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Building a better Lafarge
Written by Global Cement staff
19 June 2013
Lafarge's decision to expand in Zimbabwe adds to the mix in sub-Saharan Africa.
As we discussed in Global Cement Weekly #104, Dangote and PPC (formerly Pretoria Portland Cement) may be facing off as the biggest local cement producers in the region but the influence of the European-based producers should not be dismissed too readily. Investing US$200m over the next 10 years matches PPC's similarly sized investment announced in November 2012. According to Lafarge, the spend will help maintain the cement producer's market share in the country.
The other point of note from Lafarge's Zimbabwe announcement is the emphasis on the multinational's 'Building Better Cities' campaign in the story. This is unsurprising given that that Lafarge Zimbabwe Managing Director Jonathan Shoniwa made the comments about Lafarge Zimbabwe at a branding event for the campaign. Similar events are happening around the world. However, looked at overall, the decision to place cities at the heart of its marketing makes an increasingly compelling case for a variety of markets.
Some commenters on the Global Cement LinkedIn Group discussed this very issue recently in response to a news story on Lafarge's next set of expansion plans for China. Specifically, someone asked why would Lafarge want to expand in a market suffering from overcapacity!
The Building Better Cities campaign offers one answer. As China prepares to shut down excess capacity, Lafarge's strategy to be in place once the dust settles (perhaps literally in some places) starts to make sense. As a marketing tagline 'building better cities' works well because who doesn't – from Zimbabwe to China to even France – want better cities with better transport links through price, planning, technical and aesthetic innovations.
To give a sense of the environmental zeitgeist happening in China right now, this week we carry a news story on the Chinese Institute of Public and Environmental Affairs reporting 17 Chinese cement companies for environmental misdemeanours. Elsewhere, we can see evidence of continued foreign enthusiasm for investment in the Chinese cement market from Japan's Sumitomo Osaka Cement, despite fears of overcapacity. Lafarge is saying the right things at the right time but it may not be alone in its strategy.
China: 17 cement companies have been found to regularly violate environmental protection laws by illegally discharging airborne pollutants, according to a report led by the Institute of Public and Environmental Affairs (IPEA). The report, conducted by the IPEA with several independent institutes and environmental non-government agencies (NGO), also accused the companies of failing to disclose environmental information as required.
The 17 cement companies have about 170 recorded environmental violations between them. Violations listed in the records include the lack of denitrification facilities, faulty monitoring appliances and excessive emissions.
"The State Council recently released 10 measures to control airborne pollution and achieve energy and emissions reductions. The extremely energy-intensive cement, steel and thermal energy production industries, especially those leading listed companies, need to share the heavy responsibility of reducing emissions and not disappoint the public," said Ma Jun, director of the IPEA.
The cement industry is among the six most heavily polluting industries that were required by the Environmental Protection Ministry to meet international emission limits from March 2013. Dust emissions from the cement industry accounted for about 30% of total industrial emissions in 2009.
"We found that this industry has shocking problems with dust and waste gas emissions. The cement industry's violations have deeply harmed the living environment and health of those who live near the factories," said Fang Yingjun from environmental NGO Green Jiangnan.
The environmental NGOs said that they have contacted the 17 listed companies to inform them of the aforementioned pollution problems, but most of the alleged offenders took an evasive stance.
Sumitomo Osaka Cement ups cement production in China 19 June 2013
China: Sumitomo Osaka Cement intends to increase cement production by 80% in China's Yunnan Province by 2016. The Japanese cement producer has been making cement in Yunnan Province since 2007 in partnership with a local steelmaker and a Hong Kong construction materials company. That operation involves four plants, each run by a separate joint-venture firm.
With infrastructure investment still active in Yunnan, the plan is to build two more cement plants with a combined production capacity of 6.4Mt/yr. This will make the operation the province's largest, with a capacity of 14.6Mt/yr.
The first new plant will be built in December 2014 and the second in 2016. Sumitomo Osaka Cement will invest around US$42m for its share of the project.
Rumours that Votorantim will halt IPO 19 June 2013
Brazil: Votorantim Cimentos, Brazil's largest cement producer, and its shareholders have cancelled a US$4.8bn initial public offering (IPO) that had been scheduled, according to a report from Reuters. Controlling shareholder Votorantim Participações was unwilling to sell its stock of Votorantim Cimentos below the suggested price range of US$7.34-8.71, according to a source reported by Reuters.
The news-wire service also reported that a second source had said that potential investors would take part in the IPO provided that shares offered a 'large discount' when viewed against the US$7.31/share price at the bottom of the potential price range. Any such discount would value Votorantim significantly below its rivals in the Brazilian cement market. Votorantim Cimentos has not confirmed the suspension of the IPO plan.
Austrian cement industry hit by pressure on prices 19 June 2013
Austria: Price pressure is becoming an ever-greater problem for the cement industry in Austria, according to the head of an industry group.
"In 2012 the volume of sales remained the same, but revenues dropped substantially", the chairman of the management of the Association of Austrian Cement Industry (VÖZ), Rudolf Zrost, said on Tuesday.
Cement sales in 2012 remained almost unchanged at 4.46Mt, compared to 4.43Mt in 2011. However, revenues slumped by 4.7% to Euro375m.