CemWeek Magazine, Issue 5

CemWeek CemWee MAGAZINE

GLOBAL CEMENT INDUSTRY. KNOWLEDGE.

OCTOBER / NOVEMBER 2011

ITALIAN CEMENT

CemWee AROUND THE WORLD UK & US CemWee BMWeek Market without Margins

Biofuel at Lafarge Canada Saudi's surprising fuel wars Polysius' view on India KHD on expansions in Turkey

Anglo-Saxon Regulation

News

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Analysis

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Market Coverage

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Interviews

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People Moves

Letter from the publisher and editor

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

Increasing information velocity As we’ve noted before, the cement industry’s global concerns play out locally, affecting regions and countries in ways that must then ripple through the wider industrial landscape.

As cement industry-related and impacting issues seem to be rippling across the globe and the sector ever faster, we fanned out our analytical net to take in a broader than usual range of issues. And while perhaps they may seem to impact markets afar, the implications are just as far reaching.

To start, with cement consumption plummeting in recent years by nearly one third, how are Italy’s cement companies coping with the uncertain marketplace? “Italian Cement: A Market Without Margins” (page 4) presents the CW Group’s research on trends and outlook on this distinct European market, while our Leader’s Comment Q&A with Giuseppe Mapelli of Equita Financial Group (page 10) provides a complementary viewpoint on some of the uniquely Italian concerns facing Italcementi, Buzzi Unicem and other key players in the Mediterranean.

More eastward, we take a closer look at Saudi Arabia with a report on fuel shortages that highlights the interdependence of cement with other industries. We also spotlight two central issues facing the US and UK: environmental and regulatory developments. And we keep our very quantitatively oriented DNA firmly in place with some initial thoughts on Latin American cement prices. You will be seeing a lot more from the CW Group Research on cement prices, volume forecasts and new production capacities going into 2012.

Finally, in October CemWeek publisher Robert Madeira—in his role as MD and Head of Research at CW Group Research—was invited to present research on cement market dynamics at the 2nd Annual Asia Petcoke Conference in Dubai. Highlights from his presentation, in particular on GCC supply-side dynamics, can be found in “Fueling the Industry” on page 14.

Always looking ahead, CemWeek’s next issue falls at the new year. As such, our first New Year’s issue will offer a 2011 retrospective, including our pick of the cement industry’s Person of the Year. If you’d like to make a nomination, suggest content or schedule an interview for our on-going Q&A series, please contact us at editor@cemweek.com. As always, we welcome your feedback.

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Robert Madeira

cemweek publisher head of cw group research

CW Group

JENNIFER RIDGEWAY project editor

Paolo Dela Rosa art director

Anthony Fitzgerald advertising

Jennifer Adams Diana Heeb Bivona Mihai Musatoiu Claudia Stefanoiu 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.

Robert Madeira publisher and head of research

Jennifer Ridgeway project editor

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

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CONTENTS FEATURES 4 Italian Cement Unsettled markets and price wars in Bella Italia

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14 Research CW Group Research at the Asia Petcoke Conference in Dubai

ITALY CEMENT

34 Technology Ceprocim Engineering discusses plant refurbishment

14

PETCOKE CONFERENCE

34

CEPROCIM ENGINEERING

DEPARTMENTS Numbers in Brief 2 Market prices in Latin America

From our Industry Partner 2 Building materials update

Leaders Comment 10 Giuseppe Mapelli on Italy’s cement sector outlook

Updates 16 Saudi Arabia fuel supply war hinders cement sector 18 U.S. EPA regulations meet resistance 33 UK cement facing regulation reviews

Country Snapshots 30 Turkey: KHD on expansion and the Turkish market Regional Reports 20 Europe, Middle East & Africa 24 Asia Pacific 25 South Asia 26 America

Projects & People 38 Notable projects and suppliers 45 People on the move 40 Focus – Lafarge Canada’s homegrown biomass 44 Focus – Polysius on energy and

capacity in India Data Share Performance 46 Overview of stock performances for cement companies

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KHD TURKEY

40% energy savings delivered TITAN Group’s decision to convert existing electrostatic precipitator technology to a hybrid filter at its Kamari cement plant in Greece was good for the bottom line. The new hybrid filter – including duct, fan, stack and installation – cost 1 million euro less than a new fabric filter.

It has delivered energy savings of approximately 40%. And it was installed with minimal downtime during the annual stop, enabling TITAN to comply with stringent emission standards.

The fact is, no other company in the cement and minerals industries can call upon and co-ordinate such a broad array of engineering resources and commercial experience. From air pollution control to material handling, we offer you one source for everything it takes to design, build and operate profitable plants.

For more information please visit us at www.flsmidth.com

NUMBERS IN BRIEF Clearing the fog: CW Group Research raises the question

What is the price? A Latin American view Price. With information widely available yet incomplete, the limitations of the systemic data make this fundamental global industry concern one of the most difficult to ascertain. CW Group Research’s on-going initiative brings light to the often murky issue. Here we highlight some of the latest trends in Latin America.

LATIN AMERICA EXPORT PRICE INDEX (2006=100; GRAY CEMENT) Index (Ex) Country 105 (Ex)

Country 129 (Ex) Country 135 (Ex)

LATIN AMERICA IMPORT PRICE INDEX (2006=100; GRAY CEMENT) Country 6 (Ex) Country 106 (Ex)

300

Country 129 (Im)

Country 37 (Im)

Country 53 (Im)

Country 135 (Im)

Country 106 (Im)

Index (Im)

150

175

Country 65 (Im)

100

100 50

2006

2007

2008

2009

60

2010

2006

2007

2008

Source: CW Group Research

2009

2010

Source: CW Group Research

Between 2006 and 20010, export prices in Latin America largely rose as most markets experienced domestic shortages, making exports more expensive on an opportunity basis. Overall, prices rose 74 percent through 2010, though notable variations existed. The import side was somewhat more muted as global prices cleared at more competitive levels, especially as export capacity around the world increasingly competed to capture import demand. As such, we saw import prices in Latin America remain stable, with a relatively modest increase on average.

LATIN AMERICA IMPORT AND EXPORT PRICES (JAN 2011 = 100; GRAY CEMENT) COUNTRY 37 (EX)

150

INDEX (EX)

COUNTRY 37 (EX)

COUNTRY 53 (EX)

COUNTRY 135 (EX)

INDEX (IM)

100

60

JANUARY

FEBRUARY

MARCH

APRIL

MAY

JUNE Source: CW Group Research

In 2011 prices have continued to climb, both on the import and export side. Partially driven by large markets such as Brazil, the trend is largely consistent across the selected key markets. Through June 2011, prices in Latin America had increased approximately seven percent.

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FEATURE

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ITALIAN CEMENT:

A MARKET WITHOUT MARGINS Stagnant construction, regional discord.

Has Italian cement found the bottom of its slump?

The cement sector in Italy has faced one of its most challenging down cycles in a long time. In the aggregate, nationwide cement consumption plunged by almost a third to 33.3 million tons in 2010. The major groups are now largely operating at break-even EBITDA margins, or below. In many cases, smaller groups are facing even steeper challenges. With fiscal troubles looming, construction activity is becoming increasingly regionalized. Though national reach helps, the battle increasingly looks more regional and construction fortunes diverge

OCTOBER/NOVEMBER 2011

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FEATURE Construction sector The construction sector has played a central role in the Italian economy, particularly from 1999 to 2007. During this time, the sector grew more than twice as fast as the country’s GDP, with the value of investments in the sector rising 27 percent.

For nine consecutive years, the sector boomed, reporting a recordbreaking level of investment in 2007 and contributing close to ten percent of the country’s GDP. Italy, like many other countries, was affected by the international financial crisis. The country’s construction market was hit especially hard, first slowing down in 2008, then dropping a full 17 percent in 2009 and falling even further in 2010 (-6%). In just three short years (2008-2010), the sector witnessed a downsizing in investments of around 22 percent.

Demand for construction continues to stagnate and is likely to remain weak throughout 2011.

Businesses and individuals remain cautious with regard to their investment plans, electing to put off property plans at least for the immediate future. Furthermore, a decline in infrastructure spending by the government, a delay in payment to contractors for public works projects, and a reduction in available credit to construction companies has hampered further recovery in the sector.

Italy’s construction industry projects a four percent decrease in construction investments for 2011 and a 3.2 percent decrease for 2012. Housing (-5.9%), nonresidential private housing (-4.3%) and public works (-9.7%) are all forecasted to decline further this year.

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than 80 active cement plants. The market is surprisingly dotted by independent operations throughout the country, making for a relatively fragmented competitive landscape. Nonetheless, heavyweight champions largely dominate the Italian cement industry. Italcementi, Buzzi Unicem, Colacem, Cementir, Sacci, and Holcim Italy are the biggest cement companies in Italy. Italcementi controls the largest portion of the active nameplate capacity with 26 percent of the total. Buzzi Unicem and Coalcem round out the threesome that together controls more than half of the country’s production capacity. The shares have remained largely the same in recent years.

italy cement production units Integrated Unit Grinding Unit

Cement sector The Italian cement industry is one of the largest cement markets in the world, ranking as the world’s twelfth cement producer and Europe’s largest in 2010 (ex-Russia).

Italian cement output represents around 18 percent of overall cement production for the EU's 27 countries. Italy is a largely self-sufficient cement market with 99.8 percent of demand covered through domestic production in the last 20 years, even as it imports notable clinker volumes.

The cement industry is mostly internally focused, though trade constitutes a nontrivial element.

Overall, there are over 20 cement companies in Italy that operate more

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Starting in 1997, the cement industry entered a “golden decade” of uninterrupted growth that peaked in 2006 with a record production of 47.4 million tons.

The next four years, however, were sufficient for the market to plummet back to volumes not seen since 1997. Regional dynamics are a bit more nuanced, but no region has escaped the harsh new reality of a limping construction industry, high input prices and uncertain outlook.

Competitive dynamics The level of rivalry has reached a crescendo as sales have collapsed and utilization rates have slid into the 50 percentiles. Price competition has continued and peaked in mid- to late 2010 as prices plunged.

An unusually fragmented marketplace for such a mature market has further complicated the pricing picture as there is less pricing control within regions, and the marginal price is often set by the most desperate operator.

MACRO VIEW (currency in bn)

CONSUMPTION (mm tons) 50

Real GDP (Constant nat'l currency, billions)

1,400

80

70

30

1,250

20

60

currency in bn

Construction GDP (Nat'l currency, billions)

40

10 0

2007

2009

2011E

2013E

1,100

2005

2006

2007

2008

2009

2010E

2011E

2012E

2013E

Source: CW Group Research

2014E

2015E

50

Source: CW Group Research

Italy - Calusco d'Adda cement plant (Courtesy of Italcementi)

OCTOBER/NOVEMBER 2011

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FEATURE PRICE INDICES FOR CEMENTITIOUS MATERIALS (CW Group Research index, Jan 2009=100) Cement (producer)

Bricks and concrete

Cement products (binders)

110

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

Jan-10

Dec-09

Nov-09

Oct-09

Sep-09

Aug-09

Jul-09

Jun-09

May-09

Apr-09

Feb-09

Jan-09

90

Mar-09

100

Source: CW Group Research

Italy - Salerno cement plant (Courtesy of Italcementi)

One of the biggest pressures facing Italian cement companies on the input side is fuel.

The run up to 2010 saw a severe energycost inflation with virtually all fuel types gaining in price in Europe. Coal and petcoke together are the most used fuels in the cement industry.

Demand and supply Domestic demand and supply have been largely balanced in Italy over time. Any deviation from the equilibrium on the cement side has largely been the result of trading activity. On the whole, Italy has been a net cement exporter for the past few years, which has resulted in cement supply hovering about two percent over domestic demand. However, Italy imports

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a significant amount of clinker for its various grinding units.

Between 2005 and 2010, cement demand decreased by 6.3 percent per year on average, falling to 33.3 million tons in 2010.

From a regional point of view, demand also decreased across all regions. The highest decline was registered in the Northeast with a 7.2 percent negative CAGR between 2005 and 2010.

For most of the last nine quarters, building material prices have been under intense pressure as demand has waned. At a national level, however, prices to date seem to have hit a plateau in mid- to late 2010, as corroborated by the cement producers.

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There was a modest attempt at a recovery in early 2011, but it is still too early to see any sustained recovery at the prevailing low utilization rates.

Cement and clinker trade is an important part of the Italian cement industry. On average, Italy exported about six percent of its production and about half that in imports between 2005 and 2010. In comparison, Russia exported 2.2 percent of its production in 2010, while imports represented 2.5 percent of consumption.

However, other major European cement markets rely more on external trade, including Turkey that exported 17.8 million tons of cement and clinker in 2010 (31% of production). On the other

Italy - Vibo Valentia cement plant (Courtesy of Italcementi)

extreme, countries like Spain have turned to more exports out of necessity in order to fight its domestic cement demand implosion. Spain successfully boosted exported volumes from 2.8 million tons in 2009 to 4.5 million tons of cement and clinker exported in 2010.

Outlook Barring any unforeseen shocks, the CW Group sees that the worst is behind for Italy’s cement industry. Not that we expect any material improvement in 2011, but we also expect the downdraft of 2007 through 2010 to abate. The resulting fragile equilibrium has brought most operators close to the brink. EBITDA margins have slid for the industry, and by 2010 many were operating at break-even or below.

Squeezed by rising input costs and an inability to raise prices, the operating environment is grim.

Following the multi-year contraction that saw demand decline by 28 percent, demand seems to have troughed in 2010. With some construction segments slowly recovering, consumption is expected to turn in 2011,

SHARE OF PRODUCTION CAPACITY

Other

Cementi Rossi

Cementi de la Lucania

Sacci

Cementi Moccia

Holcim

Cementeria di Monselice

Cementir

Calme

Colacem

Cementizillo

Buzzi Unicem

Barbetti

Italcementi Source: CW Group Research

albeit very slightly initially. With many public projects being delayed or outright cancelled, uncertainty still lingers. In the CW Group base case scenario forecast, we estimate that volumes will increase by about half a percent in 2011 but faster in 2012 and beyond through 2015. However, the fragile state of an industry operating near or, in some cases, below breakeven does not leave a lot of room for error nor margin for further deterioration. BMWeek BMWeek BMWeek

This update briefly highlights findings from the recently published, 71-page CW Group Research report “Italy cement market (2011 update)”. To find out more visit www.cwgrp.com/research, or contact us at inquiries@cwgrp.com.

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LEADERS COMMENT

Q&A with Giuseppe Mapelli Giuseppe Mapelli has been a financial analyst for Equita Financial Advisory Group since 2002, focused on the building materials and construction sector. He has a degree in Economics from Bocconi University in Milan. Mr. Mapelli spoke with CemWeek about market fragmentation, recent price wars and the Italian cement market downturn

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Coming off highs a few years ago, how would you characterize the market in Italy today? Have we reached the bottom, and what is the outlook?

The Italian market closed 2010 with consumption close to 34 million tons, down 29 percent from the 48 million peak reached in 2006.

Italcementi (Italy’s market leader) gave some guidance, projecting a flattish market trend for 2011. A more recent statement from another Italian player guided for a market down five to eight percent due to a slowdown in the business experienced after June.

I believe that it is reasonable to assume a market down five to eight percent, but I don’t see any further significant downside going forward even in a stagnant scenario, as all three main end markets (residential, commercial and infrastructure) are already at a very depressed level. On the other hand, I underline that, thanks to investment related to the 2015 Expo that will be held in Milan, some big infrastructure projects will start in Northern Italy in the next six to nine months.

To tell the truth, per capita consumption was 565 kg in 2010, a figure still above the average of the main European countries.

I don’t see a significant downside risk on this front because cement intensity for each Euro of investment in Italy is higher due to orography (a large part of the country is mountainous) and construction technology (all houses are made using cement).

The Mediterranean basin is facing material production surpluses in several markets (eg, Spain, Greece, Turkey) that have traditionally exported to Italy as well. How will this pressure point impact the Italian market in the near term, and is it a material risk factor?

Import from the Mediterranean basin was and is definitively an issue for the

Italian market. The coastal regions (Italy has around 7,500 km of coasts) are in fact affected by import as there are players in the market acting only with grinding centers that are able to easily switch from Italianproduced cement to cheaper, imported cement. Import from the Mediterranean basin together with fragmentations are the two main reasons explaining the depressed price scenario that characterizes Italy. In the near term, importation will be an issue, in particular in Southern Italy because it will put a cap to the underlying price’s upward adjustment.

I don’t see any further significant downside going forward

industry will close 2011 with an EBITDA margin just slightly above break even as a large part of price adjustment will be eroded by cost trends.

Up to now, the impact of European environmental regulations has been quite limited, in particular because free allowances of CO2 emission rights have been sufficient to cover current production levels. A question mark is still there from 2013 onward where visibility on the CO2 issue is still very limited. Cement is among the sectors affected by carbon leakage, so I think the regulators will take a soft approach, also justified by the current sluggish macroeconomic scenario.

Italy is a fairly unique European market in that it has an unusually high degree of fragmentation with many independent operators. Are there structural elements in the Italian market that support independents to a higher degree than, for example, in France?

Are cement companies having any success in passing on rising energy / input costs? How much do European environmental regulations have an impact on the competitiveness of Italian cement companies?

In 2010, the Italian market was affected by a severe price war that depressed margins.

The price war started when two market leaders, Italcementi and Buzzi Unicem, began to apply commercial policies aligned with the aggressive approaches of small players in order to defend their market shares after months of continuous erosion.

Till 1H11, operating margins in Italy were at break even only thanks to the sale of CO2 emission rights. Starting from 1Q11, prices started to recover thanks to the change of commercial policies of Buzzi Unicem and Italcementi. I believe that, even taking that increase into account, the Italian cement

In Italy, the cement industry is mainly a family business. In the top ten market players, only Holcim—number five in term of installed capacity with a market share of around five percent—is not controlled by an Italian family.

Historically speaking, both Italcementi and Buzzi Unicem were able to consolidate the market, but at the moment there is little room to see further concentration.

Families are wealthy or don’t want to sell to historical antagonists. It’s also necessary to bear in mind that the current scenario is depressing valuations of assets, creating a spread between bid and ask that forbids any kind of negotiations.

Northern and Southern Italy experience different economic strengths and weaknesses, including in the cement market. Are there specific geographic or historic differences that account for this, and how do the differences affect imports and pricing by region?

OCTOBER/NOVEMBER 2011

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LEADERS COMMENT As far as the cement market is concerned, Northern Italy is characterized by an higher degree of concentration (a lot a small players are concentrated in the South) and a lower exposure to imports coming from the Mediterranean Basin due to logistic reasons. Those features explain why in Northern Italy the market scenario is less competitive than in the Central to Southern regions.

commercial sector is concentrated in Northern Italy.

Historically speaking, the difference in prices has been significant, even above EUR 10 per ton on an average price that today is EUR 58 to 60.

Concentration could definitively solve the problems of the Italian cement industry, as it would enable a downsizing or mothballing of capacity, creating a less competitive environment from the point of view of prices. But, as I already said before, there is small room to see further concentration.

In terms of end markets, the weight of residential business is higher in Southern regions, while most of the industrial and

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With volumes falling, Italian operators seem to be operating at cash cost in several cases, or even below. What sort of restructuring do you think will be needed in the industry? And what are some of the most recent M&A transactions that have taken place?

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Small players could be divided into two main categories: from one side wealthy companies with low leverage owned by families that don’t need cash that are waiting for the recovery of the market; from the other side, companies with very high leverage that are owned by families that don’t want to sell at valuation depressed by the market scenario and that are sustained by a banking system that is not willing to account loan losses on P&L. The last two significant M&A took place in 2010 with a merger of two small players (each owning one single plant) in Northern Italy and in 2007 when Lafarge sold Italian activities (1.2 mn tons) to Sacci, creating Italy’s number six player (with 5.4 mn tons). BMWeek CemWeek CW Group BMWeek BMWeek

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FUELING THE INDUSTRY NOTES FROM THE 2ND ANNUAL ASIA PETCOKE CONFERENCE

The CW Group's Robert Madeira discussed changing markets and energy use trends at the Asia Petcoke Conference in Dubai, UAE, highlighting the interconnected nature of the two industries. Madeira presented the latest research on energy consumption, distribution and demand projections

The 2nd Annual Asia Petcoke Conference, hosted by Jacobs Consulting, was held in Dubai on October 3rd and 4th, 2011. Presenters at the conference included significant industry figures, such as Ashok Dhar, President of Marketing at India’s Reliance Industries.

Robert Madeira, Managing Director and Head of Research of the CW Group, the global cement sector insight and advisory firm and CemWeek’s parent company, was invited to share the latest thinking and viewpoints with the petcoke sector—in particular those focused on fuel grade— to help the sector better understand the current cement market dynamics globally as well as in Asia. Madeira’s attendance in Dubai follows similar participation in the

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11th Annual Petcoke Conference in San Diego, U.S., in February of this year.

According to Madeira, with fuel prices rising, it is crucial that the cement sector understand fuel options but also vice versa. That is, the fuel sector must increase its understanding of the cement sector: its needs, economics and how to look at evolving production patterns. “It was interesting to hear the ‘other’ side’s story in Dubai,” said Madeira, “to listen to the concerns of the fuel grade petcoke supply-side as it searches for new business opportunities and an expanded role as providers to the cement sector.”

Madeira’s presentation was grounded in global cement market dynamics to set the context on evolving trendlines and

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patterns, but given the location of the event, emphasized the perspective of GCC countries (Bahrain, Kuwait, Saudi Arabia, the Sultanate of Oman, the United Arab Emirates, Qatar and Yemen).

Global context Though it is a story that is getting somewhat tired, the emphasis of growth in the 3.3 billion ton global cement sector has shifted markedly over the past few years. In 2010, 83 percent of global cement demand was focused in Asia, with more than twothirds of demand coming from China, up from 65 percent in 2000.

The CW Group also shared its view on the near-term outlook for the global cement market, and highlighted some of the paradoxical growth patterns

(but starting further behind), followed by the Middle East and Africa. Highlighting different energy use patterns in the Gulf, a few examples were discussed in the UAE and Oman, where energy costs on an adjusted basis represent between 30 percent to more than 55 percent of sales (energy, in this sense, includes both fuel and electricity costs). In contrast, for the very largest Indian cement companies the picture of adjusted energy use as a percentage of sales is materially lower and rests just above 20 percent.

that are emerging. These have in part resulted in diverging utilization rates for manufacturing capacity. Globally, cement capacity utilization reached into the 80 percents, with a slight increase in utilization expected by 2012. While most regions, including the Middle East and Asia ex-China, have seen utilization hit lows in 2010, China’s cement sector is essentially operating at full capacity.

GCC supply-side and energy use When looking at all-in supply-side dynamics for the Gulf Cooperation Council, Saudi Arabia dominates supply with 44 percent of distribution capacity, DISTRIBUTION OF CAPACITY

followed by the UAE at 38 percent.

Total cement production capacity for the region has passed 110 mtpy from 45 cement companies and 52 cement production facilities (most GCC cement companies are single plant operators).

Cement production in the region consists of 85 percent integrated facilities and 15 percent grinding units, but there are meaningful and important differences across the countries.

Although the presentation included key research on regional market trends from the CW Group, the purpose of his presentation was not to dump numbers on the audience. “More important than specific data points shares,” said Madeira, “was to leave the audience with a set of key questions to ponder around evolving cement production patterns, production economics and how changes in the regulatory environment will impact cement production and fuel decisions and in turn the petcoke and other fuel providers.” BMWeek BMWeek BMWeek

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Contact the CW Group at inquiries@cwgrp.com to discuss these topics further, or for more information on the CW Group’s regular cement market demand projections, global utilization projections and energy use benchmarks.

The last two decades have seen a decline in energy use for the production of cement on a unit-basis, with China making the biggest improvements in consumption

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Fuel supply “cold war” holds back Saudi Arabia

A developing conflict between two of the most important industrial sectors in Saudi Arabia cement sector is affecting growth plans in the country as leading cement companies and the state-owned energy giant Aramco are locked in a dispute over fuel supply at discounted prices The practice of delivering cheaper, state subsidized fuel to cement manufacturers has no doubt helped Saudi Arabia’s cement industry. The revenues and net income of the nine listed cement companies increased by 23 percent and 21 percent, respectively, in the second quarter year-over-year.

Also, the average price of cement per ton for the same nine companies increased by six percent year-over-year and five percent quarter-over-quarter to SAR 241 in 2Q 2011.

According to government policy, Saudi Aramco has been selling fuel to all cement companies at subsidized prices in order to ensure a steady supply of the building material in the quickly developing kingdom. The policy is understandable, since subsidies are a way of life in Saudi Arabia. They exist as a way to redistribute the kingdom’s oil wealth to the population, and this system makes it possible for gasoline to cost only 12 cents a liter, cheaper than bottled water.

Saudi Arabia is thus seen as a success story across the whole region in terms of profitability and quick industrial growth, but lately there has been trouble in paradise.

The Looming Crisis Tensions, however, arose as cement manufacturers have not received enough fuel to power their kilns, leading to supply shortages and rising prices in

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the local market. Cement makers have been complaining that a cement crisis is looming as early as next year unless the authorities increase fuel supplies and stop a situation that, they say, is currently disrupting the sector.

Growth of the biggest cement makers is threatened, Safar Dhufayer, Chief Executive of Southern Province Cement (SPCC), said at the Reuters Middle East Investment Summit on October 26. He explained that his company, currently the country’s largest cement maker by market value, will probably have to delay plans to extend its production capacity from 19,000 tons annually to 24,000 tons, because of fuel shortage.

Demand for cement in Saudi Arabia is about 48 million tons this year, but demand will grow to 52 million by 2013, according to Dhufayer. At the same time, supply is 55 million tons this year, and future growth is uncertain.

"Maybe we will have a shortage in 2013 and 2014 if we don't have expansion of new plants, but that depends on fuel. We cannot think of new lines without guarantees from Aramco about fuel," Dhufayer warned.

Due to the cement shortage, prices have been on the rise, and Saudi Arabia is actually, along with Qatar, the only market in the whole Gulf Cooperation Council (GCC) area where cement prices have increased lately.

Cement prices grew significantly in 2Q 2011 to SR241 per ton from SR227 per ton in 2Q 2010. One of the most quoted reasons was a temporary halt in the production activity of Yanbu Cement due to fuel supply shortages combined with stronger demand.

Rather, the energy company blamed cement makers for not withdrawing enough from their allocated fuel supplies.

A month later, in July of this year, Aramco revealed that 11 of the kingdom’s 14 cement factories had applied for an increase in the amount of fuel to expand their production lines, but insisted that these expansions are higher than the real need of the cement market.

On the other hand, Aramco’s board may be unhappy that while the cement sector is supported by the subsidized oil, its own business is missing growth opportunities.

Officially, according to a June statement by Aramco, there is more than enough fuel in the local market to supply the needs of cement makers and sustain an annual production of 50 million tons of cement.

The two sides have already built a recent history of conflicting opinions. It began during the spring and continued with a petition submitted by Aramco in which the energy supplier asked for a halt of issuance of new cement plant licenses, triggering loud protests on the part of cement players.

Further growth to be affected?

The GCC states have begun to explore alternative sources of energy such as solar power, nuclear and natural gas in an effort to boost capacity and diversify the energy mix. Saudi Arabia has the largest installed energy capacity in the area, and analysts expect it to play a major role in the selling of power over the next years.

In a statement delivered on October 8, the Saudi oil minister Ali al-Naimi said that Saudi Arabia slightly lowered production in September by about 400,000 barrels per day (bpd) to 9.39mn bpd. "Demand is always fluctuating, but our position is that we will supply whatever our customers ask for,” Ali al-Naimi promised.

In other areas of the region, including Kuwait, Bahrain, the United Arab Emirates, Qatar and the Sultanate of Oman, demand has fallen and cement makers are being pressured to decrease prices despite their increasing energy and fuel costs.

The hidden side of the conflict If you ask Aramco about the conflict with the cement industry, everything is pretty much in order. The company claims to have delivered the quantities they had promised, and Aramco is continuously working to update existing refineries in order to keep pace with the growing demand for fuel.

However, the company has to face a long string of accusations from cement makers.

southwest China, in an area where Beijing is building an oil and gas pipeline.

If Aramco would sell less cheap oil to the cement industry and instead export the oil abroad, profits would grow.

Moreover, the company is involved in some international large scale projects that are also in need of resources. Saudi Aramco President and CEO Khalid Al-Falih said last year that his company would invest around US$120 billion over the next five to six years in developing projects in the oil and petrochemical sectors. About US$60 billion would go into the oil sector. And last March, Aramco signed a memorandum to supply crude to a planned refinery in

Things look good for the cement sector, too. Saudi Arabia’s largest investment bank, NCB Capital, has announced at the end of September that the outlook for the Saudi cement industry remains strong through the end of 2011, with good demand growth and stable prices following the normal seasonal slowdown witnessed in July and August. In the longer term, Saudi Arabia will need about two million homes by 2014 to catch up with the demands of a population that has increased four times in 40 years.

If the demand for Saudi oil continues to be strong both in the domestic market and abroad, the controversy with the domestic cement industry is likely to continue. BMWeek

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The United States EPA and Cement Producers:

The Next Chapter Unfolds

The ongoing environmental regulation of the United States’ cement industry has entered a new chapter as recent proposed regulations are making life potentially more challenging for the cement industry. Stringent new rules coming out of the U.S. Environmental Protection Agency (EPA) since 2010 may make it more difficult for cement manufacturers to produce and compete in the global economy. On the other hand, the EPA states that it is simply doing what is necessary to protect the environment from mercury, acid gases, and particulate pollution The Regulatory Backdrop Starting in 2010, the EPA released new sets of rules targeting cement makers.

These rules include the New Source Performance Standards (NSPS) based on Clean Air Act sections 111(b) and 112(d) and the National Emission Standards for Hazardous Air Pollutants (NESHAP). At issue are increases in emission control requirements and modifications to the existing regulations for solid waste management. The EPA believes that the new restrictions will reduce annual emissions of mercury and particulate matter by 92 percent, hydrochloric acid by

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97 percent and sulfur dioxide by 78 percent, preventing up to 2,500 unnecessary deaths annually. Targeted to take effect in 2013, the response to the new rules from the industry has been overwhelmingly pessimistic.

At issue is the extent to which cement manufacturers are truly emitting pollutants and the feasibility of meeting the EPA's new standards. Industry groups assert that kilns were double-counted during analysis, providing a false profile of pollutant emissions. The new standards have also been shown to exceed the realm

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of possibility for even the top 12 percent of manufacturers, emphasizing the gap between the perceived present state and the desired future state under EPA guidelines.

The Portland Cement Association fears that the EPA's plan may cripple the industry and has noted that the finalized rules could jeopardize the viability of 18 of the approximately 100 U.S. cement plants. Meanwhile, the Association of General Contractors has reported that more than 1,800 cement industry jobs may be negatively impacted, along with 9,000 related construction industry

jobs. On annual revenues of just US$6.5 billion in 2009, total U.S. cement industry compliance costs were estimated at US$3.4 billion to meet the EPA's Commercial/ Industrial Solid Waste Incinerators standard.

New Legislation & Rulings With the costs and stakes high, the cement industry has naturally challenged the pending implementation of the EPA standards. In particular, manufacturers have been responding to increased limits on mercury emissions. Mercury occurs naturally in the limestone used in cement grinding, but producers are being continually pressured to lower mercury emissions at ever higher economic costs.

Ash Grove's cement grinding plant in Oregon is a perfect example. Over the last three years, the company has invested more than US$20 million on mercury control equipment that cut its emission levels by 75 percent in accordance with an agreement made in 2009 with the State of Oregon. Installation of the mercury control equipment continued even when the location closed due to low demand for production. Now, the new EPA standards would render the equipment obsolete and require further costly investments, and the company can't afford to continue investing in the site.

Situations like the case with Ash Grove add urgency to the industry's response and help persuade lawmakers to support cement manufacturers in their challenge to the EPA rulings. On October 9, the

Ash Grove Cement Plant, Oregon

Cement kilns at the center of the US EPA regulations

U.S. House of Representatives backed the industry by approving H.R. 2681, also called the Cement Sector Regulatory Relief Act of 2011. The bill is designed to force the EPA to rewrite their rules for emissions and solid waste, especially in light of concerns that the rules are imposing significant and costly hardships in a down economy. “No existing plant can achieve any of these [regulations] in combination,” said Carter Phillips of Sidley Austin LLP, who represents the Portland Cement Association.

Contingency Plans For cement manufacturers, it all adds up to taking things one day at a time. The Obama Administration is backing the EPA, but the force of the industry opposes the legislation and has the backing of the economy against costly new regulations that could hurt jobs. In light of the uncertainty, plant managers have to plan for alternative scenarios, reserving funds for potential future compliance costs that could be used to develop business or production capacity.

Phillips also testified on behalf of the industry at a panel on October 11 with the U.S. Court of Appeals for the District of Columbia. Though the House bill has not yet passed to the Senate, and the Obama Administration has threatened to veto it in order to let the EPA regulations stand, the new standards are simultaneously being challenged in court. With Portland Cement Association v. EPA, 11-1358 and 11-1359, the industry alleges that the EPA doublecounted kilns and failed to properly notify the industry of proposals before issuing final rules. No final ruling on the challenge has been issued to date.

U.S. manufacturers are also bitterly aware that the EPA's rules could move additional cement production overseas, where standards are less stringent. Keystone Cement Plant Manager Stephen Hayden noted that if the regulations do go into effect, producers will have no choice but to pass the costs on to consumers. This will raise U.S. construction costs and encourage further importation of cement, so that “globally, the rules could lead to increased emissions,” said Hayden.

Related legislation may affect how the case unfolds, both in Congress and in the Courts. On October 18, the House passed H.R. 2273, also known as the Coal Residuals and Management Act. The bill prevents the EPA from designating fly ash as a hazardous material and creates additional precedents for ruling in favor of industry.

It's the proverbial rock and a hard place. If the EPA “wins” the battle on the proposed rules, the industry they regulate could crumple, driving business to international competitors with fewer restrictions. If manufacturers “win” this round, the business status quo is maintained, but for how long? The future remains uncertain, and the Obama Administration's vow to veto changes is no empty threat. BMWeek CemWeek

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REGIONAL REPORT:

however, continue to function as a center for milling.

In Serbia, Lafarge was successful in finally gaining complete control of Beocinska Fabrika Cementa (BFC). Lafarge had invested US$100 million in the plant to date and had worked to purchase all shares of BFC from small shareholders. BFC has prospered since Lafarge’s takeover in 2002 and is used as an example of success for the country’s privatization efforts.

In Eastern Europe, Poland saw production increase 19.9 percent in the first eight months of the year—the highest growth rate in Europe. Polish cement manufacturers produced over ten million tons and are forecast to hit 17.5 million tons for the year, up from 15.4 million tons in 2010.

In Romania, cement production was up, rising 8.1 percent in the first half of 2011 to 3.18 million tons. Domestic sales were up 2.4 percent to 2.95 million tons. The cement market has shown a slight recovery as construction work has resumed in many parts of the country.

The UK’s Competition Commission is probing the proposed joint venture between Lafarge and Angelo American. The commission is concerned that the venture could potentially affect competition in the ready-mix concrete market.

Europe

Brazil’s Votorantim and Korea’s Daewood are eyeing the assets of the Gallardo Group, in particular the group’s sites in Germany, Badajoz, and Renteria. The interest comes after termination of a contract between Gallardo and Brazil’s Siderurgica Nacional to acquire the Gallardo Group.

The Holcim board has some decisions to make regarding its composition. Recently, board member Thomas Schmidheiny increased his holdings from 18 to 20 percent, while Russian Filaret Galtschew hiked his shares to 10.2 percent. Eurocement also increased its shareholding in the company from 6.52 percent to 10 percent. Now, directors must decide whether to include Russian representatives on the board to reflect this new, enlarged contingency.

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Sapo reports that Cimpor is the eighth largest cement manufacturer in the world, producing over 35 million tons in 2010.

While good news for the company, market speculation regarding the global producer remains high.

Recent news reports suggested that Camargo and Votorantim were in buyout talks with Cimpor. The companies currently own 54 percent of Cimpor; however, both companies have rigorously denied reports, including a written denial to market regulators.

Cement consumption in Spain dropped 19.8 percent in September, marking the 46th consecutive month of decline. The global cement market downturn is seen as the largest contributor to the continued slide. Poor economic conditions were also cited as Vulkan Cement decided to shutter its kiln at Dimitrovgrad. The facility will,

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Finally, nine cement makers are fighting back against an anti-trust probe. The companies—including Holcim, Cemex, Heidelberg, and Buzzi Unicem—filed a motion with the court alleging the region’s competition watchdog has gone too far and is asking for too much data.

Russia & the Baltic Countries Regionally, the southern areas of Russia and Azerbaijan have seen an increase in cement production. Russia’s southern regions have become a major cement market for the country, accounting for around 20 percent of Russia’s domestic cement production. Additionally, cement production in Azerbaijan climbed six percent in the first eight months of 2011. In September, the country reported cement

The Russian cement market witnessed some changes in players: CRH is poised to enter the Russian market, and new owners took over INTECO. Ireland’s CRH is close to striking a EUR 400 million deal to acquire a 75 percent stake in Basel Cement. While CRH has not commented on the deal, it has indicated its interest in acquisitions in Russia.

CRH already maintains a large cementmanufacturing base in eastern Europe, including Poland and the Ukraine.

Furthermore, it supplies the St. Petersburg market from its Finland-based operation.

In related news, Morningstar reaffirmed the growth prospects for CRH, despite the continuing struggle of the global construction market. Morningstar believes CRH’s healthy balance sheet and diversified revenue streams will serve the company well.

Finally, the Baturina family sold all its interest in INTECO for a little over US$1 billion. The company’s new owners are Mikail Shishkhanov, the chairman of Binbanka, who will own a 95 percent

stake. The remaining five percent will be controlled by a subsidiary of Sberbank.

Middle East

Higher input costs are expected to hit the GCC region’s cement firms. Sector profitability fell 4.7 percent in the first half of the year. While this represents an improvement over last year’s 12 percent decline, cement prices are down throughout the region.

Civil unrest continues to plague Egypt, halting approximately 60 percent of reconstruction efforts, according to the Association of Traders. Cement prices have spiked as factories continue to struggle with high diesel prices. Additionally, thousands of cement traders have closed up shop.

In July, cement production dropped 1.3 percent and clinker production dropped 6.4 percent compared to June.

To boost interest in the cement sector, the government plans to allocate 12 cement production licenses before the end of the year in order to promote competition among existing firms. The licenses are only available to new companies.

In the interim, Italcementi is pushing forward with its plans to increase its presence in the Egyptian market, building a new state of the art renewable

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

PLANT

Italcementi (Italy)

Mazzano

Lafarge (Russia) Cimpor (Spain)

Ferzikovo Kaluga Cordoba and Niebla units

Eurocement (Russia)

A new kiln at the plant will increase capacity to 3,000 tpd with a maximum output of 1 mtpy. EUR 1.5 million is being paid at the commencement of work and EUR 5 million total to Mazzano and neighboring Rezzato.

Table available in the CemWeek Magazine Print Edition.

Construction moves forward at new 2 mtpy cement plant. The facility will cover 430,000 square meters. Operations are set to begin in 2014.

Upgrades at Cordoba and Niebla include improving energy efficiency, improving worker safety and reduction of CO2 emissions. Clinker capacity will rise from 1,500 to 2,200 tpd. COST: EUR 60 million.

Eurocement will expand installed capacity in Russia and the CIS by 11.7 million tons.

COST: US$2 billion.

New Plant (Russia)

Tambov

Cemex (Latvia)

LafargeStrabag (Hungary)

OVERVIEW

A new facility in Tambov will have a capacity of 1.2 mtpy. Construction Is set to

conclude in 2014. COST: 8.5 billion rubles. www.cemweek.com/subscribe

Cemex announced plans to produce and sell more than one million tons of cement in 2011 in Latvia. A new plant will have an annual production capacity of 1.6 million tons of cement. COST: EUR 275 million.

Királyegyháza

France's Lafarge and Austria's Strabag will build a cement plant in Hungary. Capacity will be 750,000 tons of clinker and 1 mtpy of cement. Full capacity will be reached in 2 to 3 years. COST: EUR 270 million.

energy project in the Red Sea area. The project represents the first foreign direct investment in this sector for Egypt. Once underway, the EUR 140 million project will serve the energy needs of the Suez Cement Company plants.

The Arab Spring witnessed in Egypt, Syria, and Libya is affecting exporters in neighboring areas. Turkey experienced a 27 percent decline in exports for the first half of 2011, while Lebanese exporters complained about the difficulties in shipping to Egypt and Syria. Lebanon produces 6.5 mtpy for a domestic consumption of five million tons, leaving 1.5 million tons of cement available for export. Given the uncertainty in these markets, exporters are having to look further afield for markets, which will likely lead to increased costs for exporters.

regional report: europe, middle east, africa

reserves of 18,000 tons, and the government was encouraging the construction of new production facilities. Currently, 50 percent of cement is produced locally, and the rest is imported.

In Saudi Arabia, increased government spending on infrastructure and several major real estate projects in the pipeline contributed to increased cement sales in the third quarter. Overall, sales increased seven percent to 10.3 million tons. Al Jouf enjoyed the largest increase, followed by Arab Cement and Yanbu Cement. NCB Capital has forecast a strong outlook for the remainder of 2011, as good demand and stable prices will fuel continued growth.

Given the current supply shortage, the government of Bahrain has granted traders licenses to import more cement.

The country uses 800,000 tons of cement, importing roughly 600,000 tons annually.

Plans to expand the domestic production base are under discussion.

Cement production in Iran rose 16 percent in the first half of 2011. The government is working to double cement production capacity to 84 mtpy—a considerable increase from the 32 mtpy capacity registered in 2005. Exports also increased 13.5 percent in the first five months of the year, and the government intends to export ten million tons by the end of the year.

Turkey’s cement industry is celebrating its one hundred year anniversary and, according to a report from Ackansa, is now claiming to be the number one producer in

Source: CW Group Research (see the CW Group's "Cement Plant and New Capacity Monitor for comprehensive details) OCTOBER/NOVEMBER 2011

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regional report: europe, middle east, africa

Europe. However, the group places Turkey as the world’s fifth largest cement maker, producing 66 million tons in 2010 and generating US$1 billion in exports.

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Cimpor (Egypt)

Alexandria

Africa

Importation activity is up in several African nations as countries try to meet shortterm demand. In Ethiopia, eleven cement companies are only able to produce 2.3 million tons of cement, but demand sits at 11 mtpy. While the country is taking steps to increase domestic production, it must turn to imports to meet its current needs.

Tanzania finds itself having to import more from Pakistan after one of the country’s plants broke down. However, it is currently cheaper to import from Pakistan than to produce cement locally. In Nigeria, Sokoto Cement is calling on the government to increase imports by 30 percent in order to ease the burden on the country’s only two cement providers.

Between 2005 and 2010, cement sales soared 40 percent in Morocco, increasing from 10.3 to 14.6 million tons. Social housing initiatives appear to be driving the current run up in cement sales. The sales increase led to a flurry of new building activity as manufacturers competed for increased market share.

However, a slightly different picture is emerging for 2011. As more capacity comes online, cement manufacturers are seeing a declining sales. Lafarge suffered a nine percent decline in sales, while Holcim was jolted by a 16 percent drop. Four million tons of additional capacity generated by Atlas Cement and Addona are cited as the main reason for this most recent decrease.

The Algerian government’s five year plan to increase cement production to 20 million tons by 2015 and to invest 150 billion dinars in the industry appears to be on track. The industry produced 7.3 million tons in the first eight months of 2011. Currently, several facilities are being constructed in the country and are set to increase cement production to 8.5

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Yanbu Cement (Saudi Arabia)

Polysius is contracted to upgrade kiln line 2 and convert cement mill to increase cinker capacity to 3,500 tpd. Bag filters to replace electrostatic precipitators, two grinding plants to be equipped with high-efficiency separators for throughput of 170 tph each. Commissioning of grinding plant set for early 2012. Kiln system to come online in 2013. Net Capacity Add: 1.15 mtpy.

Table available in the CemWeek Magazine Print Edition.

Yanbu's fifth production line will come online in January 2012 for total capacity add of 3.2 mtpy. Implementation was delayed due to lack of fuel to operate the line.

National Cement (Egypt)

National Cement has announced plans to produce 2.8 million tons of clinker with sales projected at 1.36 billion pounds. The upgrade will increase coal production by 526,000 tons and increase fuel efficiency. COST: 526 million pounds.

Dangote (Cameroon)

City of Douala

Cimpor (Mozambique)

Dondo Cement Unit

Schwenk-Gruppe (Namibia) Dangote (Nigeria)

OVERVIEW

New plant to be built in Cameroon's economic capital and port city of Douala with 1.5 mtpy cement capacity. Construction has started for a cost of US$115 million.

Dangote is seeking US$585 million in investments.

New cement plant with total capacity of 750,000 tons will be completed in early

www.cemweek.com/subscribe 2013. Total Capacity Add: 500,000 tons. COST: EUR 15 million.

New Namibian cement facility has a capacity of 700,000 tpy (200,000 in phase one). Development lasted 22 months. COST: EUR 252 million.

Ibese

Production began Sept 2011 with capacity of 6 mtpy. A new production line will be added to the Obajana plant in 4Q 2011, bringing capacity at Obajana to 10 mpty.

Source: CW Group Research (see the CW Group's "Cement Plant and New Capacity Monitor for comprehensive details)

million tons over the next few months. The government has also taken steps to restrict the licenses of private cement vendors and resellers as part of an effort to replace private distributors with public vendors.

Tanzania and Cameroon are also projecting cement increases. In Tanzania, production is forecast to increase 18 percent this year, compared to the region’s anticipated 13 percent growth rate. Cameroon is forecasting cement consumption to climb as much as eight million tons by 2013, although current consumption sits at 2.5 mtpy.

As the cement market becomes more competitive, Ohorongo Cement is seeking infant industry protection status from the government of Namibia. If the

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government endorses such measures, a ban on imports will likely follow.

Ohorongo Cement is currently the only plant operating in Namibia, but two other cement plants are being built in Otjiwarongo and the Karibib region.

Regarding land acquisitions, Pretoria Portland purchased three aggregate quarries in Botswana for US$6.8 million, making its aggregates unit the largest in the country. Also, the East Africa Portland Cement Company (EAPCC) plans to sell 1,000 acres in the Athi River region where it has exhausted its limestone reserves.

Proceeds from the sale will enable EAPCC to purchase 300 acres in Mutomo, Kenya where huge limestone deposits have been identified. BMWeek CemWeek CW Group BMWeek BMWeek

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REGIONAL REPORT:

The ASEAN region is experiencing robust economic growth but lacks sufficient cement manufacturing capacity. However, China, which has been working to improve its existing capacity, has emerged as a regional producer.

indonesia

Sales of cement in Indonesia rose 52 percent in September over the previous year. The increase was due to an increase in property and infrastructure building.

The Indonesian Cement Association forecasts a 14 percent sales growth for 2011, moderating to ten percent in 2012.

State-owned Gresik has indicated that a hike in cement prices, even though input prices are rising, is unlikely given the fierce competition.

is encouraging cement manufacturers to export. By the end of 2010, Vietnam was exporting roughly one million tons, increasing exports to 2.8 million tons in the first eight months of 2011, the highest ever for the country. While domestic overproduction is behind the export push, poor infrastructure and competitiveness may hamper future efforts.

Private cement companies in Indonesia continue to expand, seizing as much local market share as possible. Prominent players include Indocement, Tunggal, Holcim Indonesia, and Semen Gresik. However, Boral Cement is looking for a buyer for all its Indonesian and Thai units. Boral had planned to divest itself of its U.S.-based units but has discovered that a higher price can be attained for the other units.

other asia pacific

The government of Vietnam believes local production is sufficient to satisfy demand through 2012. Demand is expected to reach between 55 and 56.5 million tons, with domestic production hitting 70 million tons in 2012. Demand for 2011 is estimated to reach 50 million tons. With the higher production levels, the government

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OVERVIEW

Semen Gresik/ SMGR (Indonesia)

Java and Sumatra

Two cement factories will be built in Java and Sumatra in 2013, increasing company revenue by 10%. Targeted plant capacity is 2.5 to 3 mtpy. A feasibility study for the second plant is underway. COST: US$375 to 500 million.

Bosowa (Indonesia)

Maros, South Sulawesi

Vietnam National Materials (Vietnam)

A plant will be built in Maros, South Sulawesi with a completion date in 2012.

Bosowa's total cement capacity will expand to 4.5 mtpy. COST: US$120 million.

The greenfield cement plant was first contracted in 2006 for a 2,500 tpd capacity.

Ignition test firing and cement mill operations began in 2009. As of June 2011, PAC certification has been obtained. Total Capacity Add: 825,000 tons.

Indocement (Indonesia)

Central Java

China National Building Material Group (Tajikistan)

Shahrituse

A new plant in Central Java with a capaicty of 2.5 mtpy has been announced.

Construction is set to begin in 2012. COST: US$300 million.

Feasibility study underway for new cement plant in Tajikistan. Construction expected www.cemweek.com/subscribe

to be complete in 2013. The first production line will have a clinker capacity of 2,500 tpd, producing more than 1 mpty of cement.

Schwenk-Gruppe (Namibia) Dangote (Nigeria)

Table available in the CemWeek Magazine Print Edition.

New Namibian cement facility has a capacity of 700,000 tpy (200,000 in phase one). Development lasted 22 months. COST: EUR 252 million.

Ibese

Production began Sept 2011 with capacity of 6 mtpy. A new production line will be added to the Obajana plant in 4Q 2011, bringing capacity at Obajana to 10 mpty.

Source: CW Group Research (see the CW Group's "Cement Plant and New Capacity Monitor for comprehensive details)

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The government of Taiwan claims that Chinese imports are causing substantial damage to its local cement industry. As such, the government has taken steps to levy anti-dumping duties on imports, slapping a provisional duty of 91.58 percent on Chinese-imported Portland cement.

The duty has been backdated to May 30th and is good for five years (May 2016).

In Australia, the local cement industry continues to speak out against the carbon tax that passed the House of Representatives in September. The industry believes the tax will hamper local manufacturers’ ability to remain competitive and will place strain on the economy in general. BMWeek CemWeek BMWeek BMWeek

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originally hired consultants to study the feasibility of merging the two companies, but several problems have emerged relating to branding, markets, and the share-swap ratio. Meanwhile, Ambuja finalized its acquisition of fly ash maker Dirk India for RS 16.51 crore. The unit will become a subsidiary of Ambuja. Century Textiles also announced plans to merge its cement unit with UltraTech. The deal should be completed in the new few months. When finished, the collective capacity of the two companies will reach 17 million tons.

regional report: asia pacific & south asia

REGIONAL REPORT:

Aditya Birla plans to spend RS 11,000 crore over the next three years to enhance its manufacturing facilities and has furthermore expressed its interest in acquisitions, especially in the Indian Ocean rim region where it is currently concentrating its efforts.

Reportedly, the company has also placed an offer on the table to buy assets from Cemex and Votorantim in South America to the tune of US$1 billion. However, all three companies have declined to comment on the validity of the report.

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select PROJECTS IN THE WORKS: SOUTH ASIA

Rising raw material and capital costs, a slowdown in government projects, construction delays and slowing demand have squeezed India’s cement manufacturers over the last few quarters.

Utilization rates have declined to 76 percent, and according to a Money Control report, revenues were projected to decline 12 percent quarter-over-quarter. Still, the ICICI research firm projects cement sales will hit six percent for FY 2012.

COMPANY (LOCATION)

As the monsoon season ends, Indian manufacturers have hiked cement prices between RS 5 and 20 per bag. Prices are up all over, except in the South where they have remained relatively stable. The highest price increases were noted in the northern and eastern regions. The average price increased nine percent for the month of September.

Anjani Portland (India)

Holcim has put its merger of ACC and Ambuja on the backburner for now. It had

PLANT

Jai Bhole Cement (India) Sri Lanka Cement (Sri Lanka)

Maharashtra

Maharashtra government and Jai Bhole Cement have signed an agreement for a 2 mtpy capacity clinker plant. The proposal includes a 72 megawatt power plant in Yavatmal district. COST: 1502 crore (phase one).

Kankesanthurai Plant

Rehabilitation has begun at Kankesanthurai Plant. The plant closed in 1990 due to violence between securityforces and the LTTE. Initial plans include opening the packing plant using imported bulk cement. Grinding and packing operations will require imported clinker. Integrated cement manufacture can utilize locally available raw materials.

Kishan (India)

Jaiprakash (India)

OVERVIEW

Table available in the CemWeek Magazine Print Edition.

Kishan has formed a new company named "Hi-Bond Cement India" with plans to establish a new cement plant by Diwali. The plant has an innitial capacity of 900,000 tpy. COST: Rs 250 to 300 crore.

Karnataka

Madhya Pradesh

Anjani is seeking a limestone mining license with plans to open a 1 mtpy greenfield unit in Bijapur. Once completed, the company's total capacity will reach over 2 million tons. Production should come online in 2014. COST: Rs 300 crore.

A new plant will be built within the existing Madhya Pradesh facility, bringing total www.cemweek.com/subscribe capacity from 3.5 mtpy to 5 mtpy. Ten hectares of land have been acquired for the expansion. The environmental clearance proposal recommends a 33% green belt around the plant and 60 crore will be spent on pollution control measures. COST: Rs 450 crore.

ACC (India)

Dangote (Nigeria)

Karnataka

Operations are stable at ACC's new clinker line in Wadui and two integrated grinding units in Kartnataka. The Karnataka project expanded clinker production to 12,500 tpd. Two satellite grinding plants for Portland slag and fly-ash based pozzolana were also built. COST: Rs. 1,634 crore.

Ibese

Production began Sept 2011 with capacity of 6 mtpy. A new production line will be added to the Obajana plant in 4Q 2011, bringing capacity at Obajana to 10 mpty.

Source: CW Group Research (see the CW Group's "Cement Plant and New Capacity Monitor for comprehensive details) OCTOBER/NOVEMBER 2011

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REGIONAL REPORT: data. The association asserts that if the rules were to go into effect, it would cost the U.S. cement industry around US$3.4 billion and lead to the shuttering of between 18 and 100 plants. In September, the U.S. House of Representatives passed legislation that would force the EPA to scrap and rewrite an existing cement plant regulation bill.

However, the Senate has yet to take up the bill, and if it does clear Congress, the President has threatened to veto it.

Cementos Argos was successful in obtaining regulatory permits in the United States to acquire US$760 million worth of Lafarge cement assets and trucks. The deal includes a 1.1 million ton cement plant in Harleysville, South Carolina, a 1.6 million ton plant in Robert, Alabama and a 500,000 ton clinker grinding unit in Atlanta, Georgia. The company also purchased 79 concrete plants with an installed capacity of 3.3 million cubic meters, five ferrous terminals and a seaport. The acquisitions bring Argo’s installed U.S. capacity to 3.2 million tons of cement and ten million cubic meters of concrete.

North America

Several cement companies operating in Mexico face allegations of cartelization and price fixing. Cemex, Holcim, Cruz Azul, Corporacion Moctezuma, and Apasco Cement stand accused of dividing the cement market by predetermining retail and bulk cement pricing. A long legal battle is expected to ensue as the government pursues its investigation. The companies rigorously deny the charges.

Cement companies are not the only groups coming under review. In October, the Mexican Federal Competition Commission (CFC) fined four traders and four individuals 13.763 million pesos for engaging in monopolistic practices for trucking services in the state of Baja California Sur. The CFC reported that traders held conventions in which they agreed to set a single price for cement truck services, limiting the number of

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trucks that each carrier could own and determining the number of customers and shares each one could cater to exclusively.

Moving north, the United States government has recommitted to its antidumping duties on Japanese grey cement and clinker, stating that lifting the duties would prove disadvantageous to the local cement industry. Meanwhile, a U.S. appellate court ruled that Cemex owes Texas US$488 million in mining royalties for use of the state’s granite, limestone and other minerals. According to the original lawsuit filed by Texas, Cemex and its predecessors have mined over 100 million tons from a Texas quarry located near the Mexican border since 1940 without paying the required royalties.

The U.S. Portland Association issued a challenge to the EPA over its new proposed mercury emission rules, stating they would be too restrictive and are based on flawed

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U.S. Concrete has teamed with researchers at UCLA and Arizona State University to reduce CO2 emissions. The group is currently focused on developing alternative inputs to replace cement in the production of concrete.

Also in “green” news, the Cement Association of Canada recently launched a new cement product it believes will decrease CO2 emissions by ten percent, improving the environmental footprint of Canada’s cement industry. The product, called Contempra, is expected to decrease the nation’s greenhouse gas emissions by up to 900,000 tons per year. Contempra, while “green,” has the capacity to produce durable and strong concrete and, potentially, Portland cement.

Colacem Canada is looking to expand its operations by building a US$225 million cement plant next to the existing Bertrand rock quarry near L'Orignal within the next three years. The new plant is expected to create 128 direct jobs, 82 indirect jobs and 90 trucking jobs. Colacem already operates

Central America & Caribbean Production costs in the Dominican Republic have doubled in recent years because of higher fuel, power and transportation costs. At the same time, local cement manufacturers have seen demand drop 24 percent between 2006 and 2011.

The Cuban Domestic Trade Ministry (Mincin) reaffirmed its commitment to supply the cement needs of the Cienfuegos region. The ministry claims there are currently 540 tons of cement available in the area and another 200 tons in storage.

Shipments to nearby areas, such as Villa Clara, are also planned. The region, like the rest of Cuba, is experiencing a shortage of building materials due to insufficient local production, which has allowed the black market to thrive. In order to avoid black market sales, Mincin is also publicly announcing low prices for cement.

South America

Cement shipments from domestic manufacturers in Argentina were up in August, climbing 7.1 percent over the same period in the previous year. Companies shipped over 1.1 million tons of cement and were forecasting 11.35 million tons by end of the 2011. Also in Argentina, Cuyo Cement is moving forward with its plan to build a plant in Malargue. The 400,000 ton capacity facility was originally slated to be built in San Juan, but the company changed the location to Malargue after Loma Negra built its plant there. In the meantime, Loma Negra was granted a ten year tax exemption on the gross increase from its La Calera unit in exchange for guarantees of additional investment.

Paraguay and Bolivia remain heavily dependent on cement imports. In Paraguay, cement imports increased 60 percent between January and August to reach five million bags. Between September 2010 and 2011, Bolivia also imported 500,000 bags. Bolivia’s trend toward

importation is likely to continue given a 9.5 percent construction sector growth rate, as reported by the National Statistics Institute. Bolivia’s domestic cement market has failed to add new capacity to keep up with existing demand.

Gloria Group is pushing forward in Peru with its purchase of a 47 percent stake in Consortium Soboce Southern Cement, after Mexico’s El Grupo Cementos de Chihuahua (GCC) decided to sell its shares because of continuing political uncertainty in Bolivia. Meanwhile, SA Commercial Investment Company (MIC), which owns a 51.3 percent stake in Sobocce, is pushing

capacity. Cemex is not likely to be a part of the government’s expansion efforts unless a resolution can be found over the handling of its sequestered Venezuelan assets. Venezuela has agreed to pay Cemex US$200 million for those assets, but Cemex places the value at US$600 million.

With no resolution in sight, the company has filed an international arbitration case with the World Bank’s tribunal.

regional report: americas

a cement plant, established in 2007, in Grenville-sur-la-Rouge.

Cemex is hoping for a more positive outcome in Colombia, as it eyes potential cement market growth, which is projected to rise 13 percent thanks in part to a boost by the construction market. The company

select PROJECTS IN THE WORKS: AMERICAS COMPANY (LOCATION)

PLANT

Holcim (Ecuador)

Work on the new mill began in Sept 2011. The new facility will expand production capacity between 3.5 and 5.4 mtpy. COST: US$120 million

Votorantim (Brazil)

Cuiaba

Votorantim Molins (Uruguay)

Treinta y Tres

Sinoma (Bolivia) RHI AG (Brazil)

Cementos San Marcos (Colombia)

OVERVIEW

Cochacamba unit Burns, near Rio de Janeiro Valle del Cauca

Table available in the CemWeek Magazine Print Edition.

New plant with 1.2 mtpy capacity was completed ahead of schedule in July 2011.

The local governor has praised the facilty's adherence to environmental standards.

COST: US$390 million Construction expected to begin FH 2012 for completion in 2014. New facility will produce 750,000 tons of cement per year, creating 200 direct and 500 indirect jobs. Represents a partnership between Artigas (60%), Votorantim (20%) and ANCAP (20%). COST: US$160 million.

New plant with designed capacity of 396,000 will be built in two phases. COST: US$100 million (phase one).

RHI AG's first cement plant in Brazil will be built in the Industrial District of Burns. www.cemweek.com/subscribe

Innitial capacity of 60,000 tpy will come online by the end of 2013. COST: EUR 85 million.

Construction is 80% complete at 200,000 tpy plant in the Valle del Cauca. Project is funded by Steel of West, Solarte, and the Otoya Dominguez and Cobo Lloreda families. COST: US$80 million.

Source: CW Group Research (see the CW Group's "Cement Plant and New Capacity Monitor for comprehensive details)

for arbitration over the long-standing dispute claiming GCC did not provide MIC with the opportunity to exercise its preferential purchase rights. GCC states that MIC did make an offer to purchase but that the offer did not comply with the provisions of the shareholders agreement, thus allowing the Mexican cement manufacturer to sell its stake in Soboce.

In Venezuela, cement production currently averages five million tons annually. As shortages continue to plague much of the country—up to 60 percent in some regions—the government plans to invest another US$620 million to increase

currently sells about 25 percent of all cement production in the country and plans to expand its production volume between eight and ten percent over the next two years.

Brazil’s cement sector is expected to grow eight percent in 2011 fueled in large part by the government’s social housing program and the accelerated building schedule ahead of the 2014 World Cup games. In regional news, Sergipe has emerged as the largest cement producer in northeast Brazil, accounting for 27.8 percent of the region’s production, according to Aqui Acontece. BMWeek CemWeek CW Group BMWeek BMWeek

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SECTOR COVERAGE:

contribution to GDP will remain under eight percent this year, compared to 8.1 percent last year. The sector is negatively affected by steep and steady price increases in cement, bricks and steel rods, as well as other input materials.

Australia is witnessing a record increase of engineering work which offsets the weakness in home and commercial construction. During the last quarter, the value of construction work increased slightly, by 0.7 percent.

Big investments on the horizon Saudi Arabia will create significant business opportunities in the next three years, with the construction sector expected to spend around US$420 billion.

The money will go to building construction but also to oil and gas development.

Vivid activity is also registered in Russia in the commercial real estate sector. In the first half of this year, investment in commercial real estate has doubled to EUR1.77 billion. Investments in the sector reached EUR2.2 billion in 2010 and just EUR0.9 billion in 2009.

A quick world tour of the building sector shows that the financial crisis which still plagues Europe and the U.S. poses risks and brings uncertainty over the entire global market.

Europe, United States Stall Markets The European sector remains hesitant due to the regional sovereign debt crisis that has affected a great number of markets, including the construction sector.

France has managed to grow by five percent in the second quarter, while the U.K. reported the 15th consecutive quarter of decline in the third quarter (-1.9%).

Bulgaria looks interesting to investors since being featured as the cheapest European country to build in by a recent study. Another market that seems in good shape is Portugal. According to the

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latest Eurostat data, Portugal has scored highest in the European Union in terms of construction output in August over the previous month (+7.6%).

Over the Pacific Ocean, experts say the United States will undergo a few years of slow growth before the construction industry recovers. A two percent growth is expected this year, while next year the sector could accelerate to a positive six percent evolution.

A workforce shortage will likely affect the Indian construction market, whose

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China is of course on the list of spectacular new projects. Construction of the 500 meters Zun tower, set to become the highest skyscraper Beijing, has recently begun in the Chinese capital. On the other hand, China has plans to build a massive airport with around nine runways near Beijing.

The new airport will handle about 370,000 passengers every day and is expected to turn China into the largest aviation hub in the world. Experts are looking for ways to connect the metro line to the new airport.

Another infrastructure super power, Russia, has begun construction of a highway between Moscow and St. Petersburg, with completion expected in three years. The site will be run by NWCC, a joint-venture between Italy’s Vinci and Russian partners. In Moscow, a new district covering 90,000 square meters and worth US$300 million will be built opposite of Kremlin. The project will be developed by DB Development, a joint venture between Deutsche Bank and Strabag.

On the Arabian Peninsula, the Muriya Tourism Development Company is planning to invest around US$1 billion for a number of tourism projects in Oman. Four tourism projects in the areas of Muscat and Dhofar will be developed, including hotels, villas and shopping areas.

Africa completes the list of big projects with almost 500 bridges being built in Angola as the government increases investment in infrastructure to sustain growth. This will increase the number of bridges in Angola to 879.

Building materials In Europe, Moody’s Investors Service has recently downgraded its industry outlook for the European building materials industry to stable, the result of the sector’s downside risks having increased. The company has indicated it could revise its outlook to negative should volumes fall back due to renewed economic difficulties caused by the sovereign debt crisis.

There is a direct correlation between the debt crisis and construction sector outlook, since weak public finances are raising the discussion of austerity measures which, among other measures, would likely include decreased funding for public construction.

In the past three quarters, building materials sector volumes have increased in a number of Western European markets and also in Eastern European markets.

However, pricing has been lower for most producers based on year-on-year comparisons.

Building materials prices have also gone down in the United States. For example, due to lower demand for construction services, the cost of construction materials fell by 0.6 percent in August, according to recent reports. Prices for asphalt, tar

roofing and siding fell in the same month, as well as iron and steel. On the other hand, softwood lumber and nonferrous wire and cable prices were slightly up.

Also in the United States, the North American subsidiary of France-based giant Lafarge and Martin Marietta Minerals, one of the biggest producers of building materials in the U.S., have announced they will switch some Denver assets. Martin Marietta will receive aggregate quarry sites, asphalt plants, ready-mixed concrete facilities and road-paving businesses in Denver, while Lafarge will get distribution yards and quarries near the Mississippi River.

In Latin America, equipment sales have increased during 2Q2011 between 23 cheapest places in the world to build 2011 Place

Country

% from base (costs in UK)

1

Taiwan

22

2

India

24

3

Sri Lanka

24

4

Ghana

31

5

Indonesia

31

6

Morocco

36

7

China

37

8

Saudi Arabia

38

9

Bulgaria

38

10

Tunisia

39

…

…

…

53

Japan

107

54

Sweden

109

55

Denmark

119

56

Switzerland

140

It will be the company’s second facility in the area, with a capacity of 40,000 to 80,000 square meters per year. The facility was designed to be very environmentally friendly and includes dust containment and water recycling equipment, among other environmental protection systems.

The facility has storage space for aggregates and other raw materials as well as five cement silos.

Also in France, Mexico-based conglomerate Cemex has launched a new 6,500 square meter facility after an investment of EUR 600,000. The plant is located in Landes and is expected to produce about 1,200 cubic meters of concrete every month.

sector coverage: construction materials

In Spain, the government has allotted EUR281 million for new contracts concerning a rail line to Galicia. The project would involve construction of the Cerdedelo-Prado and El Corno sections, including the development of approximately 8.8 km in tunnels.

In South Korea, the Danyang region is set to host four new ready-mix concrete plants. The proposed facilities are expected to lower concrete costs in the area and help stimulate the region’s construction sector.

The ready-mix plants would be built in the Danyang Industrial Parks, by H.Danyang Corp., which would invest two billion won in the project.

In Ipswich, Australia, a new concrete pipe plant is expected to boost the local economy. Holcim announced that it will be investing around US$75 million to construct a concrete pipe facility at a 20 hectare site within the 500 hectare Swanbank Enterprise Park. Construction of the facility is expected to generate 250 jobs, and around 130 people are expected to work at the concrete facility.

Source: Construction consulting firm EC Harris, research on 56 countries

and 31 percent. Planned sporting events in Brazil have been raising the number of works in the region and the country’s demand for construction machines.

Currently, Latin America is one of the main markets targeted by the U.S. Concrete A new concrete plant will be built in Vitrolles, France, by Fabemi Provence.

Gypsum and Lime The prospects for gypsum-based products are still expected to increase in the near future, even as continued weakness in the global construction industry remains a concern. China remains the key demand region for gypsum.

In Russia, TMK and Luast will invest around EUR 100 million for the development of a joint venture project in lime production.

The new facility, developed in the Sverdlovsk Region of Russia, is expected

OCTOBER/NOVEMBER 2011

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TURKEY COUNTRY SNAPSHOT

KHD:

All Eyes on Turkey

While the company’s presence in Turkey goes back 60 years, KHD Humboldt Wedag has spent the last decade growing its position in the Turkish cement industry, increasing market share through a series of installation and commissioning projects. Managing Director Ralf Slomski and Sales Manager Oral Tueresay share details of the company’s latest contracts and outline the company’s strategy for Turkey KHD EXPANDS ITS POSITION IN TURKEY KHD Humboldt Wedag has announced two major installation contracts awarded this past July by Kahramanmaras Cement (KCS) in southeastern Turkey and Askale Cement in the East Anatolian Region. The latest orders, by KCS and Askale, join a growing number of installations by KHD in the Turkish cement market. At present, KHD has a 40 percent market share in terms of production and 70 percent market share in terms of units. “That means that two-thirds of all kilns in Turkey are from KHD,” said Ralf Slomski, Head of KHD’s Customer Service Center for EMEA (Europe, Middle East and Africa) Kahramanmaras Cement KHD’s most recent contract is from Kahramanmaras Cement (KCS), a subsidiary of KIPAS Holding, in the form of a 4,500 tpd clinker production line near the city of Kahramanmaras, in

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southeastern Turkey. KHD will also install a Comflex grinding system to increase the plant’s cement grinding capacity. The line is being built next to the KHD-delivered Line I, which has been in production since 2009. The commissioning of both the new kiln line and the clinker grinding system is planned for the end of 2012.

The scope of KHD´s services for the KCS project includes the engineering and delivery of mechanical and electrical equipment, as well as supervision of erection and commissioning—including training—for the clinker grinding system and the new 4,500 tpd kiln line. The overall plant capacity will increase from 100 to 200 tons of cement per hour.

The core equipment, to be designed and delivered by KHD, includes a single string 5-stage preheater system with calciner and Pyrotop compact mixing chamber;

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tertiary air duct with dust settling chamber; combustion chamber with Humboldt chamber burner; 4.6 meter by 54 meter Pyrorapid and two-tire rotary kiln; Pyro-jet kiln burner for coal, petcoke, and fuel oil; clinker cooler with roll-type Pyrocrusher; kiln diagnostic system; clinker sampling system that includes sampling and preparation equipment; and X-ray laboratory and computer system.

The clinker grinding system, to be delivered

by KHD, includes a roller press RPS 16170/180, cascade separator with type VS 524 static classifier, a high-efficiency separator with type SKS-VC 3250 dynamic classifier, and an HKF 200/265 system fan.

For the second line, KCS chose to install a KHD combustion chamber that can be used with coarse secondary fuels, or secondary fuels associated with difficult ignition and combustion. According to KHD, the

Kahramanmaras Cimento Beton Sanayii Ve Madencilik Isletmeleri (KCS)

technology included in this installation will both lower the requirements for alternative fuel quality and reduce the degree of preparation required. This will be the second KHD combustion chamber in Turkey, the first installation being in a cement plant near Ankara.

The clinker capacity increase for the new kiln line accompanied a decision by KCS to increase the output of the existing cement mill from 100 tons per hour CEM I 42.5.

The concept, suggested by KHD, includes a new Comflex system in combination with the existing ball mill system. In fact, “this will be the first new design Comflex unit in Europe,” explained Slomski. Also,

use of the horizontal version of the static VS separator will allow for a significant reduction in the installation height of the system.

Expanding Market Share Oral Tueresay, Sales Manager for KHD, points to innovation, and a commitment to being at the leading edge of industry trends, as the key to the company’s competitive advantage in the region. “KHD’s strategic approach to the market is to be the leading supplier of innovative, environmentally friendly, and energy-efficient technologies, focused on reduced operating and maintenance costs,” said Tueresay.

KHD has more than 60 years of presence in the Turkish cement industry. “More than 45 kiln lines and 100 grinding units were delivered to Turkish companies by KHD between 1955 and 2010,” explained Ralf Slomski. Even in light of this solid history, however, in the last five years KHD has seen an unprecedented number of orders from Turkey. “Since 2005, we have received six orders for new burning lines and five orders for new roller press units,” said Slomski. “We are always open to support our customers in Turkey and the whole world to optimize their cement production and upgrade existing burning and grinding capacities.”

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TURKEY COUNTRY SNAPSHOT The company is proud of its involvement in the region, and Oral Tueresay took the time to highlight some of the company’s recent installations throughout Turkey: “In 2008, we installed the new roller press unit for Denizli Cement Plant.

The clinker grinding capacity increased, after the commissioning of the new Comflex grinding unit with roller press and V-Separator, from 65 tons per hour up to 210 tons per hour. And the energy consumption was decreased from 43.2 kilowatts per ton to 29.9 kilowatts per ton.”

“In 2009, the Limak Cement Group contracted KHD for a capacity upgrade of Sanliurfa Cement Plant from 2,000 tons per day to 4,500 tons per day of clinker.

The commissioning of the upgraded plant is expected in summer 2011,” continued Tueresay. “And in January 2011, we received an order for a new burning line in Van Cement Plant from Askale Cimento with a capacity of 3,500 tons per day of clinker.”

Askale Cement In addition to meeting output guarantees in its previous installation and commissioning contract with KIPAS Holding, in the last five years, KHD has fulfilled a series of equipment and commissioning orders for Askale Cement in Turkey’s East Anatolian region.

KHD received another order from Askale Cement in July 2011, this time for a new burning line at the Gümüshane Cement Plant with a clinker capacity of 4,000 tpd.

“This will be the third burning line being delivered to Askale Cimento by KHD after Van Cement Plant,” said Tueresay.

The order also includes commissioning and on-shore training at the plant, which lies near the town of Gümüshane in the Northeast Black Sea region of Turkey.

Under a contract with general contractor Sintek Madencilik, KHD will supply automation equipment and instrumentation as well as core KHD design components, such as a 5-stage Humboldt preheater with calciner, equipped with the Pyrotop mixing chamber and tertiary air duct with dust settling chamber, a 4.6

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Flow diagram for increasing the output of the KCS clinker grinding system

meter by 54 meter two-tire rotary kiln, a clinker cooler equipped with hammertype clinker crusher and controlled by the PFC control system, among other units. The plant is being erected near the existing 100 tph capacity Gümüshane cement grinding unit. Commissioning is scheduled for early 2013.

KHD would like to further expand its services within the Turkish market. “KHD knows the importance of the Turkish cement market and wants to defend its outstanding position in Turkey,” said Oral Tueresay. “In order to honor that, and to serve our customers even better than in the past, we plan to install a local representative office in the country with the target of delivering world class support and service to our valued customers.”

The Future of Turkish Cement Although many of Turkey’s traditional export markets have been drying up in recent years, Ralf Slomski is not concerned about the future of Turkey’s

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cement industry. “There is still a big cement demand for the local and export market, especially in the eastern part of Turkey,” said Slomski. “Looking ahead, the Turkish cement producers will increase their burning and grinding capacities and will optimize their plants for the hard competition. We will certainly support our customers with their future projects, as we have always done.”

After all, Turkey is the biggest cement producer in Europe and the fourth biggest in the world.

“Today the Turkish cement suppliers with their experienced and educated personnel are a good example for the whole Middle East region, North Africa, as well as Europe,” Slomski added. “We believe that the Turkish cement companies will expand their activities also to other territories such as the Middle East and North African countries, and will endow the world with well-educated cement engineers.” BMWeek BMWeek BMWeek

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UPDATES formal investigation of market practices.

The move was prompted by the ongoing prominence in the cement sector in the U.K. of five major producers—Holcim, Heidelberg, Cemex, Lafarge, and Anglo American via Tarmac—who collectively account for some 90 percent of the market.

John Fingleton, executive chief of the OFT, said that the agency was concerned that competition was not working well in the sector to prevent persistent concerns and higher prices for consumers.

Castle Cement's Padeswood kiln, United Kingdom (Courtesy of HeidelbergCement)

As their formal response, the OFT recommended in September that the deal be referred to the Competition Commission. The OFT will advise the regulator throughout the evaluation process. The final report is due in February 2012, leaving the completion of the deal pending. Small and large producers are watching to see what regulators will rule, as the impact across the industry could be considerable.

Big UK Cement Players Face Regulation Reviews Size, Merger Activity Prompt Office of Fair Trading Competition Commission Reviews

Despite having a very bad business year, cement industry players are facing increased regulatory scrutiny in the UK. Britain's Office for National Statistics has reported that new construction volumes are at their lowest levels since 1980 for the first six months of 2011. In response to such grim numbers, the cement industry has been consolidating vertically and seeking cost efficiencies through partnerships. Unfortunately, these mergers and cost cutting measures have raised flags with UK regulators concerned about fair trading practices and competitiveness in the sector formal investigaion launched In addition to ongoing concerns over competitiveness and pricing, the proposed 50:50 merger between Lafarge and Anglo American appears to have prompted the review. Announced in February 2011, the merger would create a business with £1.8 billion in sales, more than a third of the £3.4 billion national market. The two firms say they need the more than £60 million

in expected joint operating cost savings to survive in the ailing U.K. construction market, but regulators say the move may further squeeze smaller suppliers, reduce competition levels, and lead to hikes in consumer prices.

In August, the Office of Fair Trading (OFT) announced that after a year-long study of the industry it was launching a

INTEGRATION A FACT OF LIFE The added measure of uncertainty is unwelcome in the markets, though regulators insist their moves are valid and in keeping with European Community precedents for maintaining competitive markets. There is a level of vertical supply chain integration in the U.K. for raw supplies, aggregates, and ready-mix that is unmatched in other parts of the broader Continental community. It is this integration which is being highlighted by regulators as contributing to a potential lack of competitiveness in the industry.

Producers say that the reviews will find little more than the hard facts of life for their market in the U.K. Dependent on public sector construction for 40 percent of revenues, government cutbacks and the end of the London Olympics signal upcoming hard times that producers hope regulators will not intensify. The construction sector as a whole represents seven percent of the U.K. economy, and while integration and partnership may seem like collusion to outside observers, producers insist such cooperative elements are their only hope for survival. BMWeek CemWeek

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TECHNOLOGY

Clinker Grinding contribution by Ceprocim Engineering

Refurbishing an existing cement plant with the purpose of increasing output, improving quality or reducing production costs is a worthwhile endeavor, providing good returns for money spent.

However, it is also a complex affair which requires thorough investigations and guidance from specialists. This article showcases successful refurbishment projects carried out in recent years

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The Feasibility Study The first step to understanding case-specific possibilities involves engaging an external specialist for an in-house assessment of the plant. Once the resources have been allocated, the study will review current plant conditions to identify bottlenecks and propose solutions for improvements, either through re-use of existing equipment or by rehabilitating and upgrading the production facility. The engineers propose a concept definition and provide all the information and assessments necessary to elaborate a feasibility study, including alternatives, the investment required, and the expected return, each of which becomes the basis for the owner’s decision making process. Once the project is selected and approved, the engineers

will proceed with a design and general layout, possibly including workshop and execution drawings of design details.

Capacity Increases: Grinding It is common for cement plants to need increased clinker grinding capacity, either because they have increased production capacity already or they want to increase cement production by a higher additives proportion.

The most common paths to ball mill capacity increase are improving the tube mill ventilation to 2 m/s, introduction of a static separator on the tube mill circuit and splitting the de-dusting circuit in two parts—one for the tube mill and one for the dynamic separator, elevator and air slides.

The expected effects of these modifications include an increase in cement production and the cement cooling effect, and improvement of dynamic separator efficiency by decreasing its load. Better cement grain size distribution leads to a higher cement quality at the same cement fineness.

Ceprocim Engineering carried out one such project during the upgrade of two existing cement mills for Ciment de Sibline in Lebanon.

First, the mill was modified by increasing ventilation and introducing a static separator on the mill de-dusting circuit.

Furthermore, the mill de-dusting circuit was split into the separator and annexes

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TECHNOLOGY circuits. After the upgrades, the mill capacities were increased from 54.7 tph to 66.7 tph and the energy requirement reduced from 29.0 kWh/t to 23.6 kWh/t.

All measures were made at a Blaine value of 3,300 cm2/g.

Introducing additives to mills The second project for the same client consisted of adding kiln EP filter dust from the kiln line to two cement mills.

Using fine EP dust in a ratio of about five percent of cement output replaced the coarse limestone filler with a grain size up to 25 mm.

Case Study In connection with the construction of a new clinker line, the client needed to increase the capacity of nine existing cement ball mills and to improve cement quality. Some of the mills had already been upgraded in recent years, and the turn had come to mills six, seven and nine.

The project had many constraints, and there were several restrictions to be considered.

The direct results of this modification were a cement production increase from 66.7 tph to 70 tph and reduction of grindingspecific energy consumption from 23.6 kWh/t to 22.5 kWh/t. Furthermore, this upgrade improved kiln operation by taking sulfur, chlorine and alkalis from petcoke and alternative fuels out of the kiln/pre-heater loop.

First of all, the new structures had to be designed inside the old building, which dates back to the construction of the plant.

The engineers had to use the confined space in and around old structures and consider unknown sub-surface obstructions. This required minimizing the modifications and avoiding any weakening of the existing foundations and structures.

Grinding limestone and pozzolana and adding them to the cement resulted in a further increase of cement mill output.

The additives were prepared in an existing raw mill, stored in one of the existing raw meal silos and, after dosing, pneumatically transported to the two cement mill outlets.

It is generally possible to use up to 15 to 20 percent filler and thus obtain higher cement capacity, as well as reduction of the specific energy required for grinding.

Secondly, the brief given by the owner asked Ceprocim Engineering to maximize re-use of the existing installation, including both buildings and equipment.

About Ceprocim Engineering A member of the French Group SNEF, Ceprocim Engineering specializes in cement plant refurbishment, with sixty years of experience in all cement specialties and process areas. The company is headquartered in Bucharest, Romania.

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Furthermore, the owner wanted the highest possible level of equipment standardization, considering the other mills also. Spare parts should, to the extent possible, be interchangeable so that exploitation and maintenance are as easy as possible.

Avoiding any interference with production during construction was the most important requirement. It was therefore necessary to erect the new building in the confined space available and under difficult conditions. The switch to the new circuits had to be coordinated with the plant within a shut-down window of only two weeks for each mill.

The Solution Using 60-year-old drawings and measurements on site, the mill building and equipment were mapped and a 3D model created. This permitted the process

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engineers to propose a conceptual design for the upgrade. A project description, flow sheets, calculations and equipment specifications were discussed with the client in several stages and, after final approval, the detailed designing phase commenced.

Ceprocim Engineering proposed upgrading the existing open circuit cement mills by adding for each mill a third generation high-efficiency separator in closed circuit.

A new steel structure to accommodate separators, bucket elevators, de-dusting filters, overhead cranes and other equipment were erected inside the existing building, protruding through its roof. Everything was built and optimized perfectly around the old mills, including electrical installations, and control and command were integrated with the automation systems of the new line under construction at the same time.

Starting the design phase with 3D modeling has many advantages in a refurbishment project. It permits visualizing the integration of new and existing equipment.

Also, when all design departments work on the same model, the risk of errors and surprises is reduced. The only drawback to such models is preparation time and the immense computing power required.

After upgrades, the mill capacities presented an average increase for II/A-P 32.5R cement of up to 66 percent, while specific power consumption was at the same time reduced by 33 percent.

The project was proposed and realized as a semi-turnkey supply in close cooperation between Ceprocim Engineering and IMSAT, sister companies in the SNEF Group. The cement mills continued producing throughout the erection period and the switch-over to the new circuits was realized within the two weeks initially planned. BMWeek CemWeek CW Group BMWeek BMWeek

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Continued from page 27: REGIONAL REPORT: SOUTH ASIA

The October release of coal for auction to manufacturers was derailed after Coal India announced it would divert four million tons to power generation companies. The potential coal shortage from Coal India’s decision was not expected to effect cement makers, however, as between 70 and 75 percent of coal is imported. In related news, Prism Cement signed an agreement with India Resources, Australia for mining, development and operation of the Sial Ghogri coal block near Chhindwara, Madhya Pradesh. The cement manufacturer will use the mined resources for captive consumption.

India’s National Congress Party has asked for a probe into the alleged activities of eight cement companies in Meghalaya.

India’s largest political party suggests that firms including Star Cement, Topcem, Adhunik, Jud Best and Hills Cement set up cement plants without obtaining the required prior government permission.

other south asia

Pakistan despite regulatory intervention.

Additionally, cement makers have approached the government seeking approval to increase prices. Higher input costs, including rising electricity and fuel rates, were cited as factors for the desired increase.

Cement prices continued to rise in

The construction boom in Sri Lanka continues to fuel the cement market as the country moves to expand its cement capacity. One producer eyeing a return to the booming market is Sri Lanka Cement Corporation. The company’s factory ceased operations in 1990 following the escalation of violence in the country.

SLCC is currently studying several options, including resuming production at Kankesanthurai. BMWeek CemWeek CW Group

In Pakistan, the cement sector registered a turnaround profit of RS 2.54 billion in FY 2011 following losses of RS 2.59 billion in 2010. Sales volume had declined, but a 32 percent increase in prices helped to offset the drop, and sales revenues rose 14 percent to RS 115.6 billion in FY 2011. The biggest winners in terms of gains were Kohat Cement, Pioneer Cement, Fauji Cement, Dewan Cement, and Mustehkam Cement.

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Continued from page 31 SECTOR COVERAGE: CONSTRUCTION & MATERIALS BY BMWEEK.COM

to meet the growing demand for limestone products in the region. It is expected to aid in the qualitative development of Russia’s chemicals, glass and paper industries.

In the established economies, synthetic gypsum is gaining popularity and conquering the construction market as a material that complies with environmental building requirements and is price competitive.

In France, Lafarge’s limestone facility in Charente—one of ten Lafarge Ciments production sites in the country—is celebrating its 80th year of operation. The facility currently employs around 120 people who work to produce about 900,000 tons of limestone per year.

In the Great Lakes region, limestone shipments have declined by 6.7 percent in September compared to the previous month to 3.5 million net tons. Compared to the same month of the previous year, however, shipments have increased by 2.4 percent. Shipments from quarries in the U.S. are on the rise, while those from Canada decline.

Aggregates In France, the international producer of building materials Vicat will develop a new

processing facility with an investment of EUR 3.5 million. The new facility is dedicated to Aggregates Vicat’s Souvigny operation and will be used for concrete production.

European construction output perfectly flat Portugal

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The five big players of the UK U.K. aggregates industry Czech Republic have attracted the attention Netherlands of the Fair Trade Office due Poland to concerns regarding fair Sweden competition.

Aggregate Industries, Cemex, Hei- Germany delberg Cement, Lafarge, Slovakia and Tarmac—together ac- Romania counting for 90 percent of Slovenia the UK cement market, 75 EU27 percent of aggregate sales and 68 percent of readymix production—are suspected of unfair practices.

The government of Argentina has established higher fines for operations that extract aggregates from rivers without municipal authorization. Reports show that an increase in illegal extractions has been recorded lately in the country.

Meanwhile, the Concrete Committee in the U.S. announced that it is developing

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a proposed standard for lightweight aggregates. The group says using pre-wetted lightweight aggregate increases concrete durability and service life in an economical and practical way.

Green materials The request for ecological building materials is on the rise. In Europe, Germany and France lead the investments in environmentally friendly materials, but customers across the continent are showing greater demand, according to a study involving 1,200 European architects.

In India, the popularity of eco-materials rises as well, and the “green” construction market is expected to grow from US$10 billion to US$30 billion in the next four years. Recently, India has decided to develop a Green Building Council to push the concept of green building, to certify infrastructures and to train professionals.

The council stated that environmentally friendly construction can increase energy savings by 20 to 30 percent and water savings by 30 to 50 percent. BMWeek CemWeek

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PROJECTS & SUPPLIERS Equipment and Notable Projects Lafarge UK Rolls Out “Adams 2000” The Adams 2000 packing system by Haver & Boecker was introduced to the public for the first time at the recent Interpack fair in Düsseldorf. The new Form-Fill-Seal high-speed system for filling powder-type products into watertight PE bags will go into action for the first time at Lafarge Cement UK, part of plans to make its plants and products as environmentally friendly as possible.

With environmental measures in mind, already back in 2005 Lafarge installed the newly-developed Haver FFS technology, which works according to the Haver Adams Process (HAP) principle to provide product protection, extended storage times and led to less dust along the entire logistical supply chain. Convinced by the advantages, Lafarge put additional machines into operation for filling mortar products and special cements in various plants throughout England over the years.

Using the Adams 2000, the company expects to profit from the continuous development of this environmentally gentle packing system. One advantage is a considerable speed increase from 1200 bags to over 2000 bags per hour. Moreover, limited free-flowing products can also be filled. According to Lafarge, the technical innovations allow greater flexibility in planning and when replacing existing systems.

Pfeiffer Wins Monarch Upgrade Monarch Cement Company has contracted with Gebr. Pfeiffer to upgrade their MPS 3450 Raw Mill. The project goal is to improve airflow in order to meet the new National Emission Standards for Hazardous Air Pollutants (NESHAP) requirements.

The mill upgrade solution will include a new fan and grinding table for the raw mill, SLS 3750 High Efficiency Classifier and an AZZ 5600 Cyclone. Additional duct work and engineering services will also be provided, along with installation of a Gebr.

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Adams 2000 packing system from Haver & Boecker

Pfeiffer “lift and swing” device to simplify mill maintenance.

The upgrade project will allow hot gases from two kilns to both be directed through the raw material mill, cleaning the gas pollutants while grinding limestone.

Completion is expected by March 2013.

Ciments du Maroc Opens Wind Farm Ciments du Maroc has inaugurated a wind farm in Laayoune at a cost of 100 million dirhams. The turnkey project was delivered

by Gamesa and has an installed capacity of five megawatts. The site can answer 80 percent of the energy needs for the firm's grinding unit. Excess production is being sold to the National Electricity firm.

Sinoma Secures Slag Roller Deal China's Sinoma has secured an equipment order from Kazakhstan's South Oil Company to deliver a 90 tph slag grinding system which will be self-developed, designed and manufactured by Sinoma.

This will be Sinoma International's first roller mill slag export.

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The contract includes engineering design, equipment supply, technical service and equipment installation. Meanwhile, both sides signed a standard, one-year cement production technology services contract.

Babcock Wins Lafarge Equipment Deal Babcock has secured a ten year, £50 million deal with French cement maker Lafarge to manage and maintain the firm's heavy equipment in the U.K. The deal covers heavy mobile equipment at the aggregates and cement businesses and is being billed as a global first in the quarry fleet management sector.

Babcock has also confirmed exclusive negotiations with Lafarge to roll out the management and maintenance model across its global operations, with the U.S. being the next territory. The contract value for this phase will likely reach an additional £100 million.

Corporate News

Closures and Shutdowns

FLSmidth Buys Transweigh India FLSmidth has acquired 100 percent of the shareholding in India Transweigh, a supplier of gravimetric feeding equipment to the steel, iron and cement industries. Transweigh also markets and sells FLSmidth Pfister’s leading fuel feeder product range to the Indian market. The company’s customer base consists of end consumers (i.e. cement producers, steel mills, sponge iron producers, etc.) and original equipment manufacturers. “Transweigh has a very well equipped sales force and provides FLSmidth with direct access to the customers in the important Indian market,” said Group CEO Jorgen Huno Rasmussen.

Ash Grove to Suspend 6 U.S. Plants Ash Grove Cement has announced the temporary shuttering of six units due to economic difficulties. Approximately 220 employees at Chanute, Durkee, Inkom, Ieamington, Montana City and Seattle will be effected.

Loesche Energy Celebrates 5 Years Loesche Energy Systems (LES) celebrated its fifth birthday in 2011. Founded in January 2006, LES handles Loesche business for the worldwide fuel-grinding markets for power generation.

Lafarge to Close Fredonia Plant Lafarge has announced the closure of its Fredonia, Kansas unit following more than 100 years of activity. Plant manager Sean Brennan says long time workers will receive pensions, and the plant’s 73 employees will be able to apply for positions at other Lafarge plants. However, environmental coordinator for the plant Mark Metcalf has said there are not enough open jobs to place all of Fredonia’s plant workers.

Operating in the power market presents unique challenges for LES, including fierce competition.

The company’s market success has been dependent upon customer loyalty and proving product effectiveness and reliability.

The LES business strategy in Loesche the power market is focused on two core services: design and installation of coal mills (including biomass mills) for new-build plants, and retrofitting Loesche dynamic classifiers to existing coal mills to improve performance and efficiency. These services are provided to customers with a choice of supply-only or full turnkey options.

LES customers are primarily boiler manufacturers and EPC companies for new-build power plants. In the case of dynamic classifier retrofits, LES customers are operators or corporate owners. In the past five years, LES has supplied (or has procured orders for) over 50 coal mills up to size LM 35.3 D and over 280 dynamic classifier retrofits to existing coal mills, including projects delivered with the support of Loesche Mills Shanghai (LMS) New SLV Dealer for African Market Cachapuz Bilanciai Group has extended the representation of SLV Cement to new countries in the African Continent through the Sasco Africa company. With this partnership, the SLV Cement solution will be promoted in South Africa, Botswana, Malawi, Namibia, Swaziland and Zambia. Sasco Africa was founded in 1910 and is the largest weighing company in Africa.

The range of products offered includes both general weighing equipment and advanced weighing systems for specific industrial and commercial sectors.

“The furloughs this year are less extensive than those in the previous two years because we will work on special projects in select departments and perform regular maintenance on our facilities, which will shorten the furlough period for some employees,” states Ash Grove SVP of Manufacturing Mike Hrizuk.

"It's just one of those things that happen when the economy is like this," says Metcalf. "I had it happen to me when I was in Independence. That plant was there for over 100 years. I was there for 20 years and they closed it, came here and the same thing happened."

Russia Halts Savinsky Cement Bailiffs suspended operations at Savinksy Cement in Russia’s Plesetsk region following environmental violations. An audit revealed numerous violations of the rules of industrial safety for dangerous production objects, creating a threat to human life and health.

A court bailiff sealed the premises and facilities and warned the plant manager of criminal liability for the resumption of activities before the elimination of all violations. Unscheduled inspections will monitor the repairs.

Monarch Cement Temporary Shutdown Monarch Cement in Kansas will implement a four to ten week shutdown to begin once storage silos become full. The temporary layoff affects 85 hourly employees. Previously, Monarch closed for the winters of 1975 and 1975 due to weak sales caused by economic conditions.

“The exact timing will depend on the strength of our market as we head into late fall and early winter,” said Monarch President Walter Wulf, Jr. “That is often dictated by weather conditions.

Inventory and beginning of the year sales forecasts will determine when we will begin calling back employees.”

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Lafarge Canada:

Proving the value of homegrown Biomass Mr. Robert Cumming, an Environmental and Public Affairs Manager for Lafarge Canada, was recently interviewed by CemWeek and offered insight into the company’s successful efforts to improve their environmental impact. Mr. Cumming also discussed the company’s initiatives to further improve emissions in the future

CW: You recently won the PCA award, in large part for your biomass project. What were the goals that you set out to meet and what is the "Energy Farm” project?

RC: Lafarge’s Bath plant has 14 key project initiatives covering the gamut from biodiversity to climate change, and our environmental improvement effort was recognized by the award. As an international company, one of our voluntary goals was to reduce its worldwide net CO2 intensity by 20 percent and to reduce absolute emissions by 15 percent (both as compared to 1990). The Lafarge Group achieved both

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goals ahead of schedule and we are proud of that achievement.

To further our sustainability ambitions at the local plant level in Lafarge North America and Lafarge Canada, we have undertaken several initiatives. For example, the Lafarge Bath plant in Canada, supported in part by Natural Resources Canada, partnered with Queen's University of Kingston on an innovative biomass project. The question to be answered was “Can we grow our own renewable fuel?”

To study this idea, the plant worked with local farmers—on nearby farms and on

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Lafarge’s own property—to plant a variety of fuel crops. These annual crops included non-food sorghum, switch grass, hemp, maize, millet, and other grasses. This was the first time these farmers had worked with these crops. Yield and other practical measurements were taken for later use.

It is estimated that the cement industry generates up to five percent of the carbon emissions around the world. The use of biomass fuel and other renewable energy sources can substantially reduce the carbon emissions within our industry.

Returning to the 14 projects recognized at the Bath plant, other goals included reducing the landfilling of cement kiln dust by over 90 percent and the introduction of new electrostatic precipitator technology to reduce kiln dust emissions. The Lafarge Group has outlined emission reduction targets for worldwide operations for itself and its subsidiaries.

Our other sustainability goals include biodiversity, green-buildings and water conservation initiatives. We also extensively use fly ash from power plants and furnace slag from the local foundries in the cement making process.

fuels will require significant equipment modifications, pre-processing of biomass to increase its energy density, or both.

Clearly the low hanging fruit for CO2 reduction is the use of biomass byproduct fuels where a fuel cost saving can be achieved in addition to the other environmental and social benefits. The adoption of these biomass fuel feed systems will prepare the industry for a low carbon future. Purpose grown biomass fuel crops can someday be a workable means of fuel supply, when other sources are in high demand.

The other questions related to water consumption, biodiversity, and land use will be addressed through the Queen’s University Life Cycle Assessment study led

by Dr. Warren Mabee. We need to ensure that in the future, should carbon trading systems become in force, that biomass fuels are given full credit for CO2 reduction.

Early work with solid biomass fuel production on a life cycle basis indicates that the net CO2 savings are around 90 percent compared to the use of coal. This will rise to 100 percent when transportation fuels and products are themselves derived from renewable sources.

CW: What are the cost benefits from the biomass project?

RC: Cost effectiveness will improve should carbon costing systems be adopted in the future by regulators. The program includes finding other sources of biomass to meet our future renewable energy needs as well.

The benefits to us from an environmental and social standpoint are very significant.

Finding local energy sources offers huge benefits for our communities as well.

In Ontario, we import US$1 billion of coal each year to supply electricity, steel, cement, and to fuel other industries. If the efforts to find renewable, locally produced fuels are successful, we can spend that US$1 billion locally while helping Ontario meet its commitment to reduce greenhouse gas emissions. (Ontario has set a goal of reducing greenhouse gases by 15 percent from 1990 levels by 2020 and by 80 percent by 2050.)

The biggest technical challenge to the adoption of large scale biomass fuel use is biomass’ lower energy density. This is a result of lower carbon-hydrogen ratios, lower heating values, lower bulk density and higher levels of moisture. To get the same amount of net energy from a biomass pile as from a pile of coal, the biomass pile would be three to four times larger—and it cannot be stored outdoors. Since cement kiln fuel and combustion processes are sized for the use of coal and similar fuels, large scale conversion to biomass

from food production. Solid fuel biomass crops have numerous advantages over seed-based fuels (e.g. corn kernels). The yield per acre is much higher and the need for fertilizers, if any, is much lower with the perennial grasses and woody crops that are the most likely source of solid biomass fuels in the future. Some biomass annual crops can be used in crop rotation programs to enhance soil for food production and to break disease cycles. Also, many biomass crops are suitable for planting on marginal land. Due to these and other reasons, biomass fuel crops can be produced with negligible effects on food production.

Robert Cumming, Environment & Public Affairs Manager, Lafarge Canada

CW: Are there any other considerations in a project of this magnitude?

RC: Areas of exploration are the social impact, life cycle of the project, land use, measurable performance, water use, and quality of our product.

From a community perspective, Lafarge conducted a public meeting to address any issues with the project. It was a highly positive meeting with 145 people attending.

We informed our neighbors about the plant, the project, and the science to be done, and we were given immense public support for the project.

The most common question about biofuels is whether their production would detract

CW: Are there other potential forms of renewable biomass to use as alternate energy sources?

RC: One thing to keep in mind is that virgin biomass supply can be obtained from purpose grown farm crops, but it can also be sourced from forestry. However, the high cost of transportation must be considered. Other, more immediately economical sources include biomass byproducts that have no other value, such as construction and demolition debris, sewage products, agricultural byproducts, and pulp and paper byproducts.

For example, bone meal powder is used in Lafarge cement plants and it is not only a biomass fuel, it also contains calcium which is used as an ingredient in cement.

Scrap tires contain a fraction of biomass in the form of natural rubber. Agricultural

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FOCUS In theory, you could implement a biomass project anywhere, but some parts of the world may even be better than our location—if, for instance, they have a longer growing season.

In the end, a widespread adoption of the purpose grown crop approach globally is years away, but there may be interest at other plants on the horizon. Unfortunately, for the time being, biomass can’t compete with coal, as its energy value is much lower.

However, other facilities are already using alternative fuels, such as wood chips, bone meal, and other alternatives that provide the same carbon benefits.

CW: We understand that you have also reduced dust emissions at the plant. How was this achieved?

byproducts are another option, and Lafarge uses rice and coffee husks in some cases. Oat hulls were included in our October trial at Lafarge’s Bath plant.

Hemp produces a tough, natural fibre with multiple uses, and decortication plants produce a hard byproduct which can be used as fuel. Pre-screened and preprocessed household waste contains over 50 percent biomass. However, these sources may be fully consumed as our societies turn increasingly towards biomass-based energy and as the chemical industry also seeks to make use of natural biomass sources as a replacement for petroleum as a feedstock.

CW: What can other companies learn from your efforts, and would the program be effective in other parts of the world?

RC: To implement a program like this, you need land that is not allocated for food crops. Thus it naturally follows that underutilized rural, agricultural locations are best suited for biomass fuel crop development, particularly since farming expertise already exists in those communities. You will need 1.5 tons of biomass to replace one ton of coal and, in northern climes, four to six tons per acre per year is the top yield expectation until new engineered crops become available.

RC: Our engineering team has gone to great lengths to implement a new technology to reduce the dust emissions from our kiln operation and to re-use all of the captured cement kiln dust. We have reduced our average opacity level by 50 percent by using Power Off Rapping. This technology improves the cleaning efficiency of our electrostatic precipitator by turning off the power, in a careful sequence, to the plates when they are rapped to remove buildup. Also, the kiln dust captured by the precipitator is now fully returned back into the process, reducing power consumption and the quantity of material going to landfill.

CW: Thank you for your time; we look forward to seeing the results of your continued efforts. BMWeek CemWeek CW Group BMWeek BMWeek

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HIGHLIGHTS Lafarge’s Bath plant currently uses over 100,000 metric tons annually of petroleum coke and coal as fuel. In an effort to offset this consumption of fossil fuels and the associated release of carbon, the company is turning to biomass fuels as a promising solution. While biomass byproduct fuels are readily available today, these products could become scarce as society turns to biomass fuels on a larger scale.

Lafarge has planted numerous energy crops which, if successful, can fill this gap in supply. In November 2010, Lafarge Canada and World Wildlife Fund Canada signed a local collaboration to develop an “Energy Farm” project, supported by Ontario’s Environment Ministry. A year later, research is being carried out on the most appropriate crop species, the most economical production techniques and long-term obstacles such as the impact on food production. The project has received EUR 210,000 in financial support from Lafarge Group and WWF International for 2011 to 2012.

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Coa Coa Coa

PLANT

MAINTENANCE Rope and remote access services throughout the cement plant High-capacity industrial vacuuming services, wet and dry Cleaning and painting of small and large structures Clean outs of cement bulk ship transport carriers High-altitude measurements and verification of plant infrastructure

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worldwide service

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conjunction with Sepolhr (a horizontal dynamic separator) or Sepol PC (a staticdynamic separator) for increasing energy efficiency and reducing investment costs for raw material and clinker grinding.

According to Marathe, this success at Vasavadatta Cement in Sedam has established that such systems consume 25 to 30 percent less power compared to VRMs for a given capacity. “A paradigm shift is observed towards this technology,” said Marathe. “It is evident from the fact that Polysius has sold 21 such circuits in just eighteen months.”

India and Alternative Fuels Energy problems are a seemingly constant struggle for Indian cement companies, a challenge confirmed by Marathe. The problem is that almost all plants in India are coal based, with linkages to public sector undertakings. The shortfall that such linkages create can only be met by importation of coal or shifting to alternative fuels such as petcoke. “To overcome these energy-related problems, cement manufacturers have no option but to install their own captive power plants, and waste heat recovery has become essential,” said Marathe.

Emerging Market:

Polysius in India Makarand Marathe, Senior Vice President of Polysius India, spoke with CemWeek about current trends in the Indian cement market, including concerns such as renewable energy and capacity expansions. The full text of our Q&A with Marathe was included in the latest issue of India Cement and Construction Materials It’s the Technology Polysius has a long and innovative history working with Indian cement manufacturers, including Ambuja Cements, India Cements, Vasavadatta Cement, the Aditya Birla Group, and ACC. According to Makarand Marathe, Senior Vice President of Polysius India, the engineering firm’s success in India is dependent on a commitment to new technology and innovation.

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“Polysius makes huge investments each year in developing more efficient technologies and processes,” said Marathe. “Involvement of Polysius Beckum in projects handled in India is in the form of technological support, supply of critical components, agreement on equipment selection and sizing, and process calculations.”

One of Polysius India’s most well-regarded projects to date is the installation of a high pressure grinding roll Polyco in

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Although alternative fuel usage has not reached the levels in India that it has in Europe, cement manufacturers have begun to consider its usefulness more seriously, with petcoke as the preferred alternative fuel. For instance, Aditya Cement, Vikram Cement, India Cements and Shree Cement have all turned to petcoke.

According to Marathe, a successful tire reconditioning industry in India makes tires unsustainable as a fuel source, although Vasavadatta Cement and India Cements are considering this option.

Plastic waste is also recycled in India, but Vikram Cement has carried out experiments using treated municipal waste. Marathe confirms that similar alternate fuel experiments—such as sludge from effluent treatment plants, tar waste from the petroleum industry, paint sludge, refinery sludge and agricultural waste—are being carried out throughout India.

PEOPLE MOVES Hoclim: Bernard Fontana New CEO Bernard Fontana, the CEO of Aperam, will become the new CEO of Holcim when Markus Akerman steps down in early 2012.

“We have succeeded in finding a successor with a winning personality who has a true track record in corporate leadership as well as in central group functions such as HR and sustainable development,” said Holcim Chairman of the Board Rolf Soiron.

Innovation In terms of the global future of cement, Marathe believes the next wave of innovation in the cement sector will come from China and India. “The simple reason is the investments made by global players in these countries in manufacturing as well as development work,” said Marathe.

“Innovations will be driven by demand, and of course will be backed by European research.”

KHD Adds Board Member Heinz Otto Geidt, Head of Asset Management of the Software Foundation and a member of the Supervisory Board of Software AG, has been appointed to the Board of KHD Humboldt Wedag International following the resignation of Gerhard Rolf effective September 30 for personal reasons.

“Mr. Geidt not only has experience in committee work, but will bring in industrial expertise he was able to gain at home and abroad, "said Chairman of the Supervisory Board Gerhard Beinhauer.

CarrÉ New Suez Managing Director Bruno Carré has been appointed as the CemWeek’s full interview with Makarand new Managing Director of Suez Cement— Marathe can be read in Vol 1, Issue Italcementi Group’s subsidiary in Egypt— 2 of India Cement and Construction effective October 1. Carré previously Coal Week Materials magazine. BMWeek CemWeek CW Groupserved as General Manager at Ciments CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW GroupCalcia.

Coal Week Polysius India is a division of 152-year-old engineering company Polysius, an arm of German multinational group ThyssenKrupp.

Polysius’s footprint in India dates to 1938 with the supply of four 250 ton-per-day (tpd) lepol cement plants to Dalmia Cement. Full Indian operations began in March 1980 when Polysius entered into a collaboration with Buckau Wolf India (now ThyssenKrupp Industries India) to manufacture and supply mineral and cement plant machinery and equipment to the Indian sub-continent.

Since then, Polysius India has installed and commissioned 26 integrated plants with capacities ranging from 650 to 10,000 tpd, and seven integrated plants are in various stages of completion.

France: New CEO for Ciments Calcia Jean-Yves Le Dreff replaces Bruno Carré as CEO for Ciments Calcia. Le Dreff will also support the coordination of activities for Italcementi Group, France and Belgium. Le Dreff, who holds a Master of Accounting/Finance, joined Italcementi Group in 1986 and took the post of Director of Management Control in Bergamo in January 2003. He became General Manager of concrete activities in France and Belgium in July 2007 before becoming CEO of the Group in Spain in June 2010 .

new Vice President. Guerini has a degree in Business Administration from Bocconi University in Milan. Prior to joining Italcementi, Guerini worked with KPMG handling its Italian operations.

CEMBUREAU President Sets Priorities Incoming President of the European industry association, Ignacios Madridejos, is taking steps to define solid priorities for his tenure.

Madridejos released this statement: “The promotion in collective and generic fashion of the use of cement and concrete must be given a new thrust. An inventory is being made of all actions taken and of those to be implemented in view of the EU’s agenda and current developments in the marketplace.

What are competing materials doing to qualify for Green Procurement? What is being done elsewhere in the world in order to promote cement and, most of all, how can CEMBUREAU actions be made more relevant and better known?”

Spain: New CEO of FYM Domenico Mario Bracci has been appointed to replace Jean-Yves Le Dreff as CEO of FYM. Bracci has extensive knowledge of the sector and the company, having joined Italcementi Group in 1990.

In 1995 he joined the Italcementi factory in Nazareth, in the United States, first as assistant director and later as plant manager. Previously, he was CEO of Asia Cement, Italcementi’s subsidiary in Thailand, where he was responsible for developing the Group's expansion plan in Asia. In 2003, Bracci was appointed general director of Interbulk, Switzerland.

KHD CFO Resigns KHD Humboldt Wedag International has announced the resignation of its Chief Finance Officer, Manfred Weinandy, for personal reasons. The Supervisory Board has approved the resignation and appointed CEO Jouni Salo as acting CFO.

Italcementi Names New VP Italcementi has announced the appointment of Renato Guerini as the company’s

OCTOBER/NOVEMBER 2011

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45

Coal W Coal W Coal W

DATA SHARE PERFORMANCE As of November 1, 2011. All share prices in local currency 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)

3.72

2.22

-22.85%

29.28%

2.74

2.88

4.89%

-0.23%

BORAL LTD FPO (ASX)

5.73

3.13

-33.51%

21.73%

3.48

4.06

9.47%

-6.20%

TITAN CEMENT (Athens)

18.36

9.32

-23.80%

50.11%

-

-

N/A

N/A

(Bombay)

1.00

1.00

N/A

N/A

-

1.00

N/A

N/A

INDIA CEMENT (Bombay)

127.80

62.10

-38.15%

27.29%

73.39

77.38

7.71%

2.15%

JK CEMENT (Bombay)

199.90

96.05

-46.05%

12.29%

111.80

115.30

-3.54%

-6.46%

PRISM CEMENT LTD. (Bombay)

65.90

39.10

-34.14%

11.00%

42.22

46.13

2.79%

-5.91%

SAGAR CEMENT(BSE (Bombay)

161.40

113.00

-18.18%

16.86%

136.46

140.15

-3.23%

-5.78%

SHIVA CEMENT (Bombay)

10.49

4.92

-42.04%

23.58%

6.38

6.24

-4.72%

-2.62%

FLSMIDTH & CO. (Copenhagen)

549.00

255.20

-41.26%

26.37%

303.49

368.81

6.27%

-12.56%

WEST CHINA CEMENT (Frankfurt)

0.32

0.09

-70.19%

5.49%

0.15

0.23

-35.46%

-57.64%

SHANSHUI CEMENT (HKSE)

10.20

4.72

-44.22%

20.55%

6.58

7.91

-13.54%

-28.04%

ASIA CEMENT CH (HKSE)

7.34

2.85

-51.91%

23.86%

4.52

5.57

-21.84%

-36.68%

ANHUI CONCH (HKSE)

56.90

17.90

-52.46%

51.12%

23.82

32.74

13.57%

-17.39%

INDOCEMENT TUNGGA (Jakarta)

18,250.00

10,700.00

-16.44%

42.52%

13,936.10

15,689.40

9.43%

-2.80%

HOLCIM INDONESIA (Jakarta)

2,575.00

1,650.00

-25.83%

15.76%

1,838.33

2,043.56

3.90%

-6.54%

SEMEN GRESIK (PER (Jakarta)

10,150.00

7,250.00

-11.33%

24.14%

8,720.00

9,302.27

3.21%

-3.25%

TONGYANG CEMENT & (KOSDAQ)

2,850.00

865.00

-65.61%

13.29%

990.00

1,351.81

-1.01%

-27.50%

ASIA CEMENT (KSE)

49,600.00

33,600.00

-31.35%

1.34%

34,875.80

42,228.10

-2.37%

-19.37%

LAFARGE MALAYAN C (Kuala Lumpur)

8.11

6.06

-15.54%

13.04%

7.75

7.52

-11.62%

-8.95%

YTL CEMENT BHD (Kuala Lumpur)

4.85

3.80

-5.77%

20.26%

4.76

4.40

-4.01%

3.75%

CIMPOR R (Lisbon)

5.55

4.27

-5.57%

22.71%

5.02

5.11

4.38%

2.64%

STEPPE CEMENT (London)

59.86

30.00

-45.71%

8.33%

31.95

38.70

1.73%

-16.02%

CEMENTOS PORTLAND (MCE)

17.19

9.26

-41.48%

8.64%

10.08

11.82

-0.20%

-14.88%

GRUPO CEMENTOS (Mexico)

56.50

38.00

-20.35%

18.42%

40.35

40.80

11.51%

10.29%

BUZZI UNICEM (Milan)

11.01

5.45

-43.05%

15.05%

6.33

8.00

-0.93%

-21.59%

CEMENTIR HOLDING (Milan)

2.65

1.53

-37.74%

7.84%

1.67

1.86

-1.06%

-11.26%

ITALCEMENTI RSP (Milan)

3.97

1.91

-46.10%

11.92%

2.18

2.78

-1.84%

-22.97%

46

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CW Group Coal Week CemWeek BMWeek CemWeek CW Group Coal Week BMWeek CemWeek BMWeek CW Group 2011 Coal Week OCTOBER/NOVEMBER

As of November 1, 2011. All share prices in local currency 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

ASSOCIATED CEMENT (NSE)

903.60

415.05

31.05%

185.30%

786.51

618.19

50.56%

91.55%

ANDHRA CEMENTS LI (NSE)

23.70

18.50

-63.50%

-53.24%

19.24

19.24

-55.04%

-55.04%

BINANI CEMENT LIM (NSE)

96.60

58.00

-6.31%

56.03%

88.28

83.83

2.51%

7.96%

BURNPUR CEMENT LI (NSE)

15.75

10.20

-49.21%

-21.57%

11.22

11.46

-28.68%

-30.16%

DALMIA CEMENT (BH (NSE)

284.80

134.00

-76.70%

-50.49%

216.64

225.53

-69.37%

-70.58%

DECCAN CEMENTS LI (NSE)

248.00

156.10

-40.52%

-5.51%

163.07

164.23

-9.55%

-10.19%

ITD CEMENTATION I (NSE)

292.40

174.20

-46.75%

-10.62%

236.56

239.69

-34.18%

-35.04%

MADRAS CEMENTS LT (NSE)

139.60

95.50

-25.54%

8.85%

114.85

107.92

-9.49%

-3.68%

MANGALAM CEMENT L (NSE)

128.00

46.25

-19.57%

122.59%

112.25

73.90

-8.29%

39.31%

SHREE CEMENTS LTD (NSE)

2,454.10

1,700.00

-21.70%

13.03%

2,118.58

2,002.35

-9.30%

-4.04%

CRH PLC AMERICAN (NYSE)

25.16

14.17

-26.83%

29.92%

16.97

19.61

8.49%

-6.14%

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

11.15

2.53

-60.81%

72.73%

3.74

6.42

16.98%

-31.96%

EAGLE MATERIALS I (NYSE)

33.22

15.36

-38.05%

33.98%

17.88

23.14

15.13%

-11.05%

TEXAS INDUSTRIES, (NYSE)

47.42

30.11

-36.74%

-0.37%

33.24

37.01

-9.75%

-18.95%

CIMENTS FRANCAIS- (Paris)

77.49

53.42

-20.18%

15.78%

59.46

67.73

4.02%

-8.68%

LAFARGE (Paris)

48.76

22.29

-43.78%

23.02%

26.66

38.73

2.85%

-29.22%

ANHUI CONCH CEMEN (Shanghai)

43.05

16.80

-53.57%

18.99%

18.38

27.32

8.74%

-26.84%

FUJIAN CEMENT CO. (Shanghai)

14.70

6.75

-28.71%

55.26%

10.15

11.33

3.21%

-7.52%

CHINA SINOMA INTL (Shanghai)

50.50

22.95

-58.44%

-8.54%

26.44

32.05

-20.62%

-34.50%

HUAXIN CEMENT CO (Shanghai)

5.48

1.71

-60.24%

27.43%

1.98

2.78

9.98%

-21.70%

SIAM CEMENT -F- (Stuttgart)

10.54

6.58

-37.61%

0.00%

7.92

8.87

-17.02%

-25.87%

TAIWAN CEMENT TWD (Taiwan)

49.45

29.00

-25.18%

27.59%

34.25

39.70

8.02%

-6.79%

ASIA CEMENT CORP (Taiwan)

48.30

28.25

-24.95%

28.32%

33.58

38.29

7.96%

-5.32%

CHIA HSIN CEMENT (Taiwan)

20.30

14.65

-26.60%

1.71%

15.49

17.28

-3.79%

-13.75%

LUCKY CEMENT TWD1 (Taiwan)

9.20

5.85

-32.93%

5.47%

6.15

6.98

0.27%

-11.61%

HOLCIM N (VTX)

76.90

42.11

-31.01%

25.98%

50.75

57.55

4.53%

-7.82%

HEIDELBERGCEMENT (XETRA)

54.00

23.92

-43.67%

27.20%

28.82

38.34

5.54%

-20.65%

KHD HUMBOLDT WEDA (XETRA)

8.24

4.17

-46.03%

6.64%

4.52

5.71

-1.70%

-22.11%

OCTOBER/NOVEMBER 2011

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

47

Coal W Coal W Coal W

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

Saudi Arabia and Egypt are often in the headlines, and increasing industry news from Spain has caught the eye of CemWeek.com readers.

Russia, Mexico and Brazil continue to hold our attention, and the major cement markets are in the spotlight.

IN THE NEXT ISSUE

PERSON OF THE YEAR: 2011’s Key Players - Who led the industry?

REGIONAL FOCUS: Persian Gulf markets and highlights from the 2nd MEA survey TECHNICAL FOCUS: European emissions and bulk-handling developments A YEAR IN REVIEW: From pricing to court battles, how did the industry fare in 2011?

Persian Gulf

European emissions

48

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BUZZ TOP 15 STORIES

CEMWEEK.COM

Indian cement rises while companies seek to acquire and sell. The most popular stories on CemWeek.com: 1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

India cement prices increase Cement prices rise in India India: ACC commissions new units Dangote to construct plants in Africa with KHD, AVIC Ultratech looking for fresh acquisitions Barclays takes grim look at Cemex Report: India's Birla Group bidding for Cemex, Voto assets Sources: Holcim puts India ACC, Ambuja merger on backburner India cement prices to rise post monsoon Indian cement firms face probe Report: India to initiate action against cement cartel Mexico probes alleged price fixing in cement industry Lafarge India to support Indian festival Report: Boral seeking to sell off units in Indonesia, Thailand India's Kishan to spend Rs 300 crore on new cement unit

saudi riyals china

factory

imports

profits

development

finance surge

shares reached increased measures

level

saudi

joint

world

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

15.

conch

fuels fuel votorantim

coal cimpor

thousand

work

control

general

produce

target

power financial management

statement camargo assets

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stock

industries

stop

chairman revenue

costs

carbon

province

national

sector

kiln volume

bond

long

region

rising

land

continue investment portuguese

association

yuan

domestic

brazil economic plants producers

energy

board

plans

india

equipment consumption

manufacturing

capital

public

BMWEEK.COM

Limestone, fly ash and all kinds of “green.” Here’s what you’re reading on BmWeek.com: Etex seeking 1.3 bn euros to finance bid for Lafarge unit Vietnamese building materials market continues to face difficulties Montana company seeks to lessen landfill bound waste CSR Gyprock product used for hospital expansion US fly ash ban in construction to prove costly India halts Birla's limestone mining in Rajahstan ‘Green’ bricks to increase savings by 40% Lafarge turns to India’s low cost housing sector Costs of new building materials increase in Greece Lehigh lawsuit counteracts ban Prefabricated products seen as solution to India’s construction delays Cemex US expansion plan approved South African commission to list priority construction projects FHWA allows of work for SR 99 to begin Lafarge may set up new R&D facility in India

ministry

materials

environmental products alternative

emissions

makers

impact

material

government project growth

quality

private

increases

place available

lafarge rate

TOP 15 STORIES 1.

exports

pakistan manufacturers

director

countries major

significant imported infrastructure

shortage

china

environmental gypsum

decline economy

india

worth completed

continues

design

mining

activity

deal

include

national

products

asphalt

produce

areas

france

public

quality

price coal

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investment

equipment

limestone

association

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experts

highway research index

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costs

engineering

builders

government

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product road

markets lime

says

improve

sustainable

facility

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developed

competition

sector

sales

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steel

world

economic

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ready

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concerning

order

project concrete recently continue

operation

energy

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rise

rate

starts

buildings

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

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