CemWeek Magazine, Issue 13

CemWeek CemWee MAGAZINE

GLOBAL CEMENT INDUSTRY. KNOWLEDGE.

FEBRUARY / MARCH 2013

CemWee EGYPT CemWee CW GROUP RESEARCH ENVIRONMENTAL POLICY CHALLENGES BMWeek Global Cement Volume Outlook

CEMENT TRADE

Ayman Ismail Head OF Asec Trading

Obstacles Ahead

Cement Equipment Indices Saudi Arabia’s Golden Era

News

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Analysis

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Market Coverage

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Interviews

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People Moves

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CemWeek EDITOR'S NOTE CemWeek CemWeek CemWeek BMWeek BMWeek BMWeek MAGAZINE

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Letter from the publisher and editor

Greater Focus As we inch further into 2013, the picture of the global cement industry is coming into better focus. While the global outlook remains mixed, with several key economies limping along and searching for the path to a sustainable recovery, global demand trends upward, albeit slowly. Local and regional pockets of growth warrant optimism, as is the case in many African and Middle Eastern markets. In this issue, we highlight three of those important markets and the challenges ahead when we look at Saudi Arabia, Nigeria and Egypt.

While all cement manufacturers share common challenges within the global cement market, each local and regional market also has its own unique circumstances: factors and obstacles that can potentially shift the supply and demand of a market. CemWeek looks at one such factor in its feature, “Environmental Policies Challenge an Industry.” Three of the world’s largest economies – the U.S., EU and China – are bracing for the impact of tighter environmental guidelines. We discuss how these regulations may potentially influence the cement market in their regions.

The CemWeek Magazine is published by the CW Group (CemWeek LLC) 848 N. Rainbow Blvd., Box #1658 Las Vegas, NV 89107, USA T: +1-702-430-1748 F: +1-928-832-4762 www.cwgrp.com www.cemweek.com

CW Group staffbox CW Group

Robert Madeira

cemweek publisher head of cw group research

CW Group

Diana Heeb Bivona project editor

Paolo Dela Rosa art director

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The CW Group Research team shares its insights on how the global economic downturn has taken its toll on the cement plant equipment tracking indices, and takes a final look at cement company performance in 2012. Gloomy for most, but not for all cement majors.

Holcim and HeidelbergCement, for example, remained on an unabated trajectory of growth in cement sales.

Finally, in addition to our regularly featured departments, we feature an interview with Ayman Ismail, the head of Egypt’s Asec Trading. Mr. Ismail shares his perspective as a trader on the current state of the international cement market. He touches on trends and opportunities in international trade and the effect that increased capacity witnessed throughout the MENA region is having on the cement trade.

Claudia Stefanoiu Mihai Musatoiu Laura Goldner roxana chisop contributing writers & researchers

To subscribe or advertise, please contact us at T: +1-702-430-1748 F: +1-928-832-4762 E: sales@cwgrp.com ©2012 CemWeek LLC. All rights reserved. The contents of this publication may not be reproduced by any means, in whole or in part, without the prior written consent of the publisher.

Any submissions or contributions from readers shall be subject to and governed by CemWeek's Terms and Conditions, which are available upon request.

Robert Madeira publisher and head of research

Diana Heeb Bivona project editor

The publishers regret that they cannot accept liability for error or omissions contained in this publication, however caused. The opinions and views contained in this publication are not necessarily those of the publishers. Readers are advised to seek specialist advice before acting on information contained in this publication which is provided for general use and may not be appropriate for the reader's particular circumstances.

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CONTENTS FEATURES 10 Environmental Policies Challenge an Industry Value Engineering as a Strategic Mode 14 LEADERS COMMENT Ayman Ismail, head of Asec Trading 26 COUNTRY SNAPSHOTS Spain: Sustainability Commitment Continues 04 analysis 1H2013 Cement Volume Forecast

14 26 09 23 DEPARTMENTS Numbers in Brief 02 Cement Equipment Indices Research 24 Saudi Arabia Entering Golden Era 20 A Gloomy 2012 But Not for All Regional Focus 08 Egypt’s Economy: Challenges Ahead

Regional Reports 28 Europe, Middle East & Africa 33 South Asia 32 Asia Pacific 34 Americas From our Industry Partner 36 Building materials update Projects & People 40 Equipment & notable projects 41 People on the move

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The program will take a dual-track business and technical approach to issues around: ■ Opportunities and challenges in North and Sub-Saharan Africa ■ Investments, finance and expansion programs ■ Environmental performance and alternative fuels ■ Cement trading, logistics and handling ■ Cement fuels: coal, petcoke and energy improvements

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NUMBERS

IN BRIEF

CW Group Cement Equipment Indices:

Not out of the woods yet The global economic downturn took its toll on the cement plant equipment tracking indices monitored by CW Group in the third quarter of 2012. Expectations are that the equipment cement market continued its subdued stage in the last quarter of the year.

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Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Q4 2010

Q3 2010

Q2 2010

Q1 2010

0

Source: CW Group Research

CEMENT EQUIPMENT ORDER BACKLOG INDEX (CEOB) 120

CW Group Coal Week CemWeek BMWeek CemWeek CW Group Coal Week BMWeek CemWeek BMWeek FEBRUARY / MARCH 2013Coal Week CW Group

Q4 2012

Q3 2012

Q2 2012

Q1 2012

Q4 2011

Q3 2011

Q2 2011

Q1 2011

Q4 2010

0

Q3 2010

60

Q2 2010

The focus in 2012 was on execution excellence with the last of the pre-crisis contracts being finalized by the end of the year, a situation that may hint at a more challenging 2013.

100

Q1 2010

Cement Equipment Order Backlog Index The CW Group Cement Equipment Order Backlog index (CEOB) settled at 101.2 in the Q3 2012, declining slightly from the 110.3 level of the previous quarter. In the last quarter of the year, a preliminary estimate of the CEOB reached a comparable QoQ level versus the corresponding period of 2011 – around 92.

200

Q4 2009

Even though economic uncertainty and customer hesitancy to initiate new investments generated a slowdown in the second half of the year, the 2012 overall order intake was around 4.7 percent over 2011. Estimates indicate that the industry might have bottomed out in 2012 when only 40 million tons in global new kiln capacity (excluding China) was contracted.

CEMENT EQUIPMENT ORDER INTAKE INDEX (CEOI)

Q4 2009

Cement Equipment Order Intake Index The CW Group Cement Equipment Order Intake Index (CEOI) plummeted to a worrying 55.3 in the third quarter of 2012, which represented the second lowest level of the last three years. The minimum of the period was noted in the first quarter of 2011 when it notched only 51.8 versus the base quarter of Q4 2009. Preliminary estimates showed that CEOI shrank further in the last quarter of the year and reached 52.7.

Source: CW Group Research

The resource for global cement prices The CW Group's Global Cement Trade Price Report includes current pricing for cement delivered through the retail channel as well as import and export pricing for major markets around the world.

Worldwide monthly cement prices

■■ Major market retail prices ■■ Regional retail price indices ■■ Covers grey and white products

Regional monthly cement price indices: ■■ ■■ ■■ ■■

Mediterranean basin North America & Caribbean East & Southeast Asia And other regions

Global import and export cement prices: ■■ Major market trade flows ■■ FOB export prices ■■ CIF import prices

Global market cement prices.

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ANALYSIS

CW Group 1H2013 Global Cement Volume Forecast Report:

World ex-China cement manufacturing utilization bottoms in 2012, volume growth lowered through 2017

The CW Group nudges its 1H2013 worldwide cement volume forecast down, sees demand to rise 4.9 percent through 2017 after recovering in 2012 to 3.73 bn tons. Globally, ex-China cement manufacturing capacity utilization expected to have reached bottom in 2012 of 66.6 percent, though regional divergence remains stark.

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Per capita (kg)

Global Consumption (million tons) 800

(kg / capita)

5,000

2,500

600

0

2009

CW Group Coal Week CemWeek BMWeek CemWeek CW Group Coal Week BMWeek CemWeek BMWeek FEBRUARY / MARCH 2013Coal Week CW Group

2010

2011

2012

2013

2014

2015

2016

2017

400

Source: CW Group Research

Worldwide cement consumption expanded 4.1 percent in 2012 and passed, based on the CW Group’s preliminary estimates, 3.73 billion tons for the year.

As economies struggled, the estimate for the year was revised down from the previous 2012E view of 3.78 billion tons. On a longer-term basis, the CW Group sees global cement consumption expand by 4.9 percent on average per year through

2009 – 2017E GLOBAL CEMENT CONSUMPTION OUTLOOK

(mm tons)

World cement volumes to grow by 4.9% p.a. on average through 2017 With global economic growth having been revised downwards for the last few cycles, 2012 is expected to have ended with a 3.2 percent rise. Though the year ended with the long fabled “green shoots” of growth perhaps creeping into the vocabulary again, the expansion is uneven, uncertain and fragile. The impact on the construction sectors remains material and in some regions (notably Southern Europe) maintains a chokehold.

2017. Global per capita cement consumption rose from 448 kilos in 2009 to 539 kilos in 2012 and is expected to continue on to 645 kilos by 2017.

“Even though we remain cautiously optimistic that recovery is gaining a foothold in some of the core markets and problems in Europe are slowly being contained, if not resolved, many markets are still in the balance. In particular, we are happy to see the US turnaround progressing, but are also a bit nervous about some of the larger emerging markets if global economic conditions deteriorate,” said Robert Madeira, the CW Group’s Managing Director and Head of Research.

Ex-China manufacturing capacity utilization hits bottom in 2012 A rough measure of profit health and outlook for cement plant capex, cement manufacturing utilization rates point to improved conditions ahead. Having peaked in 2009 at 68.1 percent, but since deteriorating to 66.6 percent in 2012, the CW Group estimates that the bottom may have been found for the global exChina manufacturing capacity utiliza-

CEMENT MANUFACTURING UTILIZATION RATE BY REGION (2009 – 2017) China 100

Asia ex-China Latin America

Middle East

E Europe & CIS

Global

North America

(% utilization)

Western Europe

Africa

40

2009

2010

2011

2012

2013

2014

2015

2016

FEBRUARY / MARCH 2013

2017

Source: CW Group Research

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ANALYSIS 5-year cement consumption outlook

-4%

10%+ Source: CW Group Research

tion. When China is included, the recovery trend strengthened in 2012 to 77.1% after hitting bottom in 2010 at 75.6%.

“Based on a bottom-up tracking of greenfield and brownfield cement plant projects as well as permanent and semipermanent closures, we see utilizations improving through 2017 to 82 percent.

However, with an abundance of new projects in growth markets, we do caution as we see supply outpacing demand in some markets,” explained Claudia Stefanoiu, Senior Analyst with the CW Group’s European Analytics Team.

Regional divergence: North America bungee jumps, frontier markets remain exciting, while Europe sinks into the abyss Perhaps surprisingly, North America is projected to show one of the strongest consumption volume growth trends out of the global regions through 2017. In fact, we expect demand in North America, even on the conservative basis we use for the region, to trend just marginally above the demand growth in the Middle East of 7.1 percent per year on average.

“But the strong forward growth patterns for the two are based in part on fundamentally different drivers. North American demand is driven by a recovery story in the US (although we still do not expect

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to see a return to peak demand volumes during our forecast horizon). Meanwhile, the Middle East is driven by strong “new” growth in Saudi Arabia, Iraq and--to a smaller extent--recovery in the UAE, Syria and Oman.”.

We expect growth in China to moderate, but stay positive, as the government is dead set to stimulate growth through infrastructure programs. Frontier markets in Sub-Saharan Africa and some recovering North African markets (e.g., Libya) will continue making this area an exciting market where we expect over 6 percent growth on average through 2017 for the region as a whole. Latin America is expected to decelerate somewhat, falling to 5.6 percent on average as Brazilian growth moderates, while Asia ex-China will enjoy growth accelerating with Indonesia and Philippines seeing strong growth in the next years.

Western Europe will slowly start showing a pulse again in the next few years as markets bottom out and the weakest (Greece, Portugal and Spain) run out of room to fall much further. Eastern Europe and the CIS will do better, however, driven by the non-European markets in the near term with the region’s demand growing 5.2 percent per year on average through 2017. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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About the GCVFR The CW Group’s Global Cement Volume Forecast Report is a twice-yearly update on projections for cement volumes at the national, regional and global basis. The report brings together the CW Group’s principal research team to provide the latest insights on the evolution of cement volume trends for over 50 important cement markets worldwide (click here for listing), as well as regional and global totals.

The report contains the CW Group’s 1H2013 outlook for: • National cement consumption (tonnages, 2012E-2017F) • National cement production (tonnages, 2012E-2017F) • Industry-wide utilization rate (%, 2012E-2017F) • Cement production capacity (integrated & grinding tonnages, 2012E-2017F) The 1H2013 forecast is a data-oriented forecast report, providing extensive details on the outlook for key cement markets around the world. The 2H2013 update (also included in the subscription price) additionally includes overviews of country dynamics for the report coverage Contact the CW Group at inquiries@cwgrp.com to discuss further.

RESEARCH

The CW Group publishes a series of unique data-rich reports on a periodic basis for the global cement sector. These must-have reports for cement traders, analysts, investors and equipment vendors are indispensable in understanding changing market conditions, monitoring the latest cement prices and staying up to date on new cement capacity projects, among many other key outlook and competitive dimensions. The reports are available on an annual subscription basis.

Contact us at sales@cwgrp.com to learn more.

Global Cement Market Data Service

Global Cement Retail Price Report

Global Cement Trade Price Report

Global Cement Volume Forecast Report

Cement Plant & Capacity Monitor

Statistical update on key cement markets worldwide

Comprehensive report on local retail cement prices worldwide

Detailed data and chart report on cement prices

Current and outlook for cement volumes

Tracking new cement plants and expansions

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Individual countries & global

Global scope, ex-China

■■ ■■ ■■ ■■

Cement consumption Cement production Cement trade and/or Select cement prices

Online (CemWeek.com)

■■ Actual retail prices per bag ■■ Range of prices and avareges ■■ Gray and/or white cement ■■ Weekly price data points Hardcopy

■■ ■■ ■■ ■■ ■■

Gray, white and / or clinker Monthly import prices Monthly export prices Regional price indices Monthly trade volumes Hardcopy

■■ ■■ ■■ ■■

3-year volume outlook Historical volumes Capacity utilization Annual volumes Hardcopy

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New cement plants Plant expansions Overview of project Location details Hardcopy

* Subject to change; † Actual country data reported on different lags; S&H: Shipping and Handling for reports distributed in physical hardcopy;Discounted group and corporate rates available upon request

We know the cement industry well. Let us guide you. For more information please contact us at inquiries@cwgrp.com or on +1-702-430-17 48 848 N. Rainbow Blvd., Box #1658, Las Vegas NV, 89107, USA

REGIONAL

FOCUS

Egypt’s Economy Challenges Ahead

Against a landscape of political turmoil, Egypt’s economy struggles to find its footing on a road to sustainable recovery. Potential growth opportunities, however, are notable in key industries including construction, lending hope for a more stable recovery in 2013.

ollowing the revolution in Egypt and the consequent resignation of Hosni Mubarak as president in February 2011, the country began an uphill battle of implementing political and economic reforms in order to provide more opportunities to most of the population, who suffer from unemployment and poverty. Although GDP growth fell flat to 0.4 percent in 2011 because of the transition, many were hoping for better than the 2 percent growth in 2012. After President Mohammed Morsi took office in June 2012, his administration came under fire

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when his promise of more food, a stable energy supply, better traffic and safer streets in his first 100 days fell through.

With the country remaining in the throes of political turmoil, the road to recovery still seemed bleak and full of obstacles.

Stumbling Blocks Political stability is unquestionably the biggest hurdle that Egypt will need to overcome. With the end of the Mubarak administration, exceedingly high expectations coupled with the incumbent government’s focus on politics rather than economic reforms disappointed

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constituents and drove many to demonstrations in Tahrir Square. Unless the Morsi administration can begin to show people tangible results, political unrest is likely to continue, which will affect many sectors of the economy, including the once-profitable tourism industry.

Revenues from tourism declined significantly from US$12.5 billion in 2010 to approximately US$9.4 billion in 2012.

Consequently, the Egyptian pound continues to weaken against the dollar. It remained at its weakest against the U.S.

dollar since 2004, having fallen 6 percent

by December 2012. With less foreign remittances from Europe, the U.S. and Libya, as well as lower exports, Egypt’s bigger problem has become funding its imports, including food imports, which make up half of all imports.

Construction Growth Despite the fiscal problems of Egypt, the construction sector offers promise and growth potential over the coming years.

Construction investment is expected to reach US$7.5 billion by 2015 in view of increasing population and infrastructure projects in the pipeline.

The country’s population is currently at 90 million and expected to double in the next 25 years. To meet the increasing demand for housing, the government plans to develop one million low-cost houses over the next five years. Moreover, the Egyptian government and the U.S. Agency for International Development enhanced the country’s mortgage finance system, which is expected to jump-start residential construction in the next five years. Other plans include new power stations, three nuclear power plants (1,800 MW) by 2020 and a 34-kilometer metro line from Imbaba to Cairo.

However, threatening to dampen the positive outlook in the construction sector are the current fuel supply problems faced by many industries, including cement manufacturers in the country. Early in December 2012, production in some cement plants was halted due to a lack of natural gas supply. With the shortage comes news that the government plans to increase natural gas prices from US$4/ mm Btu to US$6/mm Btu. Furthermore, the price of alternative sources of fuel such as mazut will likewise be hiked from US$150/ton to US$225/ton.

Nevertheless, cement producers remain optimistic and look forward to potential growth in the construction sector. For instance, Arabian Cement increased its

capacity to 5 mtpy while ASEC Cement forecasts full production commencing early in 2013 with 1.9 mtpy.

Economic Outlook for 2013 While there is no doubt that the government is still struggling to find its footing, the prospects are potentially positive going forward. President Morsi is intent on implementing economic reforms to resolve the country’s budget deficit as well as the gap in the balance of payments. Crucial to his success is the US$4.8 billion IMF loan that will

give the administration breathing room.

Support from the IMF will likewise give the country a needed boost to attract wary investors. And as the government continues to outline fiscal tightening measures, the IMF expects the economy to grow by 3 percent in 2013. Although that is a far cry from the 7 percent growth Egypt registered before the revolution, the new administration remains optimistic that it can push Egypt to a better and more stable future that will improve the lives of a majority of its poverty-stricken constituents. BMWeek CemWeek CW Group Coal Week CemWeek CemWeek

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ACTUAL & PROJECTED ANNUAL GDP (%)

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Egypt Middle East & North Africa

3

0

2011

2012F

2013F Source: IMF, World Economic Outlook (Oct. 2012)

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FEATURE

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Policies Industry Several key cement markets brace for more stringent environmental regulations in 2013. What impact these regulations may have on the cement market is explored.

FEBRUARY / MARCH 2013

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FEATURE

he outlook for the global cement industry in 2013 is mixed. Even though several key economies continue to limp along on a path to sustainable recovery, the global demand is expected to rise, albeit slowly.

Another factor expected to affect the industry is the push in many countries to adopt more stringent regulations on emission levels. In 2013, three of the world’s largest economies – the U.S., EU and China – brace for the impact of tighter environmental guidelines.

NESHAP Revisited In 2010, the U.S. Environmental Protection Agency (EPA) proposed new regulations for the cement industry.

The new standards called for stringent limits on the emissions of mercury, total hydrocarbons, acid gases and particulate matter. These regulations, known as the National Emission Standards for Hazardous Air Pollutants (NESHAP), were originally to take effect in September 2013.

Cement industry experts argued that the proposed standards were too stringent and technical compliance would be tough for manufacturers to implement. After lengthy discussions with various interested parties, the EPA amended the NESHAP rules in December 2012. Under the amended

Final Emissions Limits for Portland Cement Manufacturing Pollutant

Final Limits Existing Source

Final Limits New Source (applies to all kilns built after 5/6/2009)

Mercury (major and area sources)

55 pounds per million tons of clinker, averaged over 30 days

21 pounds per million tons of clinker, averaged over 30 days

Total Hydrocarbons (major and area sources)

24 parts per million by volume (ppmv), averaged over 30 days

24 ppmv, averaged over 30 days

Organic Air Toxics – Alternative Limit (alternative to the total hydrocarbon limit) (major and area sources)

12 parts per million by volume (ppmv). Threerun stack test required every 30 months; stack test average is used to determine compliance and set kiln-specific operating limit. Continuous monitoring required to demonstrate operating limit compliance.

12 parts per million by volume (ppmv). Threerun stack test required every 30 months; stack test average is used to determine compliance and set kiln-specific operating limit. Continuous monitoring required to demonstrate operating limit compliance.

Particulate Matter (as a surrogate for toxic metals other than mercury) (major and area sources)

0.07 pounds per ton of clinker. Annual three-run stack test required; stack test average is used to determine compliance and set kiln-specific operating limit. Continuous monitoring required to demonstrate operating limit compliance.

0.02 pounds per ton of clinker. Annual threerun stack test average used to determine operating limit. Continuous monitoring required to demonstrate operating limit compliance.

(MACT and NSPS limits are the same)

Hydrochloric acid (major sources only)

3 ppmv, averaged over 30 days

3 ppmv, averaged over 30 days

Source: EPA Fact Sheet, http://www.epa.gov/airquality/cement/pdfs/20121220_port_cement_fin_fs.pdf

guidelines, the compliance date was extended to 2015 (but manufacturers can also request an additional year), giving more time to manufacturers to plan and invest in necessary technology to achieve compliance. It was originally proposed that Particulate Matter (PM) emission levels would be determined via Continuous Emission Monitoring systems (CEMS). This has been amended to the more practical manual stack testing, ultimately altering the numeric value assigned to the standards earlier.

Unchanged, however, are the emission standards for mercury, total hydrocarbons and HCL. While the U.S. cement industry welcomed the extension of time to implement the changes, opponents are expected once again to challenge the EPA’s ruling, alleging that the delay in compliance “will cause between 1,920 and 5,000 Americans to die prematurely from exposure to cement plants’ soot pollution,” and “will also allow cement plants to pump approximately 33,000 additional pounds of mercury into the environment.”

EU’s ETS Phase III The EU Emissions Trading Scheme (EU ETS) entered its most stringent phase (III) in January 2013, and the new guidelines are likely to hit the cement industry hard. Under phase III, which will extend until 2020, a centralized, EUwide cap on emissions will be set. Phase II had 27 national caps. Previously, EU cement manufacturers had the advantage of offsetting their carbon credits across various operational locations.

This advantage is lost.

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CW Group Coal Week CemWeek BMWeek CemWeek CW Group Coal Week BMWeek CemWeek BMWeek FEBRUARY / MARCH 2013Coal Week CW Group

Proposed Annual ETS Cap Figures for Phase 3 Year

Billion metric tons of CO2e

2013

1.974

2014

1.937

2015

1.901

2016

1.865

2017

1.829

2018

1.792

2019

1.756

2020

1.72

Source: European Commission, Questions and Answers on the Commission’s Proposal to revise the EU Emissions Trading System (Brussels, January 23, 2009), response to question 12.

Free Allocation Limits will decline.

Auctioning will be the default method to allocate allowances accounting for 40 percent of allocations in 2013, and this proportion will rise every year. Cement companies will have to invest more in buying allowances, as the proportion of free allowances will reduce. Under the new guidelines in phase (III) of the EU’s ETS, installations that meet benchmarks will receive all allowances they need.

For the cement industry, this benchmark has been fixed at 766kg of carbon dioxide equivalent per ton of clinker. According to industry experts, this is 10 percent lower than the average emission levels, which stood at 858 kg/ton in 2007-08.

To qualify for free allowances, this 10 percent gap has to be closed, which is highly difficult to accomplish because 60 percent of the direct emissions in cement production come from processing clinker. The alternative would be to aim for 10 percent emission reduction from the combustion of fuels (accounting for the remaining 40 percent emissions), which is, at best, impractical.

Generally, one viable option would be clinker substitution. Unfortunately, this option, which might include substituting with fly ash or slag, is not as feasible.

Experts contend that fly ash is likely to

have more contamination now as power stations (producers of fly ash) have their own emission targets to adhere to, and the problem with slag is its limited availability, making it difficult for European cement companies to procure this raw material.

Thus, clinker substitution is not a viable option for the EU cement industry.

The direct impact of the phase III EU ETS is that investment in capacity expansion will likely slow in Europe, potentially leading to supply gaps. Companies will be forced to import cement to meet the deficit, and given that countries outside the EU are not required to adhere to the same requirements, European manufacturers are questioning just how competitive they can remain. Furthermore, some industry watchers argue that EU cement manufacturers may be unable to pass the full EU ETS compliance costs onto their customers. This will in turn ultimately reduce profitability for an industry already struggling to recover from the ongoing regional economic downturn.

China to Become Stricter on Air Pollution Levels Following one of Beijing’s worst air quality periods, China is taking air pollution control seriously. The government of

the world’s largest emitter of greenhouse gases is set to spend close to US$375 million on emergency pollution control programs, enhancing energy efficiency and strengthening the country’s recycling economy. A crucial part of the air pollution control includes tightening the emission levels of key polluting sectors, including cement.

Currently, overcapacity and outdated facilities have been the largest problem with the Chinese cement industry.

Following China’s powerful economic growth in the last decade, infrastructure projects were on the rise, fueling demand for cement and leading to the expansion of the cement industry through increased capacity. Additionally, an aggressive program to eliminate outdated facilities was undertaken.

In an industry facing reduced profitability due to overcapacity, investment in modern technology for compliance with stricter emission norms will not be easy.

China is looking at major restructuring in the cement sector with mergers and consolidation among companies to enhance efficiencies and improve profitability. This approach may assist in paving the way for smoother compliance with the new emission standards.

The EU, U.S. and China are not the only regions faced with tightening environmental regulations.

Other countries are beginning to question and refine existing policies. Still, these three illustrate how difficult it can be to find the right balance between ensuring environmental objectives are met while growing and remaining profitable during difficult economic times. Most within the global cement industry remain committed to “doing the right thing” in terms of the environment, but the reality of implementing these regulatory schemes may leave best intentions in the dust when it comes to surviving and thriving in challenging economic times. BMWeek BMWeek BMWeek

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LEADERS

COMMENT

Cement

Trade Adjusting to the Changing Environment

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Ayman Ismail, the head of Asec Trading, offers a trader’s perspective on the current state of the international cement market. Mr. Ismail touches on notable trends and opportunities in international trade, and discusses how the increase in capacity witnessed throughout the MENA region is affecting cement trade.

FEBRUARY / MARCH 2013

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LEADERS COMMENT during 2012 and an increase in cement prices of 10 percent in the fourth quarter.

The long-standing tradition of Egyptian families to invest in lands and real estate helped the real estate market and the construction sector to grow. Export volume achieved 333 percent volume growth during 2012 versus 2011, and reached the 2 million ton mark despite all the challenges from oversupply in the region.

2013 will be a challenging year for cement operators and traders in Egypt, considering the inflation of energy costs. This will exert real pressure on the industry and the new capacity coming online during 2013. Traders should be able to gain from the depreciation of EGP versus USD, and this could balance the increase in cement production cost. Still, during 2013, we should notice an increase in the import volume (cheaper cement) and an increase in the export volume to the North and East Africa region.

At Asec, we do have a positive forecast for the construction sector and the cement sector in Egypt during the next few years, and you should not be surprised to see Egypt once again become an importer of cement by the year 2017-2018.

CemWeek: What do you see as the most notable current trends in international cement trade? Do you see any particularly interesting shifts in regional trade over the last year?

Ismail: International cement trade markets remain marred with uncertainty.

Although some slight improvement and actual movement have been seen in the market, especially in the U.S. and eastern Europe in 2012, the global economic slowdown still raises concerns that 2013 may fail to be a better year for the trade markets.

With regard to regional markets, North Africa and East Africa could be the stars for 2013. Still, FOB levels in these regions

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will always be a big challenge for traders, particularly with the continuous rise in production cost and energy inflation. We are also monitoring the comeback of the U.S. market, but it is too early to identify whether or not this market will be a prime cement importing market. Finally, a slight slowdown in the Russian and Brazilian markets might be seen in 2013.

CemWeek: How have the massive capacity expansions witnessed throughout parts of Africa and several GCC countries changed cement trading?

CemWeek: Egypt’s cement market has ridden the proverbial roller coaster over the last year. How do you see the year ahead for this local market?

Ismail: The massive capacity expansion through Africa and GCC countries has definitely had a great impact on cement trading in the last couple of years, and is expected to continue for the coming few years. To simplify the subject, in 2011 and 2012 we noticed an average decrease over those two years of 45 percent in the volume being traded. The MENA region has turned from being a main importing region of cement to an exporting region.

Ismail: The Egyptian cement market continued to surprise the world in 2012.

Although the economy slowed, the market achieved 5 percent volume growth

Take Turkey, for example. In 2010, it was one of the biggest exporters. Turkey was exporting 73 percent of its cement export to the MENA region in 2010 versus only

CW Group Coal Week CemWeek BMWeek CemWeek CW Group Coal Week BMWeek CemWeek BMWeek FEBRUARY / MARCH 2013Coal Week CW Group

32 percent in 2012. The massive expansion witnessed in the region has led to a big decrease in actual demand versus a huge increase on the supply side. The same may be noticed in various key markets in Africa such as Nigeria, East Africa and the South Africa region.

The positive impact, from the perspective of importers, was the gain from the high competition between traders and greater availability leading to a tremendous decrease in the CFR prices. Regrettably, the negative impacts for producers and exporters were the lower FOB prices and the decrease in the demand.

CemWeek: Renewed growth in the Middle East, especially among several of the GCC markets, is good news for cement companies in the region; however, overcapacity and ambitions to also export are a concern for established traders. What can the region do to address these challenges?

Ismail: Challenges have increased for sure for traders and cement manufacturers in the region. To succeed in the coming years, the surplus in the region has to be diverted to other regions, which may be challenging considering the high competition from Asian and Mediterranean Basin markets with lower FOB. Further, it involves realizing that the current market is a buyer’s not a seller’s market. Thus, that requires traders and cement manufacturers to make some adjustments. One of my favorite quotes illustrates this sentiment best: “We cannot change the direction of the wind, but we can adjust our sails.”

Cement manufacturers and traders need a new approach for their trading business strategies and a strategy for innovation in a rapidly changing era. Trading strategies, nearly all of which mistakenly assume that a predictable path to the future

can be paved from the experience of the past, cannot be taken as gospel. Too many uncertain factors without resolution remain. A turbulent world, a customerdriven economy, the need for speed and flexibility, and opportunity-driven business development demand calls for a strategy that is dynamic and responsive to eternal turbulences and shifts.

Trading companies should brace themselves for a future of hyper-competition.

They should respond to rapid changes in the business environment by adopting a new approach to strategy that combines speed, openness, flexibility and strategic thinking. Experimenting with new strategies is important. Constant testing, learning from feedback, adaptation and building on what is found to be successful with customers is the way forward, especially when you are trying to re-invent the value provided, offering new services or evaluating the way it is delivered.

FEBRUARY / MARCH 2013

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LEADERS COMMENT CemWeek: The EU’s launch of its 20132020 Emission Trading Schemes (ETS) is taking a toll on many European cement manufacturers concerned about competitiveness. Since cement imports are not subject to the rigorous directive, does this provide an opportunity for cement manufacturers in countries not subject to carbon constraints to expand their export markets in Europe (exclusive of the weak demand in Europe)?

Ismail: During the last few years, the real gain for the CO2 trade has been for the benefit of big cement operators in Europe. While markets were collapsing in western Europe and utilization rate dropping to 30 percent in southern Europe, we saw the positive contribution for CO2 trade in cost reduction plans and the positive impact on their EBIDTA. Cement operators were reluctant to close plants, which would mean losing lucrative CO2 allowances.

It does not make economic sense to close a plant when CO2 prices are high, even when the underlying profitability is depressed. In a context where CO2 prices have not recovered and with a further decline in the CO2 prices expected from 2013 to 2020, I believe further capacity reductions will be a must in Europe.

While it may make sense to cut capacity further in southern Europe, any positive impact may not be seen considering the utilization rate is already around 30 percent.

Although it is too early to draw conclusions on how this will affect opportunities for other markets, the real impact may ultimately be seen in the northern and eastern European markets, and in the North American markets where further closures may have a positive impact on the trade markets with a real and strong demand in those regions noted.

CemWeek: What are the big new opportunities that are emerging across Africa (and beyond) that you are seeing and how are they different? From a trad-

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ing perspective, what types of capabilities does a cement manufacturer need to compete effectively in these markets?

Ismail: I still see Africa as the future for cement traders and operators. This region is forecasted to have the highest GDP growth and has a continuous need for infrastructure development over the next decade.

Trading companies must follow new strategies in Africa. Strategies that lead into developing and penetrating new markets, creating new opportunities for business growth while adapting to the market. Changes in strategy could lead to a positive impact on cost reduction and the creation of new opportunities with new services provided.

A strategy that recognizes the added value of supply chain management and

a customer satisfaction program is also beneficial. Exceptional customer satisfaction results in greater customer retention, which in turn leads to higher profitability.

Customer loyalty is a major contributor to sustainable business growth, as research indicates keeping an existing customer is five to seven times more profitable than attracting a new one. Supply chain management should maximize the value and efficiency of the entire trading process by focusing on speed, service, quality and certainty, while still responding quickly to market changes.

By focusing strategy on these areas, I believe a significant difference in the value delivered to customers can be seen, as can an opportunity for the creation of new services. Moreover, a positive impact on cost reduction, customer retention and sustained business growth experience is achieved. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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Ayman Ismail is the head of Asec Trading, the international trading arm for the Asec Cement Group. He holds a Mechanical Power Engineering degree from Alexandria University (1994) and a diploma in Management and International Business. After an extensive experience in the engineering and project management field, he shifted to the cement and trading business in 2002.

Previously, he has worked with Orascom Cement as head of contracts and supply for the Middle East and Africa and as BU manager, and with Lafarge as head of contracts and operation.

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EVENT

Cement Business & Industry (CBI) Brazil & Latin America 2013 Conference GMI Global kicked 2013 off with a big success – the CBI Business & Finance Highlights: ◆◆ Robert Madeira, Managing Director & Head of Research Brazil & Latin America 2013 Conference in Sao Paulo, at the CW Group, discussed “The Good, The Bad, & The Brazil, on February 27-28. With more than 300 delegates Ugly” of the Brazil and Latin American Cement Market. registered, an exceptional selection of speakers who ◆ ◆ Lorena Mancia, Strategy Manager of Cementos Proare leaders in their fields, and top sponsors from the greso, reviewed the Challenges and Solutions of the Lime most influential cement business and manufacturing Business from a Central and Latin American Perspective. companies – this was indeed THE Brazilian Cement ◆ ◆ Rodrigo Lara, Director Presidente of CPX Brasil, spoke & Industry Conference of the year! When asked for on Project Financing: Public and Non-Public Capital, The comment, GMI Global said: “It was wonderful to be in Sao Paulo, Brazil – one of the most exciting and dynamic cement markets, not to mention the country hosting the 2014 World Cup and the 2016 Olympics.”

◆◆

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Challenges in Financing the Brazilian Cement Sector.

Claudia Stefanoiu, Senior Analyst at CW Group, provided insight on Cement Trading and concluded that trade in Latin America is still strong.

Felipe Bittencourt, Commercial Director of WayCarbon, discussed Carbon Regulations and the Impact on the Cement Sector.

Laura Goldner, Senior Analyst at CW Group, shared her insight on Fuel Prices and Outlook – Oil, Petcoke, and Other Petro-Fuels.

The first CBI Brazil & LatAm 2013 was opened by ◆◆ Conference Co-Chairmen Mr. Adriano Greco and Mr. Robert Madeira. Sao Paulo’s Municipal Secretary for Labor and Entrepreneurship, Corporative Development, Mr. Eliseu Gabriel provided the keynote address on entrepreneurship in Sao Paulo. GMI’s conferences have Technical & Engineering Highlights: ◆◆ Olivier Thomas, Technical & Performance Director at dual-track sessions that focus on business & finance Loesche, presented on Quality Cements Produced with the and technical & engineering topics.

CBI Brazil & LatAm 2013 was sponsored by: A TEC GRECO, Loesche, Claudius Peters, Haver & Boecker Latino Americana, Magnesita, Gebr. Pfeiffer, Fives FCB, Densit do Brasil Ltda, LV Latino America, RUD, CEMI Process Technology and Engineering, Scheuch/Tersel, PragoTec, Scantech, IKN, Dynamis, Alstom, Promac Engineering Industries, Thorwesten Vent, PANalytical, FRITZ & MACZIOL group and Martin Engineering.

CemWeek also provided key support to CBI Brazil & LatAm 2013.

GMI Global is looking ahead and is excited to begin planning for the next CBI Brazil & LatAm Conference.

Stay tuned for news on one of the most exciting and dynamic cement business and industry events, which is now held annually.

◆◆

◆◆

◆◆

◆◆

◆◆

“Green” Loesche Cement Grinding Plant.

Phillip Hempel, Project Manager at Gebr. Pfeiffer, discussed the World’s Biggest VRM by Gebr. Pfeiffer SE: A Landmark Decision in Brazil.

Guillermo Etse, Executive Director at Saxum Servicos de Consultoria, reviewed the Key Factors Influencing the Construction Costs of Cement Facilities.

Stephan Oehme, Sales & Technology Director at Claudius Peters, provided a presentation on ETA Cooler – Now for Easier Conversions.

Clelio Tonneli Filho, Business Manager – Packaging & Filling Systems at Haver Boecker, shared his insights on Innovation in Product and Engineering.

Jonathan Forinton, Director of A TEC GRECO America, discussed Technical Developments Enabling Tomorrow’s Operations – Preheater Upgrades/Chlorine Bypass/A TEC Calciners.

To learn more about GMI’s cement industry events, please contact us at: sales@gmiforum.com or +1-203-516-7424 FEBRUARY / MARCH 2013

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RESEARCH

A Gloomy ‌But Not for All

2012 was a gloomy year, but not for all cement majors. Holcim and HeidelbergCement, for example, continued their growth trajectory in cement sales.

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3

Lafarge

Vicat

Holcim

HeidelbergCement

Cemex

0

-8

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Italcementi

Buzzi Unicem

In these conditions, all three main product groups reversed the positive trend of 2011 and registered moderate declines in 2012. Combined cement sales performed

by Holcim, Lafarge, HeidelbergCement, Cemex, Italcementi, Buzzi Unicem and Vicat shrank 0.85 percent from 539.6 million tons in 2011 to only 535 million tons sold in 2012. Aggregates sales plummeted by more than 4 percent and

CEMENT: 2011 - 2012 TONNAGE CHANGE

% CHANGE

he global cement market opened 2013 with the reinforcement of the visible gap between expanding and depressed markets, which reached a new level in 2012. A generalized decline in Western Europe, which plummeted 14 percent in cement demand when compared to 2011, coupled with political instability in some MENA countries, generated major losses, especially for the companies accustomed to placing an enhanced focus on these areas. In contrast, a glimpse of relief came from the direction of growing North American, South American and Asian markets.

Source: CW Group Research

BUILDING MATERIALS: 2012 VOLUMES Buzzi Unicem Cemex

Holcim

2012 Concrete Volume 2012 Aggregate Volume

Italcementi

2012 Cement Volume Lafarge Vicat 0

50

reached 806 million tons by the end of 2012, while concrete volumes declined by a softer 3.1 percent to reach 207.2 million cubic meters in sales last year.

However, given the massive pressure on cement prices in markets where the supply-demand relationship still describes a favorable market environment, 2012 is not appearing that gray and cloudy anymore when analyzed from the perspective of revenues. All cement companies posted revenue increases in their reporting currency, except Cemex and Italcementi, which posted a negative trend of their revenues expressed in their base currency, U.S. dollars and Euro, respectively. At a compound level, the 2012 Euro total revenue of Holcim, Lafarge, HeidelbergCement, Cemex, Italcementi, Buzzi Unicem, Vicat, CRH and Titan topped 88.7 million, expanding from 84.8 million Euro registered in 2011.

However, due to currency turbulence, the U.S. dollars-expressed revenue posted a negative growth rate of 1.2 percent over 2011.

100

150

200

managed to sell almost 4 million tons of cement more than in 2011. Closing 2012 with 148 million tons of cement deployed on the companies’ markets, the cement major was unable to increase its sales in aggregates and concrete, which declined by 7.7 percent and 3.1 percent, respectively.

The negative impact coming from Europe was outpaced in some degree through organizational streamlining and

250

Source: CW Group Research

HeidelbergCement

downsizing. The concerted measures announced last year aim to reduce cement capacity by around 10 percent in Europe. The downsizing actions include the closure of the Haccourt grinding station in Belgium, the closure of the Ebange plant and the transformation of the Dannes cement plant in France, the transformation of the Merone plant in Italy and the reorganization of the readymix concrete business in Germany.

HOLCIM SURFACES ABOVE THE LINE IN 2012 Among the few cement companies to post a hike in cement volumes in 2012, Holcim

FEBRUARY / MARCH 2013

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RESEARCH TURNOVER (MILLION EUR): 2011 - 2012 CHANGE

Source: CW Group Research

If in the last years, Lafarge and Holcim performed neck-and-neck in cement sales, 2012 can be considered the separation year. With Holcim notching the biggest increase of the year (2.6 percent), Lafarge lost the leading position after declining almost 2.9 percent from 145.3 million tons in 2011 to 141.1 million tons of cement sold in 2012. This renders Lafarge 6.9 million tons below Holcim, the new market leader. Lafarge also sold 188.3 million tons of aggregates and 31.8 million cubic meters of concrete in 2012. The company continued its divestment actions with 474 million Euro in cash received in 2012 and around 900 million Euro divested to date.

% 2012 (1.3 million tons in cement sales in percent growth rate), while aggregates declined 4.4 percent (243 million tons) due to sluggish infrastructure spending in U.S., UK and some Eastern European markets. Concrete sales were kept 8% constant over 2011 at 39.1 8.5 million cubic meters.

HeidelbergCement along with Holcim are the only cement companies that posted an increase in cement tonnages in 2012. HeidelbergCement benefited from an advantageous positioning in the growth markets and rates its success as a consequence of efficiency and margin improvements. The company recorded 89

Cemex reported somewhat comparable volumes YOY, with concrete sales practically unchanged over 2011 (54.9 million cubic meters), aggregates declining by around (159.4 Vicat 0.4 percent Lafarge million tons in 2012) and cement sales closing the year one HeidelbergCement million tons below 2011 level of 66.8 million tons. Last year

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1% 12

.3

5.10%

3.34%

CEMENT: 2012 SHARE OF MAJORS

26

.37

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Italcementi Cemex

Holcim Buzzi Unicem

Source: CW Group Research

16.63%

27.66%

22

Titan

CRH

Vicat

Lafarge

Holcim

Italcementi

-4

HeidelbergCement

Cemex

0 Buzzi Unicem

% CHANGE

10

million tons in cement sales in 2012 (1.3 percent growth rate), while aggregates declined 4.4 percent (243 million tons) due to sluggish infrastructure spending in U.S., UK and some Eastern European markets. Concrete sales were kept constant over 2011 at 39.1 million cubic meters.

Cemex reported somewhat comparable volumes YOY, with concrete sales practically unchanged over 2011 (54.9 million cubic meters), aggregates declining by around 0.4 percent (159.4 million tons in 2012) and cement sales closing the year one million tons below 2011 level of 66.8 million tons. Last year was acknowledged as a recovery year by the company, which took decisive steps in the direction of debt maturity improvements and capital structure strengthening.

to continue to do so at least for the short to medium term. As a consequence, cement companies are focusing their expansionary efforts on the regional growth pockets, while they continue to implement cost reduction measures.

The role of cost control measures will be enhanced further as more and more companies find it increasingly tougher

to impose cost inflation directly on retail prices and expect price pressure to intensify in the coming years. All in all, companies are optimistic about 2013, especially when it comes to their cementdedicated activities, though they are more pessimistic about their ability to revive the aggregates and concrete markets. BMWeek BMWeek BMWeek

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Italcementi was one of the most adversely affected cement companies in 2012 with declines on all counts, including turnover expressed in Euro (3.8 percent decline).

The company managed to secure only 45.9 million tons in cement sales (6.6 percent decline), 34 million tons in aggregates sales (10.8 percent decline) and 12.9 million cubic meters in concrete sales (10.8 percent decline). During 2012, the company launched its 2015 Project that intends to rationalize the Italian production network. The expected positive annual effect of the project, following implementation, is estimated at around 40 million Euro.

Buzzi Unicem dispatched to its key markets 27.3 million tons of cement (3.4 percent decline) and 13.6 million cubic meters of concrete (9.5 percent decline) in 2012. On the other hand, Vicat obtained only a minimal contraction of its cement sales from 18 million tons in 2011 to 17.9 million tons in 2012.

Geographical patterns and regional footprints of major cement companies made the difference between success and distress in 2012, and they are expected

FEBRUARY / MARCH 2013

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RESEARCH

Entering Golden Era Saudi Arabian cement demand is expected to increase 9.4 percent per year to more than 80 million tons by 2017 as massive infrastructure projects create surging demand. Virtually all regions of the country will post gains, with large new cement production capacities coming on-line in the next few years. These and other trends are presented in the “2013 CW Group Saudi Arabia Market Update report,” a new study from CW Group, the leading global cement industry consultancy and research house based out of New York, USA. he country’s Ninth Development Plan 2010-2014 includes provisions for massive governmental investments, driving the construction share of GDP to an estimated 5.9 percent by the end of 2014. But the report cautions that “a unique set of coinciding mega-forces have converged to create this benign scenario, which may not be sustainable (from Arab Springmotivated investments, industrial policy, unique ownership arrangements, energy subsidies, etc.).”

In 2005, cement demand in the Kingdom of Saudi Arabia reached less than 25 million tons. Since then the market has expanded by double digits, closing 2012 at more than 53 million tons in cement consumption. The recently published “2013 CW Group Saudi Arabia Market Update report” sees the cement industry embarking into a “Golden Era” with strong growth in cement consumption, subsidized energy prices and limited foreign competition. By the end of 2017, cement demand is projected to be 30 million tons higher than today. “Admittedly, our 2017 demand number is aggressive, but the government’s resolution to spend its way to social harmony in the Kingdom is proven and should not be underestimated. We expect more projects to

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be announced together with expansion of existing projects,” the CW Group analysts predicted. But the industry is not without its concerns: a surge in cement prices has prompted caps on cement prices and led the Saudi Ministry of Commerce to reinstate an export ban for both cement and clinker.

As new cement manufacturing capacity comes on-line, the fight for additional subsidized energy supplies is also raging between cement companies and the national energy provider, ARAMCO. The fuel issue is likely to intensify, as by the end of 2012 all cement companies operating in the Kingdom had announced expansion plans.

More than 25 million tons in new cement capacity has been announced to be commissioned by the end of 2017, with the bulk of the production lines scheduled

to come on stream in 2014 and 2015.

Yamama Cement and Eastern Province Cement have to date announced the most ambitious projects, each planning to add 3.5 million tons per year. From a regional perspective, the cement capacity breakdown is not seen to shift the profile materially; the center region will hold the leading position while strengthening its regional footprint by 0.5 percentage point in the next five years.

The CW Group analysts note that the implications stretch beyond the borders of the Kingdom: “these production capacities raise a loud alarm bell for cement producers in neighboring markets if the export ban is lifted and energy subsidies continue. Saudi Arabia will be the contender in this region and be a very strong competitor for regional export markets if it develops the logistics, marketing and distribution capabilities.”

The “2013 CW Group Saudi Arabia Market Update report” is available from the CW Group.

For further details, contact sales@cwgrp.com, or visit our website at http://www.cwgrp. com/research-a-analysis/research-reports/306061-saudi-cement-market-2012-update. html for a complete table of contents, including a competitive dynamics analysis enriched with a SWOT perspective, complemented by cement consumption and nameplate capacity projections up to 2017.

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We know the cement industry well. Let us guide you. For more information please contact us at inquiries@cwgrp.com or on +1-702-430-17 48 848 N. Rainbow Blvd., Box #1658, Las Vegas NV, 89107, USA

COUNTRY

SNAPSHOT

Spain’s Cement

Consumption Plunges Yet Sustainability Commitment Continues

pain’s cement consumption dropped to the lowest level seen since 1967, and consumption is forecasted to decline by 20 percent in 2013. Yet while the immediate economic environment is challenging, the country’s industry continues to make progress in fostering sustainability.

Spain’s cement consumption in 2012 was reported as the lowest in almost a half century at 13.5 million tons, a figure last seen in 1967. It was considered the largest decline in the country’s history at 34 percent when compared to the previous year’s 20.44 million tons. The downtrend was most apparent in December 2012 with a decline of nearly 37 percent from the same period in the previous year.

Similarly, cement production plunged by 28.6% to 15.83 million tons from 22.18 million tons in 2011.

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The decline is primarily attributed to the European financial crisis, which led to a substantial reduction in public-works spending by the government. During the first nine months of 2012, only 6 billion Euros were spent on public works, compared to more than 30 billion Euros a few years back. Meanwhile, residential construction was practically at a standstill considering the glut in the real estate sector, with unsold properties piling up over the past five years. At its peak, cement consumption reached 56 million tons in 2007. When the recession started to take its toll, the cement industry found itself cutting 28 percent of jobs since 2008 while several plants had to shut down.

The sector’s workforce of 7,300 in 2007 is now at 5,200 and expected to fall further to 4,300 next year as labor force adjustments by Cemex, Portland Valderivvas, Holcim and Corporación Noroeste take effect. Of the 36 cement plants in Spain,

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only half are operating due to depressed demand. For 2013, consumption is forecasted to further dip by 20 percent at 11 million tons.

Commitment Continues Despite industry woes, the Spanish cement sector continues to pursue its commitment to reduce carbon dioxide emissions and cut down on energy consumption. A large part of its sustainability initiatives involves the replacement of fossil fuel and raw materials with suitable waste materials.

The waste materials used for processing include slag and ash from thermal processes, sludge from paper mills, foundry silt, sugar mill foam, iron scrap and more.

The use of fly ash and granulated slag from blast furnaces in cement production, along with gypsum from gas scrubbing processes, prevents the release of

Accumulated Production & Consumption MONTHLY DATA (DEC)

ACCUMULATED DATA OF THE YEAR (JAN-DEC)

2012

2011

% Variation

2012

2011

% Variation

CEMENT PRODUCTION

919580

1311362

-29.90%

15830104

22178237

-28.60%

DOMESTIC CEMENT CONSUMPTION

762671

1206382

-36.80%

13500987

20441060

-34%

Source: Officemen, Spanish Cement Industry Association

such waste materials in the environment while minimizing the use of natural resources from quarrying or mining operations. In 2011, 2.8 million tons of raw materials were sourced from industrial wastes among the total 33 million tons used in cement production. According to estimates, this represents 37 football stadiums full of waste.

Conversion from fossil fuels to alternative fuels is increasing every year among Spanish cement manufacturers. Of 35 plants surveyed, 31 were using some type of alternative fuel such as biomass, dried sludge sewage, tires, industrial waste, etc. That is according to the paper, Recuperación energética de residuos en la industria cementera (2010). Further supporting the trend in alternative fuel usage were the numbers from Oficemen showing that 23.7 percent of energy supply used by cement manufacturers as of September 2012 came from alternative fuel. Although this represents a considerable increase over almost a decade ago, much work remains for the country’s industry in regard to replacing fossil fuels with waste. When compared to its European counterparts in Holland, Switzerland, France, Austria, Germany and Belgium, which show rates ranging from 50 to 80 percent, Spain has some catching up to do.

Recent insolvencies in Spain’s real estate sector suggest the cement industry’s woes are far from over. The focus for many cement manufacturers likely remains on implementing measures that will keep them afloat. Still, in light of further decline, it is evident the industry as a whole remains firmly committed to making significant progress in alternative fuel usage and sustainable waste management. BMWeek BMWeek BMWeek

SPANISH CEMENT PRODUCTION

60,000,000

30,000,000

0

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010

2011

2012

Source: Officemen, Spanish Cement Industry Association

SPANISH PER CAPITA CONSUMPTION 1,500

750

0

CemWeek CemWeek CemWeek

2000

CW Group CW Group CW Group

2001

2002

Coal Week Coal Week Coal Week

2003

2004

2005

2006

2007

2008

2009

2010

2011

Source: Officemen, Spanish Cement Industry Association

FEBRUARY / MARCH 2013

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REGIONAL REPORT: unemployment in the sector rising 34.4 percent. The sector accounted for 16 percent of the total number of unemployed people registered in Portugal at the end of November 2012.

EUROPE Lafarge and Anglo American put the finishing touches on their 50:50 joint venture in the United Kingdom. The new company known as Lafarge Tarmac began trading in early 2013 following final clearance from the UK Competition Commission, after completing the sale of a portfolio of Tarmac and Lafarge construction materials operations in the UK. The Lafarge Tarmac combination is expected to generate synergies of £60 million through improving operational, logistical and purchasing efficiencies and the introduction of value-added products across a wider geographic area.

The CEO of Ecocem, an Irish-owned “green” cement producer, charged that the Irish cement industry allegedly is getting tens of millions euros annually in windfall profits. Donal O’Riain says this is because of anomalies in the EU Emissions Trading Systems (ETS). The anomalies could cost the exchequer more than €250 million over the coming seven years and has already cost the region €120 million since 2005.

O’Riain claims the anomaly arose because the Irish cement sector had lost 75 percent of its demand since the peak of the Celtic Tiger years, yet the allocation of ETS credits to the sector was based on its historical sales levels. He also says that the over-allocation of credits to the sector represents a windfall gain, as the credits can be sold. It also represented a loss to the exchequer as the credits could be sold by the State instead of being given to the sector.

Cement consumption in Portugal plunged last year, mirroring similar rapid declines in neighboring countries such as Spain. The Portuguese Federation of Construction Industry (FEPICOP) announced that consumption in Portugal in 2012 fell to volumes last seen in 1973.

According to FEPICOP, last year’s cement consumption fell 26.9 percent, with the construction industry due to break records in terms of negative licensed dwellings and number of employees. The drop in activity in the construction sector had a direct impact on unemployment, with

select PROJECTS IN THE WORKS: europe, russia and baltic region COMPANY (LOCATION) TBA/France

OVERVIEW New clinker grinding plant in Montoir-de-Bretagne will be operational next spring.

Total investment of 50 million euros. Annual production capacity of 600,000 tons is to be achieved by 2017.

Table available in the CemWeek Magazine Print Edition.

HeidelbergCement/ Georgia

HeidelbergCement has launched a new cement plant construction project in Kaspi, in the Shida Kartli region. Initial output will be million tons and in the future the plant's output will increase to 2.8 mtpa.

Pikalyovsky Cement/ Russia

A proposed modernization plan for the Pikalyovsky Cement unit has been approved by the www.cemweek.com/subscribe government of Leningrad region. The project will increase the production capacity of the plant to 1.946 mtpa. The investment is worth 679,300,000 rubles.

Verkhnebakansky Cement/Russia

Plant has inaugurated a new dry process production line which will produce 2.3 mtpa. The new line was put into operation at the end of December.

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The consumption of Spanish cement plunged 34 percent in 2012 to account for 13.5 million tons. However, the Spanish cement industry was expected to bottom out in 2013 after a tough period brought about by the economic crisis. Analysts project infrastructure spending will rise, and local building activity will slowly increase, spurring local cement makers to expand production.

Serbia is working to eliminate tariffs on industrial goods manufactured in the European Union (EU) such as cement, concrete, plaster and ceramic products.

The move is part of the Stabilisation and Association Agreement (SAA), which calls for the liberalization of trade and the gradual lowering of tariffs over a six-year period. Industrial products eventually will be completely liberalized, meaning no tariffs on these products. However, organic products produced in Serbia will remain protected by tariffs until at least 2014.

RUSSIA & THE BALTIC REGION In Russia, the production of cement in 2012 grew by 10 percent relative to 2011, reaching 61.5 million tons – a record amount over the past 20 years. Cement consumption also increased by 13.2 percent in relation to 2011. The largest growth of cement consumption occurred in the Central Federal District (14.9%) and the North-West Federal District (20.5%).

Last year, the volume of imports of cement sales increased by 20 percent to 1.4 million tons. Main sources of imports of cement from Russia were Kazakhstan (767,000 tons), Azerbaijan (362,000 tons) and Belarus (276,000 tons). Average annual prices of cement producers in Russia for 2012 relative to 2011 increased by 13.4 percent to 2,957 rubles per ton.

At the same time, the purchase price for

COMPANY (LOCATION)

OVERVIEW

Lucky Cement/Iraq

Lucky Cement has invested in a cement grinding plant as part of a JV with a partner in Basra (Iraq). Production is expected to start before the close of the current year.

Northeast Cement/ Turkey

Company is looking to invest US$200 million to build a cement plant in Turkey's GĂśrele district. Production capacity will be at 2 mtpa, with an eye to hiking capacity to 4 million tons eventually.

Sahel Cement/Benin

Senegalese firm Sahel Cement has invested 250 million euros in Benin for a unit with a capacity of 2.5 million tons, scheduled to open in June 2013.

Table available in the CemWeek Magazine Print Edition.

TBA/Afghanistan TBA/Saudi Arabia

A cement plant is set to rise in Afghanistan's Kandahar province. The governor of the province www.cemweek.com/subscribe is looking for project investors.

Saudi Arabia is mulling three new cement plants to ease the country's supply situation.

There is a study for the establishment of three cement plants in Taif, Baha and Medina, at a cost of US$1.2 billion.

the period increased by 12.9 percent and amounted to 4,041 rubles per ton.

prices, which create favorable conditions for the growth of imports of cement.

Experts forecast growth in the cement market at 5 to 7 percent per year until 2014, but they caution that expanding production will be challenged by the great distances from the producers of the regional markets and by rising domestic

In related news, the major Russian cement players are losing their share in the market thanks to new energy production and imports. For example, in the first nine months of 2012, the market share of Eurocement declined 4.7 percent. Other

manufacturers such as Lafarge , Novoroscement, Sibtsem and Sebryakovcement lost roughly 1 percent each. The volume of production at Eurocement Group and Lafarge plants decreased by 0.3 and 9.1 percent, respectively.

Cement production in Belarus increased by 6.7 percent for January through November 2012, compared to the same period in the previous year, according to the National Statistics Committee. Belarus plans to double the production capacity of cement and reduce the cost of energy resources to produce more clinker. The government intends to provide a comprehensive modernization of building materials and designs through 2015. The program is being developed by the Ministry of Architecture and Construction and will include the introduction of new facilities and the renovation of existing facilities using the latest high-performance, high-tech and resource-saving technologies based on local raw materials. The improvement plan is expected to cost more than Br12.5 trillion.

regional report: europe, middle east, africa

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Ukrainian cement enterprises in 2012 reported lower production levels. Production fell 6.8 percent compared to the same period in 2011, according to the State Statistics Service of Ukraine. Ukrcement, the Ukraine’s cement association, projects cement production falling 5 to 7 percent (by 489,000-684,000 tons) in 2013.

This translates to 9.089 mtpa, down from 9.284 mtpa in 2012.

MIDDLE EAST Jordanian cement makers reported higher demand in 2012, as sales rose to 4 million tons. Last year, the local market saw strong activity in the cement sector driven by the movement of housing construction from the private sector. Abu Soufa of Assabeel reported that cement consumption reached about 4 million tons in 2012, compared with 3.72 million tons in the previous year. The industry is projecting a better outlook for the year, especially on the back of the implementation of government projects that give a strong boost to real estate market activity.

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regional report: europe, middle east, africa

a change in prices. A number of manufacturers of cement in the country report the sector is in dire need of government intervention to restore balance. Experts pointed out that new infrastructure plans in Abu Dhabi could perhaps restore balance to the market again.

Iraq should limit the quantities of imported cement it lets into the country if it wants to support local industries; economist Salam al Quraishi suggests a measure like this would help to support local products. “Some cement production lines have threatened to stop production due to the difficulty of marketing their products in the local market. Policy should reduce the existing commodity dumping,” he said.

Iran’s cement plants produced 69.457 million tons of cement between February 2012 and February 2013, an increase of 6.7 percent. Iran produced roughly 65 million tons of cement in 2012, ranking it fifth in the world. The secretary of the Guild Association of Cement Producers, Abdolreza Sheikhan, noted 58.622 million tons of cement were produced in the country during the past 10 months, showing an increase of 4.6 percent year on year.

Earlier, Deputy Minister of Industry, Mines and Trade Vadzhiholla Jafari announced annual cement production would be increased to 75 million tons in 2013. He noted that planned investments in the coming years will allow Iran to become third in the world in the production of cement. According to the deputy minister, in 2025, the volume of cement

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production in Iran will reach 115 mtpa, and next year it should exceed 85 mtpa.

Cement makers in the UAE are asking the government to help them return to profitability amid a tough market. Analysts expected cement sector prices in the current quarter to remain fixed. Ordinary cement is now sold at 230 dirhams per ton bulk and 12 dirhams per bag. Analysts suggest that the second quarter may see

A lack of cement plants in Saudi Arabia is putting pressure on supplies in light of increased demand there, reported Construction Week. According to Abdullah Radwan, Chairman of the contractors’ committee at the Jeddah Chamber of Commerce and Industry (JCCI), the cement factory in Yanbu is under intense pressure because of its close proximity to clients in Jeddah, Makkah and other cities in the western region. There are only 17 factories in Saudi Arabia, making it difficult for manufacturers to meet demand by providing high quantities at a low cost.

Afghanistan is set to tender for three cement plants. According to the Ministry of Mines, included in the three tenders is the Herat Cement Factory, which previously had been contracted with an Iranian company. However, that arrangement was terminated by the ministry because of the company’s failure to fulfill its commitments in due time. The ministry also

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OVERVIEW

CIMAF/Burkina Faso

Plans to invest EUR30 million in country. Started construction in the industrial area of Kosodo ​​ on a new plant.

CIMERWA/Rwanda

The expansion program for Rwanda's CIMERWA is underway. The factory is expected to increase from 100,000 to 600,000 tons annually.

Dangote/Tanzania

The US$420 million cement factory is expected to produce 3 mtpa, and will be finished in 2016.

Table available in the CemWeek Magazine Print Edition.

Dangote/Zambia

Dangote will open its new US$400 million cement plant in Lusaka in 2014. Company plans to open another 1.5 mtpa capacity plant in the capital city after the completion of the Ndola plant next year.

Flour Mills/Nigeria

Company wants to build a 2.5 mm ton per year cement plant and plans to borrow as much as US$500 million to build it. The new cement plant will be completed by the first quarter of 2016. www.cemweek.com/subscribe

Heidelberg Cement Group & Cimburkina/ West Africa

JV will build a grinding unit with an annual grinding capacity of 70 million tons of cement; estimated cost to build US$25 million.

PPC/Zimbabwe

PPC is planning to build a US$200 million cement plant in Harare. The new one mtpa plant will cater to Zimbabwe and the central Mozambican market and complement PPC’s two manufacturing plants in Bulawayo and Collen Bawn.

SEMAF/Burkino Faso

Construction started on 500,000 ton plant. Investment cost estimated at EUR30 million.

TBA/Libya

Investors from Saudi Arabia are looking to invest 450 million riyals to build cement plants in Libya.

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percent compared with the same period of the previous year for a volume sold of 14.5 million tons. Bad weather experienced since October was cited as a primary factor.

AFRICA Egypt’s Minister of Petroleum and Mineral Resources Eng Osama Kamal denied there was a deficit in the amount of gas for cement companies. He said that cement producers have raised prices on their own, although they are getting their full quota of gas needs. The minister added that the government is working to provide all the needs of different types of fuel, whether gasoline, diesel or gas.

Nigerian cement makers are reeling from the effects of an oversupply situation that has hit the industry. According to Joseph Makoju, Chairman of the Cement Manufacturers Association of Nigeria, cement manufacturers are producing more cements than are consumed in the country.

He hopes the government might step in to save the fledgling industry from the same path the textile industry went. Lafarge Cement WAPCO recently called on the federal government and other arms of the government to explore more ways of using local cement, especially in the construction of roads in the country.

As of mid-February, Egyptian cement prices rose, tracking a general rise in the prices of building materials. Experts say the price increase was caused by a rise in the prices of spare parts, and because the domestic market is suffering from a severe recession brought on by the country’s current instability. The restrictions on cement imports also were noted as hurting the industry, as current domestic production levels were not enough to satisfy demand.

Chad’s liberalization of cement prices may be having a negative effect on market prices and supply. The Minister of Trade and Industry, Mahamat Taher Allahu, had liberalized prices by decree, but some critics charge that the cement market is a monopoly, influenced by a small group of people. Total freedom of access to the market is restricted, there is no full transparency, prices and quantities are unpredictable, and the flow of information is not perfected on market conditions.

regional report: europe, middle east, africa

noted that in the next Persian year of 1392 (March 2013-March 2014), the cement factories of Jabul Saraj in Parwan province and Ghori in Baghlan province also will be put up for bidding.

Savannah Cement is bearing the brunt of intense market competition in Kenya, with its rivals questioning its bid for special terms at Athi River’s Export Processing Zone (EPZ). Kenyan producers have charged that Savannah’s enjoyment of EPZ status has left the region’s 10 operators at a disadvantage. This is because continued on page 42

Cement imports from Algeria almost doubled in 2012, contributing to an increase of nearly 12 percent of the import bill of construction materials. According to the National Center for Informatics and Statistics (CNIS) Customs, imports rose 94.67 percent in 2012. Imported cement showed the same trend, rising from 1.361 million tons to 2.701 million tons, an increase of 98.37 percent.

Shortly after the increase was announced, the Cement Industry Group of Algeria (GICA) launched an international tender for the import of 450,000 tons of cement.

The deadline for interested foreign companies was set at 60 days.

Moroccan cement and concrete sales were mostly flat last year as construction activity slowed. According to statistics released by the Professional Association of Cement (APC), cement sales in late November sunk into the red, falling 0.47

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REGIONAL REPORT:

The China Cement Association says profits for the industry were lower last year as the cement industry added 125 new production lines, further exacerbating the production capacity excess of the cement industry, reported China Economic.

Under greater pressure of excessive supply, total profit of the cement industry in 2012 decreased by nearly 50 percent year on year. Statistics from the China Cement Association showed that total profit of the cement industry in 2012 was about RMB 56 billion yuan, dropping nearly 50 percent compared to that of 2011.

Myanmar’s cement industry is expected to strengthen in the coming years, with analysts saying it has huge potential for growth. Wisoot Anupunthumetha, an adviser for LV Technology, said, “There is massive potential for cement growth in Myanmar. The growth trends for the industry will be similar to Thailand, with more direct investments leading to higher demand.”

Currently, there are 14 cement plants in Myanmar with a combined capacity of 3.5 million tons per year. Demand is 6 million tons.

Thailand-based Siam City Cement will expand production in Thailand and build a new plant in Indonesia as part of its expansion plans this year. The firm says it will spend 3.6 billion baht this year and next. Managing Director Philippe Arto indicated the company will spend 1.45

billion baht to upgrade one of the two kilns that have been shut down for five years at its Saraburi plant.

Indonesia’s cement consumption is forecasted to rise more than 10 percent, from 55 million tons in 2012 to 62 million tons this year. A senior official of the Ministry of Industry Indonesia, Tuti Rahayu, suggested the country’s cement demand this year will increase, due to increased implementation of infrastructure development projects across the country in the framework of the government’s plan to expand and accelerate overall economic growth.

According to reports, Indonesia’s domestic cement consumption continues to rise, with an increase of 14.5 percent noted in 2012, up from 48 million tons in 2011. The eastern region has the highest consumption rate in the country at 54

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percent. With this momentum, Indonesia would need to build at least two new cement plants each year to meet domestic demand.

Philippine cement sales rose 17.5 percent year on year in 2012, according to data from the Cement Manufacturers Association of the Philippines. Cement sales in the Philippines in 2012 reached 18.4 million tons, a year-on-year growth of 17.5 percent, the highest growth rate for 15 years. The association credited the increase to acceleration of government infrastructure projects to break a bottleneck, as well as to the enhancement of social consumer confidence, and said it expects the electoral impact this year to hike cement sales as well.

Finally, sluggish construction activity has prompted Holcim to idle some of its plants and workers in Australia as part of cutbacks. It shut down two manufacturing plants in Ipswich around the start of the New Year. The Swiss company with outlets in 70 countries announced plans last November to lay off 150 staff and mothball 30 facilities in Australia.

regional report: SOUTH ASIA

REGIONAL REPORT:

At the end of 2012, the cement market in Uzbekistan demonstrated significant activity, according to Uzbek Republican Commodity Exchange. Data showed that over the 12 months of last year, the volume of supply of cement increased by 13 percent compared with 2011. In general, sales through exchange trades were 4.4 million tons of cement.

Kazakh cement demand also rose, with volume produced climbing to 7.05 million tons, up 13 percent year on year. The Kazakhstan market is largely ensured by domestic production. The share of imports amounted to 0.9 million tons of cement, or 13 percent of total consumption in 2012.

Cement production in Tajikistan in 2013 is set to double, according to government representatives. The country is set to produce more than 474,000 tons of cement this year. Sources indicate that the forecast plan for the current year is twice the amount of cement from last year, which was at 234,400 tons.

The Eurasian Development Bank and Kazakh-Tajik direct investment fund (KTFPI) signed a Memorandum of Understanding for the co-financing of a cement project in Tajikistan. It is anticipated that the Khujand cement plant will produce 500,000 tons of cement per year.

The All Pakistan Cement Manufacturers Association reported that exports continued to tumble in January, but domestic sales helped keep the industry afloat.

In January 2013, domestic cement dispatches jumped by 10.10 percent to 2.135 million tons, but cement exports declined in the same month by 11.91 percent with total exports of 522,584 tons. In the first seven months of this fiscal year, total cement dispatches in the country reached 18.607 million tons. Domestic use stood at 13.862 million tons, and the exported quantity was 4.746 million tons.

Pakistan-based Lucky Cement and other cement makers are looking to tap high growth markets such as Sri Lanka to drive profits. The company is currently

select PROJECTS IN THE WORKS: south asia COMPANY (LOCATION)

OVERVIEW

Amrit Cement/India

Recently commissioned the one mtpa Jayantia Hills plant in Meghalaya which will deliver mainly to North-Eastern market.

HeidelbergCement/ Kazakhstan

A new cement plant is set to rise in Shetpe Mangistau in Kazakhstan in 2014. The planned production capacity is up to one mtpa.

JKCL Cement/India

Government of Jammu requesting a new plant to produce 300 tpd cement be built as soon as possible.

Khujand cement plant/Tajikistan

The Eurasian Development Bank and Kazakh-Tajik direct investment fund" (KTFPI) signed a Memorandum of Understanding for a cement project in Khujand, Tajikistan; 500,000 tons of www.cemweek.com/subscribe cement per year.

OCL India/India

Plans to set up a 1.3 mtpa grinding unit in West Bengal at a cost of RS 500 crore.

The plant would be commissioned by the end of December 2013.

TBA/Kyrgyztan

China will allocate funds for the construction of a 1.2 mtpa cement plant in Kemin; investment valued at US$50 million.

Table available in the CemWeek Magazine Print Edition.

establishing a 500,000 metric ton grinding plant in Sri Lanka. Meanwhile, Thatta Cement also received approval from the Sri Lanka Ports Authority (SLPA) to set up a cement processing plant at the Port of Hambantota in the southern region.

Another market of interest for exporting is Afghanistan. Pakistani exports to Afghanistan showed a 11.7 percent increase over the last six months. Total exports from Pakistan to Afghanistan were estimated at 62 percent while exports to India declined by 44 percent and other markets largely remained unchanged.

The Indian cement industry is expected to add 30 to 40 million tons of additional capacity. The industry currently has a capacity of 324 million tons per year and operates at 75 to 80 percent utilization, due to weak cement demand from realty and infrastructure sectors. Capacity added in 2013 will be more than expected as some of the projects that were slated for completion in 2012 were delayed but are expected to go on stream in 2013.

Some of the major projects that are to be completed during the year include ABG Shipyard’s 3.3 mtpa at Kutch in Gujarat and Century Textiles’ 2.5 mtpa at Chandrapur in Maharashtra. In Karnataka, Sagar Cement and Chettinad Cement will add 3 mtpa and 2.5 mtpa at Gulbarga, continued on page 42

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REGIONAL REPORT: Mexican-based Cemex hopes to charge higher prices in the United States going forward to boost its core profit. The company had earlier reported weak sales in Europe, offset by a pickup in its U.S. business, but leading to a wider-than-expected fourth-quarter loss.

The latest forecast from the U.S. Portland Cement Association (PCA) predicts an 8.1 percent growth in cement consumption in 2013, significantly higher than the tepid growth projected in its Fall 2012 report. The upward revisions reflect adjustments made in light of the recognition of stronger economic momentum and markedly more optimistic assessments regarding residential construction activity. The January report put 2012 consumption at 78.5 million metric tons, an 8.9 percent increase compared to 2011.

“Growth in 2013 cement consumption will be largely driven by gains in residential construction,” PCA Chief Economist Ed Sullivan said. “Housing starts should reach nearly 950,000 units, with single family construction near 700,000 starts during 2013. We see starts hitting the one million mark in 2014 or 2015.”

Sullivan did caution, however, that the first quarter of 2013 would actually show

declines compared to the same period in 2012. “It is important to point out that this potential decline in first quarter growth rates does not signal a weakening in market fundamentals, but rather a hangover from unfavorable 2012 weather conditions. Stronger gains in cement consumption growth are expected during the second quarter.”

PCA also upwardly revised its longrange projections for 2015-2017. Annual growth during that period is expected to be as high as 9.2 percent.

Cement consumption in Mexico presented a growth of about 3.5 percent at the end of 2012 compared with the previous year, reaching about 35 million tons, reports Economia Terra. This increase in demand is due to stronger growth in the infrastructure sector and moderate growth in self-help housing as well as the construction of industrial buildings, offices and shopping centers.

Cemex expects pretax profits to recover by 2016 to levels seen before the 2008 global financial crisis. The company’s EBITDA fell from US$4.6 billion in 2007 to US$2.3 billion in 2010 and 2011 as a result of the crisis, with the company returning to EBITDA growth last year.

Chairman and Chief Executive Lorenzo Zambrano expects EBITDA to reach US$4.7 billion in 2016, up from US$2.6 billion in 2012.

Lafarge and Elementia have agreed to combine their cement assets in Mexico.

Lafarge will contribute its two plants Vito and Tula with a total capacity close to one million tons, while Elementia will contribute the new one million ton plant it is currently building in central Mexico.

According to reports, the transaction, which involves no cash and is subject to regulatory approvals, is expected to close in the second half of 2013, pursuant to the start-up of the new plant of Elementia. The new joint venture will be 47 percent held by Lafarge and 53 percent by Elementia.

Colombian cement shipments declined in December, as demand flagged. On the production side, cement production in the country reached 1.0924 mm tons, an increase of 1.4 percent in December.

In total, December shipments were at 831,500 tons of gray cement to the domestic market, which represented a decrease of 5.9 percent.

Ecuadoran and Colombian authorities have noted an increase in illegal cement shipments from across the border, which they fear may be used to build illegal structures and aid in the production of cocaine, reports Confirmado. According to Colonel Mauricio Silva, battalion commander of Tulcán Galo Molina, the

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Shipments of cement in the Peruvian market totaled 9.571 million tons in 2012, a 15.41 percent increase year on year, reported Peru 21. Last year, cement production was 9.847 million tons, representing an increase of 15.87 percent over the previous year. In late 2012, exports reached 200,485 tons, indicating an increase of 196.96 percent compared to 2011.

Peru’s Indecopi sanctioned Cementos Lima and three of its distributors for refusing to contract with small businesses that also worked with Cemex. The practice, called vertical collusion, reportedly affected hardware stores and sought to prevent these outlets from buying Cemex cement. Cementos Lima, which has a dominant position in this market, may appeal the sanction.

Bolivia’s state-owned import agency plans to double the amount of cement it buys from Peru’s Yura. In 2012, it purchased 1.3 million bags; this year, it is projected to import 2.5 million bags or 59,000 tons.

The CEO of IB, Oscar Sandy, noted that in 2012 it imported 1.3 million bags of cement and this year it plans to acquire a similar amount, though, “if there is an increase in the demand of the product, this volume can be increased.” Sandy explained there is the possibility of signing an agreement with the company Misicuni for the construction of a dam in Cochabamba. The signing of that agreement would require 150,000 bags of cement for the first half.

In order to increase the supply of domestic cement, Paraguay’s INC has proposed that major distributors in Alto Paraná buy bulk cement. Thus, consumers will favor smaller amounts, keeping customers in the local market, according to the head of the state cement company, Carlos Krüssel. He indicated that the goal is to keep customers and make domestic con-

sumption increase, even amid stiff competition from imports.

Camargo’s Loma Negra says its plans to build a new plant in Argentina will proceed. In August 2011, the firm announced the start of construction of a new cement factory at Loma Negra in San Juan that would be ready in early 2014.

However, the actual start has been questionable, given the delays amid resistance from some locals. At the start of this year, the company confirmed it would take the first steps to finally build the plant. Reports indicated the company will focus on designing the plant to produce 2,000 tons of cement daily, increasing the country’s current cement capacity by 8.5 percent.

Cementos Molins sold EUR64 million worth of shares of its two joint ventures in Argentina and Uruguay to Votorantim. The Spanish firm now holds 51 percent of the capital and Votorantim has 49 percent. According to Cementos Molins, the sales are part of the company’s strategy to strengthen its partnership with Votorantim.

Cement sales in the Brazilian market totaled 68.3 million tons in 2012, an in-

crease of 6.9 percent over 2011, according to preliminary data from the National Association of Cement Industry (SNIC).

On a quarterly basis compared to 2011, sales in the fourth quarter of 2012 grew 4.4 percent, reflecting the trend of deceleration compared to the expansions experienced in the first, second and third quarters of 2012, reaching 13.7, 5.9 and 4.7 percent respectively. Cement imports in 2012 totaled 977,000 tons, down 10.4 percent from 2011. Exports reached 26,000 tons last year, a decrease of 40.6 percent.

regional report: americas

military seized more than 400 pounds of cement. “In Colombia there is a restriction on the sale of cement that is used as a precursor chemical for evasion of cocaine,” said Silva.

Cimpor approved a merger of Cimpor’s operations in Brazil with those of InterCement. The merger follows the group’s announcement that the valuation of assets to be swapped among Cimpor, InterCement and Votorantim requires that Cimpor pay EUR382 million to InterCement as an adjustment for the plant swap carried out last year.

In December 2012, Venezuelan Minister Ricardo Menendez reported the local cement industry broke the record for cement production in 2012, reaching 8 million tons produced as of November.

The increase still may not be enough to meet demand as Venezuelan traders contended in January that they had not received government-subsidized construction materials for some time, necessitating an increase in the number of imports. As a result, some traders had seen a sharp decline in sales, and others indicated that they had been receiving cement deliveries only once a week, forcing them to regulate sales to meet the needs of their customers.

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OVERVIEW

Fancesa/Bolivia Loma Negra/ Argentina

The main factory of Chuquisaca will increase its current capacity, to 760 tons per day of clinker and 400,000 tons of cement per year.

Table available in the CemWeek Magazine Print Edition.

This year, the company will focus on designing its long-delayed new plant to produce 2,000 tons of cement daily.

Votorantim Cement /Brazil

New 2 mtpa plant in Ceará to be built. Total investment estimated US$700 million. The start-up is scheduled for 2015.

Votorantim/ Brazil

Company wants to build a new cement plant in Maraba and intends to acquire part of the area of ​​ Cosipar to build a plant.

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SECTOR COVERAGE: Meanwhile, Saudi Arabia has agreed to grant US$448 million to Bahrain as part of a US$2.5-billion pledge to fund housing, infrastructure projects and education systems in the area, while the United Arab Emirates announced that projects worth approximately 20 billion dirhams are ready to roll, including a new refinery in Al-Zour and a North Zour station to generate electric power.

Heading now for South America, Brazil is preparing for the 2014 World Cup by presenting eight public-private partnership infrastructure projects worth US$20 billion to British potential contractors.

The projects include the construction and maintenance of three subway lines, a monorail, an intercity train network and four new hospitals.

Europe’s construction market is facing difficult times, with building sectors declining in France, Ireland and Spain. The construction sector in Spain will continue to fall until at least 2015, according to Euroconstruct. Experts predict that the sector will fall by 30.8 percent in fiscal 2012, which would be the second largest decline after the 22.4 percent recorded in 2009.

construction Announcements on massive infrastructure projects are flowing from the Middle East and Brazil, while the Chinese construction market, on the other hand, has seen better days. The harsh winter almost halted construction activity in China, and the country has to put up with new taxes on construction materials exports to the European Union. And Europe is struggling to keep the construction market going, with building sectors in France, Ireland and Spain falling during the last months.

In the Middle East, the Gulf Cooperation Council’s construction insurance sector is expected to see a surge starting this

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year. The region is set to invest more than US$900 billion in infrastructure projects over the next decade. In the next eight years, the member-countries together (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates) will be spending around US$100 billion in road and rail projects alone.

Moreover, the European Bank for Reconstruction has allocated investment funds worth 2.5 billion Euros to four countries in the region – Egypt, Jordan, Tunisia and Morocco – while the construction of a US$1-billion super-regional urban shopping center called Sowwah Central will start this year in Abu Dhabi.

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Following a similar pattern, the Irish construction sector was in the red last December, although there were signs that the decline is easing, as activity, new orders and employment fell at lower rates.

The seasonally adjusted index designed to track changes in total construction activity posted a value of 43.0 points in December, up from 42.6 in the previous month.

France is going through the same situation, as the local construction equipment market stagnated in 2012, according to the French Union of International Business machinery, mining, quarrying, construction and lifting (Seimat). For 2013, Seimat expects a decrease in activity, influenced by the decline in the level of orders. The union also raises the issue of many uncertainties in the sector, including the low level of confidence and lack of economic transparency.

As for innovations in the concrete sector, Eastern Concrete Materials, an American company, has announced the introduction of two new high-performance products: Con-Tite EF Waterproof Concrete and Sea-Site EF Saltwater-Resistant Concrete.

The new products are targeted for use in rebuilding areas ravaged by Superstorm Sandy and protecting concrete structures subject to damage from water, air or waterborne salts.

In Europe, Spain is also working on a new “green” type of concrete that combats the excess of carbon dioxide in the atmosphere. Spanish researchers say the “green concrete” has the property of ab-

New residential construction in the U.S. (thousands of units) December 2012

November 2012

December 2011

Building permits

903

900

701

Housing starts

954

851

697

Housing completions

686

675

606

Source: U.S. Census Bureau, New Residential Construction Statistics

sorbing carbon dioxide because it contains colonies of microorganisms (such as lichens, mosses and algae), which naturally absorb the carbon dioxide from the atmosphere. Scientists are still working to improve the new material, in order to make it usable on a larger scale.

Gypsum and lime Moving to the United States, drywall manufacturers have allegedly conspired to raise prices by 35 percent this year and stopped offering discounts on big jobs to monitor any “defection” from the conspiracy. Sierra Drywall Systems sued several companies that “manufacture and sell almost all of the gypsum board sold in the United States.” Named as defendants are USG, United States Gypsum, New NGC, LaFarge North America,

CertainTeed, Georgia-Pacific, American Gypsum, TIN dba Temple-Inland and PABCO Building Products.

sector coverage: construction materials

Concrete In Russia, concrete production keeps expanding, as a new plant was built in Blagoveshchensk area. The construction of the line took a year and a half. The plant will produce building materials of concrete using the latest technologies, such as hollow floor slabs of reinforced concrete columns, beams and piles.

In Asia, Japan will award Y1.06 billion in compensation to 158 workers who have been suffering from lung diseases, such as lung cancer and mesothelioma, due to exposure to asbestos dust. This is a significant ruling as it was decided that the state’s inadequate regulations led to the workers’ sufferings. The lawsuit was filed against the state by 308 former construction workers in and around Tokyo and by 42 construction material makers. They demanded payment of Y11.8 billion in compensation.

As for new European projects, a kaolin mine in Germany, in the district of Kab-

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CONSTRUCTION & MATERIALS BY BMWEEK.COM

nicipal waste would be solved soon as the municipality has drafted a plan to build three new recycling plants in compliance with a study carried out in conjunction with the World Bank.

schutztaler Schletta, seeks approval. The regional planning process for the planned 164-acre mining area was completed.

The mountain plan approval process will probably take three to five years to complete. In 2011, there were 13 surface mines in Saxony that produced approximately 1.6 million tons of kaolin, about 25 percent more than the previous year.

Also in the mining area, the Philippines is reviewing the applications of 68 cement companies for the expansion of limestone quarry areas. “The mining policy allows the expansion of certain areas recommended [by] the Economic Development Cluster. We are just waiting for the decision of the cluster to find out which among those applications would be allowed to expand their areas,” Mines and Geosciences Bureau Director Leo Jasareno said.

Aggregates In Spain, the Community of Madrid, one of the 17 autonomous regions of the country, imposed fines for illegal mining, as the government probed three illegal mining operations. A recent report also states that more than a third of aggregates in the Port of Granadilla are illegally sourced. From the nearly 2 million cubic meters of materials that were provided from 2010 until last October, 35.5 percent had been mined illegally.

Remaining in Europe, aggregates production is falling in Northern Ireland, as data

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shows the recession has cut production by 45 percent since 2008.

England also faced a rapid decline in construction activity in 2012. MPA sales survey results indicate for 2012 a reduction of 9 percent in aggregates, cement and ready mixed concrete markets and an 18 percent decline in asphalt sales. The provisional construction output figures for 2012 indicate a 9 percent fall during the year.

Green and innovative building In the Middle East, Kuwait is set to install three recycling plants, as the municipality says this could be the solution to getting rid of solid waste in the area. The Kuwait municipality director, engineer Ahmed Al-Subaih, said that the problem of getting rid of solid, constructional and muConstruction production

(index change in Dec. 2012 vs. Nov. 2012) COUNTRY

Index evolution*

Macedonia

10.5

Czech Republic

2.1

France

1.2

Portugal

0.8

Romania

-2.8

Germany

-8.9

Poland

-10.1

Bulgaria

-10.3

UK

-15.6

Source: Eurostat

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Remaining in the area, Abu Dhabi is trying to save energy as it builds new efficient buildings. The Department of Municipal Affairs confirmed that the application of the Abu Dhabi International Codes for lower energy consumption contributes to the rationalization of energy consumption by 22 percent, and 9 percent for water consumption, in addition to lowering the cost of maintenance of buildings by 40 percent.

In the United States, local authorities in North Dakota advanced a bill that makes the use and disposal of so-called coal ash “acceptable” in the state, without it being regulated as a hazardous waste. Waste from coal-fired power plants has been used in the state to make everything from highways and bridges to buildings.

Meanwhile, in the UK the use of recycled aggregates is growing. It now accounts for 20 percent of the total aggregates market there. In its latest survey on the industry, BDS Marketing Research has identified around 530 static sites in the country with an aggregates recycling plant. Together, these plants produce around 37 million tons yearly.

Last but not least, a new French decree sets minimum baseline requirements for a building to be classified as biobased.

Requirements and procedures for earning the biobased building award were released in France last December, and are made up of three levels based on the rate of incorporation of material derived from plant or animal biomass. According to press reports, the measure is meant to promote the use of local resources, boosting the local economy and promoting the development and structuring of ecoindustries. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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EQUIPMENT

& NOTABLE PROJECTS

Loesche wins order for slag grinding in Germany In November 2012, Loesche won a contract from the German cement company Spenner Zement for the supply and construction of one complete slag grinding plant with the Loesche mill type LM 46.2+2. The plant will be built close to the steel plant of Hüttenwerke Krupp Mannesmann (HKM) in Duisburg, Germany. The contract includes the supply of the complete equipment from the slag conveying and dosing system to the inlet of the product bucket elevator.

It includes the Loesche mill and Loesche hot gas generator and the product bag filter, as well as the process equipment and technology. The electrical equipment and automation system will be delivered

by Loesche Automation. Loesche is also responsible for the engineering, delivery and construction of the complete mill building, including all excavation and foundation works.

The planned grinding plant is capable of handling more than 300,000 tons of slag per year. Spenner Zement transports 157,000 tons of cement powder each year from its own cement plant in Erwitte to the new plant in Duisburg. This cement is blended with the slag powder to blast furnace cement. According to Spenner, the main market is the area around Duisburg. The commissioning of the plant is scheduled for the first quarter of 2014.

Loesche Supplies Dangote’s Ethiopian Plant On behalf of Dangote Industries (Ethiopia), the management of Sinoma International Engineering (NCDRI) will rely exclusively on Loesche grinding technology. Sinoma, which has used Loesche Mills for many years, once again has chosen to use Loesche’s vertical roller mills for the new grinding plant in Menagasha in Ethiopia.

Both the plant elevation of 2,600 meters above sea level and the very poor grindability of the cement raw material

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were special challenges for the layout of the grinding equipment. Delivery is scheduled at the beginning of 2014.

Ibese Orders Vertical Roller Mills On behalf of Dangote Industries, the management of Sinoma International Engineering (NCDRI) placed another order for five Loesche vertical roller mills for the cement plant Ibese Line 3&4.

Having delivered equipment for Ibese 1+2, Loesche has now been awarded a contract for Ibese 3+4. Sinoma, which has used Loesche Mills for many years, once again has decided for Loesche’s vertical roller mills. Delivery is scheduled at the end of 2013.

Vertical roller mill for Dumai Clinker For the new grinding terminal, Dumai Clinker, located at the seaside east of Sumatra, PT Semen Padang has once again decided to go with a Loesche vertical roller mill. Along with the mill and the mill motor designed for a capacity of 3.150 kW, the order includes the complete import portion of the grinding plant, filter, fan, electrical equipment and automation. Delivery is scheduled in November 2013.

Raw and cement grinding plants for India JK Cement has contracted ThyssenKrupp Polysius to supply three new grinding plants equipped with POLYCOM highpressure grinding rolls. The grinding plants are to be constructed at two different cement production locations.

At the company’s Jharli works in the state of Haryana, a combi grinding plant is to be installed. At the Mangrol works in the state of Rajasthan, raw material grinding will be taken over by a POLYCOM with 2 x 1,700 kW drives and a SEPOL-PC high-efficiency separator for a rated raw meal output of 400 tph.

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BWF Envirotec adds to product portfolio BWF Envirotec is extending its product portfolio with the new PM-Tec product line and is offering new filter media specifically used in filtration of minute dust particles. The new PM-Tec product line represents the highest demands on a filter medium for industrial filtration.

BWF Envirotec combines in the new product line first-rate carrier media consisting of needlona® needle felt or fiberglass fabric with a high-efficiency ePTFE membrane, and brings to the product decades of experience in filter medium production. The continuous in-house process chain, starting with the manufacture of needlona® filter media, including the laminating process, to finishing of complete filter bags, guarantees the high quality standard of PM-Tec. The product line consists of a carrier medium on which an ePTFE membrane is laminated. The membrane produced from polytetrafluorethylene possesses characteristics that are optimally suited for use in industrial fine dust filtration.

BWF Envirotec supplies the new product line as material from the roll for manufacturers of filter bags and as made-up filter bags for manufacturers or operators of industrial dedusting plants.

The new PM-Tec product line for fine dust filtration is available with two different carrier media. BMWeek CemWeek BMWeek BMWeek

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PEOPLE

Mika Vehviläinen

Cargotec’s New President and CEO Cargotec’s Board of Directors appointed Mr. Mika Vehviläinen as Cargotec’s new President and CEO. Mr. Vehviläinen will start at Cargotec on March 1, 2013. Tapio Hakakari, Cargotec’s Vice Chairman of the Board, was to continue as the interim President and CEO until February 28, 2013.

Mika Vehviläinen comes to Cargotec from Finnair, where he was the President and CEO. Previously he has held senior leadership positions at Nokia Siemens Networks and Nokia, and has worked in logistics and service development in the United States and in Asia.

“During his successful international career, Vehviläinen has convincingly proven his leadership and result creating skills even during difficult circumstances.

The Board is certain that under his management Cargotec is well prepared to face the future changes and challenges,” states Cargotec’s Chairman of the Board Ilkka Herlin.

“The importance of transport and logistics will continue to increase in

the future. Cargotec as the forerunner in cargo handling solutions offers an interesting challenge.

I am excited to develop Cargotec business further, together with the whole personnel,” says Mr. Vehviläinen.

of India. The prestigious award was presented at a recent event held at the TAJ Lands in Mumbai. The award recipient was chosen by a joint think tank from the CMO Council and CMO Asia. The award was based on an overall ranking on leadership in the marketing area.

New CEO at Holcim USA Holcim has named Mr. Filiberto Ruiz to serve as the company’s President and CEO in the U.S. Mr. Ruiz’s appointment also includes serving as president and CEO of Aggregate Industries US, a Holcim Group company.

LOESCHE South America Sales Manager Mr. Eduardo Garcia has joined Loesche America (LAMI) to support the sales and marketing team for the South American market. Mr. Garcia holds a bachelor’s degree in mechanical engineering and an MBA with a concentration in supply chain management. His prior experience has been within the cement industry with CEMEX in Venezuela, and more recently for Holcim Group Support in the USA. At Loesche America, Mr. Garcia will be responsible for aiding in the definition and execution of sales and marketing strategies to increase sales potential in South America.

“As we look to the future, it is clear that Filiberto is the right choice to lead both organizations,” said Bernard Terver, a member of the Holcim Executive Committee. “I am confident that through his leadership we will continue to develop the next generation of leaders from within the organization, maintain our focus on the communities we operate in, the environment and our commitment to delivering the highest quality products and services to our valued customers.”

Additionally, Mr. Terver, who is the former president and CEO of Holcim (US) and Aggregate Industries US, has been named Chairman of the Board.

New Country CEO Lafarge Pakistan Cement announced the appointment of Mr. Amr Reda as the new country CEO of Lafarge Pakistan. As a finance veteran, Reda has held many senior positions in various multinationals. Before joining Lafarge Pakistan, he was the regional business controller of Lafarge Middle East and Pakistan, and he has served as member of the board of directors of Lafarge Pakistan since January 2007, the company said in a statement.

Top CMO Wholetime director Mr. Krishna Srivastava won an award from the CMO (Chief Marketing Officer) Council Asia as one of the 50 Most Talented CMO’s

Eduardo Garcia

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FLASHBACK News flow on CemWeek.com last two months (darker red shows higher news volume)

GLOBAL SPOTLIGHT All eyes are on India as the world's second largest cement market is fined by the competition authorities. China, Spain and the United States also make the headlines on CemWeek.com continued from page 33

continued from page 31

and UltraTech Cement will come up with 4.4 mtpa at Malkhed.

the Export Processing Zones Authority (EPZA) offers tax incentives, including a VAT waiver on import of equipment, exemption from 25 percent import duty on inputs and 10-year income tax relief.

At the end of January, India’s Competition Appellate Tribunal adjourned the hearing on the plea of 11 cement companies seeking a stay on the RS 6,307 crore penalty imposed by fair trade regulator CCI on the grounds of cartelization. COMPAT was expected to hear the matter in the next few weeks. COMPAT will hear the amended petitions of the companies after CCI serves them separate copies of its order providing them with complete details on production, pricing, dispatches and sales. COMPAT directed CCI to provide fresh copies of its order levying penalties on the 11 cement companies for cartelization. In its earlier order, CCI had not disclosed various facts about matters such as production, dispatches and pricing.

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According to recent media reports, Savannah, which has been the subject of a flurry of complaints to government agencies in Kenya, Uganda and Tanzania, confirmed it has started the process of degazetting its EPZ status.

South African-based PPC hinted it was pursuing additional acquisition opportunities to further its operations in Africa.

The group promised to deliver more news of acquisitions this year. PPC hinted at possible opportunities in Zimbabwe, saying that obtaining its indigenization certificate during November was an im-

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portant step for the group’s strategy. Additionally, despite “limited visibility” of major infrastructure projects, PPC held a cautiously optimistic outlook for cement demand in South Africa, Botswana and Zimbabwe.

The Development Bank of Ethiopia withdrew from a 1.52 billion Birr loan agreement made with Habesha Cement. A year before, the bank had given approval to the loan, which was expected to cover more than 70 percent of the financing of the proposed cement factory. Sources indicated the bank withdrew from the agreement it had endorsed in September 2011 on the basis of its inability to disburse money at this time. In addition, it also pulled out of loan commitments to five other companies, citing similar reasons.

BUZZ TOP 15 STORIES 1.

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Sinoma to invest in India venture, acquiring stake in LNVT Lafarge cutting kiln temperature for clinker production Reliance Cement launches new marketing campaign Egypt to issue more cement licenses in February PPC to expand presence in Africa CRH to continue expansion plans in India Sinoma gets fresh deal in Indonesia Saudi set to issue 3 new cement plant licenses Spanish cement makers increase waste fuel use JKCement orders three grinding plants from Polysius Lafarge to cut Brazil investments by half InterCement closes on majority of Cimpor CRH, Holcim jockeying for India’s Shriram cement unit Madras Cement lauded for management style India’s ABG looking to unload minority stake in cement

CEMWEEK.COM activity

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crisis crore

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earnings

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government growth holcim grew

increased india indonesia industries investment lafarge lemona likely limestone loss makers margins materials ministry mubasher national outlook pakistan peru

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markets

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plans

profits project reached region results revenues rise sector selling sephaku significant spain spanish stake trade transaction uniland units valderrivas volumes work workers 2015

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Mittal launches Hope Construction Materials unit Quarzwerke acquires majority stake in Kaolin Report: Vale looking to sell Kronau Potash project Kenya puts forth new building code More than a third of aggregates in Grandilla illegally sourced UK: Complaints against quarry plan Rebar falls as China demand slows US construction material prices rising Boral to sell NSW concrete masonry business Cuba to increase aggregates production Lehigh Hanson unit joining Energy Star challenge Chile nixes another quarry project Fehmarnbelt tunnel project attracts bids Spanish researchers working on ‘green’ concrete.

Lafarge sells off six quarries in Georgia USA

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infrastructure international investment jobs kaolin large long management markets mining national operating operations output planning plans plants port price private process product

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sector service services spending support technology transportation units vulcan waste water work world

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