation of major infrastructure projects in 2012. Both infrastructure and private sector investments in property developments, including housing and commercial establishments, are expected to boost demand for construction materials, including cement.

It's official: the big boys are heading to India this week.

First Lafarge head Bruno Lafont announced broad expansion plans in the subcontinent. Then a Holcim presentation emerged from earlier in 2012 projecting that the company expects India's overall construction market to take the global third position after China and the US by 2020.

With the Indian construction share set to rise from US$360bn in 2010 to US$840bn in 2020 that's one massive market share up for grabs. Throw in some interpretation from India's 2011 census and the signs are that its population could overtake China's by 2030. Sounds like an absolutely perfect opportunity for your average embattled European cement corporation!

Except that there's no such thing as a sure bet. As we covered previously, Indian cement consumption fell for the first time in 20 years in August 2011. The cause was put down to political problems holding up infrastructure in key states. In March 2012 we've had two stories that have impacted upon the local industry. First the Railway Board of India hiked the freight rates by 24%. Then the Union Budget for 2012-13 increased the excise and service tax. Clearly everybody wants a piece of the 'inevitable' bonanza. If anything impedes India's growth in the next decade there may be bargains going for cement on the export market.

Elsewhere this week we have stories on the potential cost of a proposed air pollution ruling upon two plants in the US state of Montana, more information on a revival in the Gulf Cooperation Council region and more capacity growth in Indonesia.

Denmark: Carsten R Lund will be appointed new Group Executive Vice President of FLSmidth and a member of the Group Executive Management in July 2012. He will replace Christian Jepsen, who will be joining Alcoa, one of FLSmidth's global mining customers. Lund will be heading the new global Bulk Materials Division that was formed as part of the new FLSmidth Group structure announced in February 2012.

Lund, age 49, is a Danish citizen, Executive MBA and Mechanical Engineer (BSc.), who has been employed by the FLSmidth Group for 24 years in varying managerial positions. Most recently, Lund has headed the implementation of a major business system program for the entire FLSmidth group as program director. Prior to that, he was CEO of FLSmidth Airtech from 2007-2011 and responsible for growing and developing FLSmidth's Air Pollution Control business to become a major global player.

China: Analysts expect the profitability of China's leading cement producers to weaken in 2012 due to slowing demand and falling prices.

SWS Research analyst Ye Rong expects the earnings of China's second-biggest cement producer, Anhui Conch Cement, to plummet by half in the first quarter, because the Yangtze River Delta, where most of Anhui Conch's sales are based, has seen cement price drops of 5% to 20% since the Lunar New Year, on 23 January 2012. Citic Securities forecasts the Hong Kong-listed firm's net profit will drop by 40% in the first quarter.

The net profit of Anhui Conch soared by 88.1% to US$1.84bn in 2011, while revenue surged by 41% to US$7.71bn. The state-owned enterprise's results for 2011 were in line with market expectations, wrote Luo Yang in a Nomura report. However, Anhui Conch's profit margin was likely to deteriorate in 2012, due to downward pressure on selling prices, rising costs and decelerating productivity, Luo wrote. "Under severe overcapacity, the company is subject to higher price risk in comparison with most of its peers."

Anhui Conch chairman Guo Wensan said the industry would face unfavourable factors in 2012, such as a slowdown in investment growth, regulation of the real-estate sector and rising energy prices. Anhui Conch plans a capital expenditure of US$1.27bn in 2012 less than the US$1.44bn in 2011.

In an exception to this trend, mainland China's biggest cement producer, China National Building Materials, announced it expected net profit to jump more than 100% from 2011. However, JP Morgan expects prices and profit per tonne for most mainland cement producers in 2012 to be up to 10% lower than 2011, and has trimmed its earning estimates for most listed cement companies. The growth in the mainland's cement consumption would be 5% to 8% in 2012, against 11% in 2011, the China Cement Association said.

The net profit of China National Materials (Sinoma) rose by 32.78% to US$231m in 2011, while turnover grew by 14% to US$8.04bn. The Hong Kong-listed firm's cement sales surged by 40% to US$3.21bn in 2011, while sales of its hi-tech materials increased by 7.7% to US$981m and its cement equipment business dipped by 0.1% to US$3.85bn.

Sinoma's net profit in 2011 was 10% below market consensus and 11% below Nomura's estimate. This was mainly due to much lower top-line growth and a disappointing margin performance. The state-owned firm's biggest business sector, cement equipment, suffered a small drop in 2011, because China's fixed-asset investment in cement fell by 8.3% in 2011, Luo wrote. "We expect it to further decrease by 15% in 2012." Sinoma's cement prices were under significant downward pressure, especially in Xinjiang province, due to worsening overcapacity, Luo warned.