CemWeek Magazine, Issue 9

CemWeek CemWee MAGAZINE

GLOBAL CEMENT INDUSTRY. KNOWLEDGE.

CLIMATE IMPACT

JUNE / JULY 2012

CemWee CemWee BMWeek RESEARCH

Gray Cement’s Price Decline Coal and Petcoke Price Update

Regulators & Industry Step Up Assessing the Legislation

A GLOBAL INDUSTRY China in Africa Morocco Snapshot

News

|

Analysis

|

Market Coverage

|

Interviews

|

People Moves

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

www.cemweek.com

Letter from the publisher and editor

Cement Industry: Experiencing a Climate of Change Two climates currently pervade global discussions in the cement industry—investment and environmental. Though differences across regions naturally exist, we still see a healthy dose of caution needed at the executive levels. This said, we also begin to see nascent opportunities at the global level—it is increasingly becoming a world of precision and strategic insight as we navigate the shoals of uncertainty and diminished visibility.

In the investment climate, the on-going development of Africa’s cement sector has come, perhaps, with mixed repercussions. With nearly 2,000 Chinese enterprises in Africa, the role of China should not be overlooked nor underestimated. The feature article “The Expanding Chinese Influence in Africa” (p4) discusses recent Chinese investment activity in African nations, acknowledging the benefits to local employment and industry amid less favorable reports of environmental abuses and unfair labor practices.

Of course climate continues to be a talking point for the cement industry, and the Rio + 20 UN Conference on Sustainable Development concluded last week with some surprising results (or lack thereof). The lowered cement production levels resulting from the economic downturn have led in turn to lowered emissions, transforming the Kyoto Protocol conversation. The feature article “What Happened to Climate Impact” (p12) unpacks the new dynamic of regulators backing off and producers instigating change.

To further analyze the dynamics and impact of climate change legislation on the cement industry, CemWeek looks to new CW Group Advisors team member Terry Pavlopoulos.

In our Tools & Analysis section (p 18), Mr. Pavlopoulos addresses the business areas that will be impacted by impending legislation and the industry’s preparedness to comply.

The analysis continues as CW Group Research presents an overview of global gray cement prices (Technical Analysis, p48), which continue to experience a pattern of decline.

Finally, from the research arm of CW Group comes a snapshot of cement manufacturing in Morocco (Country Snapshot, p24), which reveals an industry poised for growth.

To participate in the conversation, we welcome your comments, feedback and content suggestions at editor@cemweek.com.

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

JENNIFER RIDGEWAY project editor

Paolo Dela Rosa art director

Anthony Fitzgerald emea & americas advertising t: +44(0)1488

680623

Jennifer Adams Diana Heeb Bivona Uys Leo De Jager Mihai Musatiou Claudia Stafanoiu 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 ©2011 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.

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.

Robert Madeira publisher and head of research

Jennifer Ridgeway project editor

To subscribe please visit www.cemweek.com/subscribe

The ownership of trademarks is acknowledged. No part of this publication or any part of its contents thereof may be reproduced, stored in a retrieval system or transmitted in any form without the permission of the publishers in writing. An exemption is hereby granted for extracts used for the purpose of fair review.

CW Group

CONTENTS FEATURES 4 The Expanding Chinese Influence in Africa Benefits aren’t without costs as China builds up Africa’s cement industry 10 What Happened to Climate Impact?

Regulatory interventions appear to give way to industry self-determination 22 COUNTRY SNAPSHOT Moroccan Cement Industry

10

16 4 DEPARTMENTS Numbers in Brief 2 Cement Fuel Management

31 South Asia 32 Americas

Research 16 Tools & Analysis: Assessing the Impact of Climate Change Legislation 42 Technical Analysis: Global Gray Cement Prices in Decline

From our Industry Partner 36 Building materials update

Regional Focus 21 Events: CBI 2012, India – Organizing a Global Conference Regional Reports 26 Europe, Middle East & Africa 30 Asia Pacific

Projects & People 40 Notable projects 41 People on the move Data Share Performance 45 Overview of stock performances for cement companies

41

It was a pleasure to work with FLSmidth.

They readily accept customers’ ideas and convert them into successful projects DURAISAMY SIVAGURUNATHAN Executive President India Cements Limited

Collaboration cuts costs and achieves 35% capacity upgrade Collaboration was the key to an innovative capacity increase at India Cements Limited Chilamkur plant. FLSmidth and the plant’s senior management teamed up to analyse potential bottlenecks and challenges. Reusing existing equipment from a competitor and inserting FLSmidth technology in parallel resulted in a solution that achieved all guaranteed performance parameters at a lower cost than originally projected. We’ve been helping cement plants implement innovative upgrades since 1882 – we’d be happy to do the same for you.

For more information about how FLSmidth can help make your plant more competitive, visit www.flsmidth.com/upgrades

NUMBERS

IN BRIEF

Cement Fuel Management Have Coal Prices reached bottom? Is Petcoke turning a corner (for better or worse)?

BMWeek BMWeek

2

www.cemweek.com

CemWeek CemWeek

CW Group CW Group

Coal, Australian thermal coal, 12,000- btu/pound, less than 1% sulfur, 14% ash, FOB Newcastle/Port Kembla, US$ per metric ton HBA (USD/MT) - GCV (GAR) 6,322 kcal/kg, Total Moisture (arb) 8.00%, Sulphur (arb) 0.80% (arb), Ash Content (arb)15.00% Petroleum coke, not calcined (US exports)

CEOI (4Q2009=100)

150

Source: CW Group Research Source: CW Group

90

Source: CW Group Analysis

May-12

Mar-12

Jan-12

Nov-11

Sep-11

Jul-11

May-11

Mar-11

Jan-11

Nov-10

Sep-10

Jul-10

May-10

30 Mar-10

However, petroleum coke appears to be the first fuel to inflect and show signs of increase, rising in February and March 2012 after more than six months of decline. Given this increasing trend, coupled with the negative slope of coal prices (that only plummeted further in May and June 2012), the market might once again face comparable prices for petcoke and coal on international markets, thus raising the prospects of coal taking a larger share of cement sector fuel needs. It is still early to make a definitive statement, but the CW Group analysts will be monitoring the situation. BMWeek CemWeek CW Group

Richards Bay 6000 kc NAR fob Steam Coal Spot Price/South Africa

Jan-10

Petcoke prices On a January - April 2012 YTD basis, the US export price of uncalcined petroleum coke (using the CW Group’s in-house metric of blended US West and Gulf Coasts, all HGIs and all sulphur grades as a macro benchmark) showed an even higher year-on-year decline with an almost 35 percent negative growth rate.

Meanwhile Indonesian, Australian and South African coal prices declined in the range of nine to 14 percent.

STEAM COAL AND PETCOKE PRICES (USD/ton)

JANUARY - APRIL 2012 YTD EVOLUTION (%) CEOB (4Q2009=100)

Coal prices With steam coal prices declining sharply in the first four months of 2012 versus the corresponding months of 2011, a situation that seriously affected the dynamics of coal purchases, analysts are fervently asking whether coal prices can go any lower than this. While some experts do not see much room left for decrease, others call for limiting coal purchases, sure that the downward trend will continue through 2012.

0.0

-17.5

Richards Bay FOB -35.0 Coal Week Coal Week Coal Week

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

Australian Thermal Coal

Source: CW Group Indonesian HBA Research Petcoke US Exports Source: CW Group Analysis

5 STEPS TO REDUCTION OF EMISSIONS AND COST SAVING

A TEC _ FROM WASTE TO FUEL Step 1 - sourcing

Step 2 - sampling

Step 5 - clean development mechanism (CDM)

Step 3 - pyroprocess optimisation Step 4 - fuel preparation

A TEC complete solutions for using alternative fuels will enable you to reduce CO2 and other emissions, lower your energy costs long term, conserve valuable resources and create an additional source of income by way of CO2 permits. And all this on the basis of CDM

w

(Clean Development Mechanism). As the technology leader in cement pyroprocess technology, you can be sure with us of getting both the most efficient processing technology in the world and also of achieving much-needed optimisation of the cement pyroprocess.

The complete A TEC package from one source. Complete for the environment. lia

Complete for your competitive advantage.

p velo n De Clea

nis cha t Me n e m

m(

)|C CDM

om

plet

, ent pm o l e dev egy t a r e st

a ng nni pla

n

ti nta me e l p d im

o

mp Co n|

ith ew nc

en

v

ula reg l nta me n iro

ns tio

w

w

.

e at

c-

ltd

.c

om

FEATURE

4

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

The Expanding Chinese Influence in Africa

The establishment of Chinese cement manufacturers in developing Africa has grown in recent years. Infrastructure development, high-value economic activity, knowledge sharing and skills development are but some of the incentives offered to struggling African economies in return for a hold on the largely untapped natural resources. These relationships aren’t without their difficulties.

Alleged and confirmed social and environmental infractions and a seeming disregard for local law often lead to strained relationships between Chinese manufacturers and the African communities that they benefit.

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

5

Coal W Coal W Coal W

FEATURE

Courtesy of CBMC

In recent years, China has become Africa’s largest trading partner. Trade volumes jumped from US$6.5 billion in 1999 to an estimated US$160 billion in 2011, with approximately 2,000 Chinese enterprises established on the continent. he increasing number of Chinese enterprises and growing investment are welcomed by host countries, most of them often riddled with debt, struggling with notoriously high unemployment rates and unable to expand their own economies due to a lack of national infrastructure. Skills and knowledge transfer in countries where the opportunity for education is either non-existent, lacking, or inaccessible is an additional perk of Chinese presence.

However, China’s presence in Africa is not without incident. Accusations of unfair labor practices, environmental damage and acting with perceived impu-

6

www.cemweek.com

nity are some of the accusations against Chinese enterprises in Africa. Chinese manufacturers have also been accused of using Chinese prisoners as workers to cut back on labor costs, subsequently denying locals much-needed employment opportunities.

The remainder of this article examines recent Chinese investment and activity, most notably in southern and eastern Africa’s cement industry. This is not an exhaustive list of initiatives in the cement sector, but rather a sampling of some of the notable initiatives.

Mozambique Three cement plants funded by African

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

Great Wall Cement Manufacturer, the China International Fund, and GS Cimento are underway in Mozambique.

A fourth plant is being considered in the Cheringoma district by China’s Bill Wood. The construction of these plants is said to satisfy the growing demand for cement in Mozambique. Once construction on all three, possibly four, plants has been completed, Mozambique’s cement production will have tripled.

Africa Great Wall Cement Manufacturer’s plant carries a price tag of US$78 million. Construction of the 500,000 tpy plant is set to be completed by the end of 2012. The China International Fund’s plant, located near limestone-rich Sala-

manga, is currently under construction.

The US$72 million plant will have an annual production capacity of 800,000 tpy once complete.

Of the three, the GS Cimento plant in Boane will be the most expensive with an estimated US$100 million price tag. Its annual production capacity is expected to be 500,000 tons of Portland cement.

The plant is initially expected to make 200 new jobs available to locals. A February 2011 report by South African Coastal and Environmental Services states that local talent will eventually be trained to replace expatriates. Downstream employment opportunities in handling, logistics, sales and retail are also cited as expected windfalls from the construction of the plant.

CFM, Mozambique’s publicly-owned rail and transport company, recently decided

in favor of a passenger train between Salamanga and Maputo. This initiative coincides with the upgrade of the existing rail line and is largely due to Salamanga’s enhanced profile as a result of the cement plant. The line is expected to be completed in July 2012.

However, despite the construction boost and the resulting boon to local employment, Mozambican cement manufacturers are accusing the Chinese of lowering their profitability with an inferior product up to 70 percent more affordable than their own. Similar complaints have recently come from Namibia, where affordable but allegedly low-quality cement is damaging the local industry.

Reports of abuse, illegal logging, poaching and environmental damage by the Chinese and those associated with their plants add to a seemingly growing list

Select China-backed cement plants in Africa

of infractions. In October 2010, the Mozambican government revoked the visas of three Chinese nationals following the abuse of Mozambican workers. According to sources, workers were beaten with a number of tools and also scalded with boiling oil. Earlier this year, Mozambique’s labor ministry said it was expelling 60 illegal Chinese workers. It added that local laws prevent foreigners from entering into employment where suitable Mozambican skill is readily available.

Zimbabwe China is Zimbabwe’s second biggest trading partner after South Africa and has already established trade in the areas of agriculture, information technology, tourism and construction. Gweru-based Sino-Zimbabwe is the result of a US$51 million joint venture between the Zimbabwean Industrial Development Corporation (IDC) and China Building Material Industrial Corporation (CBMIC), and has been operational since 2001.

In 2011, Sino-Zimbabwe announced the construction of another cement plant near Masvingo city, following the discovery of large limestone deposits in the Nyanda mountains. The multimillion dollar construction project will be funded

by Sino-Zimbabwe and will include the construction of a residential area capable of housing 4,000 workers.

China’s presence in Zimbabwe has, however, not been without incident. In 2008, the Environmental Management Agency of Zimbabwe ordered the closure of the Sino-Zimbabwe plant in Gweru. Inspections revealed that higher-than-normal amounts of cement dust were emitted into the atmosphere through the plant’s chimneys. It was also found that the company was discharging cement dust and raw sewage into a stream feeding into the Gweru river and had also disposed of used oil into the environment.

Source: CW Group Research

More recently, workers cried foul over inadequate health and safety regulations and equipment, subsequently being exposed to cement dust. Reports of workers

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

7

Coal W Coal W Coal W

FEATURE suffering from TB and resulting deaths due to direct exposure have also come to light in recent years, although SinoZimbabwe management dismissed the claims as fallacious rumors.

Meanwhile, the completion of the Masvingo cement plant will soon bring the number of cement plants in the country to four, with Lafarge Zimbabwe and South African Pretoria Portland Cement already in operation. It is estimated that, once the Masvingo plant has been completed, more than 10,000 jobs will be created in Zimbabwe.

South Africa South Africa’s already strong cement industry is set to increase output with the construction of a Chinese-funded cement plant in its Limpopo province. Set to open its doors in 2012 with an estimated production capacity of 2,500 tons of cement a day, the plant represents a deal signed between South Africa’s

Downstream employment opportunities in handling, logistics, sales and retail are also cited as expected windfalls Women Investment Portfolio Holdings (Wiphold), limestone mining company Continental Cement, China’s Jidong Development Group and the China-Africa Development Fund. The deal, worth ZAR 1,65bn, will see Jidong and CADFund

8

www.cemweek.com

hold 51 percent of the joint venture, with Wiphold’s share at 23.9 percent and Continental Cement’s at 25.1 percent.

During the construction phase, 700 workers will be employed in what is known as one of South Africa’s poorest provinces.

Once construction has been completed, 170 workers will have permanent jobs.

Skills and knowledge transfer as well as best-practice experience add to the benefit this plant will bestow on the handful of temporary and permanent employees.

Tanzania Chinese firm Lee Building Materials is planning to build a US$12.5 million grinding unit near Lindi, south of Dar es Salaam. The plant will specialize in producing white cement, which is not produced locally on a large scale. Upon completion, the plant will have an annual production capacity of 300,000 metric tons. It is also expected to revive the district’s dormant Kilwa port.

Tanzania’s current cement production profile includes Heidelberg subsidiary

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

Tanzania Portland Cement Company, French Lafarge subsidiary Mbeya Cement Company and Holcim Mauritius subsidiary Tanga Cement Company.

Kenya A US$96 million cement and grinding plant has recently been constructed in Athi River by Savannah Cement—a consortium of Chinese and Kenyan investors known as Savannah Heights and Catic Cement. Kenyan investors and Chinese investment firm Wan-Ho each have a 40 percent share in Savannah Cement, while Catic Cement has 20 percent.

The plant was originally due to be constructed in the Kitengela area by Catic Cement, but after objections from locals, construction was halted. Savannah Cement will invest an additional US$150 million in a clinker plant during a second construction phase.

The addition of the new plant will increase the total cement output of an already competitive region where Larfage-owned Bamburi, East African Portland Cement Company (EAPC) and Athi River Mining (ARM) currently dominate the top three

positions, with Mombasa Cement and Simba Cement short on their heels.

Republic of Congo In 2011, Chinese firm FORSPAK announced that it was commencing the construction of a US$16 million plant near Dolisie in southwest Congo. The plant is expected to be operational by the end of 2012 and will have a production capacity of approximately 300,000 metric tons. This will contribute to a market where demand currently exceeds supply.

Congo's Société Nouvelle des Ciments du Congo (Sonocc), located east of Brazzaville, has been the country's only cement manufacturer since 2004—a joint venture between the Republic of Congo and China. The project was funded by the China Road and Bridge Cooperation (CRBC) and the Congolese Government through a concessional loan from the Export-Import Bank of China (EXIMBC). Sonocc’s construction also relied on Chinese mechanical and electrical imports.

In 2007, Sonocc workers reported discrimination and illegal practices in the cement factory. According to reports, workers were paid US$20 per month in spite of a signed agreement with the manufacturers for US$49 per month.

Workers were allegedly also denied paid sick leave as well as paid holidays. It was further reported that Congolese workers weren’t allowed to use the company infirmary, with the infirmary itself only available for use by Chinese workers. Workers were also banned from forming unions, instead having to rely on representatives appointed by company management.

As FORSPAK completes construction of its new plant and with the troubled Sonocc plant already fully operational, these two plants have helped develop railway infrastructure in the country’s south, which in turn helped develop local industry.

Ethiopia Huang Shan Cement of the Guangdong Chuanhui Technology Development Continued from pg 54

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

9

Coal W Coal W Coal W

feature

What Happened to Climate Impact?

Long regulatory silences, bursts of activity ‌ What's really facing the cement industry

10

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

“lowered production has lowered emissions, but it has also shifted the dialogue”

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

11

Coal W Coal W Coal W

FEATURE

The climate impact debate has never left the mind of cement industry strategists, but one might be forgiven for thinking the rest of the world was less interested. Faced with an uncertain global economy, many regulatory agencies seemed to go into a sort of hibernation after Kyoto and Copenhagen. The Durban platform disappointed. Instead of CO2 emissions making front page news, business woes have led the way.

Secretary-General Addresses Rio+20 Plenary 20 June 2012

his is no coincidence. Lowered economic expectations have lowered cement production levels, leading to fewer emissions, but that's not the whole story. In response to past efforts in the climate impact space and the cost of traditional energy sources, cement manufacturers have been shifting to alternative fuels and low carbon production methods.

Now, with newly announced guidelines for the Portland cement national emission standard for hazardous air pollutants (NESHAP) and new source performance standards (NSPS) in the United States and reignited climate debate following the Rio + 20 Conference, cement makers are well positioned for the current climate impact challenges.

Economic shift lowers emissions The first part of the equation is that with a lowered economic forecast globally, cement makers have been producing less cement of all types. Naturally, when production drops, emissions drop. Environmental regulators around the world have taken notice.

12

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

In Ireland, the 2012 State of the Environment report notes that the country is now on track to be fully compliant with Kyoto Protocols and that waste levels from the construction industry are down 81 percent since 2007.

More broadly across Europe, lower production's lower emissions have resulted in an estimated 3.1 billion metric tons of “surplus� CO2 allowances, 78 percent of which are held by large construction firms.

Even emerging markets have seen substantial drops.

China's output fell last year for the first time. The InterAmerican Cement Federation (FICEM), representing Latin American cement producers, reported doubledigit declines in both net and gross CO2 emissions per ton of cement.

Thus, lowered production has lowered emissions, but it has also shifted the dialogue. Business concerns have risen to the forefront as governments focus on generating growth. Non-CO2 emissions have also become a larger area of interest.

Shift to non-carbon emissions Falling CO2 emissions have allowed environmental regulators to focus on non-carbon emission issues. In the United States, the EPA has been focusing on particulate matter and smog. On June 15 the agency announced its intention to tighten the particulate standards set during the most recent Bush Administration, lowering the standard from 15 micrograms per cubic meter to a new level of 12 to 13 micrograms per cubic meter.

However, cement groups have long opposed tighter particulate matter standards, which have been presented unsuccessfully as a part of multiple rulings, citing the high costs of compliance. The June 15 announcement was followed by an announcement on June 25 from the EPA that the existing regulatory burden on U.S. Portland cement makers under the 2010 Portland Cement Rule would be reduced and the compliance deadline extended for an additional two years, moving from September 2013 to September 2015.

It is not just a U.S. agency backing off. Other world bodies are having to give more attention to business needs and solutions outside pure regulation. In the Euro summit leading up to June’s Rio + 20 conference, Poland led a sharp rebuke to new proposals tightening regulations for everything from CO2 to particulate matter. The nation advocated that instead of new, expensive rules and standards which would be a burden for industries in all sectors, the European Union should promote the use

Golden Bay Cement turned to construction waste to create a woodfueled bioenergy plant. ”

“

of alternative and green technologies to cut emissions, particulate matter and climate impact as a whole.

This “Polish Position” is a public vocalization of what many firms in the cement industry have already been addressing privately. Faced with expensive regulatory rulings, cement manufacturers are interested in systems that allow them to not only meet requirements but rise above them longterm. This means substantial investment in alternative fuel systems, waste-heat recovery, and energy efficiencies that boost compliance rates as well as having a positive impact on the bottom line.

Though EU leaders pledged to push ahead with their position without Poland, the Rio + 20 conference proved that Poland was not alone in its views. Binding standards to implement after the Kyoto Protocols expire could not be agreed upon, in large part due to concerns about business impact and signs that many industries are independently finding workable carbon and particulate reduction alternatives to environmentally unsustainable processes.

Cement makers independently finding alternatives One industry making notable progress is, of course, cement. Both large and small firms have made impressive gains in alternative fuel use in the last 12 months, leading to better environmental outcomes and positive bottom line benefits.

In June of 2012, Cemex announced that it had successfully maintained a 25 percent usage level for alternative fuels in 2011 in its plants worldwide. This builds on the company's back-to-back Energy Star awards from the United States EPA and positive citations in Britain for using waste tires as fuel. All in all, the firm cut CO2 emissions by 1.8 million tons in 2011, saving the company the cost of purchasing an estimated two million tons of coal. The company is on track to hit its target of 35 percent alternative fuels use by 2015.

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

13

Coal W Coal W Coal W

FEATURE

Lafarge has also announced the results of its 2007 - 2012 sustainability plan, noting that the firm successfully cut CO2 emissions per ton by 20 percent. Building on this success, in June the firm announced its 2020 goals, which include ensuring 20 percent of Lafarge cement will contain reused and recycled materials, and 50 percent of the company’s fuel will come from non-fossil fuel sources.

On the smaller end of the scale, New Zealand's Golden Bay Cement company turned to construction waste to create a wood-fueled bioenergy plant. The plant will now enjoy ongoing savings of US$3 million per year in energy costs and the elimination of 58,000 tons of CO2 emissions. In May 2012, it was awarded an Energy Efficiency and Conservation Authority Award.

In Texas, local Capital Aggregates announced a new system to capture flue gases from its coal-fired kiln and turn them into marketable chemicals. The system represents a partnership

14

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

with ConocoPhillips, BP, Northwater Capital, and PVS Chemicals, who will buy the reclaimed chemicals. The process will directly capture 83,000 tons of gases and create products such as bicarbonate which could be used as a further pollution reduction scrubber.

Private Ownership, Local Solutions.

All in all, the evidence is clear that the biggest thing that has happened to climate impact is a shift toward private ownership of the issue. Governments and international regulatory bodies remain players, but in the face of shifting requirements and disagreement on world standards, cement manufacturers and business owners from all industries are increasingly seeking their own locally controlled long-term solutions. With financial benefits in saved energy and environmental benefits that boost compliance and sustainability in processes, cement makers are leading the way toward production practices that will keep emissions low even when production volumes increase. BMWeek BMWeek BMWeek

CemWeek CemWeek CemWeek

ase Ple r . w mo no le m.co om* b a l i .c ru ava ifo um nt @gm mifor u o isc o ac w.g d d ails t e ww r i b m lin e rly Ea end er on s ist reg

ADVERTISING

cbi

conference:

cement business & industry Mumbai, India. October 10-11, 2012. The Leela Mumbai Hotel CBI India 2012 will be a key conference in India this year with global appeal and a significant Indian orientation as it will explore many global and regional issues under the umbrella of “The Shift from West to East in Global Cement” CBI India 2012 will focus on the various aspects of India’s cement industry from a business growth & investment perspective. Notably, the programme will take a dual-track business and technical approach to the issues around: ♦♦ Economic forecasts, infrastructure planning, and sector outlooks ♦♦ Rethinking capital raising and investment allocation decisions ♦♦ India as an emerging exporter with foreign investment opportunities

GMI

GLOBAL

For attendance and speaking opportunities please contact Andre Cholewinski at ac@gmiforum.com (+1-203-516-7424) For sponsorship opportunities please contact Anthony Fitzgerald in the UK at af@gmiforum.com (+44(0)1488 680623). Sharon Neetal in India at CBIIndia2012@gmiforum.com (+91-98-850-35455).

For registrations please contact Sushanth Swaroop in India at ss@gmiforum.com (+ 91-124-4636710)

♦♦ Need for efficiently optimize capacity and evolve the technical base ♦♦ Coal / fuel sourcing, technology decisions and vertical integration ♦♦ Petcoke as fuel – business opportunity and technology challenges ♦♦ Alternative fuels: economics, innovation and role

Register for attendance directly on www.gmiforum.com, or contact sales@gmiforum.com.

You may also call us in the US at +1-203-516-7424 Backed by:

CemWeek

india CemWeek

CEMENT & CONSTRUCTION MATERIALS

Organized by GMI Global LLC and supported by CemWeek and the India Cement & Construction Materials journal www.gmiforum.com

TOOLS

ANALYSIS

Assessing the Impact of Climate Change Legislation on the Cement Industry by terry pavlopoulos partner, cw advisors The global cement industry produces an estimated five percent or so of total CO2 emissions.

The political agenda across the world is that the sector should shoulder the costs of reducing green house gases (CO2 abatement). Here we consider two questions about cement and climate change legislation. Firstly, we look at the business areas that such legislation will impact on the sector. Secondly, we assess the preparedness of the sector to address the impact of impending legislation.

16

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

ow would climate change legislation affect the sector? Clearly, there are differences between markets and regions. These range from the tight and well defined (albeit, dysfunctional) ETS in Europe to the Clean Air Act in the U.S. to other regions that have not yet begun to formulate relevant environmental legislation. It is, however, inevitable that climate change legislation will become part of life for the cement sector world-wide.

We believe that climate change legislation will have a profound impact on the industry and will affect a whole range of business activities within organizations.

In detail, we believe that climate change legislation will affect the industry in six specific areas. These are: 1. investment planning and technology choices. In this business area, legislation will dictate the approach to investing in plant and equipment and other technological advances in order to reduce carbon emissions. At the plant level, cement production emits the following: ■■ Process Emissions: direct emissions from the calcination process (estimated at over 50% of global CO2 emissions from cement manufacture) ■■ Fuel Combustion Emissions: emissions from fuel used (estimated at over 30% of global CO2 emissions from cement manufacture) ■■ Indirect Emissions: mainly electricity and handling within a cement plant (estimated at over 10% of global CO2 emissions from cement manufacture) In these three areas, cement producers will have to assess and make choices driven by climate change legislation. The investment considerations will involve plant layout and process flow, such as raw materials handling, debottlenecking, etc. Equipment efficiency and heat recovery will also be key investment areas, with BAT (Best Available Technology) installations and a change in production process from wet to dry or installing pre-

heaters to improve emissions and plant performance.

The other area impacted by legislation will be technological considerations regarding CCS (Carbon Capture and Storage technology), cement composition and the use of extenders (cement substitutes—fly ash, slag, natural minerals—limestone, pozzolan, etc.), and low carbon cements. Low carbon cements include innovative processes/technologies that produce cement or cementitious substances or concrete that can absorb CO2.

2. fuel procurement and sourcing

A range of factors in fuel procurement and sourcing will be impacted by legislation and will need careful consideration by cement manufacturers.

For instance, in terms of carbon prices and taxes, the level of the “carbon” direct cost will determine the level of alternative fuel consumption. Meanwhile, actual fuel prices will drive the choices between various fuels, and price volatility will affect the contract strategy and long term forecasting accuracy.

strategy.

When looking at alternative fuels in particular, manufacturers must consider the

security of supply as well as engineering considerations and constraints. Indeed, engineering considerations will dictate the highest level of alternative fuels used without compromising the technical efficiency and integrity of a plant. Political constraints will also play a role because, although politicians profess a strong preference for alternative fuels, at local levels producers often find it difficult to introduce even modest levels of nonfossil fuels.

3.

carbon taxes and carbon credit

Producers will find themselves facing increased costs due to carbon taxes and carbon credit sourcing.

What are the issues that they might face and how can they counteract their impact? Consideration must be given to the following solutions:

sourcing.

First, manufacturers may need to invest to reduce emissions. As discussed earlier, producers may be forced to introduce BAT at their plants and reduce clinker content in their cements. Producers may also purchase credits and allowances in the market, but this assumes that there is an established market for such instruments that can be accessed by producers in a timely manner and at reasonable

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

17

Coal W Coal W Coal W

TOOLS & ANALYSIS cost. Another option is to participate in offset schemes. The Clean Development Mechanism (CDM) provides some relief in this area but there are many drawbacks and issues surrounding this solution.

Manufacturers may attempt to recoup costs through increased prices. This is possible but cannot be a primary consideration when setting prices, particularly as the various market participants will have different climate change profiles.

Supply-demand balance will always prevail in setting prices.

4.

market competitiveness and struc-

Climate change legislation may well affect market competitiveness and structure. This may manifest through climate

ture.

responsible for the whole cement chain (including concrete).

mentally friendly building codes may require less clinker content.

5. demand for cement. Climate change legislation may have a substantial impact on both the cementitious materials market share in construction and, more probably, the loss of market share of clinker within the cementitious materials market. This may come about as follows:

And finally,

First, the introduction of low carbon cements. This is a nascent area but very well invested. There may well be a breakthrough soon that will change the dynamics of cement composition. Second, the extensive use of extenders (alternative clinker—fly ash, slag, pozzolan, limestone, etc). This is not a new area and

6. company profile and reputation. Climate change legislation may well have an impact on the corporate profile and reputation of cement producers. We already see such impact in certain regions, and an environmentally tarnished reputation carries a number of uncomfortable consequences.

For example, environmentally disreputable producers will find it difficult to either invest in new plants or expand existing ones. Furthermore, a bad reputation in this area will affect both local and nation-

We believe that climate change legislation will have a profound impact on the industry ”

“

change taxes that will change the cost structure of the industry and will affect different participants in different ways.

It is accepted that increased regulation increases costs in conforming, monitoring and reporting compliance. Similarly, carbon leakage is a favorite subject among major European producers who fear that imports from unregulated markets around Europe will lead to the demise of domestic production. This is an important issue, and unless there is an equitable global level of carbon taxation, this may become an issue for any market.

has been pursued by the cement sector in a number of regions including Europe, the U.S. and Japan. The level of substitution, however, may be affected by climate change legislation. Third, a push to introduce alternative construction methods and materials (wood, steel, clay bricks, etc.) may have an impact on cement demands. Last, tighter building codes may also impact demand as more environ-

Also, climate change legislation may well impact cement producers’ strategies regarding vertical integration. Depending on where the emissions are counted, cement producers may find themselves

18

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

al relations with authorities, communities and other stakeholders. Few investors will consider backing an environmental pariah. This is becoming more and more prevalent among investors both in publicly quoted companies but also in private deals. As a result of the above, producers will face difficulties in attracting and retaining key employees.

4. Capability to evaluate options.

5. Organizational ability to implement options.

The business uncertainties facing cement producers with regard to climate change legislation are: 1. Access to easily understood information.

2. Availability of toolbox to integrate legislative changes into company context.

3. Insufficient understanding within the company.

4. Uncertainty about the legislative future. he second consideration in this article is whether the industry is prepared to address the impending climate change legislation. To answer this question we must consider the business intelligence areas that cement companies must be good at and also the business uncertainties that

they will face and must be able to resolve.

The business intelligence areas are: 1. Understanding current legislation.

2. Grasp of potential future legislation scenarios.

3. Understanding of options available under different legislation scenarios.

In order to put this all together, we have designed a Climate Change Matrix (CCM), a diagnostic tool that brings all these areas together and examines the preparedness of a cement company regarding climate change legislation. The graph below shows a typical profile of a cement player:

Company profile/ reputation

Carbon taxes/ carbon credit sourcing

Fuel procurement/ sourcing strategy

Demand for cement

BUSINESS INTELLIGENCE

Market competitiveness and structure

BUSINESS AREA

Investment planning and technology choices

Climate change matrix

Understaning of current legislation Understanding of potential future legislation Understanding options under various scenarios Capability to evaluate options Organizational ability to implement options

STRONG

MODERATE

WEAK Source: CW Advisors JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

19

Coal W Coal W Coal W

TOOLS & ANALYSIS

In conclusion, we will stress that climate change legislation is a strategic issue for the sector and it will not be confined to specific regions or countries. The impact on the cement sector will be substantial, and it must be addressed in order to protect the fundamental economics of

the industry. Climate change legislation will impact the sector in many business areas and as such must be considered on a holistic basis. Many cement companies are poorly prepared to address this issue and lack the tools and capabilities to put themselves in a winning position. BMWeek BMWeek BMWeek

individuals operating or interested in the cement sector Mr. Pavlopoulos brings substantial financial expertise in the sector, including M&A transactions, capital raising and fund management. His career developed in a number of “blue chip” names such as Blue Circle Industries, Amec and Credit Suisse Asset Management, and he has an extensive network within the investment community with an interest in the sector.

Terry Pavlopoulos joins CW Advisors US-based CW Advisors, a member of CW Group, welcomes a new partner in London, UK to deepen service capabilities and expand the platform’s global reach.

The CW Group has announced the addition of Terry Pavlopoulos to member CW Advisors, which offers advisory services to companies, institutions and

20

www.cemweek.com

“It is with great pleasure that we announce Terry joining the firm. He brings a unique, complementary consulting and advisory skill set and is one of the global cement industry’s thought leaders,” said Robert Madeira, Managing Director and Head of Research at CW Advisors parent company, the CW Group.

Mr. Pavlopoulos has authored articles on various issues, including climate change legislation, vertical integration, M&A

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

Contact Terry Pavlopoulos, Partner at CW Advisors, on tp@cwadvisors.biz, or +44 1844 345457 to learn more.

CemWeek CemWeek CemWeek

CW Group CW Group CW Group

Coal Week Coal Week Coal Week

activity, industry trends and other topics in globally circulated trade magazines and sector specialist internet portals. He is a graduate Mechanical Engineer with a Masters degree from Imperial College London. He also has an MBA from London Business School.

When the new Partner at CW Advisors was announced, Terry Pavlopoulos said he intends to “bring additional focus to delivering management consulting and transaction related services to our clients as well as helping the CW Group management develop the franchise further to be able to support our clients better across the continents. It is a first rate team that I am excited to join.”

Terry’s role is effective immediately and he can be contacted for further discussions around the sector’s most challenging issues and growth opportunities in London, UK at +44 1844 345457 or by email at tp@cwadvisors.biz. BMWeek CemWeek BMWeek BMWeek

CemWeek CemWeek

CW Gro CW Gro CW Gro

EVENTS

Events in Global Cement Andre Cholewinski of GMI Global—the organizer of the Cement Business & Industry Conference—spoke with CemWeek about its flag event, the Cement Business & Industry India 2012 Conference, which will be held in Mumbai, India on October 10-11, 2012 at the Leela Mumbai Hotel.

Andre Cholewinski, Director of Business & Client Services, told CemWeek, “I can go as far as to say that we are selective in the development and delivery of our programs to ensure we deliver quality programs that are commensurate with our reputation for top-notch programming.” According to Cholewinski, GMI Global has earned this reputation by utilizing the input of industry leaders to develop its programs and events.

When looking at the Cement Business & Industry India 2012 (CBI) conference, the goal is to provide a forum that is not only informative and relevant from an industry perspective, but one that also provides great networking opportunities. It’s a lofty promise. According to Cholewinski, “Our philosophy is to take a dual track approach whereby we are able to provide a ‘content-first’ forum that provides our delegates with a careful and relevant content agenda and not a mere succession of PowerPoint slide presentations. This content agenda is shaped around common as well as dual track sessions aligned along both business and technology perspectives to attract ‘both’ sides of the house to further hone in on relevant topics.”

Employing this approach, GMI Global brings together both important perspectives while maintaining the individuality of each so that they can select topics relevant to them and prevent the mishmash of agenda topics that pollutes some events.

The response to CBI India 2012 has been enthusiastic among a variety of Indian organizations as well as internationally. “This is

truly a ‘Global’ event, appealing to both international as well as local thought-leaders and participants,” said Cholewinski. “Just the other day, a manager from a leading cement company in India said,‘Thank you for finally putting some relevant content on the table for us.’”

Cholewinski finds this kind of feedback motivating as the final preparations for CBI India are put in place. He attributes the positive response to the conference’s focus on both the regional context and providing meaningful content to the global community. “In addition to our dual approach that I mentioned previously, the theme of the conference is ‘The shift from West to East in global cement.’ This is reflected in the content of the program as well as the individual presentations which will be delivered at the conference,” said Cholewinski.

In addition to GMI’s current focus on CBI India 2012, the group is already preparing for the follow up, CBI India 2013. Andre Cholewinski was quick to add that GMI Global is paving the way for CBI Africa 2013 and CBI Brazil 2013. “You will also be seeing several cement sector summits that are highly relevant to the cement industry later this year and into next,” he said. BMWeek BMWeek BMWeek

To learn more about CBI India 2012 or other GMI events, contact Andre Cholewinski at ac@gmiforum.com or via telephone at +1-203-516-7424. www.gmiforum.com

Cem Cem Cem

COUNTRY

SNAPSHOT

CW Group Research Highlight:

MoroccAn Cement Industry Land of Contradictions

The Kingdom is divided into wealth and poverty, with inadequate energy supplies and insufficient infrastructure, but ties to European trade are strong and twenty years of regional development have spurred construction. Thanks to a recovering economy that felt only minimal effects of the Arab Spring, coupled with strong infrastructure spending, the Moroccan cement market anticipates growth.

22

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

Macroeconomic View (left axis gdp and right axis construction)

Construction GDP (Nat'l currency, billions)

900

Real GDP (Constant nat'l currency, billions)

450

30

0

Construction

GDP

60

0 2005

2006

2007

2008

2009

2010E

2011E

2012E

2013E

2014E

2015E Source: CW Group Research

Consumption Per Capita (left axis population and right axis per capita cement consumption) 50

700

Population

25

350

0

Per capita consumption (kg)

Consumption per capita

Population (million)

0 2005

2006

2007

Economy Privatization had been a cornerstone of the Moroccan economy since 1993.

However, the global economic crisis and ongoing political unrest has forced the government to invest heavily in social programs and subsidies. Thus, efforts to accelerate privatization of the economy has stalled somewhat over the last few years.

The Kingdom of Morocco is situated in the northwestern corner of North Africa.

The former French colony shares a land border with Algeria and Western Sahara and coastline with the Atlantic Ocean and Mediterranean Sea. The capital city is Rabat. The population of Morocco sits at around 32 million (2010).

2008

2009

2010E

2011E

2012E

Historically, Morocco has been heavily dependent on its agricultural sector. While agriculture contributes only around 14 percent of GDP, it accounts for 40 to 45 percent of employment. Steady development of the country’s services and industrial sector has however helped to diversify the country’s economic growth.

Today, the service sector contributes over half of GDP, with tourism, telecommunications, information technology, and textiles accounting for the most growth.

The Moroccan economy has strong ties to Europe. Nearly 60 percent of its export revenues are generated through trade with the European Union. Additionally, around 80 percent of all tourists to the country are from Europe. Considering tourism is a growing part of the country’s

2013E

2014E

2015E Source: CW Group Research

economy, providing 400,000 jobs and ten percent of GDP, the economic downturn occurring throughout much of Europe has many Moroccans bracing for the possibility of only moderate economic growth in 2012.

The economy grew at four percent in 2010 and five percent in 2011 largely thanks to the government’s increased spending on social programs. The government is projecting the economy will grow by 4.1 percent in 2012 and that agricultural activity will fall 2.2 percent while non-agricultural activities will increase 4.9 percent.

Construction sector Strong infrastructure spending has helped the construction sector to recover.

In 2011, real growth in the sector sat at 7.4

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

23

Coal W Coal W Coal W

COUNTRY SNAPSHOT as one of the most advanced markets in Africa. On the other hand, the South places Morocco towards the more impoverished end of the spectrum.

CEMENT PRICES CPJ 45 (DH/t)

CPJ 35 (DH/t)

DH/ton

1300

1150

1000 2007

2008

2009

2010

2011

percent. Projections for 2012 have con- riod. Morocco was fortunate in that it struction growing at 6.5 percent and be- did not suffer significant damage to its tween five and six percent through 2016. infrastructure, as was the case in Tunisia, Libya and Egypt during their revolutions.

The housing market began to slow in Therefore, the country is not facing a na2008 as the fallout from the global finan- tional debt in the billions. cial crisis began to spread. In addition to being a popular tourist destination for The Modern Landscape Europeans, Morocco was once also fa- Morocco is the land of contradictions. vored as an affordable location for Euro- The differences that exist between Northpeans interested in purchasing a second ern Morocco and Southern Morocco, home or vacation getaway. The economic combined with the specificities of each downturn, later coupled with regional of the country’s 16 regions, leave the impolitical unrest, took a toll on the demand pression of many countries made into for this type of housing. Prices, though, one. The North benefits from a developed did not fall sharply as fewer properties market structure that qualifies Morocco were on the market and new construction slowed.

The country managed to emerge from the Arab Spring democratic movement unscathed by the bloodshed that has occurred in countries like Tunisia, Egypt, Libya and Yemen. By instituting constitutional changes and reducing the power placed in the hands of the king, Mohammed VI, the government survived the turmoil with what analysts are calling a “gentle revolution.” However, the country is still dominated by the king, as political parties lack influence and power. In these conditions, unrest may still be a possibility if citizens come to view the abovementioned changes as artificial.

Morocco presents another two particularities that affect its competitiveness but also protect it from international competitive pressure. First, Morocco remains the only North African country that cannot domestically cover its energy needs. The high costs associated with having to buy energy affect the country’s sectors on all levels. The Kingdom is currently pursuing a diversification strategy that should supply 42 percent of total energy demand by renewables (including solar, wind and

International builders, once prevalent in Morocco, pulled out of the country’s construction market. Lower demand, combined with a cumbersome government permit process, worker restrictions, and requirements to use local companies in certain areas, often added to the expense and delay of new construction projects, motivating many global builders to pull up stakes. It is estimated that nearly 70 percent of market demand is for social housing.

The government has significantly boosted its infrastructure spending over the last five years (2008-2012) to US$47 billion, up from US$9 billion in the previous pe-

24

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Courtesy of Ciments du Maroc Coal Week Coal Week Coal Week

hydraulic) by 2020. In addition, the Kingdom is tackling its second main concern, infrastructure. Ambitious targets were set on major development areas: roads, rail and ports.

Market structure (2011 segment volume deliveries)

Cement Market Similar to the national economy, the cement market in particular is also divided up into distinct regions that function independently of one another to some degree. Imposed zoning of the market dating from the 1980s still impacts its activities. Energy and logistics costs are also major concerns for cement companies which counteract the increased costs by building alternative energy sources or investing in production improvements.

Becoming self-sufficient in clinker production is another target of cement companies, as clinker imports have a history of inflating production costs.

Precast Public works (bulk) Ready mix Retail

Source: CW Group Research

Morocco’s cement industry was established in the early years of the 20th Century. The first cement factory, located in Casablanca, started production in 1915 with an annual cement capacity of 20,000 tons. In 1952 and 1953, four new cement plants were commissioned—Agadir, Meknes, Tetouan and Tanger.

During the period from 1974 to 1979, Morocco’s cement industry experienced a significant increase, with cement consumption rising from 1.5 million tons in 1974 to 3.5 million tons in 1979. The booming conditions could not be extended in the following years due to cuts in public spending, and up to 1987 the industry grew by only 1.2 percent. This period is also when the processes of market liberalization and zoning began.

Starting in 1988, a renewed focus on regional development once again saw an increase in public spending and infrastructure projects, which generated construction segment growth of three percent CAGR (real terms) through 2000.

Fueled by construction projects, the cement industry has been on the rise, focusing on modernization and capacity Continued on page 35 JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

25

Coal W Coal W Coal W

REGIONAL REPORT: However, the company also intends to reorganize its domestic operations, expressing optimism for the year due to its units’ improved performance in emerging markets, which now account for 60 percent of its business.

Spain's cement market has dipped to its lowest levels in almost half a century, exacerbated by a dramatic fall in construction amid a crippling economic crisis.

Between January, February and March, cement consumption fell by 34 percent over the same period last year. The continued low demand prompted Holcim to announce plans to close its Murcia plant at the end of the year.

First quarter sales for Lafarge Greece declined almost 38 percent. The drop reflected the intensifying recession in the domestic private construction market, for a fourth consecutive year, as well as a substantial suspension of public and co-financed infrastructure construction activity.

Titan Cement also reported a first quarter loss in profits, citing the severe and extended winter period this year across the Balkans, Turkey, and Greece that significantly affected building activity in those regions.

Paris, France

Europe Anglo-American and Lafarge must sell off units to secure a nod from British regulators who want to ensure that competition in the market remains above board. Anglo, which is refocusing on core mining activities, struggled for more than three years to find a buyer for its Tarmac UK unit before agreeing last year to a joint venture with Lafarge. Britain's Competition Commission ruled in February that the planned joint venture could damage competition in certain markets for construction materials. According to sources, the Commission said the two

26

www.cemweek.com

companies had to sell an "extensive package of operations,” including one of the UK's largest cement plants.

In France, Kercim Cement is building a 600,000-ton plant in the Montoir-deBretagne area in Loire-Atlantique. The new EUR 44 million plant will be completed in late 2012, and production will begin in early 2013.

While new domestic plants are not in Lafarge’s future, the company announced it will maintain its presence in France despite having to shut several facilities.

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

According to Balcerek Andrzej, President of Górażdże, the largest cement producer in Poland, the EU's stiffer CO2 emission limits will curb the competitiveness of cement makers operating in Poland, resulting in a hike in production costs, thus making them uncompetitive and opening the door to cheaper imports. Currently, cement plants in Poland this year have been given free emissions allowances of about 10 million tons of CO2, but that has served as only a stop gap measure.

Russia & the Baltic Countries Russia's cement exports are increasing as domestic demand has been unable to cope with production increases. To date, a considerable part of local cement production has been exported, marking the difference between domestic market size and yield. Reports indicate that in 2010

regional report: europe, middle east, africa

the cement industry gradually began to recover from the economic crisis, posting revenue growth of 12.27 percent. While the speed of recovery is still low, growth is expected throughout 2012.

Expansion efforts have ratcheted up, with several new projects underway. A new cement plant in the Novgorod region is expected to be completed by 2014. Also, the Babinov cement plant will be built in conjunction with a metallurgical production unit, and Dyckerhoff will build a plant in Omsk starting this summer.

The news is not as bright for BaselCement, which filed for bankruptcy in May. However, the company insists it will pay off a 2.5 million rubles debt owed to VestPromResursom before it finalizes the bankruptcy filing.

Belarus is looking to produce up to 10 million tons of cement this year, exporting half. The government is studying the addition of new cement lines, asserting that raw materials in the country remain abundant. Belarus is also moving to modernize state-owned cement makers to improve efficiency and potentially lower prices.

To that end, the government announced that a new, modern and environmentally friendly cement plant had opened in May. The facility was financed with the assis-

tance of the Chinese government as part of the Belarusian-Chinese investment project. The plant’s kiln can be fuelled by either natural gas or coal. Additionally, a new cement unit with an installed capacity of 1.8 mtpy was recently commissioned in Kostiukovichi.

The use of adulterated cement in Ukraine has increased to 26 percent as more vendors are mixing in extender ingredients.

According to the Ukraine Cement Association, cement packed directly by producers is engaged in continuous laboratory quality control, but many stocks are bought and then resold. Some vendors have arbitrarily mixed cement with dif-

select PROJECTS IN THE WORKS: EUROPE & RUSSIA COMPANY (LOCATION)

PLANT

Dyckerhoff (Russia)

Akbulak

Italcementi (Bulgaria)

Devnya

Mordovcement (Russia) NMD Ural (Russia)

Rudny Cement (Kazakhstan)

OVERVIEW Dyckerhoff has announced plans to build a cement facility in Akbulak.

Construction will take three years. Plant capacity is undisclosed.

Table available in the CemWeek Magazine Print Edition.

Sinoma International signed a deal to supply a 4,000 tpd clinker production line for the Devnya expansion, where wet production is being replaced with an expanded, dry processing technique. COST: â‚Ź 119 million.

Mordovcement is expanding its grinding capacity for a total cement production capacity of 1.89 mtpy. COST: 4.5 billion rubles.

Chelyabinsk

Rudny

China's Sinoma has signed a contract with NMD Ural to buid a 5,000 tpd plant in Chelyabinsk, with a feasibility study under way. COST: 2.6 billion rubles.

The planned Rudny Cement Plant in the Kostanai Region will have a

www.cemweek.com/subscribe 500,000 ton cement capacity and will create 220 jobs. COST: 9.5 billion tenge.

Tojikiston (Tajikistan) Verkhnebakansky (Russia)

Varzob Novorossiysk

A 72,000 ton capacity cement plant will be in operation by the middle of 2012.

A new 2.2 mtpy cement plant will be built in Novorossiysk, boosting regional output by 150%.

ferent impurities without any quality control. There is also a growing problem of counterfeit packaging, logos, and brands.

Middle East Mirroring a recovery in the construction market, investments in the building materials industry in the GCC countries also rose in 2011. According to one report, investments hit about US$31 billion and accounted for roughly 9.5 percent of the total funds invested in manufacturing. For all the countries of the GCC, the estimated value of projects (current and future) until 2020 is US$2.5 trillion ,with around 50 percent of them in the UAE and Saudi Arabia.

In related GCC news, earnings by cement makers witnessed double-digit growth in the first three months of the year. Profits surged 21.2 percent in the first quarter of 2012, while net profits increased from US$359.5 million in 1Q 2011 to US$435.6 million in 1Q 2012.

The UAE and Oman, which had experienced declining sales, reported higher revenues due to the better operating environment in both countries. Sales revenues in the UAE increased 7.7 percent to reach US$258.1 million, bringing the gross margin back to double-digit growth of 10.5 percent. Omani companies witnessed a 16.7 percent increase in sales revenue, reaching US$100.3 million.

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

27

Coal W Coal W Coal W

regional report: europe, middle east, africa

select PROJECTS IN THE WORKS: middle east & africa COMPANY (LOCATION)

PLANT

Savannah Cement (Kenya)

Savannah Cement will begin operations by the end of the second quarter.

Askale Cement (Ghana)

Cement Mozambique, a unit of Cimpor, is conducting feasibility studies for a proposed 100 million euro facility.

Ndola

Qianting (Ethiopia) Arkan Building Materials (UAE)

Table available in the CemWeek Magazine Print Edition.

Askale intends to establish a cement plant in Ghana after the government unveiled new construction projects that will raise domestic consumption.

Cimpor (Mozambique) Cathay Pacific (Zambia)

OVERVIEW

Cathay Pacific Steel will invest US$200 million to build a new cement plant in Zambia.

Qianting will spend 244.1 million birr to build a plant in Ethiopia.

Al Ain

A new cement plant is announced in Al Ain with operations to begin this year. The AED 500 million expansion involves construction of a cement and brick plant and www.cemweek.com/subscribe boosts the company's capacity to 4 million tons clinker and 5.6 million tons of cement.

Cimencam (Cameroon)

Cimencam cement company will build a plant on the outskirts of Yaounde the Norma Eustace in Cameroon.

Lucky Cement (Iraq)

Pakistan-based Lucky Cement will set up a US$15 million plant in Iraq with 50% equity in the project. Production capacity is estimated at 870,000 tpy.

In reaction to UAE companies dumping excess cement at cost in the Omani market, Oman is igniting price wars that are pressuring Omani cement companies' profits.

Qatar also witnessed increasing sales revenues (a 7.3% increase) and posted a 16.6 percent increase in net profits. The Saudi market experienced a strong 34.7 percent increase in revenue during 1Q 2012, outperforming the UAE, Qatar and Oman. Gross margins increased to 55.5 percent. In addition, net profits increased 23.6 percent to reach US$364.5 million.

Cement prices in the GCC averaged around US$66.7/ton in 1Q compared to

US$66.0/ton enjoyed in 1Q 2011. The 1.1 percent increase is mainly due to a price increase in Saudi Arabia.

Turkish-based Sanko has set aside US$150 million to upgrade a cement unit in Bartin, where it plans to increase capacity as demand for cement in neighboring countries grows. The company is looking at exports to Egypt, Algeria, Bulgaria and Romania.

Cement production in Iran will hit 82 million tons this calendar year after the country vowed to add 6.2 mtpy of capacity to service demand. According to reports, over 10.4 million tons of cement was exported last year, with exports pro-

Construction site, Qatar

28

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

jected to rise to 15 million tons this year.

Iran produced over 66.4 million tons of cement last year.

Aldouh cement plant in Iraq is 80 percent complete and may be commissioned

by June. The project is one of the largest investment projects in the province and is being built at an estimated cost of US$249 million. In other investment news, Saudi-based Al Jouf Cement is looking to set up a joint venture in Iraq that will build a 7,000 tpd cement plant. Deputy Chief of Muthanna Investment Amer Abbas Aziz says a delegation came to the province to seek investment opportunities in the area, and they have expressed interest in securing a license to build a plant there.

The price per ton of cement in Yemen has risen by US$25 and is expected to climb more. Yemen has witnessed a severe crisis in cement supplies for the past several months due to a total closure of factories in Abyan and Lahj. Strikes have paralyzed both plants, with concerns over compensation and employee benefits. The Abyan unit has been closed since May of last year, while Lahj was shuttered in May 2012 following a strike by workers demanding better wages. The closure of five cement plants in Yemen has greatly affected construction and development and will likely lead to more costly imports.

The largest cement factory in Afghanistan is on the verge of bankruptcy due to its an inability to obtain bank financing. Gori Cement had opened a second branch in the city of Pul-i-Khumri Baghlan province in July 2011, but now the branch cannot get government funding.

Gori Cement is the largest cement company in Afghanistan, and it planned to open a third branch in Baghlan province, with construction to start by 2013. However, the bankruptcy of the second branch has called this project into question.

Africa Egypt is preparing 12 new cement licenses for the second half of the year, once the country's political situation stabilizes.

The licenses are expected to add 18 mil-

regional report: europe, middle east, africa Algiers

lion tons of production capacity. Analysts see demand growing to 72 million tons by 2015.

Speculation in the Algerian cement market will continue unless cement supplies can be increased. Total domestic cement production, at 18.3 million tons, cannot meet the current need of roughly 21 mtpy. Recently, Algerian construction firms asked the government for permission to import cement to make up for shortages in the local market and rising prices. Additionally, officials are calling for the creation of centralized cement distribution centers to keep prices low amid rising fees. The government is calling upon cement makers to participate in the program.

The Southern African Customs Union (SACU) recently busted a price-fixing cement cartel, causing issues over compensation to resurface. The break-up of the alleged cartel saw two of the four cartel members penalized with a fine of P257 million last year. However, the exposure of wrongdoings has also sparked questions concerning regional trade laws and revenue sharing within SACU member states. When South Africa decided not to share the penalty with member states that

the cartel operated in, the Competition Authority (CA) of Botswana contacted the South African government. The CA plans to initiate its own investigations concerning the cartel activities that were committed in Botswana.

Lafarge appointed a CEO for its South African operations, even as it continues to pare down debt. The former general manager of Lafarge in South Africa, Thierry Legrand, has taken up the new post.

The appointment appears to have overturned a news report in December that Lafarge was seeking a buyer for its South African operations, in a deal that could fetch upwards of US$800 million.

Secil Lobito wants to build a new 1.2 million ton plant in Angola to meet growing demand there.

Currently, cement consumption in Angola is estimated at 1.5 mtpy, and demand is expected to rise further in the short term.

According to a recent report, the "geographic triangle" of central and southern Angola, where Secil Lobito is located, has a potential for very high urban development as well as natural conditions suitable for the implementation of agroindustrial and oil projects.

Morocco-based Addoha will build a 500,000 ton cement plant in Cameroon for US$25.9 million. The plant will start up in December. Cameroon is also allowing Dangote Cement to set up a cement unit in the disputed Douala territory. The company had previously been blocked from using the land because it belonged to a municipality and local ethnic groups, but a land use ban was lifted on May 28 and the Nigerian company was granted a construction permit on June 4. Work has already begun on the site, and the project is expected to be completed within 18 months.

Overall, Nigerian-based Dangote Group plans to spend US$7.5 billion to fund expansion efforts in the next four years, spreading out into neighboring countries.

Dangote plans to increase production to 33 million tons by 2015, focusing most of its added capacity in West Africa.

Indian-based Birla Corporation unveiled plans to build a cement unit in limestonerich Ethiopia. The MP Birla Group recently formed a wholly owned subsidiary, Birla Corp Cement Manufacturing, in the sub-Saharan African country. BMWeek CemWeek BMWeek BMWeek

JUNE / JULY 2012

CemWeek CemWeek

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

29

C C C

Coal W Coal W Coal W

REGIONAL REPORT:

this year. Each cement plant is estimated to require an investment of US$400 million to US$500 million, with all funds coming from internal cash. The plants will each have an installed capacity of 2.5 mtpy.

Shwedagon Pagoda, Myanmar

The China Building Materials Federation and the China Cement Association have vowed to accelerate the government's plan to eliminate backward capacity in cement production as the country tries to modernize its cement production and moves to increase new clinker production capacity by 300 million tons.

While cement demand has risen in the past five years, per capita cement consumption in Bangladesh has remained low at less than 100 kg. By comparison, per capita consumption is 150 kg in West Bengal and more than 1,000 kg in China.

Myanmar has attracted foreign investors who plan to build cement facilities in the country. The country is currently attracting investors from the European Union, such as Germany, France and Italy, as well as investors from the ASEAN region, in-

cluding Thailand, Malaysia and Vietnam.

Investors are expected to build several cement plants with capacities of between five to ten thousand tons to ultimately boost the country’s cement output.

One company already in the game is Indonesia’s Gresik, which plans to invest as much as Rp 1 trillion to build a cement unit in Myanmar. The company is conducting a feasibility study for plant development. Gresik hopes the plant will be a joint venture project and plans a targeted production capacity of 600,000 tpy. Myanmar was chosen as the location for its new plant because it is considered to have bright prospects in the next few years.

Closer to home, Gresik is lining up US$1 billion to build two integrated cement plants in Central Java and West Sumatra

select PROJECTS IN THE WORKS: ASIA PACIFIC COMPANY (LOCATION) Bosowa Group (Indonesia) Semen Gresik (Indonesia) Semen Gresik (Indonesia)

30

PLANT

OVERVIEW

Table available in the CemWeek Magazine Print Edition.

Bosowa Group will build cement plants in Central Java, East Java, West Java and South Sulawesi within the next five years for a total investment over US$500 million.

Myanmar Tuban

www.cemweek.com

Semen Gresik is in the first stages of plans to build a 2.5 mtpy cement plant in Myanmar. COST: US$150-200 per production ton.

www.cemweek.com/subscribe Semen Gresik has announced the opening of its cement plant in Tuban. Test runs for the rotary kilns have been completed. Total capacity will reach 2.5 mtpy, with the ability to increase to 3 mtpy.

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

The Vietnamese cement glut continues; the country’s cement supply exceeds demand due to a depressed construction sector. Currently, cement plants in Vietnam have reached an annual capacity of 70 mtpy. Market competition is fierce and a number of Vietnamese facilities find it difficult to find buyers. The government is looking at the possibility of increasing cement and clinker exports to minimize its supply and reduce competitive pressure in the local market. To that end, Vinakansai recently announced plans to export around 100,000 tons of clinker to Singapore, and Thang Long Cement has exported 25,000 tons of cement to Africa.

According to manufacturers, Philippine cement prices are on the way up as companies try to compensate for higher input costs and rising demand. Prices are expected to go back to the 2010 level of P215 to P220 per 40 kg bag, the highest ever. Price monitoring by the Department of Trade and Industry shows that the prevailing price of cement is P205 per 40 kg bag for the Republic and Rizal brands, higher than the P185 to P190 price range in May. Australia’s Adelaide Brighton expects slim growth for its cement unit this year, forecasting marginal sales growth. An upgrade of the company's Birkenhead cement plant, which is expected to add US$10 to $12 million to before-tax earnings, is slated to be complete in the middle of next year.

Finally, New Zealand-based Fletcher Building is bracing for stiffer competition from German, South African and Malaysian building materials groups trying to break into its home markets. According to the company, it is under attack from firms undercutting prices by up to a third and aiming at Christchurch's postquake rebuild. The company is taking the threats "very seriously." BMWeek CemWeek BMWeek BMWeek

CemWeek CemWeek

CW Group CW Group CW Group

Indian cement firms plan to cut cement prices in June in anticipation of a slowdown in construction activities with the expected arrival of the monsoons. The price cuts, which are often viewed as seasonal, are expected to affect the profitability in the short-term. Many cement companies are contemplating price reductions of Rs 10 per 50 kg bag on average across the country.

Over the past five years, cement stocks have posted a good performance during

regional report: asia pacific & south asia

REGIONAL REPORT:

monsoon seasons. The top three cement companies—ACC, Ambuja Cements, and UltraTech Cement—have never given negative returns during the July to September period.

Cement makers have denied the existence of a cement cartel in Pakistan, citing differing price movements in the northern and southern areas of the country. Manufacturers argue that an increase of Rs 10 per 50 kg cement bag by the South Zone's cement companies and a decrease of Rs

20 per bag in the North Zone is proof that no cartel is working in the industry and that companies act based on regional situations.

Pakistan’s government has decided to push through a cut to excise duties paid by cement makers. It will cut the federal excise duty (FED) on cement from Rs 500 per ton to Rs 400 per ton in the 20122013 budget. BMWeek CemWeek CW Group BMWeek BMWeek

CemWeek CemWeek

CW Group CW Group

Coal Week Coal Week Coal Week

select PROJECTS IN THE WORKS: south asia COMPANY (LOCATION) Jaiprakash Power Ventures (India)

PLANT Nigrie and Bina

Ambuja Cements (India)

OVERVIEW Jaiprakash Power Ventures plans to raise Rs 3,5000 crore to fund its entry into cement manufacturing. The company received approval to set up grinding units at Nigrie and Bina that will utilize fly ash from its thermal power plants.

Table available in the CemWeek Magazine Print Edition.

Ambuja Cements plans to psend Rs 1,800 crore to expand production capacity with a 2.2 mtpy clinker unit at Nagaur in Rjasthan. The feasiblity study is complete and environmental clearance has been obtained.

ACC (India)

ACC plans to build three grinding units and a clinker unit by 2015, increasing production by 4 mtpy. COST: Rs 3,300 crore.

YTL Cement (Malaysia)

Kuantan

YTL Cement has contracted Germany's KHD Humboldt Wedag to increase daily output at the Kuantan unit by 5,000 metric tons. COST: € 100 million.

Ghorahi Cement (Napal)

Laxmipur

Ghorahi Cement Udhyog was set to start production by the end of April 2012 at a new cement plant. Total capacity is 750,000 tons of cement.

Clinker manufacture will begin at 1,200 tpd and later increase to 2,000 tpd.

Siam Cement (Cambodia)

Kampot

Thailand's Siam Cement has signed a memorandum of agreement to build a cement plant in Cambodia, boosting local market share to 40%. Total www.cemweek.com/subscribe capacity is estimated at 2,5000 to 3,200 tpd. COST: US$150 million.

Bokaro Jaypee (India)

Jaypee Group and SAIL will partner 74:24 on a a 2.1 mtpy capacity cement plant under a new company--Bokaro Jaypee Cement plant, or BOJCL.

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

31

Coal W Coal W Coal W

REGIONAL REPORT: CO2 norms. Holcim may soon find itself undertaking similar upgrades in Montana as the EPA announced plans to reduce the statewide haze problem. Holcim was one of nine facilities singled out as contributing significantly to haze pollution, which affects the air that circulates into Yellowstone National Park. The EPA has asked Holcim to submit a plan to correct the problem, and the necessary upgrades are projected to run US$6.2 million North America Lafarge is seeking a permit to utilize alternative fuels at its Bath facility in Canada, wanting to incinerate up to 75 tons of construction and demolition debris daily.

Currently, the Bath facility burns 110,000 tons of coal and pet coke each year, and it hopes to reduce that amount by 30 percent by using alternative sources. However, the plan is opposed by the Lake Ontario Waterkeeper and those living in the surrounding area.

In the United States, the Portland Cement Association (PCA) announced that an increase in job creation and the beginning of a recovery in the construction industry would translate into real construction spending gains this year following a seven-year decline. The PCA revised its 2012 forecast to 3.7 percent for the year,

followed by a 7.6 percent growth spurt in 2013 and a 14.1 percent rate in 2014.

Meanwhile, several companies are moving forward with plans to upgrade facilities in order to conform to new EPA guidelines. The Ashgrove Midlothian plant in Texas approved a US$125 million upgrade in order to conform to the EPA’s standards for Hazardous Air Pollutants, which take effect in September 2013. The Texas Commission on Environmental Quality granted Ashgrove a one-year extension—until September 2014—to comply with the ruling. The extension will allow the company to operate its existing kilns and clinker coolers until the upgrade is complete.

Lafarge’s Ravena New York plant is also upgrading to comply with new, stricter

Cement prices were on the rise in Mexico, climbing to an average of 123 pesos per 50 kg bag in May. Prices were mixed regionally, with areas around Monterrey and Guadalajara noting an average increase of two percent while in Mexico City prices were up only one percent. In Merida, prices dropped an average of one percent.

Central America & Caribbean The Cuban government announced that production has stabilized at its unit in Cinfuegos. Production had stalled because the plant’s storage silos were full, which led to the plant operating only one of its kilns in order to reduce production.

The Dominican Association of Portland Cement Manufacturers (Adocem) blames the industry’s decline in sales on stagnant construction investment in the Havana, Cuba

32

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

regional report: americas

Heartened by the increase in demand, Cementos Argos plans to spend between US$150 and $170 million to improve efficiency at its cement plants. In the first quarter, consolidated revenues grew 34 percent, and the company is expecting the country’s recent entry into a Free Trade Agreement with the U.S. to provide an additional boost to construction in Colombia.

Newly minted cement maker Cementos San Marcos also hopes for a slice of the growing domestic market. Its first cargo of 5,000 sacks of cement has been shipped to stores in Cali. With cement production at 950,000 tons per month in Colombia, the plant is projecting to cover 1.5 percent of the domestic market.

tourism and residential real estate sectors. Additionally, the constant increase in oil and other fuel prices and the surge in power supply rates have hurt the sector in recent years. Adocem notes that these costs represent roughly 60 percent of the total cost of producing a bag of cement.

Adocem is stepping up efforts to promote the future modernization and expansion of the country’s plants to ensure sustained development within the country. The Dominican Republic is projected to see growing demand for infrastructure and housing in the coming years.

Jamaican-based Carib Cement hiked cement prices by 9.2 percent in June even as it admitted demand might be weakening.

In a statement to the Jamaican Stock Exchange, the company advised shareholders that the rebound in sales seen towards the end of last year had not been maintained and the domestic market appeared to be contracting again. At the same time, Carib noted that oil prices continued to rise in the first four months of this year, up 12 percent over end-of-year prices.

The Costa Rican government announced

plans to tax cement production. A new law will assess a five percent tax on cement produced in Cartago, San Jose, and Guanacaste and extends taxation to all cement in the territory, including areas previously exempt from taxation. The government reports that 25 percent of the cement levy will be allocated to the respective local governments.

South America Cement production increased in Venezuela as demand also increased. According to reports, cement output in the country rose 8.5 percent, reportedly spurred by the government’s intension to resume work on its housing plan, Gran Misión Vivienda Venezuela (GMVV). Meanwhile, cement distribution has also risen 15 percent compared to the previous quarter.

Cement shipments in Colombia rose 8.1 percent in the first four months of the year, driven by increased demand. During this time, cement production reached 3.5 million tons, representing an increase of 6.2 percent in relation to the same period in 2011.

Cement sales in Peru rose 20 percent in March, marking the eighth consecutive month of growth. According to the INEI, in February the rate of domestic cement consumption registered a 15.63 percent increase from its previous 4.46 percent.

The government credits the implementation of private works, such as the construction of homes, shopping centers, and an investment in the electricity and mining sectors for the growth.

Peru’s Cementos Yura, which has struggled to meet local demand, decided to ship cement to Bolivia. Bolivia is expected to import between 300,000 and 400,000 bags of cement from Yura.

Bolivia will reportedly build a new cement unit in Aroma to ease the country’s cement supply shortage. The plant is set to produce 1,700 tpd of cement, which would make it the country’s second largest cement provider. Work on the new plant will begin in July with an investment of US$145 million from the Swedish Energy Saving Scandinavian Solutions (ESS). The plant will be operational in January 2014.

Argentinian based Loma Negra indicated its parent firm Brazil's Camargo Group will put up US$250 million to build a

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

33

Coal W Coal W Coal W

regional report: americas

modern cement plant in San Juan, with assurances to reduce the company’s environmental footprint. An environmental impact study for the proposed plant is being prepared. Loma Negra also secured a 500 million peso loan from a consortium of local banks in Argentina, including HSBC Mortgage Bank and BACS Bank of Credit and Securitization. The loan is the most significant in recent years and allows Loma Negra and Ferrosur Rock to fund its business. This includes investment in equipment and machinery to expand production capacity and streamline its operational processes.

Cement sales in Brazil rose 11 percent to 5.3 million tons in April due to higher demand. As of April 2012, cement sales in the Brazilian domestic market grew 10.1 percent to 66.3 million tons compared to the previous 12 month period.

Grupo Elizabeth is building a 950,000 ton cement plant in Paraiba at a cost of US$300 million, and Votorantim Cement will invest US$600 million to build

a 2 mtpy cement factory in the interior of Goiás by 2013. Meanwhile, Holcim Brazil announced that it had received approval from the Minas Gerais Council of State Environmental Policy for its new cement plant in Barroso. The facility will reportedly cost US$800 million and will help boost the company’s capacity from 1.2 million to 3.6 million tons. The facility is expected to be completed between 2014 and 2015.

Cement prices were steadily climbing in Guyana, and the government speculated it may be because of a construction boom. According to government officials, distributors were charging between US$1,800 and $2,300. The rise in prices was thought to be the result of unscrupulous behavior by some distributors. To combat this, the government announced that it was suspending the Common External Tariff (CET) on cement imports starting in May. The suspension would apply to imports from countries outside Caricom due to the high prices of cement from this region. BMWeek CemWeek CW Group BMWeek BMWeek

CemWeek CemWeek

CW Group CW Group

select PROJECTS IN THE WORKS: americas COMPANY (LOCATION)

PLANT

Venezolana de Cemento (Venezuela) Cimpor (Brazil)

The Venezuelan government has approved 129 million bolivars to promote the construction sector, 43 million of which is allocated to developing the Venezolana de Cemento quarry.

Parana

Elizabeth Cementos (Brazil)

Table available in the CemWeek Magazine Print Edition.

Cimpor plans to build a cement unit in Parana starting in the second half of 2012.

A new cement plant has been announced in Paraiba near Alhambra with a facility launch in early 2014.

Coboce (Bolivia)

Soboce (Bolivia)

OVERVIEW

Coboce has begun installation of a new production line, replacing the current 40 meter long kiln with a 72 meter long, 4.2 meter diameter kiln. Capacity of the new line will reach 460,000 tons of clinker per year.

El Puente

Soboce plans to increase capacity by 50% by investing in a new grinding plant at El Puente.

Sinoma Intl. will build a 1,000 tpd cement plant for Yguazu Cement in Villa Hayes www.cemweek.com/subscribe near Asuncion.

Yguazu Cement (Paraguay) Cerro Azul (Venezuela)

El Pinto Piar

Loma Negra (Argentina)

San Juan

Loma Negra has released US$250 million to build a 1 mtpy cement plant in San Juan Province.

Votorantim (Brazil)

Mato Grosso

Votorantim's new Cuiaba plant is set ot open in the second half of 2012. COST: 390 million reales.

34

www.cemweek.com

The Cerro Azul unit will be online by June 29th after facing repeated delays.

COST: US$193.8 million.

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

Cimpor Takeover Approved Portugal’s markets regulator, CMVM, has approved the takeover of Cimpor by Camargo Correa.

CMVM approved the offer of 5.5 Euros per share under the terms of trade and said the remaining Cimpor shareholders had until June 19 to decide whether to sell their shares.

Camargo Corrêa, already the largest shareholder in Cimpor (33%), in March launched an offer of EUR 2.5 billion (US$3.3 billion) for the remainder of Cimpor in an operation supported by the Portuguese government. The CMVM said Votorantim and Camargo Correa, who has 21.2 percent of Cimpor, agreed to a transaction involving the exchange of assets.

Camargo Correa will exchange cement and concrete assets in South America and Angola for internaCoal Week tional assets of Cimpor, includCoal Week ing China and India but excluding Coal Week Brazil. The group will also take a portion equivalent to 21.21 percent of Cimpor net debt. From this, Camargo will exchange the assets received by Votorantim's participation in Cimpor, as expected by analysts.

Earlier in the month, Brazil’s competition authorities had issued a non-binding statement on Camargo's bid for Cimpor, approving it with certain restrictions.

The restrictions included the need for Camargo Correa to dispose some of its assets in cement and concrete in the states where it has a market share exceeding 20 percent.

The considerations, however, still lack finality, dealing only with an opinion.

COUNTRY SNAPSHOT

Continued from page: 25

increases and reaching a cement consumption evaluated at 7.48 million tons by the end of 2000.

Since then, cement consumption has more than doubled to over 16 million tons in 2011. Demand is expected to follow the same upward trend up to 2015, only on a lower scale as the market enters a steady increasing pattern. The positive effects on construction generated by the election cycle fueled a cement consumption spike in 2011. The parliamentary election session scheduled for 2012 was initially moved forward to October 7, 2011 and then finally held on the 25th of November.

The Moroccan cement industry exhibits a notable degree of vertical integration for Africa. Though the retail segment still accounted for about seven-tenths of the annual sales volume, public works (bulk cement deliveries) represented over ten percent of the deliveries in 2011. Another 11 percent of the market goes to the ready-mix channel, while the remaining seven percent is destined to precast—two segments indicating a relatively mature market structure.

MAJOR PLAYERS The cement market is dominated by the presence of four major global cement

companies as well as one new entrant; together, they own a total of over 20 million tons in capacity. Lafarge Ciments is the largest cement producer, followed by Italcementi (Ciments du Maroc), Holcim Maroc and Cimpor (Asment de Temara) with its Temara cement plant.

A new company, Addoha, entered the market in 2011 by commissioning both of its proposed cement plants—Ben Ahmed and Beni Mellal. The entrance of Addoha changed the competitive landscape as the company switched from being a client for the cement companies to being a competitor that can supply its own materials to develop a real estate business line.

The 17 cement plants present in Morocco addressed the complete market needs with only limited cement imports.

The four largest cement companies of Morocco have been engaged constantly in capacity expansions along the years, increasing their capacity materially between 2005 and 2011 and intending to expand it further through 2015.

Apart from the construction projects planned and actually commissioned by Addoha Group in 2011, other cement companies announced plans to enter Morocco. However, several have, due to market conditions, cancelled or postponed these plans.

OUTLOOK The Moroccan cement market started 2012 on a high note. The already elevated cement consumption volumes of the period January – February 2011 have been surpassed this year by a wide margin. The cement consumption growth rate is expected to slow down towards the end of the year as construction projects contracted before the electoral cycle are concluded.

Going forward, the demand volume growth rate is expected to register a slight decline in 2013 before starting to rise again. The increase in cement consumption is estimated to take place in all segments, as social housing continues to expand and infrastructure projects are deployed to reach the government’s ambitious 2020 targets.

Overall, the outlook for the Moroccan market is attractive as it continues to be a growth-factor market that can leverage the losses incurred by global cement companies in other, challenged markets. BMWeek BMWeek BMWeek

CemW CemW CemW

This update briefly highlights findings from the recently published, 60-page CW Group research report “Morocco Cement Market and Forecast (2012 update).” To find out more visit www.cwgrp.com/research, or contact the CW Group at inquiries@cwgrp.com.

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

35

Coal W Coal W Coal W

SECTOR COVERAGE: expectations following a slowdown in the initial three months of the year that was partially blamed on the rate of economic growth that pushed the U.K. back into recession.

Russia’s production for several categories of building materials registered significant increases this spring. The country’s production of Portland cement, aluminous cement, slag and similar hydraulic cements increased 19.4 percent in March versus the same month last year. Russia’s lime production grew 5.4 percent, while gypsum production increased 4.5 percent.

In China, the construction sector slowdown is putting pressure on major producers of heavy machinery. Recently, equipment maker Caterpillar stated that it has overestimated the demand for construction equipment in China. Moreover, Komatsu, one of the largest producers of excavators, registered a 25 percent drop in Chinese sales in the first quarter.

Latin America, Russia and the Gulf region are markets that report solid growth amid a continuous economic crisis that is starting to affect even China.

Construction and Building Materials The U.S. market is slowly recovering, with April the second consecutive month of growth (equal to March at 0.3%) mainly due to home construction and commercial projects. Government spending, however, decreased for the fifth month in a row.

The data is less promising in Europe, where the established economies are still struggling amid the public debt crisis that affects the continent.

36

www.cemweek.com

New data shows Italy is one of the most affected construction markets since the financial crisis debuted in 2008. The Italian construction sector has lost around 400,000 jobs during the crisis, and the number of registered companies in the sector is still declining. The latest data indicate a 5.8 percent decline in 2011, following 6.6 percent in the red in 2010 and 7.6 percent in 2009.

In the U.K., construction growth has declined in April after a 21-month high registered the previous month. The industry continues, however, to have optimistic

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

Meanwhile, Latin America is seen as one of the world’s most promising regions in terms of construction growth. Recently, the government of Colombia announced plans to invest nearly US$8.8 billion per year in infrastructure, or three percent of the nation’s GDP, between 2014 and 2018.

The plans should lead to the construction of about 1,100 km of dual carriageway roads as well as 1,000 km of railways.

Peru, on the other hand, says it will spend US$15 billion to build more roads and improve broadband infrastructure in the country, while Mexico is putting focus on the housing sector, seeking to build around 250,000 homes.

Good news come also from the Gulf region, where countries such as Qatar, Saudi Arabia and the UAE are set to spend more than US$63 billion to improve critical infrastructure in their major cities in the next five years. Several “smart city” projects are being considered, taking into account the importance of integrating water services, gas and other housing

South Africa is in the spotlight with plans to host the tallest building in Africa: a proposed 447-meter high skyscraper. The skyscraper will be the centerpiece of a larger project called Centurion Symbio City and should be accompanied by two other buildings, at 336 and 210 meters high. The complex will include offices, homes, shops, hotels and a convention center.

Concrete U.S. Concrete announced it has signed license agreements with major ready mix concrete producers to manufacture its proprietary technology, Aridus Rapid Drying Concrete. The technology is the first ready-mix concrete solution for preventing floor covering failures that result from excess moisture vapor in concrete slabs, an industry-wide problem that costs millions of dollars annually in damage, downtime, repair and replacement.

Stoneway Concrete, Prairie Materials, Cemstone, Irving Materials, Bayou Concrete and MMC Materials are among the first licensees to use the new product.

Also in the United States, the CEO and President of the Brick Industry Association, Gregg Borchelt, recently praised genuine clay bricks for being versatile

Fewer mergers and acquisitions in global construction

Table available in the CemWeek Number of deals 32 36 52 47 Magazine Print Edition.

Total deal value (US$ bn.)

11.3 13.1 22.7 14.7 1Q 2012

Average deal value (US$ bn.)

4Q 2011

3Q 2011

www.cemweek.com/subscribe 0.4 0.4 0.4

2Q 2011

0.3

1Q 2011

46 22.8 0.5

Source: PwC Global Engineering and Construction industry mergers and acquisitions

materials made using abundant natural resources. The materials have reduced property damage while increasing survival odds during the country’s storm seasons. They also have one of the highest levels of moisture resistance, according to studies.

In Ukraine, a large mobile complex was used to produce concrete for the reconstruction of the Donetsk airport.

The mobile unit, which has the capacity to produce about 690 cubic meters of concrete per hour, is unique on the Ukrainian market.

Meanwhile, scientists from India have claimed that they were able to develop new particles that will hasten the construction of stronger buildings. The scientists successfully used nano-technology to alter the structure of sand, obtaining nano-sand particles that may be used in cement concrete. The so-called nanosand particles are expected to increase the strength of concrete used for the con-

sector coverage: construction materials

services in one system, so as to achieve benefits from the lowest cost.

struction process.

Gypsum and Lime In Canada, large gypsum companies affected by slowing demand, such as National Gypsum Canada, are starting to change focus to smaller markets. The company has commented that Central and South America are interesting destinations because the housing industry is just beginning to use wallboard, while the market is maturing in North America.

On the other hand, shipments of limestone on the Great Lakes totaled 3.35 million net tons in May, an increase of 30 percent compared to April and 15.6 percent better than a year ago. However, shipments were down 9.3 percent compared to the year’s five-month average.

In Ethiopia, GH Industrial has built two gypsum factories that are reportedly able to produce 4.2 million square meters of gypsum boards and 50,000 tons of gypsum flour yearly.

A team of university researchers in Japan has developed building plaster made using zeolite. The most important quality of the material is that it absorbs radioactive cesium from contaminated water by using zeolite powder instead of sand. The material may also be used to safely store debris and soil that have been contaminated by radiation.

Aggregates In the U.K., the tie-up between Tarmac and Lafarge is expected to drastically alter the “big five” structure of the country’s aggregate sector for the first time in over a decade. The five companies that dominate the market are Aggregate Industries,

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

37

Coal W Coal W Coal W

CONSTRUCTION & MATERIALS BY BMWEEK.COM

average backlog in the u.s. quarter

months

1Q 2012

7.40

4Q 2011

7.82

3Q 2011

8.08

2Q 2011

8.06

1Q 2011

7.33

4Q 2010

7.05

3Q 2010

6.95

2Q 2010

7.19

1Q 2010

6.07

Table available in the CemWeek Magazine Print Edition. www.cemweek.com/subscribe 4Q 2009 5.81 3Q 2009

5.87

2Q 2009

6.02

1Q 2009

6.53

Source: Associated Builders and Contractors, Construction Backlog Indicator

Tarmac, Cemex, Lafarge and Hanson.

Tarmac and Lafarge were required by the Competition Commission to dispose of a significant number of their assets in order to make room for competitors and reduce the probability of obtaining a dominant position.

fected. The fire may have been caused by a technical malfunction, according to the local police.

Green and innovative building The Chinese government is promoting investment in green building materials as a way to correct the ecological damage caused by the country’s rapid expansion. The authorities have published 22 standards for green building materials to promote the construction of production facilities for such materials.

In Canada, researchers from the University of Calgary are working to develop a high tech tracking tool in order to prevent accidents within construction sites. The technology is set to prevent items from being left too close to the edge of a building or any other declared danger zone. It can be programmed to sound an alarm or send an urgent message to a supervisor.

The system uses radio-frequency signals to track the locations of objects, equipment and people.

Meanwhile, hempcrete, a concrete made of hemp from the cannabis sativa plant

Authorities are interested in finding solutions to current problems faced by the Spanish aggregates sector. A local minister visited the Castilla-La Mancha region and stressed that aggregates have a major impact in the construction industry during a “critical” phase of the country’s economy. Among the solutions weighed by authorities is the improvement of a sustainable supply of raw materials.

Also in Spain, Holcim has presented the innovative restoration techniques that have been applied at its mines, organizing an Open Day at its Gador quarry. The event sought to raise public awareness of environmental care, with focus on reforestation following mining in arid areas.

Meanwhile, a fire at a conveyor belt in a quarry in Germany has caused at least 500,000 Euro in damages. The fire damaged the conveyor belt and the roof of the plant, and the power unit was also af-

38

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

that is also the source of marijuana, is a new building material that could be used for the construction of houses. Hempcrete is a mixture of lime, water and hemp and is currently being utilized for a number of construction jobs in the United States and Europe. According to reports, it can be efficient for a variety of applications, including roof installation, flooring and wall construction.

In South America, scientists from Chile are using volcanic ash as a building material for its capacity to produce resilient and efficient bricks. Scientists believe that blocks made from volcanic ash can be used to construct strong structures, and they are studying the possibility of extending their use to housing construction.

Finally, Lafarge in France says it is moving forward with the purchase of new, more environmentally friendly trucks as it seeks to reduce its carbon emissions. A combination of smart truck, trailer design and comprehensive driver training form the foundation of Lafarge’s green transport initiative, the company said. BMWeek BMWeek BMWeek

CemW CemW CemW

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, equipment vendors are indispensable in understanding changing market conditions, monitor the latest cement prices, stay 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

$475 per user / year

$1,200 + S&H per user / year

$2,300 + S&H per user / year

$1,200 + S&H per user / year

$1,300 + S&H per user per year

Rolling monthly updates (Monthly updates)

Quarterly updates (4 updates per year)

Quarterly updates (4 updates included)

Semi-annual updates (2 updates included)

Updated every 2 months (6 updates included)

48 countries covered*

25 key markets

70+countries covered*†

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 Hard copy

■■ ■■ ■■ ■■ ■■

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

■■ ■■ ■■ ■■

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

PROJECTS

SUPPLIERS

Cimpor Orders Mills for Brazil Cimpor Cimentos do Brasil has ordered from FLSmidth two more vertical cement OK mills for cement grinding. The mills are to be installed with the new pyro lines, also purchased from FLSmidth, as announced in December 2011.

The original contract comprises equipment for the Caxitu project, a new greenfield cement plant in Paraiba State near the town of Joâo Pessoa, and for a new kiln line project at the Cezarina cement plant located in Goias State, 130 km from Goiania.

This additional scope of supply includes the mills for the Caxitu project and related process engineering and site advisory and commissioning services. The new order raises the total number of FLSmidth OK mills sold in Brazil to eighteen.

Wonder Cement commissions line Commissioning has commenced at the new 6,500 tpd cement production line built by Polysius for Wonder Cement in Nimbahera in the Indian state of Rajasthan.

The main components, supplied by ThyssenKrupp Polysius, were a tangential blending silo with a 20,000 ton raw meal capacity and the kiln system, consisting of a 6-stage, 2-string Dopol’90 preheater with Prepol-MSC calcining system, the rotary kiln and a Polytrack clinker cooler.

Two cement grinding systems completed the order. Each of these 200 tph combigrinding systems consists of a Polycom high-pressure grinding roll, a Sepol-PC high-efficiency separator and a singlecompartment mill.

for a Mozambique grinding plant with a capacity of 55 tph. The work is estimated to cost US$5.25 million and will be completed in 16 months.

The company also disclosed a joint venture between firm Global Cement Capital and Chakrey Ting of Cambodia, where LTV holds a 20 percent stake. The JV plans to build a cement plant in Cambodia, worth US$2 million.

Total construction of the plants, including supply and installation of machinery, will reportedly cost near US$83 million.

Star Cement orders “Kalina Cycle” The directors of Wasabi Energy have announced that the company's Kalina Cycle licensee, FLSmidth, has secured a contract to install its second Kalina Cycle power plant utilizing waste heat from a major cement plant.

In the middle of 2011, Wonder Cement also decided to install a Polab AMT to assure cement quality.

The new contract is for a 4.75 MW Kalina Cycle power plant which will be installed by 2Q 2013 at Star Cement's cement plant in Ras Al Khaimah, United Arab Emirates. Wasabi Energy will receive a one-off license fee based on the gross power output of the Kalina Cycle plant.

LVT secures projects LVT has lined up two projects with a total worth of US$7.25 million. First, LVT has been contracted to produce equipment

Loesche wins InterCement Order The solid fuel dry-grinding plant at Barker, Argentina has signed an order for a vertical roller mill type Loesche

40

www.cemweek.com

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

LM 35.3 D. The objective of this project is the substitution of natural gas used for firing the rotary kilns.

The dry-grinding plant will be designed for the grinding of coal and petcoke with product rates of 45 tph coal respective to 30 tph petcoke. The material will be ground to a fineness of five percent (coal) and 1.5 percent (petcoke) residue on a 90 microns sieve. The mill main drive power rating amounts to 960 kW. Besides the Loesche Mill, the order comprises the complete machinery of the grinding plant in between the raw coal storage and the pulverized fuel dosification. Furthermore, electrical equipment and automation as well as the buildings’ steel structure basic and detail engineering will be delivered by Loesche.

Complete delivery is scheduled for the second half of 2012.

Switch to Coal Fuel in Kyrgyzstan Due to high gas prices, the Kant cement plant, operated by KTSZ, will start using coal as its primary fuel, reducing the cost of cement. The decision was made at a meeting chaired by Prime Minister of Kyrgyzstan Omurbek Babanov and the Director of KTSZ, Daniyar Saline. The meeting addressed the issue of a sharp rise in market prices for cement.

PEOPLE KTSZ's Director said that the company will change its process configuration and related installation work at a coal plant, with a launch planned for next month.

academic qualifications, have made careers in Argos and are knowledgeable in the concrete and cement business. They also allow the organization to promote the transfer of best practices between regions in search of a unique culture, promoting operational efficiency and favoring innovation and sustainability, the company said.

Tunisia’s Zahana Boosting Capacity CBMI has decided to significantly increase capacity at the Zahana cement plant, operated by the Societé des Cements de Zahana.

By exchanging the existing mill with a Loesche Mill, type LM 48.4, a capacity of 425 tph raw material with a fineness of 14% R 90 can be achieved. The mill motor is designed for a capacity of 2400 kW. In addition to the Loesche vertical roller mill, equipment delivered by Loesche includes a hot gas generator LOMA Type LF36 and all spare parts required. Delivery of the equipment is planned in 12 months according to contract, while commissioning is scheduled for the second half of 2013.

Tanga Cement, FLSmidth FLSmidth has confirmed reports that the company is negotiating a contract with Tanga Cement Company of Tanzania. A statement by FLSmidth states: “If and when the contract is finalized and becomes binding, we shall immediately inform the market.”

Masse Plant Adds Mill in Benin Nouvelle Cimenterie du Benin has ordered a Loesche vertical roller mill for its new, 3600 tpy clinker line at the Masse cement plant near Porto Novo, Benin.

For the completely new line at Masse, a Loesche Mill Type LM 56.4 with a 320 tph raw material grinding capacity with a fineness of 12% R 90 will be put into operation. The mill will be designed to grind a material with a maximum feed material moisture of 21 percent. The mill motor is designed for a capacity of 3000 kW.

Jorge Mario Velasquez, president of Argos

Argos Announces Appointments Colombia's Cementos Argos has announced new corporate officers to fill the vacancies left by newly promoted officials. The Vice President, Legal and Sustainability will be headed by Juan Luis Munera, a commercial law attorney with over seven years experience with Argos, who until now had been working as Legal Manager International.

The Vice President of Finance will be assumed by Carlos Horacio Yusty, an industrial engineer specializing in management systems. Yusty has been linked with Argos for sixteen years and until now was head of Corporate Finance Management. Regional Vice President of the Caribbean will be Mauricio Ossa, business manager and current manager of the industrial business in Colombia Regional, with 15 years at Argos.

Tomas Restrepo, current Vice President of Innovation, will serve as Regional Vice President of Colombia. Thomas is a mechanical engineer with a masters and doctorate in industrial engineering. Camilo Restrepo, an environmental engineer with expertise in environmental engineering sciences who to date served as manager of Research and Development of Technologies and Processes, replaces Tomas Restrepo as Vice President of Innovation.

Delivery of the equipment is planned in 12 months according to contract, while commissioning is scheduled for the midJorge Mario Velasquez, president of Ardle of 2013. BMWeek CemWeek CW Group Coal Week gos, said the new appointees have high BMWeek BMWeek

CemWeek CemWeek

CW Group CW Group

Coal Week Coal Week

Lafarge India gets new CEO Lafarge India has instated Martin Kriegner as its new CEO. Kriegner joined Lafarge in 1990 and became CEO of Lafarge, Austria in 1990 before moving to India as Head of Cement in 2002.

"I am happy to return to India as Country CEO, at a time when the construction sector is evolving quickly in the country. By combining all of our activities together, we will be able to support this evolution by offering integrated and innovative solutions at an earlier stage of construction in close proximity with our customers, allowing the full benefits of our innovative products and services to be realized," Martin Kriegner said.

Boral CEO ousted by board Mark Selway lost the support of Boral’s board, which announced they were seeking a chief executive that could bring together the changes the company made over the past two years. The building products company said Selway would step down immediately, having served just over two years as CEO. Ross Batstone, current Managing Director of the building-products division, was appointed acting CEO while the global search for a successor is underway.

"While operational improvements throughout Mark's tenure have been excellent, the Board has decided that the stewardship of the company going forward requires a Chief Executive with a leadership style suited to harmonizing the changes that have occurred over the last two years throughout the company," Boral said in a statement.

Continued on page 44 JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

41

Coal W Coal W Coal W

technical

ANALYSIS

Global Gray Cement Prices in Decline prices in long-term up-trend: recovery on the horizon?

The CW Group's Global Cement Trade Price Report (GCTPR) tracks the trade activity of more than 50 countries on a monthly basis with the objective to provide analysts, strategists, and traders with one of the most important global cement trade market price indicators: import and export prices for gray cement, white cement, and clinker.

The provisional 1Q 2012 price points for global gray cement (FOB average) continue to place the price evolution on the downward trend. The decline was sustained by structural modifications within exporting countries; the major markets are being subjected to

42

www.cemweek.com

competition from distressed markets on the lookout for importing countries.

2011 closed on a high note with an average price for gray cement of US$83.4 per ton compared to the 2010 average of US$79. Since then, a provisional gray

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

cement FOB average of US$75 per ton, calculated for the first quarter of 2012, represents a marked decline. Final values for the quarter will likely be softened because rates from the set of countries currently available are usually below the global average price line.

GLOBAL GRAY FOB (average $/ton) Last available countries (comparing the set consisting of the most recent reporters only)

All available countries (full GCTPR country set)

100

Mar-12

Feb-12

Jan-12

Dec-11

Nov-11

Oct-11

Sep-11

Aug-11

Jul-11

Jun-11

May-11

Apr-11

Mar-11

Feb-11

Jan-11

Dec-10

Nov-10

Oct-10

Sep-10

Aug-10

Jul-10

Jun-10

May-10

Apr-10

Mar-10

Feb-10

50

Jan-10

75

Source: CW Group Research

The Mediterranean Basin also reported declining gray cement FOB prices, with distressed markets such as Spain and Portugal fervently looking for in-demand markets. France, Nigeria, and Algeria benefited from increased Spanish cement shipments, while Portugal turned its attention toward Paraguay, Algeria, and Brazil. Contrary to Spain and Portugal, which managed to increase their exports, Greece and Turkey are still suffering. In addition to scarce domestic demand in the Greek market, the turmoil in Libya placed Greek cement exports on hold.

Turkey has not kept up its exports after

GLOBAL GRAY CEMENT EXPORT PRICES (average $/ton) Turkey

Thailand 80

50

Mar-12

Feb-12

Jan-12

Dec-11

Nov-11

Oct-11

Sep-11

Aug-11

Jul-11

Jun-11

May-11

Apr-11

20 Mar-11

Trends Defined By Region Regional dynamics shed some light on the declining pattern. The regions that reported decreases in global gray cement FOB prices are also the ones that export cement at lower price points. Asia, the Pacific and Japan, the region that trades gray cement at the lowest prices, faced contrasting country-based evolutions, with Korea seen on the positive side and China on the loss side. In the battle launched for capturing shrinking imports from the United States, Korea strengthened its position (it was searching for overseas markets to balance its own scarce domestic demand), while China was rated as one of the most affected suppliers.

Source: CW Group Research

the volumes that it normally dispatches to Iraq and Egypt got slashed.

South America, Western Europe and Sub-Saharan Africa were characterized by high price volatility driven by their reduced exported volumes. On the other hand, North America and Caribbean prices rose and were expected to exceeded US$100 per ton by March 2012.

At a global level, gray cement FOB prices are expected to decline further given the continued competitive pressure inserted

by Asia-Pacific-Japan and Mediterranean

Basin countries. Also, the high number of cement markets that face declining domestic demand far exceeds those countries that can absorb the global cement surplus, leading once again to a contraction in prices. BMWeek CemWeek CW Group BMWeek BMWeek

CemWeek CemWeek

CW Group CW Group

C C C

This view is a highlight from the comprehensive, quarterly Global Cement Trade Price Report that comprises a global, regional, and country-based price perspective published by the CW Group. For more details regarding the report, please contact us at sales@cwgroup.com.

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

43

Coal W Coal W Coal W

PEOPLE Continued from page: 41

Cimpor CEO Announced Ricardo Fonseca de Mendonca Lima will become the new CEO of Portuguese company Cimpor.

Ricardo Lima served as president of operations at InterCement since 2004. Between 2008 and 2010, he took over as general manager of the business unit at InterCement, Argentina. Prior to joining InterCement, Ricardo Lima was plant manager at Villares Sidenor (1998-2004) and manager in the industrial Eluma (19951998).

“I am honored and excited to lead the company’s talented U.S. management team, which is not only dedicated to serving our customers, but also cares very deeply about the health and safety of all the company’s employees,” Mr. Stull said.

“I am confident that together we can

Ricardo Lima has a degree in Metallurgical Engineering from the Polytechnic School - University of Sao Paulo and a Masters in Metallurgical Engineering from the same.

He also has a graduate degree in Industrial Administration from the University of Sao Paulo and an MBA in Business Administration from Fundação Dom Cabral.

New CEO Lafarge North America John Stull will assume the senior leadership role for all aggregate, cement and concrete operations in the United States. The appointment brings the three business lines in the U.S. together under a single leader.

Stull has more than 20 years of experience with the Lafarge Group, including assignments in the United States and Paris. Most recently, he managed Lafarge Group businesses in Latin America and Sub-Saharan Africa. He has a chemical engineering degree from the University of Akron and is a graduate of the executive management program at Harvard Business School.

44

www.cemweek.com

visory Board, Gerhard Beinhauer, and the Deputy Chairman of the Supervisory Board, Silke Stegner, have resigned effective May 31.

Ex-FLSmidth EVP joins Alcoa Christian Jepsen, former Group EVP and CEO of FLSmidth’s global minerals business, joins Alcoa as Vice President of Corporate Development this summer. Jepsen will be responsible for developing and implementing Alcoa's portfolio growth strategies, including merger and acquisition, and divestiture activities. Jepsen will also serve on the Alcoa Executive Council.

During his 22 years with FLSmidth, he served as Chief Financial Officer in several of the company's larger businesses in the U.S. and Denmark. Since 2000, he has led businesses and served in senior executive positions for FLSmidth's operations in the U.S. and globally.

Jepsen earned bachelor's and master's degrees in business administration at Aarhus University, Denmark and Ricardo Lima, new boss at Cimpor completed the Harvard Business School's Advanced Management Program in build on the foundation that is already in 2003 and the General Management Proplace and continue to meet and exceed gram at the European Center for Exour customers’ needs in sustainable and ecutive Development (CEDEP) in Foninnovative ways.” tainebleau, France in 1995.

KHD announces board changes The Management and Supervisory Boards at KHD Humboldt Wedag are proposing an amendment to the Articles of Association that would reduce the number of Board members from six to three. To facilitate implementation of the proposed amendment, the chairman of the Super-

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

"With a track record of success in both corporate finance and operations in the minerals industry, he is uniquely qualified to lead our Corporate Development organization, which has an important role in Alcoa's future growth," said Alcoa Chairman and CEO Klaus Kleinfeld. BMWeek BMWeek BMWeek

CemWe CemWe CemWe

DATA PERFORMANCE Company (Exch)

52 WEEK HIGH

52 WEEK loW

% from 52Hi

% from 52Lo

50d Mov Avg

200d Mov Avg

% from 50d Mov Avg

% from 2000d Mov Avg

ADEL BRTN FPO (ASX)

3.27

2.22

-2.75%

43.24%

2.99

2.97

6.42%

7.21%

BORAL LTD FPO (ASX)

4.49

2.95

-34.30%

0.00%

3.43

3.84

-14.09%

-23.16%

TITAN CEMENT (Athens)

17.00

9.32

-18.24%

49.14%

-

-

N/A

N/A

INDIA CEMENT (Bombay)

118.50

62.10

-26.79%

39.69%

77.86

86.19

11.41%

0.66%

JK CEMENT (Bombay)

176.10

96.05

-8.77%

67.26%

142.80

133.17

12.50%

20.63%

PRISM CEMENT LTD. (Bombay)

53.85

35.75

-9.56%

36.22%

47.88

46.36

1.70%

5.06%

SAGAR CEMENT(BSE (Bombay)

203.00

125.00

-10.57%

45.24%

172.41

160.66

5.30%

13.01%

SHIVA CEMENT (Bombay)

8.42

4.12

-40.62%

21.36%

5.07

5.16

-1.40%

-3.19%

FLSMIDTH & CO. (Copenhagen)

482.00

255.20

-33.49%

25.63%

316.82

375.44

1.19%

-14.61%

WEST CHINA CEMENT (Frankfurt)

0.25

0.09

-40.48%

64.84%

0.17

0.15

-13.17%

-0.48%

SHANSHUI CEMENT (HKSE)

10.20

4.25

-48.53%

23.53%

5.66

5.92

-7.26%

-11.34%

ASIA CEMENT CH (HKSE)

7.34

2.81

-53.27%

22.06%

3.34

3.78

2.62%

-9.15%

ANHUI CONCH (HKSE)

41.00

17.90

-48.90%

17.04%

22.51

24.32

-6.93%

-13.87%

INDOCEMENT TUNGGA (Jakarta)

19,050.00

10,700.00

-8.92%

62.15%

17,268.30

17,629.10

0.47%

-1.58%

HOLCIM INDONESIA (Jakarta)

2,800.00

1,650.00

-13.39%

46.97%

2,465.83

2,406.16

-1.66%

0.78%

SEMEN GRESIK (PER (Jakarta)

12,950.00

7,400.00

-12.74%

52.70%

11,106.50

11,469.30

1.74%

-1.48%

TONGYANG CEMENT & (KOSDAQ)

4,185.00

797.00

-32.02%

256.96%

2,629.52

2,845.50

8.19%

-0.02%

ASIA CEMENT (KSE)

53,900.00

31,100.00

-20.04%

38.59%

43,368.30

42,014.10

-0.62%

2.58%

LAFARGE MALAYAN C (Kuala Lumpur)

8.11

6.06

-9.99%

20.46%

7.75

7.52

-5.81%

-2.97%

YTL CEMENT BHD (Kuala Lumpur)

4.85

3.80

-1.44%

25.79%

4.76

4.40

0.40%

8.52%

CIMPOR R (Lisbon)

5.70

2.97

-45.96%

3.70%

5.20

5.17

-40.80%

-40.42%

STEPPE CEMENT (London)

41.46

23.50

-37.29%

10.64%

26.01

29.42

-0.03%

-11.63%

CEMENTOS PORTLAND (MCE)

13.42

3.69

-69.90%

9.49%

4.34

6.18

-6.91%

-34.63%

GRUPO CEMENTOS (Mexico)

46.99

39.62

-8.70%

8.28%

42.37

43.38

1.26%

-1.11%

BUZZI UNICEM (Milan)

9.92

5.45

-25.32%

35.87%

7.01

7.73

5.64%

-4.25%

CEMENTIR HOLDING (Milan)

1.99

1.21

-25.98%

21.43%

1.38

1.60

6.57%

-7.77%

ITALCEMENTI RSP (Milan)

3.17

1.65

-42.02%

11.39%

1.85

2.15

-0.65%

-14.65%

ASSOCIATED CEMENT (NSE)

903.60

415.05

40.33%

205.52%

786.51

618.19

61.22%

105.12%

ANDHRA CEMENTS LI (NSE)

12.35

8.00

-29.15%

9.38%

8.57

10.19

2.13%

-14.10%

BURNPUR CEMENT LI (NSE)

9.90

5.50

-39.90%

8.18%

6.03

6.56

-1.33%

-9.33%

DECCAN CEMENTS LI (NSE)

209.80

122.10

-8.82%

56.67%

185.86

165.02

2.93%

15.93%

ITD CEMENTATION I (NSE)

201.60

106.00

13.76%

116.37%

214.86

170.00

6.74%

34.91%

MADRAS CEMENTS LT (NSE)

168.90

76.00

-5.39%

110.26%

143.43

134.35

11.42%

18.94%

MANGALAM CEMENT L (NSE)

128.00

46.25

3.87%

187.46%

112.25

73.90

18.44%

79.90%

SHREE CEMENTS LTD (NSE)

3,295.00

1,520.00

-7.74%

100.00%

2,599.81

2,551.26

16.93%

19.15%

CRH PLC AMERICAN (NYSE)

22.31

14.17

-13.76%

35.78%

17.58

19.45

9.43%

-1.08%

CEMEX, S.A.B. DE (NYSE)

8.34

2.18

-19.27%

208.34%

5.63

6.50

19.53%

3.59%

EAGLE MATERIALS I (NYSE)

38.09

15.36

-1.97%

143.10%

32.59

31.82

14.59%

17.35%

TEXAS INDUSTRIES, (NYSE)

43.09

21.89

-9.47%

78.21%

33.42

33.32

16.74%

17.08%

CIMENTS FRANCAIS- (Paris)

77.49

41.63

-38.35%

14.76%

44.31

52.33

7.83%

-8.70%

LAFARGE (Paris)

42.60

22.29

-17.48%

57.75%

30.85

31.25

13.97%

12.48%

ANHUI CONCH CEMEN (Shanghai)

29.48

14.40

-49.73%

2.92%

16.35

16.58

-9.34%

-10.64%

FUJIAN CEMENT CO. (Shanghai)

14.70

6.91

-51.36%

3.47%

8.15

8.22

-12.31%

-13.04%

CHINA SINOMA INTL (Shanghai)

33.51

11.19

-65.56%

3.13%

15.82

17.63

-27.06%

-34.56%

HUAXIN CEMENT CO (Shanghai)

2.80

1.51

-42.14%

7.15%

1.75

1.82

-7.66%

-11.25%

SIAM CEMENT -F- (Stuttgart)

10.80

6.58

-17.50%

35.49%

9.52

9.64

-6.42%

-7.56%

TAIWAN CEMENT TWD (Taiwan)

49.45

29.00

-28.51%

21.90%

33.94

35.09

4.16%

0.75%

ASIA CEMENT CORP (Taiwan)

48.30

28.25

-22.46%

32.57%

35.40

35.32

5.79%

6.02%

CHIA HSIN CEMENT (Taiwan)

20.30

11.15

-33.25%

21.52%

13.24

13.14

2.31%

3.16%

LUCKY CEMENT TWD1 (Taiwan)

7.39

5.05

-17.86%

20.20%

6.02

5.82

0.78%

4.34%

HOLCIM N (VTX)

64.20

42.11

-18.46%

24.32%

51.87

54.83

0.93%

-4.53%

HEIDELBERGCEMENT (XETRA)

46.68

23.92

-19.10%

57.91%

35.28

38.09

7.05%

-0.84%

KHD HUMBOLDT WEDA (XETRA)

6.57

4.17

-25.11%

17.99%

4.91

5.50

0.29%

-10.52%

JUNE / JULY 2012

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

45

Coal W Coal W Coal W

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

GLOBAL SPOTLIGHT All eyes 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 pg 9: THE EXPANDING CHINESE INFLUENCE IN AFRICA

Group was inaugurated in August of 2010 in Mojo town, located in Oromia Regional State 75km south of Addis Ababa. The US$36 million plant can produce up to 800,000 metric tons of cement, which equates to ten percent of Ethiopian demand.

In northern Shoa, central Ethiopia, private Chinese company CH Clinker Manufacturing constructed a US$ 172 million cement plant in 2010. The plant has a production capacity of 10,000 metric tons per day. The area is abundant in raw materials required for cement production.

In May 2010, the Chinese Industry Zone (CIZ) constructed the Zhongshun Ce-

46

www.cemweek.com

ment Manufacturing Plant in Dukem, 35 kilometers south of Addis Ababa. The US$9 million 250,000 tpy project represents an investment by Jiangsu Zhongshun Import and Export and is the CIZ’s first in Ethiopia. The CIZ is expected to create over 10,000 jobs during its first development phase, which includes the construction of textile, construction, engineering, equipment manufacturing and food processing factories, among others.

TESTIMONY OF EXPANSION Far from being a complete list, the mentioned countries and operations should give a clear indication of China’s rapid expansion on a continent abundant with vast amounts of untouched natural re-

CW Group CemWeek BMWeek CemWeek CW Group BMWeek CemWeek BMWeek JUNE / JULY 2012CW Group

Coal Week Coal Week Coal Week

sources. And as long as the need for economic growth in many African countries remains dire, China may expect to be welcomed with opened arms.

Much of China’s long-term success in Africa’s cement sector will, however, be judged by its adherence to local laws, fair treatment of the local population, economic development as well as its ability to act as a steward of international standards rather than a champion of poorly disguised neo-mercantile ambitions. It is also wise to keep in mind that China is not the only world power with an eye on Africa—a factor destined to play an increasingly important role in Sino-African relations in years to come. BMWeek CemWeek BMWeek BMWeek

CemWeek CemWeek

CW Group CW Group CW Group

BUZZ TOP 15 STORIES

CEMWEEK.COM

Angling for assets, new facilities and optimism for 2013. In the news on CemWeek.com: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

India cement prices soften on weaker demand Lafarge restructures operations, moves to cut debt burden Votorantim plans to sell off Cimpor stake to Camargo ACC, Ambuja report higher production in April Holcim reportedly angling for Jaypee cement assets Intercement says changes coming at Cimpor Sinoma operating income up 21.8% in Q1 Turkey: Lafarge unveils new 'green' cement India cement prices softening India: Wonder Cement starts commissioning of new line Jaypee, SAIL inaugurate new facility in India Lafarge to build new units in Algeria Tensions high in Angola cement plant project India cement sales slowed in April FLSmidth wins Middle East order

given

material

agreement

pradesh

aditya

exchange

france

lafarge

jaypee

management

director

flat

13.

14.

15.

pounds

executive

factory

portuguese

national

camargo

cemex

crore

growth fuel

power term

bank

worth

operations

expansion government cartel

commission

world

located

intercement

workers kilns project energy expand infrastructure units materials

trade

capital

waste

equipment

province

support

rise

appeal

significant

turkey

fined

domestic

environmental

BMWEEK.COM facility

expansion

contractors

energy

homes

gypsum

deal

public

firm

development services

plans costs

activity

meters

brick australia

quarries

work africa

sand

cemex

marietta

product

order

quality

martin

roads

says

units

reportedly research

mining

rise

limestone

people

lafarge

JUNE / JULY 2012

lime

director

markets region

india share

road

spending using

known

improve

infrastructure

produce

sales value

planning

operation

economic stone

rate national

process

waste

products

vulcan

operations builders

carbon

sector

government recently growth

developed

despite

buildings

quarry

project

decline

financial

residential

concrete

world

country’s

include green water

housing

bricks

earnings

technology

aggregates

price

continues

equipment

remains

asphalt

investment

areas

environmental

contract

gravel

china

12.

sector

grinding

cimpor

investment

stock

New materials in development, and production ups and downs.

Worldwide trends on BMWeek.com:

7.

8.

9.

10.

11.

product

makers holcim stake cements building portugal order

lines

TOP 15 STORIES

2.

3.

4.

5.

6.

past

votorantim plants debt

recent

Indian building projects stifled by new sand mining rule New low carbon cement developed Cement production continues rise in Australia Case studies tie concrete to sustainability Armenia: SCR introduces new freight calculations Vietnamese building experts push for usage of unbaked materials Readymix, Cemex Espana deal approved Aggregate consumption continues decline in Spain Saudi Arabia to expand rail network FMI reveals Q1 Construction Outlook Report New building material developed for European construction projects GCC countries investing billions to upgrade infrastructure Goods and services see rise of prices in the US New concrete packaging technology developed in Brazil Lafarge to bank on innovation to maintain good position in India

titan

competition statement

assets

1.

spain

environment

china

international

coal

decision

decline public

increased

exports

facility

control

correa

union

performance

plans

existing

likely

ultratech

economic

given

CW Group CemWeek BMWeek CemWeek CW Group BMWeek www.cemweek.com CemWeek BMWeek CW Group

47

Coal W Coal W Coal W