CemWeek Magazine, Issue 11

CemWeek CemWee MAGAZINE

GLOBAL CEMENT INDUSTRY. KNOWLEDGE.

OCTOBER / NOVEMBER 2012

CemWee CemWee BMWeek SHIFT LEADERS Q&A

Ed Verhamme, Alternate Resource Partners

Market Update

Spain: Suffocated by Recession Algeria: On the Rise but Challenges Abound

CW Group Research

Mediterranean Basin Trade Prices Natural Gas: a Newfound Love?

FROM WEST TO EAST? CBI Conference Tackles question News

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Analysis

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Market Coverage

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Interviews

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People Moves

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

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Letter from the publisher and editor

ON THE HORIZON Industry leaders, managers and technical personnel from around the world converged on Mumbai, India on October 10th and 11th for GMI Global’s Cement Business & Industry (CBI) India 2012 conference. In keeping with the conference’s central theme, “The Shift from West to East in Global Cement: the Big Picture,” speakers delved into a host of topics ranging from investment management and innovation to export capacity and transportation strategies.

The CW Group, also presenters at the conference as well as hosts to the “CEO & Executive forum” and pre-conference workshop, argue that the shift currently being seen in the cement market may not necessarily be from west to east, but more north to south. It is an interesting argument that CemWeek intends to delve into more thoroughly in 2013 with a wide-range of articles and special coverage highlighting this shift.

Until then, we wrap up this year’s final issue with a well-rounded selection of offerings.

In addition to our regular department coverage, highlights from the CW Group’s second annual Americas Sentiments Survey are shared. The Spanish and Algerian cement markets are also examined.

In the Leaders Comment section, we speak with Ed Verhamme of Alternate Resource Partners. A presenter at the CBI conference, Mr. Verhamme discusses waste recovery and alternative fuel options as they relate to the cement industry.

As we get close to the end of the year, we reflect on the past year and the continued evolution of the cement industry and of the ongoing evolution of our publications. We are pleased that CemWeek and our sister publication, ICCM have been embraced by the industry as leading sources of industry research, analysis and news. For that, we thank you and ask that you join us again in 2013 for another exciting year.

As the old rock song anthem goes, “"You Ain't Seen Nothin' Yet."

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

CW Group staffbox CW Group

Robert Madeira

cemweek publisher head of cw group research

CW Group

Diana Heeb Bivona project editor

Paolo Dela Rosa art director

Anthony Fitzgerald advertising

Claudia Stefanoiu Mihai Musatoiu Laura Goldner Cristina Goanta contributing writers & researchers

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

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

Robert Madeira publisher and head of research

Diana Heeb Bivona project editor

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

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

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CONTENTS FEATURES 4 LEADERS COMMENT Ed Verhamme, Alternate Resource Partners talks waste recovery 10 CBI EVENT Coverage of the Cement Business & Industry Conference in Mumbai, India COUNTRY SNAPSHOTs 14 Spain: Suffocated by Recession 22 Algeria: On the Rise but Challenges Abound

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4 22 DEPARTMENTS Numbers in Brief 2 US: natural gas a newfound love?

Research 26 Mediterranean Basin: Export Market Turbulence 28 Global Cement Prices at a Standstill Regional Focus 20 UK: Energy Costs Hurting Energy Intensive Industries 40 Brazil and Americas Sentiment Survey

Regional Reports 30 Europe, Middle East & Africa 36 Asia Pacific 37 South Asia 38 Americas From our Industry Partner 42 Building materials update Projects & People 45 Notable projects 46 People on the move

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Answers for industry.

NUMBERS

IN BRIEF

US: natural gas a newfound love?

In the US, coal has long figured centrally as a source of fuel for the cement sector. But a structural decline in natural gas prices is accelerating the attractiveness for cement operations to switch from coal to natural gas.

Natural Gas Prices From 2004 to 2008, coal was highly competitive as an alternative to gas, with prices ranging between US$1.5/MMBTU to almost US$3/MMBTU versus gas prices that hovered around US$6/MMBTU, but spiked in 2005 caused by major disruptions related to hurricane Katrina.

But by 2009, natural gas prices plummeted in less than a year from a top US$12/MMBTU to almost US$3/MMBTU. Although the lower demand for natural gas that came with the economic recession contributed to lower prices, much of the decrease was caused by the rapid increase in domestic shale gas supplies. Prices remained around US$4/MMBTU between 2009 and 2011, until mild weather in the winter of 2011 and spring of 2012 bought down the prices to record lows, reaching a ten-year low on April 18, 2012, when the natural gas spot price at Henry Hub hit US$1.87/MMBTU. Natural gas prices will increase steadily in the coming years, driven by higher production costs and higher demand.

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Coal Prices Coal prices remained relatively stable from 2004 to 2007 but started rising around 2008 when international demand accelerated, resulting in record high prices. Following weaker global demand and an increase in supplies in 2009, prices started to slide and returned to levels comparable to the beginning of 2008. Between 2010 and 2012 coal prices have been moving around the US$2.7/ MMBTU but according to EIA price will start following an upward trend under the expectation that coal mining productivity will continue to decline.

NYMEX Central Appalachian Coal Futures Near-Month Contract Final Settlement Price History ($/MMBTU)

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conference:

cement business & industry brazil & latin america sÃo paulo, brazil ♦ February 27-28, 2013 The Cement Business & Industry (CBI) Brazil and Latam 2013 Conference, which will be hosted in São Paulo on February 27-28, 2013, will create a new platform connecting the cement industry, analysts, technologists and other stakeholders from Brazil, Latin America and all parts of the world.

With the arrival of Brazil and Latin America as one of the key cement markets of the world, and one of the most dynamic, it requires a dedicated and focused approach – which is what CBI Brazil & Latam 2013 is here to provide you with. Not only will we be looking at the industry’s issues from a global perspective, but it will be relevant and tied into specific regional issues facing the industry today.

The program will take a dual-track business and technical approach to issues around:

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■■Cement and fuel trading – still going strong or a waning force?

■■Innovation - technical, business and the human capital equation ■■Alternative fuels and the environment - new developments ■■The efficient enterprise -- designing for performance ■■The new cement plant -- tools of the trade ■■Strategy and finance -- opportunities, consolidation and what is next?

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Organized by GMI Global LLC and supported by CemWeek www.gmiforum.com

LEADERS

COMMENT

Alternative fuels Building new capabilities The CW Group Publication Manager, Diana Heeb Bivona, sat down with Ed Verhamme, the General Manager of Alternate Resource Partners to discuss waste recovery and alternative fuel options as they relate to the cement industry.

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CemWeek: The waste and cement industries have very different expectations and outlooks when it comes to the pricing of alternate fuels. How do they differ and why does it matter?

Verhamme: There are a number of big differences between the two. For instance, cement is cost-driven and waste management is revenue-driven. Cement, again, is also a cost driver while waste management is environmental-solution-driven.

Thus, having a solution that is higher on the environmental hierarchy, e.g. co-processing versus landfill, is better and will be charged at a higher rate. Another big difference is the cement industry is not as customer-oriented whereas the waste industry is service-oriented.

This is an opportunity business. When the opportunity presents itself, you have to capture it and the waste industry, in contrast to the cement industry and the design of its decision-making process, is able to do that more quickly.

CemWeek: For a cement manufacturer, what is key to implementing a successful waste strategy?

Verhamme: What is important for your strategy is to know your cement plant.

That is what we call the internal key factor. You have to know the waste market and you have to know the institutions, i.e., community organizations, municipalities and stakeholders in general. If one of these is weak, it will not sustain your alternative fuel resource (AFR) business plan. Therefore, you have to make sure that they are all strong and that you can implement it. That is why we do a prefeasibility study first. We speak with the cement companies to identify what waste products they are looking for, go to the waste market,and see what is available, then report the findings. To that end, we have developed an Industry Base Waste Mapping tool that allows us to analyze the industry and what potential AFRs are available in that region around the ce-

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LEADERS COMMENT ment plant. We need to determine what the industry looks like and it is important to do this beforehand. I will give you an example why.

SCHEMATIC STRUCTURE OF ALTERNATE PARTNERS AF(R) BD PROGRAM

We were called in to work with a cement plant that, in conjunction, with a waste management company, had decided to use oil filters as an AFR. The idea was to disassemble the oil filter that you use in your car, and that contains used lube oil, send the steel back to the steel manufacturing sector, and use the rest. The cement plant set up a processing/feeding facility to do this, but after six months, the cement plant was concerned they didn’t have enough oil filter material to feed its facility. We were called in, and in this case, performed an after-market survey.

We found out that in order to maintain an adequate supply of filters, the cement plant would need to go much further afield – several states over in fact – thus adding more cost to the process. Unfortunately, it illustrates how the process was built according to the plant’s needs without taking the market conditions in account. You have to understand what the size of the market is because if there is nothing, then it’s either going to influence your price or you will not be able to use it and end up under-utilizing your installed capacity.

CemWeek: Do you find any challenges in implementing an AFR process in the emerging markets as compared to the developed markets?

Verhamme: Environmental enforcement is one big difference. The other is the level and cost of the various environmental solutions available in that specific area.

Those are the two biggest differences seen.

CemWeek: You’ve referred to alternative fuel resource pricing as a moving target.

What do you mean by this?

Verhamme: Pricing is very often not fixed and often, depending on various factors, can change quickly. For example, changes to environmental legislation 6

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IMPLEMENTATION

III

AFR BUSINESS PLAN

INTERNAL FACTORS

Pre-feasibility: High level aspects and impacts and development of implementation roadmap

can affect pricing. What may have been considered normal practices with regard to disposing of items in landfills five years ago are no longer acceptable today and instead are separated and recycled.

In addition, pricing is opportunity driven. Animal meal is a very good example of this. There was a big problem with the disposal of animal meal. There was a huge volume of this and actually only one solution, which was co-processing it in a cement plant. That gave the opportunity to charge what they wanted and that is what they did. If the value of the solution is US$300 and the costs are US$30, the solution will still be charged the US$300.

This gave the opportunity to have a ROI of 12 months; after 24 months the opportunity disappeared as the animal meal volumes became much smaller due to other solutions being available.

CemWeek: How do the economics of alternative fuel vary across the regions?

Verhamme: Pricing is always relative to alternatives such as landfill, incinera-

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INSTITUTIONS

FOUNDATION

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tion, waste to electricity and recycling.

Depending on the local infrastructure, that is what you are up against. I use the example of the UK where in 2004, they started with a landfill tax of £14/ton, which jumped in 2012 to £64/t and will rise again to £80/t in April 2014. You can imagine how the pricing of alternatives from materials that originally had gone into the landfills and that are now being used elsewhere changes. However, if you were to have that same waste in, say, India, where the landfill fee was £14/ ton, this would be a completely different market. The point is there is no one market, even in Europe or the U.S. There are completely different economics because landfill costs vary so greatly not just throughout a region, but also sometimes throughout a country.

CemWeek: What can be done to make alternative fuel usage more attractive to cement companies around the world?

Verhamme: The cement kiln is actually the tool that can solve many waste problems, especially in emerging countries.

Ideally, emerging countries wouldn’t have to build these waste management plants and could instead spend the money on infrastructure or elsewhere, if they could work together with cement companies to find a solution. However, cement companies would have to work together with the government, states and even cities to, in essence, educate officials on what a nice tool cement companies potentially have to solve many of their waste problems and to extol the environmental benefits co-processing can provide.

You see this in Egypt where people are talking about municipal solid waste collection because the landfills are filling up.

Imagine if cement companies were to say, guarantee us roughly 40 percent of this material, and we may have a solution. For the other 40 percent you already have the solution of compost. Thus, for one ton of municipal solid waste, you only have to put 20 percent into the landfill and the other 80 percent can go either as a fuel or compost. It’s a win-win solution.

One of the things the government should do, if they are serious about their environment, is to increase their enforcement, and that is something the cement companies should also be saying.

CemWeek: Waste products such as animal meal, solvent and car frag are among

down these days. Car shredding residues still have many heavy metals (Cu) due to cables in cars, and copper specifically has a very disturbing affect on the cement process. As long as they cannot take the copper out, it is not a viable alternative for the cement market.

"The cement kiln is actually the tool that can solve many waste problems." the alternative fuel sources discussed.

Can you provide an overview of the viability of these sources for the cement industry?

Verhamme: The animal meal market has already disappeared because of mad cow disease disappearing. Solvents are going down in volume now worldwide because many of the solvents previously used in paints and other processes are going

The other problem you have in the cement plant is you are typically competing against coal as your main fuel where many other industries are using heavy oil or diesel, which of course, gives them a big advantage when it comes to price. If they have to pay a certain price, it’s still 50 percent of the oil price but for the cement kiln, it would be 100 percent of the coal price so why go to alternative fuels unless there is a CO2 credit to it?

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LEADERS COMMENT WASTE HIERARCHY

DON’T MAKE IT OR REDUCE Less raw material inputs

SUSTA

INABL

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REPAIR AND RE-USE Maximize time to end of life

RECYCLE Re-processing of waste materials

RESOURCES CO-PROCESSING Energy and mineral recovery Inter-industry cooperation

RESOURCE DESTRUCTION Incineration or chemical neutralisation

WASTE STORAGE & CONTAINMENT Secure encapsulation for future re-use, recycling or resource recovery Permanent safe landfill

However, for me, at this moment, I see still a lot of industrial waste, both hazardous and non-hazardous, depending on the specifics of the area. I see a lot of waste of which could produce RDF or SRF. One big one is municipal solid waste and packaging waste from the industry. There is a company in the U.S., for example, that is collecting all the packaging waste, shredding it, putting it into cubes, and sending it to the cement plants, which are using it as an alternative fuel source.

CemWeek: How can cement companies go about building portfolios of alternative fuel resources?

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Ed Verhamme, an entrepreneur and General Manager of Alternate Resource Partners, has more than 30 years' experience in the industrial services, waste management and cement manufacturing industry. Over the 15 years spent at Holcim, Mr. Verhamme was instrumental in developing the resource recovery business of Holcim globally. Most recently, Mr. Verhamme was Sr. Consultant for the Corporate Industrial Ecology division at the head office in Switzerland and General Manager of the waste management affiliate of Holcim US. Mr. Verhamme received Bachelor degrees in Mechanical & Environmental Engineering as well as Environmental and Safety Management

Verhamme: Start by understanding the overall waste and resource market. It is important to also have an understanding of short and long-term market developments, i.e., legislation, new waste products, disappearing industries, etc. I’d also recommend having an assessment performed with regarding to the viability of alternative fuel sources.

tries/communities. When we combine these with “waste factors” per industry, we will typically identify between four and eight major waste streams, which then would need [to be] verified with a technical assessment of the present kilns and their state of operation (i.e., looking for bottlenecks like ID fan, residence time in calciner, etc.).

Our company, Alternate Resource Partners’ Industry Base Waste Mapping tool provides a first screening of the market by looking at industry and communities present in a specific geographical area and mapped in tandem with the co-processable waste generated by these indus-

Once a company has decided to start with AFR, they can then build flexible installations and develop the correct permits to adapt to the fast changing waste market and the availability of certain waste streams. BMWeek CemWeek CW Group

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Global cement industry coverage in a new, fresh format focusing on market moving trends, analysis and business. We know the cement industry well. Let us guide you. For more information please contact us at inquiries@cwgrp.com, or on +1-702-430-1748 T: +1-702-430-1748 F: +1-928-832-4762 www.cemweek.com

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cbi event

GMI'S CBI CONFERERENCE HAILED A SUCCESS he annual Cement Business & Industry Conference (CBI) 2012 event took place at the prestigious Leela Hotel in Mumbai, India. The three-day conference, hosted by GMI Global, a leading cement industry meeting and human capital specialist firm, brought together an array of industry leaders with wide-ranging backgrounds from the global and Indian cement industry.

Mr. Andre Cholewinski, GMI Director who hosted the conference, said: “It is hugely exciting to hear the very positive buzz from the attendees around the content, quality of attendees and fresh approach to creating a forum for exchange of ideas in the cement sector.

With a great meeting behind us, we will absolutely heed the request of the attendees and make this an annual event – CBI India 2013 is a certainty and we see that our partnership with the leading industry analysts at the CW Group to shape relevant programs will continue to

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serve the industry well – here in India, or at CBI Brazil/Latam in February 2013 or CBI Africa in April 2013.”

GMI opened the conference with a strategy workshop presented by leading industry analysts and consultants from New York-based CW Group. Robert

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Madeira, Managing Director and Head of Research, CW Group, led the workshop.

Mr. Madeira and Senior Analyst, Claudia Stefaniou, led the interactive workshop that covered a variety of topics including planning and strategy, analytics and research, and reinventing the franchise and uncovering hidden profits.

to meet with the sponsors extremely helpful, but also hearing about the latest innovations and best practices. On behalf of the delegates we extend our gratitude to Gold Sponsors FLSmidth and SKF, as well as to the Silver Sponsors Loesche, Cachapuz, Grace, Crescent, Magnesita, Promac and JK & Sons. Last, but not least, of course we much appreciate the support provided by the leading cement publication for India, the India Cement & Construction Materials journal.”

The delegates attending the main two-day CBI India 2012 Conference represented cement organizations on a global scale. A wide mix of senior-level executives such as general managers, vice president, and business heads formed the majority of the audience in addition to, technical directors, engineers, analysts and associates. Numerous speakers underscored a wide variety of relevant themes and issues such as the Indian Boom, India and Beyond, Investment Management, Innovation, the Economics of Fuel, the Race for Export Capacity, Transportation and Strategy, the Business of Petcoke, and Alternative Fuels.

A highlight of the event were two CEO panel discussions featuring global cement industry leaders, including

Mr. Sumit Banerjee (CEO of Reliance Cement), Maurizio Canepelle (MD of Zuari / Italcementi India), Oliver Mahon (Country head for CRH India), Suman Mukherjee (MD of Cimpor India), and Martin Gierse (President of KHD India).

The panels, moderated by Mr. Madeira from the CW Group, focused on the central theme of the conference, that of “The Shift from West to East in Global Cement: the Big Picture” as well as priorities for the different companies and the industry as a whole.

Mr. Gerald Longo, Vice President at GMI GLobal added: “GMI wishes to particularly note the sponsors of the CBI India 2012 that helped make the meeting a successful reality. Delegates found not only the representation and ability

Many who enjoyed a platform of relevant industry topics and the opportunity to connect and network with others within the cement community lauded the conference as a great success. JeanMichel Allard, retired member of the board and deputy CEO of France-based Vicat, summed up the event best when he addressed the attendees stating, “I am proud to be here at the first Cement Business and Industry Conference; ten years from now, we shall all look upon this day and remember its significance.” BMWeek BMWeek BMWeek

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For further contact: Gerald Longo Vice President, GMI Global +1-203-516-7424 gl@gmiforum.com

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Sponsors Contribute to Event’s Success

ENDORSEMENTS

PLATINUM SPONSORS

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CEMENT & CONSTRUCTION MATERIALS

GOLD SPONSORS

GMI Global would like to thank their corporate sponsors for their support of the Cement Business & Industry (CBI) India 2012 event, that took place October 10 and 11 at the Leela Hotel in Mumbai, India. The support of the sponsors demonstrated the strong commitment to the Indian cement industry and contributed to the event’s success.

Special support for the event was provided by a set of three organizations that showed a particularly high level of focus on the Indian cement sector.

These included the platinum-level sponsor India Cement and Construction Magazine (ICCM) and gold-level sponsors FLSmidth and SKF. Mr. Gerald Longo, Vice President of GMI Global, said: “The exciting Indian cement market requires a high level of focus and attention. Our sponsors, in particular at the Platinum and Gold levels, exemplify a strong dedication to this market and we were very excited to count on their support."

Additionally, several companies played an integral role through silver-level sponsorships, including Loesche, SLV Cement, Grace, the Crescent Group, Magnesita, Promac and J.K. Sons Engineers.

Mr. Andre Cholewinski, GMI’s on-site event director, praised the sponsors saying: “Putting together an international conference of this caliber involves a tremendous amount of work.

GMI Global greatly appreciates the support of our generous sponsors and sincerely thanks all those who provided help and support.”

Sponsors were provided a forum to present their company’s product in the exhibition hall, which was also included notable companies like Mondi, Somi Conveyor Beltings, Golder Associates and Rexnord.

Several sponsors also conducted specialized presentations on some of the conference’s relevant themes. Plans are being finalized for CBI India 2013 – you will not want to miss participating in what will be another exciting venue! BMWeek CemWeek BMWeek BMWeek

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EXHIBITORS

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COUNTRY

FOCUS

Spain's Cement Plants

Spain:

Cement market SuffoCated by reCeSSion Both production and consumption dropped sharply this year in the Spanish cement market. The general economic picture is to blame, analysts say, with Spain facing its fifth year of recession.

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These figures, which are even worse than the poor results recorded in 2011, can be blamed on the general situation of the Spanish economy, which continues to struggle with unemployment around 25 percent, a huge public debt, and protests at austerity measures imposed by the government. construction market suffers Construction in Spain is forecast to struggle until at least 2014 and may fall 21 percent this year. According to recent reports, the industry will contract eight percent in 2013. The main reasons for the drop are the recession, threats on the euro and the refinancing of European

Spain: Cement Price Index Growth Rate

"Better, but still worse"

2011 CEOB (4Q2009=100)

he latest data shows that cement production in Spain fell in the first six months of 2012 to its lowest level in the last 48 years. According to data from the sector’s national association, Oficemen, Spain produced 60 percent less cement in the first half of the year compared with the same period of the previous year. Consumption also fell in the first half of the year, by 34.7 percent to 7.2 million tons. Analysts expect a 25 percent drop of demand for the whole year.

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banks. All sectors—including real estate, housing and infrastructure—are negatively affected.

2014 is the anticipated year for the start of sector recovery, although the construction market will continue to fall by 2.1 percent at that point. Indeed, when talking about Spanish construction in the coming years, the sector is hard-pressed

to find arguments that the market could grow.

60 Percent underutilized Currently, Spain’s cement sector is composed of around 500 companies and an estimated 35,000 workers.

However, the sector continues to suffer following the effects of the global economic crisis.

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COUNTRY FOCUS An important detail is that more than half of the country’s 35 cement plants are currently operating below their installed capacity, a trend that is seen as worsening

by Spain’s Oficemen association. It says 60 percent of the plants are underutilized, reflecting a continued fall in demand.

In the years preceding the crisis, Spain was the fifth largest producer of cement “and in five years it has gone to number 22,” said Juan Bejar, the president of Oficemen. cement consumPtion Plummets For an even better picture of the devastating effects that the economic crisis had on the Spanish cement market, look to the average daily consumption of cement. In May 2012, average daily consumption stood at 57,594 tons a day, a third of the value consumed in 2008 when the crisis began. Moreover, cement consumption dropped from 56 mtpy in 2007 to 20.2 mtpy in 2011.

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SpaniSh cement Sector 2012 declineS (TONS)

June 2012 June 2011 Variation % cement Production

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1.96

-24.7

domestic consumPtion

1.21

1.87

-35.1

Jan-Jun 2012

Jan-Jun 2011

Variation %

cement Production

8.55

11.88

-28

domestic consumPtion

7.20

11.03

-34.7

Source: Oficemen, CW Group analysis

Confronted with cement market numbers for 1Q 2012, Oficemen commented: “With cement consumption reduction of 31.3 percent with respect to the same period of 2011, the sector has entered in a second recession, probably worse than the previous one, with fall rates without precedents in Spain.”

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Per capita cement consumption has backed down to 1966 levels. “Due to the almost total paralysis of construction and public works, it will be more decreased due to the applied cuts in the general budgets,” Oficemen said.

Big Players hit hard Holcim, one of the largest cement companies active in Spain, reacted to the crisis by launching a restructuring plan to cut 373 jobs in Spain, or 35 percent of its staff in the country. At the end of May, Holcim announced a four step restructuring strategy that includes unifying its business operations under a single management, reducing its administrative functions and centralizing them in Madrid, reducing the cement production and scaling down development in other lines of construction materials.

Holcim also said it would shutter two kilns at its Yeles Plant in Toledo and the entire Lorca Plant in Murcia.

Lafarge, another big player on the Spanish cement market, has reported that its net profit fell in the first half of 2012 due to troubles in its European markets, mainly in central and eastern Europe, where the construction industry slumped. However, the company quoted Spain as being responsible for one of the largest drops of its businesses in Europe.

In Western Europe, Lafarge’s volumes decreased by 11 percent to 8.3 million tons, and sales decreased by ten percent to EUR 1.62 billion. Sales decreased six to seven percent in France and the UK, where declines were blamed on adverse weather and a slowdown in advance of the London 2012 Olympic Games, and by a huge 28 to 30 percent in Spain and Greece, another European country severely hit by the recession and austerity measures.

Spain’s Cementos Portland announced it will consider idling at least three of its eight plants as part of a restructuring effort and firing more than 500 workers, a sixth of its workforce in Spain. The company says its losses widened in the first half of

the year, reaching EUR 48.6 million due to the collapse of cement consumption and the impact of restructuring of the group.

The restructuring plan provides staffing adjustments both at plants and in the areas of business and corporate structure,

The sector is hard-pressed to find arguments that the market could grow

depending on needs and production forecasts. These adjustments would be in addition to the partial closure of the Cementos Portland plant Vallcarca (Barcelona) for ten months/year. The plan also aims to increase revenue, reduce costs and adopt the group’s ability to market conditions to ensure its viability, the company said.

Another company facing problems is Cementos Molins, whose corporate income in Spain fell by 13.5 percent in the first half of the year, with the company stating it will continue to blame the sharp decline in demand. The group saw a 14 percent rise of its revenues, but the result was based on its international operations.

ProBlems Beyond the economy As if economic problems were not enough, the Spanish market is also affected by investigations of the competition authority CNC. The CNC announced in June that it has fined Cementos Portland EUR 1.28 million for submitting incomplete information to the authority. One month earlier, the CNC had said that Cementos Portland was under investigation for allegedly providing incorrect information about revenues, volume of products and corporate structure.

This is not the first fine for Cementos Portland, which in January 2012 had to pay EUR 5.72 million for participating in a concrete price fixing cartel.

OCTOBER / NOVEMBER APRIL / MAY 2012

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COUNTRY FOCUS What folloWs for cement sector Estimates for the whole of FY2012 are not bright. Consumption could be around 15 million tons, representing a fall of 73 percent with respect to the historical peak of 56 million tons in 2007.

Spain is, however, looking with hope toward the saving measures that could come from Brussels, the European Union’s headquarters. European Commission Vice President Antonio Tajani recently promised that, after the summer, a series of measures to boost the competitiveness of the European construction sector will be taken as a way to overcome the continent’s long-lasting economic crisis.

The CEO of the Spanish national cement association Oficemen, Aniceto Zaragoza, reacted favorably to the EU’s promises and criticized Spain’s public policies, which lately are leaving public investment aside. “In our country, the different public administrations are trying to contain the deficit at the expense of investments in public works with the negative consequences this has on economic activity, competitiveness of enterprises and employment,” Zaragoza commented.

The public sector is especially important for the cement market, since the bulk of cement demand—51 percent of gray cement in Spain during the first quarter—went to government infrastructure projects. Non-residential building accounted for 29 percent, while residential building was set at 20 percent. In the same period last year, the proportion of public works in the cement market was even higher at 64 percent.

As indicated from the EU, there is still a path for construction related to the rehabilitation of buildings and infrastructure work, Zaragoza added.

“In Spain I would focus on the future hydraulic plan, the railroad, especially in the field of transport of goods and commuter and road maintenance,” he concluded. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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FOCUS

energy CoStS Hurting energy intenSive induStrieS A report commissioned by the UK government confirmed that European climate change policies place the UK cement industry at a competitive disadvantage, leading to a swift response by the Mineral Products Association calling for a government plan to aid the industry. report published in July by the UK Department for Business, Innovation and Skills shows that the UK cement industry is significantly disadvantaged by the cost of energy and climate change policies compared to its main European and global competitors.

Tthe Mineral Products Association (MPA)—the UK trade association for the aggregates, asphalt, cement, concrete, dimension stone, lime, mortar and silica sand industries—has responded

12 20 www.cemweek.com

by saying that the new data confirms what they have been telling the British government for the past year.

“While accepting that there is a need to manage our response to climate change, our members have been telling us for some time that they have been struggling with the cumulative burden of rising electricity costs and ‘green taxes’ designed to accomplish this,” said Nigel Jackson, Chief Executive MPA. “In turn we have conveyed these messages to Government

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in the strongest possible terms. Now its own commissioned work backs this up.”

The MPA has been lobbying the government on behalf of the cement industry, indicating that because cement is an internationally traded commodity, if production costs outweigh import costs then the UK is threatening “a strategic indigenous manufacturing industry for no environmental gain.” The Association’s concern is that energy costs and the cost of EU climate change taxes and other

policies could ultimately risk the security of the domestic supply, which would in turn impact the UK’s £120 billion construction industry.

The government took a first step in alleviating some of the financial burden in its 2011 Autumn Statement by announcing £250 million to compensate some energy-intensive industries against electricity costs. However, the cement industry will not qualify for a share of the first £110 million because the EU has ruled against such support for the sector, in relation to indirect costs associated with the EU Emissions Trading Scheme.

The government is currently collecting data to help shape its proposals for the remaining support.

According to the MPA, the July report— entitled “An International Comparison of Energy and Climate Change Policies Impacting Energy Intensive Industries in Selected Countries”- shows that the UK cement industry must receive some help if it is to survive to supply the UK’s lowcarbon economy.

“The Government now have the evidence to corroborate the industry evidence,” said Jackson, “it is time for them to respond and take the action we have been urging them to take for so long and to come forward with their long awaited Energy Intensive Industries Strategy." BMWeek BMWeek BMWeek

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5

0

Jan 09 June 09

July 09 Dec 09 EU 27 Median

Jan 10 June 10

July 10 Dec 10

Jan 11 June 11

United Kingdom

July 11 Dec 11

EU 15 Median

900

450

100 0 Jul-10

Sep-10 Nov-10

Jan-11

Mar-11 May-11

Domestic Cement Sales CemWeek CemWeek CemWeek

CW Group CW Group CW Group

Coal Week Coal Week Coal Week

Jul-11

Sep-11

Nov-11

Jan-12 Mar-12 May-12

Cement Production Source: Government, CW Group Analysis

/ MAY 2012 OCTOBER / APRIL NOVEMBER

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UPDATE

ALGERIAN CEMENT MARKET ON THE RISE BUT CHALLENGES ABOUND

On the back of a consistent construction spending increase, demand for cement shot has shot up year after year. However, challenges for the local construction materials industry, and the cement sector specifically have arisen with regard to supply ability and quality assurance.

22

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ivil uprisings in Tunisia, Egypt and Libya spawned waves of protests in Algeria last year. Civil unrest led the government to lift the country’s 19 yearold state of emergency and to promise additional economic stimulus and human development initiatives to aid the country’s residents.

In recent years, Algeria has engaged in a massive infrastructure and housing construction program geared toward changing its economy from an oil and gas based one to a more diversified economy.

On the back of a consistent construction spending increase, demand for cement shot has shot up year after year.

However, this situation raised challenges for the local construction materials industry in terms of supply ability and quality assurance. Cement supply lagged behind demand as cement capacity increased only by 28 percent between 2005 and 2011, with the highest demandsupply gaps registered in 2010. Being a state-driven industry, controlled cement imports are used to fill the gap in demand when this situation occurs.

CEMENT MARKET The Algerian cement market is on the rise. The increasing cement consumption

Algiers

is fueled mainly by public investments that offer a positive perspective for the cement market going further as well. On the negative side, the delays in cement capacity expansion and limitedly imposed imports maintained the undersupplied status of the market with serious delays in major construction projects.

Since 2005, cement consumption in Algeria has grown by almost 45 percent.

The Algerian cement market consumed more than 19.4 million tons of cement during 2011, only 0.1 million tons more than the previous year. Cement consumption grew on a gradual but steady course with a compounded annual growth rate of 6.3 percent from 2005 to 2011. Algerian cement companies operate at elevated utilization rates, exceeding 93 percent in 2011 when cement production topped 18.2 million tons.

Cement capacity sat at 19.6 million tons in 2011, but is set to increase by 60.9 percent until the end of 2015 thanks to planned capacity expansion by stateowned Groupe Industriel des Ciments d’Algerie (GICA), Lafarge and Orascom, to name a few. By 2015, the Algerian cement market will slide into an oversupplied status given that total cement capacity (31.5 million tons) will exceed predicted cement consumption by more than seven million tons.

CHANGING OWNERSHIP At the level of cement companies and ownership structure, the market is filled with turmoil. The once stateowned cement market passed through a privatization stage that left the state with a divided and unsatisfactory market share.

In an effort to regain its momentum, the state unified its cement companies

CEMENT PRODUCTION CAPACITY (2005-2015E, mm tons)

Table available in the CemWeek Magazine Print Edition.

35.0

Baseline Capacity

New Capacity

www.cemweek.com/subscribe 17.5

0.0 2005

2006

2007

2008

2009

2010

2011

2012E

2013E

2012E

OCTOBER / NOVEMBER 2012

2015E

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UPDATE ALGERIAN CEMENT PRICES 60

Table available in the CemWeek Magazine Print Edition. www.cemweek.com/subscribe 30

250

0

%change

Ex-Factory Price (AD/50 kg bag)

500

0 2005

2006

and limited foreign ownership to 49 percent for future projects. However, high negotiation power coming from private companies and the already high market share of Lafarge – still the only foreign investor to hold full ownership on the market – limit the continuous nationalization efforts.

Fourteen cement units are currently operating within the Algerian borders.

Their total capacity was rated in the end of 2011 at more than 19.5 million tons.

Foreign companies have stakes in eight of the 14 plants. Three are fully controlled by foreign ownership, and five are a mix of state (65 percent) and foreign ownership (35 percent).

2007

2008

2009

2010

companies. The country is still plagued by speculative activities regarding cement prices. Even though the law limits the margins for retailers for a 50kg bag to AD 80 and for wholesalers at AD 60, the actual price used on the market is somewhere between AD 650 and AD 700.

OUTLOOK The massive public spending planned to continue during the current five-year plan (2010-2014) and in the coming one

2011

2012

(2015-2019) are also a good indication for the cement consumption evolution. On an overall analysis, the compound annual growth rate of cement consumption is estimated at 5.8 percent for the 2011-2015 percent, concluding with 24.3 million tons cement consumption by the end of 2015. By then the cement consumption per capita would have increased by more than 56 percent, compared to the approximate 400 kg per inhabitant registered in 2005. BMWeek CemWeek CW Group BMWeek BMWeek

CemWeek CemWeek

CEMENT PRICES Since 2005, the price of building materials in Algeria has increased by 120 percent. In just three years, the price of the two most used construction materials, cement and rebar, has more than doubled in market price. Insufficient local production is the main driver in cement price increases.

The rapid increase in price has been mostly due to speculation and the abuse of the oligopoly power of state-owned

24

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The 55-page market report on the Algerian cement market is available from the CW Group. Contact the team at sales@cwgrp.com for further information).

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TECHNICAL ANALYSIS

cw group research:

The MediterRanean Basin

a changing landscape in turbulent times The Mediterranean Basin is currently under the influence of two major trading forces. On one side, the world’s major cement exporter, Turkey, is tackling a declining exporting volume courtesy of the shrinking import need from Syria and by the increased competition present on the Iraqi cement market where Iran is continuously increasing ground given its more competitive prices. On another end, Spain, Portugal, Greece and Italy are struggling to soften their tough domestic conditions by tapping into exporting activities.

26

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he pressure exerted by these main trading forces led to a clustering pattern revealed at the level of cement export FOB prices, which are reportedly inching closer to the Mediterranean average. The average export FOB price of the region for the first seven months of 2012 settled at US$64.5 per ton, 4.6 percent lower than the 2011 average for the respective time frame.

One of the countries that report a high export FOB price, Spain, registered the sharpest decline during the mentioned period, decreasing its price by 9.8 percent down to US$75.1 per ton. Italy reduced its price by only 2.6 percent, remaining the country with the highest export FOB price of the Mediterranean Basin.

On the back of the downward trend of cement exports, Turkey also decreased its export price by more than seven percent, making it the country with the lowest cement export FOB price of the region (US$58.3 per ton for January – July 2012). Portugal is the closest to the Mediterranean average, evolving also in a similar manner with a 4.9 percent decline for the period.

Greece is at the opposite end of the spectrum as the only major exporter in the region that increased prices in 2012.

The increase was rated at 12.7 percent for

the first seven months of the year, with one ton of cement exported at US$63.7 on average. Egypt and Jordan, the smallest exporters analyzed in this region are defined by a higher price volatility given their more reduced exporting scale.

The pressure is expected to intensify going forward, as traditional markets lose ground to tougher competition, as is the case of Turkey and the Iraqi market presence, or as some traditional net importing markets dry up. The latter refers mainly to Nigeria, which historically imported consistent volumes from several Mediterranean countries,

and has currently stopped imports, targeting instead to become a major exporting hub. As a consequence, the Mediterranean cement exporters are increasingly competing in the same cement markets, an example being Algeria, where Portugal, Spain, Greece, Italy and Turkey delivered in total over 1.2 million tons in 1H 2012.

Keep track of the Mediterranean Basin cement export FOB prices and gather insights on other regions and the global perspective on cement trade prices by subscribing to CW Group’s Global Cement Trade Price Report (GCTPR). BMWeek BMWeek BMWeek

Ce Ce Ce

MEDITERRANEAN BASIC TRADE PRICES (US$/TON) Italy

150

Greece Spain Portugal 90

Mediterranean Basin Average Turkey Egypt Jordan

Aug-12

Jul-12

Jun-12

May-12

Apr-12

Mar-12

Feb-12

Jan-12

Dec-11

Nov-11

Oct-11

Sep-11

Aug-11

Jul-11

Jun-11

May-11

Apr-11

Mar-11

Feb-11

Jan-11

30

Source: CW Group analysis; Note: Full data available in the CW Group's Trade Price Report (contact sales@cwgrp.com for any questions) OCTOBER / NOVEMBER 2012

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TECHNICAL

ANALYSIS

cw group research:

Global Prices at a Standstill

Global cement prices started 3Q 2012 on an upward trend that was fully reversed by the end of the quarter. reliminary price levels reported for 2012 initially revealed an uninterrupted series of monthly price increases for the first seven months of the year. After definitive numbers were integrated in the official retail cement price index calculated by CW Group as an integral part of the Global Cement Retail Price Report (GCRPR), the first signs of decline appeared.

softening the overall increase of the first quarter to 1.34 percent. A somewhat standstill May 2012 also assisted the second quarter index to settle at 1.1 percent increase. Preliminary prices published for 3Q 2012 reveal an overall constant evolution when compared to the second quarter of 2012, as the 0.3 percent increase of July was annulled by the following two months’ decreases.

The first decrease of the year was noted in February 2012 when the global price index declined by around 0.3 percent,

April 2012 still remains the month with the biggest hike of the year (0.97 percent increase), shortly followed by January

2012 index (0.94 percent increase). On an annual basis, the global cement prices increased by around 3.9 percent between October 2011 and September 2012.

When analyzed at country level, cement prices continue to paint a diverse landscape. Confronted with a glooming economical performance in the beginning of 2012 and a following declining trend in construction spending for the second quarter, Brazil reported lower prices in 1H 2012. Even though cement prices, expressed in USD per ton, started climbing

OCTOBER 2011 - SEPTEMBER 2012 GROWTH RATE (%)

Source: CW Group Research; Full data available in the CW Group's Retail Price Report (contact sales@cwgrp.com for any questions)

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Mexico

Malaysia

Japan

Indonesia

India

Hungary

Guatemala

Greece

Germany

France

Egypt

Czech Republic

Canada

Brazil

Dominican Republic

-15

Belgium

Australia*

25

MOM CEMENT PRICE COMPARATIVE SET METRICS (%)

1.0

0.0

-0.4

Sep-11

Oct-11

Nov-11

Dec-11

Jan-12

Feb-12

Mar-12

Apr-12

May-12

Jun-12

Jul-12

Aug-12

Sep-12

Oct-12

Source: CW Group Research; Full data available in the CW Group's Retail Price Report (contact sales@cwgrp.com for any questions)

2011 and the destruction of smuggling tunnels between Gaza and Rafah.

With the majority of the countries found on a rise in the last 12 months the declining trend registered in August and September 2012 is expected to be reversed once again in the coming months. The preliminary level of around 0.9 percent increase calculated for October 2012 is estimated to be softened but still to be maintained on a positive growth outcome when more static or declining markets are added to the index calculation. BMWeek CemWeek

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C C C

United States**

United Kingdom

United Arab Emirates

Ukraine

Turkey

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Tunisia

Thailand

Sweden

South Africa

Slovakia

On the opposite end, Egypt witnessed the highest increase with cement prices skyrocketing by 22.2 percent. Egyptian cement prices are also rated above international levels mainly due to the lack of supply-demand market regulations that cannot act as a correlation factor of cement prices. Stabilization in prices was noted in the third quarter of 2012 on the back of a decreasing demand versus

Singapore

Russia

Romania

Poland

Philippines

Pakistan?

Oman

Nicaragua

However, the country that reported the highest decline within the above mentioned period is Tunisia with a 13.2 percent downturn evolution. In the end of 2011 and the beginning of 2012, cement prices boomed in Tunisia due to an unexpected demand hike and increasing speculation activities. The increase in cement production capacity and control

measures imposed on pricing margins led to a consistent decrease in prices recorded in the first seven months of the year.

Serbia

in the months of July and August when analyzed from an annualized perspective, cement prices declined by around 10 percent between October 2011 and September 2012.

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REGIONAL REPORT: to restructure its business in Portugal.

The strategy of the administration led by Ricardo Lima has involved the replacement of management and directors of the cement group, and is now developing an exit plan for employees of five factories in Portugal. According to one report, the company's senior Portuguese management is being replaced by Brazilian managers, some of whom transferred from units of the Camargo Corrêa Group in Argentina.

EUROPE Now-insolvent British developer Novacem put its "carbon negative" cement technology up for sale and the rights have been sold to an unnamed Australian firm for a sum believed to be several hundred thousand pounds. The sum is still, however, a drop in the bucket in comparison to what investors and backers had pumped into the company – roughly £4-5 million.

Steel tycoon Lakshmi Mittal is reportedly interested in buying a string of cement plants and quarries put up for sale by Anglo American and Lafarge. The assets are being sold under orders from the Com-

petition Commission to offload them as a pre-condition for approving the merger of Tarmac, Anglo’s UK construction business and Lafarge’s UK operation.

According to the report, Mittal, whose wealth was estimated at £12.7 billion by this year’s Sunday Times Rich List, is bidding through one of his private ventures rather than through ArcelorMittal, the global steel giant he heads as chairman and chief executive.

Four months after Cimpor was taken over by the Brazilian group Camargo Corrêa, the company has already begun

According to data released from the industry group Oficement, Spanish cement consumption fell 34.6 percent in the first nine months of the year, reaching 10.60 million tons, ensuring that the sector was experiencing its worst crisis in history.

In September, the building sector just consumed one million tons of cement, a figure that shows a drop of 38 percent from a year earlier, just equaling the annual production capacity of one of the 35 cement factories existing in Spain today.

Greece is set to investigate alleged cartel-like behavior in the building materials industry. This is after a complaint from members of the Communist Party Karathanasopoulos alleging there is a concentration in production by three to four groups in each area of construction materials and the gradual formation of oligopolies as a possible cause of the price upswing. The Competition Commission notes that a thorough investigation is in order to analyze the relationship of prices along the chain of production, distribution and marketing to draw reliable conclusions.

The Czech Republic’s Cement Hranice reported profits rose last year due to higher export sales, up 14.5 percent YOY to 1.69 billion crowns, a net profit increase of ten percent. In Hungary, Holcim announced plans to idle its Labatlan unit by next year, as a construction slowdown cuts demand for its products. According to the company, the original plan was to wind down the 144 years-old plant by 2010, but its lifetime was extended by environmentfriendly investments of almost HUF 500 million to 2016. However, the downturn

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RUSSIA AND BALTIC REGION Holcim will invest EUR 350 million for the reconstruction and modernization of its existing plant. The Wolski plant modernization project includes the installation of a new production line for the "semi-dry" method of production capacity of 4,500 tons per day. Development and design documentation will be completed in 2013 and construction is expected to take two years.

in the plant, of which 26 percent belongs to the Kemerovo Holding Company Siberian Cement. An application for approval of the transaction was filed with the Federal Antimonopoly Service in March this year.

Ukraine says it has exported 83,676 tons of cement, or 1.9 percent of total production. According to recently released data, from January to June 2012, cement production declined by 0.6 percent com-

Belarus canceled an investment contract with Iran's Azarab Industries after the latter failed to fulfill its contractual obligations. The original investment project called for the building and operation of a cement mill in Vetka District, Gomel Oblast. The designed output capacity of the cement mill was estimated at one million tons of cement. The required capital investments were estimated to be at least US$200 million. However, the investor has failed to start working on the project.

regional report: europe, middle east, africa

of Hungary’s construction industry has now made closing unavoidable.

Production is on the rise for several Russian cement manufacturers. In the first nine months of this year, Belgorod Cement reported that its production rose 10.4 percent to 1.661 million tons. Siberian Cement production for the same period was 3.148 million tons of cement, which was 5.3 percent more than for the same period last year.

The Eurocement Group plans to build a new plant in Blagodarnenskogo district of the Stavropol Territory for an investment of 15 billion rubles. The plant's capacity will be 1.3 million tons of cement per year.

RATM Holding chief Eduard Taran said that the company has no plans to leave the cement business. A recent deal with a creditor bank to build a plant in Iskitim may have led to the change of heart. Previously, the company and Taran personally considered selling a 63 percent stake

pared to the same period last year. Clinker production in the Ukraine in the first half of the year fell by 7.1 percent.

SITA UK signed a three-year contract to supply 180,000 tons of SRF to Cemex in Latvia. According to one report, the fuel will be produced by processing residual commercial waste in a new, purpose-built facility at Ridham Docks in Kent. Once processed, the SRF material will be used as a fossil-fuel replacement at Cemex's cement production facility in Broceni, southern Latvia.

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

OVERVIEW

Odra Cement Opole, Poland

Greenfield. Odra Cement placed a mill order for its plant in Opole, Poland, with a capacity of 750,000 ton of cement and 360,000 ton of clinker per year.

Ruska kompanija Pljevlja municipality, Montenegro

Greenfield. Ruska Kompanija will invest EUR 210 million in a cement plant in Pljevlja municipality in northern Montenegro. With a capacity 1.2 million tons of cement a year, the plant will become operational starting next year.

Government Venture Chechin Republic

Greenfield. A new cement plant will be built in the Chechen Republic, with a plant capacity of 3.1 million tons per year.

Babinov Cement Russia

Greenfield. Russia based Babinov Cement expects to complete construction of a 2.15 mm ton plant by 2014.

Belarusian Cement Plant Belarus

Expansion. The OJSC "Belarusian Cement Plant “announced that it has invested in the www.cemweek.com/subscribe construction of a new production line. The project is expected to cost US$422.9 million.

The new line will boost the company’s cement output from 1.8 million tons to 2.95 million tons per year.

Table available in the CemWeek Magazine Print Edition.

MIDDLE EAST GCC countries reported higher profits for its cement makers in the first six months of the year, driven by higher demand. According to a report by the Global Investment House, the GCC cement sector grew by over 17 percent in the six months of 2012, mainly due to the significant growth of Saudi Arabia (over 20%). Oman reported a growth of 13.8 percent, while Qatar and the UAE reported roughly the same growth of 11.5 percent.

Meanwhile, cement companies in the United Arab Emirates registered the highest income growth, reporting an increase of 175 percent. Net profit of the GCC during Q2, 2012 remained 15.8 percent less on a quarterly basis while it was up by 4.8 percent on a yearly basis. For its part, Saudi Arabia witnessed an increase of 21 percent in the sales thanks to a 12.6 percent increase in cement demand and an improvement in cement prices by over 3 percent.

The Dubai Group is looking to exit its joint venture with Lafarge, Lafarge Emirates Cement by unloading its 45 percent

OCTOBER / NOVEMBER 2012

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regional report: europe, middle east, africa

stake in the firm. The state investment vehicle wants to sell assets to repay its US$10 billion debt. Lafarge Emirates Cement is restructuring and needs additional capital to help support the business, something Dubai Group is unable to provide due to its debts. According to reports, sources declined to put a value on the stake sale. The sale has generated interest from regional cement makers which are trying to cash in on a gradual recovery in the United Arab Emirates' construction sector.

Media outlets are reporting that Tonya plans to establish a cement factory in the town of Trabzon, pending the approval of an Environmental Impact Assessment (EIA). Once completed, the plant will produce 200,000 tons of clinker and clinker mixed with gypsum and pozzolanic materials after grinding, and will produce 1.5 million tons of cement annually.

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

OVERVIEW

Qassim Cement Company Saudi Arabia

Greenfield. Qassim Cement Company confirmed the completion of a 5,500 ton per day production line.

Bagel Cement plant Yemen

Greenfield. The Yemeni government is in talks with contractors for the resumption of construction work at the Bagel Cement plant, which is 60% complete. Plant has a capacity of 850,000 tons.

Government Venture Benvide Province, Iran

Greenfield. Iran has opened a new production that can produce 12,000 tons of colored cement.

The government reports spending 40 billion rials to build the plant in the province of Benvide. The government said that the first phase of the line will run at 50% of its designed capacity. The plant plans to produce a mixture of cement and cement the 56 different colors and shades.

Unknown Provinces of Basra and Muthann, Iraq

Greenfield. The National Investment Commission has received offers from a Korean company to build cement plants in the provinces of Basra and Muthanna. The company plans to set up operations in the Iraqi provinces of Basra, Muthanna, with a production capacity of up to one million tons of cement per year.

Boem Steel Industry (proposed) Douala area, Cameroon

Greenfield. A local businessman has proposed to build a cement plant in Cameroon's Douala area. Initiative spearheaded by Emmanuel Bouopda, CEO Pdg d'Afrique construction.

National Cement Ethiopia

Greenfield. New 1.8 biillion birr production line will be operational by October 2012. Trials currently underway.

HeidelbergCement Tabligbo, Togo

Greenfield. Manufacturer is constructing a new US$ 250 million clinker plant with an annual capacity of 1.5 million tons. Company is building a new cement grinding facility with a capacity of 200,000 tonnes in Dapaong.

Commissioning of the two new plants is scheduled for 2015.

KC Energy Northern Sinai, Egypt

Greenfield. KC Energy will spend US$500 million for two projects in Egypt, including the construction of a cement factory and the second power plant in northern Sinai

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The ongoing crisis in Syria is taking its toll on cement makers who are now suffering from financing woes and sanctions. The reports come even as local production continues to meet demand, which has sagged under the pressure of the armed conflict going on in the country.

fleet and equipment that were stolen by armed gangs in some companies, breaks in the power grid have also hampered operations.

daily consumption to 8,000 tons per day during the eight months of this year compared with 10,000 tons in the same period of last year.

The imposition of sanctions had affected non-secure spare parts for companies, and there have been difficulties in the transfer of staff who are trying to make every effort to reach their places of work to secure the functioning of the production process. In addition to the existence of material damage in the transport

The President of the Cement Traders Association, Mansour al-Banna, says Jordanian purchases of cement during the first eight months of the current year were at 157 million dinars, compared to last year's 180 million, a decrease of 12.7 percent. Banna pointed out that the value of purchases of cement fell amid reduced

Banna explained that the abolition of exemptions for the real estate sector contributed to a decline on the sector movement compared to the period before the decision. In possible related news, Jordan's Ministry of Industry and Trade will stop issuing licenses for new cement plants in the Kingdom until 2014 because of insufficient production of existing plants to the market. The exception will be for request to establish a factory that is committed to exporting 75 percent of its production abroad.

In Iraq, Southern Cement Company has told the Ministry of Industry and Minerals of the need to activate the laws protecting national product, due to a drop in sales of company plants of ordinary cement, while imported cement market recovers. The company says the lack of demand for the company's products

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Tanzania Cement plant coutesy of HeidelbergCement

The Iraqi National Investment Commission reported it has received offers from a Korean-based company to build cement plants in the provinces of Basra and Muthanna. The Authority said that the Korean company plans to set up cement units in the Iraqi provinces with a production capacity of up to one million tons of cement per year.

regional report: europe, middle east, africa

caused the accumulation of more than 50,000 tons of cement in its stores, which reflected on the economic situation of the company.

Iran's cement production increased by 4.1 percent to 38.8 million tons in the first six months of the current Iranian calendar year, and according to government estimates is projected to produce 75 million tons of cement by the end of the current Iranian year.

AFRICA Egypt’s government is seeking to lift Egypt's cement production by 22 million tons per annum by 2015 from 50 million tons today. The plan is to increase production to 80 million tons per annum by 2020. To that end, officials are starting to dole out a limited supply of new cement licenses.

Egypt is preparing to bid out the second of at least seven new cement licenses.

This one will be for the South Sinai. One other license has been already awarded for the construction of a cement factory in New Valley.

The South Sinai plant, to be built in Abu Zenima, will have an initial US$450 million in projected investments. The Industrial Redevelopment Authority (IDA) chose the South Sinai because no cement plants currently exist there and the area is rich in the raw materials needed for cement making.

Egyptian cement plants are now facing increased offline situations after the government reduced the amount of gas and fuel supplies by 50 percent. Manufacturers report that this has resulted in a halt

some production lines, and is making it increasingly difficult as the national gas supplier raised prices from three dollars to four dollars per gallon.

Roughly 200,000 tons of cement were injected in September into the Bechar, Algerian market to fill the gap. The shortage is likely to shrink, as the region is to benefit from the inclusion of a cement plant with a production capacity of over one million tons, expected to be completed by the Industry Grouping Cement Algeria (IPAC) Ben-Zireg.

Cameroon's cement supply gap is seen rising to 6.5 million tons per year as the

government ramps up for new infrastructure projects. To meet the growing demand for cement in the Cameroon market, the main cement firm, Cameroon Cement Company (CIMENCAM) is building a new plant, spending 500 billion CFA francs. The plant will have an annual output of 600,000 tons, and will be commissioned in September 2014, increasing the firm's production to 2.1 million tons.

In May 2012, Morocco Addoha Group also announced plans to invest in Cameroon Africa Cement Company (CIMAF) and the construction of a cement plant in Douala, the investment of 200 billion CFA francs, the report said.

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regional report: europe, middle east, africa Meanwhile, Nigeria's Dangote is building a plant in Dua bin Laden, designed with an annual production capacity of 1.5 million tons of cement, and within two years double annual cement production reached three million tons. Due to the problem of land disputes, the project has been hit by delays.

For Nigeria itself, self-sufficiency in cement has been achieved, as producers have expanded output and lowered prices. According to the Chairman of the Cement Manufacturing Association of Nigeria (CMAN), Joseph Makoju, the local cement industry was proving successful in the market at a time when the manufacturing sector was shrinking and attributed the slide in the price of cement to surplus in the market.

Per capita consumption in the East African region remains low according to one analyst. In the past five years, driven by infrastructure construction and real estate development, Kenya and Tanzania, the average annual cement consumption,

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increased by 17 percent and 12 percent, respectively. Nevertheless, in 2011, Kenya, Tanzania and Ethiopia, the three countries' per capita cement consumption is only 60 kg, lower than the African average of 150 kg and the world average of 510 kg per person level. Meanwhile, Kenya's per capita cement consumption is 79 kg, the highest for East Africa.

In Tanzania, Dangote is confident the country’s current cement shortage will shrink once its new plant comes online.

Senior General Manager for Dangote Industries Tanzania, Mr. Dilip Musale, said recently that the factory, which is expected to be commissioned in 36 months time, will produce 6,000 tons of cement per day. The firm plans to invest US$535 million in the factory to be situated at Mikindani area, about 24 kilometers from Mtwara town.

Athi River Mining (ARM), which is putting in the largest single line cement factory in East and Central Africa – 1.2 MTPA – expects the Tanga region-based

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plant to come online next year. The plant will put ARM in a position where it will easily access the Southern Africa Development Community (SADC) markets of Zimbabwe, Namibia and Mozambique and the Democratic republic of Congo.

Sephaku Cement has secured R 1.95 billion in fresh funding for its expansion plans in South Africa. The firm says it signed the ten-year funding deal with The Standard Bank of South Africa Limited and Nedbank Limited. The deal will allow Sephaku Cement to develop a production facility in the North West and a grinding facility in Mpumalanga.

AfriSam is also building a new cement plant in Coega, signing a lease agreement worth R634 million to establish a Greenfield milling and blending plant in Zone 5 of the Coega Industrial Development Zone (IDZ). The new facility will produce 740,000 tons of cementitious products a year to supplement its existing supply into the Eastern Cape market. BMWeek BMWeek BMWeek

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A resurgence in cement demand in China is in danger of being cut short in the next few months because of the onset of the winter season. According to an article by Eliza Liu, prices of cement stocks "could correct up to 20 percent during this time.

And given that the sector rose 20-30 percent in September alone, I would not be surprised to see a frenzy of profit taking in the weeks ahead," she writes.

According to her report, cement prices began to pick up in early September. By mid-October, the national average cement price had risen 4.7 percent compared with late August. China's southern provinces, mainly Guangdong and Guangxi, saw the biggest advances, with price hikes of 50-80 Yuan per ton in September driven by a sequential recovery in demand and a regional clinker supply shortage due to the closure of Anhui Conch's four clinker production lines following a mining accident in August.

Currently, the cement market in Vietnam is suffering from an oversupply situation.

Many cement plants have shut down, unable to pay their debts. Others are finding it hard to stay afloat amid a weak demand environment, surging costs, and shrinking margins. Cement plants Dong Peng (Lang Son) by the Construction Engineering Corporation (COMA), Industrial Machinery and Equipment Corporation (MIE) and Lang Son Cement Company capital contribution are just some of the firms facing financial trouble. Yet, against this backdrop, six new cement plants with a total capacity of 6.72 million tons will come online in 2013.

Indonesia's state-owned Gresik wants to hike cement production and its pres-

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Volumes in the third quarter stood at 4.4 million metric tons, from 3.89 million tons in the same period in 2011. This brought total volumes as of September to 13.9 million tons against 11.6 million tons in 2011 or 20 percent increase versus 2011.

ence in the Asian region. It is expected to become the largest cement producer in Southeast Asia next year following the opening of two new cement plants, Tuban IV in East Java and Tonasa V in South Sulawesi. Production is expected to reach 26 million tons per year.

Australia has issued 6.37 million free carbon units to companies seeking compensation from the country's CO2 pricing mechanisms. This is the first ever emission rights to be issued under Australia's carbon scheme. The units were issued via Australia's emissions unit registry to alumina refiner, Alcoa and ammonia and

Gresik has indicated that it would continue to expand through next year by beginning construction on two more plants, about three million tons of each, in Padang, West Sumatra and Rembang, Central Java.

Philippine cement sales are expected to record robust gains this year on the back of increased demand from both private and public sectors. Ernesto Ordonez, president of the Cement Manufacturers Association of the Philippines, said cement sales grew 14 percent in the third quarter and 20 percent year-to-date.

Ordonez reports these are record high growth rates given the past few years of sales data that show annual growth of between three and four percent since 1997. Growth is being driven by strong public infrastructure spending, up from a low level last year.

ammonium nitrate producer Queensland Nitrates, according to the Clean Energy Regulator, the government body administering the scheme. BMWeek CemWeek CW Group BMWeek BMWeek

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OVERVIEW

Semen Gresik Borneo, Indonesia

Greenfield. Manufacturer will build a cement plant in Central Kalimantan with a total investment of US$350 million.

Cemex APO Plant, Phillipines

Expansion. Cemex will raise capacity at the APO plant in the Philippines by 1.5 M metric tons per year. The plant will be operation in the first quarter of 2014 and cost approximately US$65 million.

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BMA Capital estimates that gross margins for cement manufacturers increased between five and nine percent due to falling coal prices, which translated into an average profitability increase of over 152 percent for 2012. For the coming year, the investment bank estimates an improvement in the gross margins by up to three percent.

In India, Ireland's CRH has ended negotiations for the possible acquisition of an equity stake in Jaypee Cement. The assets being discussed included a 3.6 million ton per year clinker plant in Klutch, western Gujarat, which sits with a 2.4 million ton per year grinding plant. According to reports, the company confirmed in August that negotiations were underway over the purchase, but has now said the two companies have been unable to agree terms.

Lower capacity utilization coupled with sagging demand and weak exports are seen undermining the cement industry in Pakistan. The cement industry is reportedly operating at 68.86 percent of its installed capacity, and many have been worried that the stagnant domestic demand seen during the first three months of this fiscal year and continuously declining exports has hurt the viability of the industry.

The All Pakistan Cement Manufacturers Association said during the first quarter of this fiscal year, the industry dispatched only 7,707,399 tons of cement, which was

nominally higher than the total cement dispatches of 7,496,470 tons during the corresponding quarter of last year. On the demand side, domestic dispatches increased during the quarter by 5.30 percent but the decline in exports by 2.68 percent reduced the overall gain in sales to 2.81 percent.

One favorable factor that may lend rise to optimism are falling coal prices. A report compiled by BMA Capital, benchmarking Richards Bay coal prices, show prices are down by almost 20 percent ($85/ton) from their average in the previous fiscal year.

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

OVERVIEW

Reliance Cement Maharashtra, IndIa

Greenfield. Reliance Cement has started production at its new grinding unit in Maharastra. While two projects of 5 MTPA each in Madhya Pradesh and Maharashtra are currently under execution, several others are under various stages of development.

Shun Shing Group Khulna, Bangladesh

Greenfield. Hong-Kong's Shun Shing Group invested in another cement unit in Khulna to increase its country production capacity to 2.9 million MTPA by 2013.

The Roofers Group Jhargram, India

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www.cemweek.com/subscribe Rennovation. The Roofers Group has performed a Rs 100 crore rennovation to plant in Jhargram.

The current plant has been renovated by the Roofers Group, and is not a new factory. Nabab India Pvt constructed the plant at Khasjangal in 2006, and the Roofers Group took over the project.

regional report: asia pacific & south asia

REGIONAL REPORT:

India's Competition Appellate Tribunal (COMPAT) has asked the CCI to give fresh copies of its order levying over Rs 6,300 crore in penalties on 11 cement companies for cartelization.

The tribunal wants the CCI to provide them with complete details on production, pricing and sales. This is after the CCI had not disclosed various facts about matters like production, dispatches and pricing. According to the report, the companies, which include UltraTech and ACC, have been asked to file their amended petitions with the tribunal within two weeks of getting the fresh order.

Sri Lanka wants cement production to increase in the country, as demand for the material is on the rise. The government says the pace of overall infrastructure development in the country is on the rise. In 2011 the production of cement in the country had been 2,446,198 million tons valued at Rs 18,920 million and the country imported 2,576,495 million tons of cement at a cost of Rs 36,828 million.

Cement production met only 48 percent of the country's requirement last year, with consumption sitting at 5.02 million tons, an increase of 4.82 percent over the previous year. BMWeek CemWeek CW Group BMWeek BMWeek

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REGIONAL REPORT: civil penalty to settle alleged violations of the federal Clean Air Act for 2007 – 2008.

Citations were related to a wet-process kiln shutdown in 2008.

Enersource and Holcim inked a deal to secure a financial incentive from the Ontario Power Authority for US$6.37 million to support the development and construction of a surplus heat recovery project at their Mississauga cement plant.

The project will capture surplus heat produced during the manufacturing of cement.

Eagle Creek, wanting to increase its capacity by 60 percent, announced that it is acquiring Lafarge’s Sugar Creek operations in Missouri and Oklahoma for

US$446 million. Lafarge wants to focus on its operations in the Mississippi River region.

California regulators are putting the screws to LeHigh Permanente’s Cupertino plant. The company must cut mercury emissions by 90 percent by 2013.

Historically, the plant has trended around 50 percent.

Continental Cement announced it is implementing a US$300,000 pollution control plan. It will also pay a US$22,025

The Mexican cement industry signed a letter of intent with the Ministry of Environment and Natural Resources to jointly implement actions to mitigate global warming. The co-processing of waste materials and manufacturing of green cement are expected to contribute to reducing greenhouse gas emissions.

There is a new cement player on the horizon in Mexico. Eduardo Musalem, Elementia CEO, announced the creation of the company Cementos Fortaleza. The company’s new plant, to be located in the state of Hidalgo, is initially expected to start producing one million tons of cement in 2013. The plant’s output is projected to cover roughly three percent of the demand in the following states of Mexico: Puebla, Querétaro, Morelos, Tlaxcala, Guanajuato, Michoacan, San Luis Potosí, Guerrero and Mexico City.

Mexican-based Cemex launched a US$1.5 million push to issue a ten-year note in October. The initial offering met with heavy demand, sending shares to a 20-month high. According to Reuters, demand for the notes approached US$5 billion before books closed.

In the Dominican Republic, President of Cementos Cibao, Denisse Rodriguez, believes that bank interest rates are at a good level to boost the construction sector and that the cement sector is in a good position to support the government’s goal of boosting the country's economy. The Dominican Republic is also drawing the attention of Columbian-based Argos, which is readying expansion efforts into not just the Dominican Republic, but also Haiti. With a US$10 million plan to invest in the region, Panama rounds off the list with regard to countries where Argos' capacity is to be expanded.

Argos is also planning to expand its operations at home, spending US$93 million to expand three of its production units

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COMPANY (LOCATION)

OVERVIEW

Cementos Argos Colombia

Expansion. The board of Cementos Argos approved an investment up to 167 bn pesos for the increase in production capacity in the country's Midwest. Investment in the plant will be focused on Rioclaro and additionally includes two further improvements in plants (Nare and Cairo). Expansion will increase production capacity by 900,000 tons annually

Andean Cement plant Trujillo state, Venezuela

Expansion. Venezuela and the Chinese company Beijing Catic signed an agreement to expand the production from 750,000 tons to 1.2 million tons per year.

Soboce Santa Cruz, Bolivia

Greenfield. The majority owner of Soboce, Samuel Doria Medina announced the undertaking of a new cement factory in Santa Cruz. The factory will have a production capacity of 600,000 metric tons (MT) of clinker and 750,000 tons of cement.

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Cement consumption in the second quarter in many major Latin American economies closely reflected the upturn in the current economic cycle. According to the report Infrastructure, Water and Waste Stats, countries like Peru, Bolivia and Chile stood out for their dynamism in a context of overall economic growth.

regional report: americas

and its concrete sales jump 14 percent in comparison to last year.

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Peru’s total quarterly consumption was 2.235 million tons of consumption, representing a notable rise of 18.3 percent YOY. The Peruvian cement industry is undergoing some consolidation because of the rapid growth, as noted by the recent merger of Andean Cement Cementos Lima and Lima to create the largest player in the market Andean Union Cement. The country is projected to grow by 5.9 percent in 2012, making it the fastest growing economy in the region.

In Argentina, the Fourth Court of the Federal Court of Criminal Appeals upheld the fine for 310 million pesos against the Association of Portland Cement Manufacturers and cement manufacturers including Juan Minetti, Loma Negra Ciasa, Cementos San Martin SA, Cementos Avellaneda and Petrochemical Comodoro Rivadavia.

The companies accused of cartelization had initially obtained a favorable ruling from the Supreme Court in July, which had suspended the implementation of sanctions. The case went to the highest criminal court, which upheld the penalty in a decision on Oct. 15.

in order to take advantage of the country’s higher infrastructure demand. The company plans to expand production at its plants located in the municipalities of Puerto Nare in Antioquia, San Luis and Santa Barbara by nine percent from the current ten million tons per annum. Argos currently accounts for 50 percent of the domestic market.

Cemex, also enjoying the rise in Colombia’s infrastructure market, estimates it will finish the year off with a five percent growth in the sales of cement and a 15 percent growth in ready-mix concrete thanks specifically to the demand in railroad construction. In the first nine months of this year, the company saw its cement sales in Colombia rise six percent,

While companies may appeal the court’s ruling, they must still pay the fine. The sanctions were to Loma Negra (US$138.7 million ), Juan Minetti (US$100,100,000), Cementos Avellaneda (US$34.6 million), San Martín Cement (US$28.5 million), Petrochemical Comodoro Rivadavia (US$6 million) and 529,289 pesos to the Portland Cement Manufacturers Association.

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RESEARCH 2nd annual Brazil / Americas Cement Sector Business Sentiment Survey:

A Cautious Outlook Towards an Improving Market

In September, the CW Group released the annual Brazil and Americas Cement Sector Sentiment Survey for 2012. The survey is one in a series of leading annual surveys, including India and the Middle East and Africa, put out by the CW Group, and has become an industry benchmark. The survey marked the second year that this particular survey was taken, with more than 250 industry participants across North and South America contributing.

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he survey divided the region into three important areas—North, South and Central America, with special emphasis given to the growing and dynamic Brazilian market. Results of the survey pointed to a change in industry dynamics over last year, with North America experiencing improved market conditions, while Brazil and the rest of South America were less enthusiastic about the industry compared to last year.

LOOKING BACK AT THE PAST 6 MONTHS, HOW DID IT MEET YOUR EXPECTATIONS? 100%

Nowhere near my expectations Below my expectations Met my expectations Exceeded Far exceeded

0 North America

Caribbean

Central America South America

Brazil

According to respondents surveyed, 78 HOW WILL THE NEXT 12 MONTHS PERFORM COMPARED TO THE LAST 6 MONTHS? percent categorized the last six months of performance as at least “ok.” This was a significant jump over the previous 100% year’s survey, where only 12 percent of a MaJOR FOR respondents held a similar view. Cement manufacturers and equipment vendors THe appeared to be more satisfied with performance in comparison to expertise cementas Process traders Thanks to its double equipment supplier and Turnkey Contractor, Fives FCB provides sustainable and reliable solutions combining technology, safety and cost-optimization in the production and industry analysts.

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of a high quality product in environmentally friendly conditions.

Recently, Fives FCB obtained two major contracts in Brazil, which confirm its presence in that market and attest of itsof status recognizedparticipartner for the cement industry in Brazil. quarter theas asurvey

A lot worse Somewhat worse About the same Somewhat better Much better

Almost a pants indicatedHolcim thatentrusted their expectations for Fives FCb with a contract for the constructionor of afar newexceed4,500 tpd clinker Cement Technik the market were exceeded 0 production line North America Caribbean Central America South America Brazil ed (8% increase from 2011). Regionally in october 2011, as part of the capacity increase of its speaking, North and South America Barroso cement plant, Holcim Brasil (sa)regawarded Fives FCB with an order for the engineering and supply of a istered the most growth inproduction these line. categonew 4,500 tpd clinker concerns detailed studies for the enries comparedThe tocontract last year, while Central Looking to the next 12 months, 50 per- sponded have seemingly turned a corner gineering of the plant, including civil engineering, supply of mechanical, electrical and control in equipment, America and Brazil noticed a softening cent of the survey respondents expressed in their outlook with a notable improveplateworks, steel structures, and technical assistance during erection and commissioning. confidence in obtaining at least somewhat ment in sentiment. In contrast, profesexpectations. un compromiso comprometimento This new production line, one of the most modern in the CiMar awarded Fives FCb with an orderAmerifor the bettercom results.

North and Central sionals in Brazil and the broader Latin de innovación inovação world will include the biggest Horomill® grinding mill ever supplied. supply of a new slag cement grinding plant y excelencia e excelência cans are more optimistic than in the 2011 America market are growing more cauImproving domestic salesHolcim emerged as its proThe line will enable Brazil to increase On May 2012, CiMaR, a Joint-venture company between duction capacity by 50% to reach 7.9 millions tpy those in the Caribbean tious as global economic conditions rethe main theme (7% increase YOY), fol- survey, while Queiroz Galvao & Cornelio Brennand groups, entrusted of cement in 2014, thus fulfilling the huge cement deFives with a contracttheir for the supply of a new slag cement mand in Brazil. adjusted expectations. main chaotic, and Central America and lowed by cost control and operational somewhat grinding plant located in sao Luis, state of Maranhão, in Brazil.

Caribbean professionals continue to see improvements. While all regions placed This plant, which will be equipped with a Fives FCB ball survey suggested that an uncertain future. BMWeek CemWeek CW Group domestic sales near the top of their lists, In general, mill, the a sONaiR type Fives FCB process filter and the the CemWeek CW Group BMWeek 3 generation Fives FCB Tsv classifier, will produce professionals that rethe top three themes did vary among the North American 80 tph of CeM ii-e (cement with 30% slag) at 3800 CemWeek BMWeek CW Group Blaine.

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445 West Bush Turnpike Richardson | Texas 75080 | USA Tel: +1 972 386 4451 usa@claudiuspeters.com

Rua Coral | 71 - 3o andar 09725-650 São Bernardo do Campo | São Paulo | Brasil Tel: +55 (11) 4122-6080 brasil@claudiuspeters.com

Claudius Peters Projects GmbH - Buxtehude | Claudius Peters Technologies SAS - Illzach | Claudius Peters (China) Ltd.- Beijing & Hong Kong | Claudius Peters (UK) Ltd. - London Claudius Peters (Iberica) S.A.- Madrid | Claudius Peters România S.R.L. - Sibiu | Claudius Peters (Italiana) srl.- Bergamo Claudius Peters (Asia Pacific) Pte. Ltd. - Singapore | Claudius Peters (India) Pvt. Ltd. - Mumbai

Copies of the full 2012 Brazil and Americas Cement Sector Sentiment Survey are available on the CemWeek website.

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SECTOR COVERAGE: The U.S. is also pushing forward with its new infrastructure investment. The U.S. government reports it will ask for the completion of vital infrastructure projects, asserting it will not allow infrastructure funds to sit idle as a result of stalled projects at a time when hundreds of thousands of construction workers are looking for work. U.S. Transportation Secretary Ray LaHood stated that more than US$470 million in unspent earmarked money will be immediately made available for projects that will create jobs and help improve transport across the country. “My administration will continue to do everything we can to put Americans back to work,” promised President Barack Obama.

Across the ocean, Europe is bracing for tough times ahead. The economic crisis that has been affecting the continent in recent years is not softening. Austrian brick maker Wienerberger announced worse-than-expected second-quarter results and said that the crisis of confidence spawned by the debt woes and resultant austerity led to "significant weakness in the new residential construction and renovation markets in the group's European core markets,” like Poland, France, Belgium, the Netherlands, or Britain.

Growth continues on the South American continent, where Brazil remains a leading player. The U.S. market struggles, while politicians promise infrastructure efforts will be increased. Europe faces a long-lasting recession, with Spain being especially hardhit and China tries to put up with slowing growth by accelerating investment abroad.

CONSTRUCTION & BUILDING MATERIALS Brazil is currently one of the most dynamic construction markets in the world.

The government announced it will spend £42 billion on infrastructure projects, with half of that sum to be invested in the next five years. The investment will cover work on more than 8,000 km of roads and 8,000 km of railways, and nine highways, ports and airports.

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The push is connected to the upcoming soccer World Cup and the Olympic Games to be hosted by Brazil in 2014 and 2016, respectively. Brazil’s president Dilma Rousseff described the investment program as follows: "We are teaming up to expand the country's infrastructure, to benefit its people and its private sector, to pay off a debt of decades of delay in investment in logistics.”

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Slower growth is affecting China, where construction machinery sales are down, U.S. equipment maker Caterpillar reported. Sales have dropped YOY every month since May 2011 after a government clampdown on real estate triggered a building slowdown. “The market is just getting worse,” an analyst with consultant China Construction Machinery Business Online commented.

The situation is better when it comes to Chinese investment overseas. Chinese money is flowing into all important markets, and recent news shows that Africa is increasingly the destination of choice. Nigeria announced it has secured US$600 million worth of loans from China’s Exim Bank to build a railway network in its capital Abuja and the surrounding area.

COUNTRY

% Change From June

Hungary

8.7

Germany

1.9

Bulgaria

1.6

Czech Republic

1.6

Romania

1.1

Slovenia

-0.8

Sweden

-1.1

Spain

-2.1

Italy

-2.2

EU27

-0.2

Source: Latest Eurostat data - July 2012

The rate was agreed to at a 2.5 percent interest rate over a period of 20 years with a grace period of seven years. According to press reports, China has made a string of cheap loans in the past few years with countries in Africa, a continent which supplies oil and raw materials like copper and uranium to the world's most populous country and second-largest economy.

the same period a year earlier. The effects of the economic crisis are being blamed for the fall, as it has impacted the level of public infrastructure works as well as building for the residential and non-residential sectors. The volumes of construction are no more than ten percent of what they were five to six years ago.

Hanson is investing £750,000 for two concrete production facilities in Glasgow (UK), in preparation for the 2014 Commonwealth Games. Both plants provide consistent product and flexibility in production and mix design from structural lightweight concrete to recycled, impermeable or high early-strength concrete.

In related news, concrete now even has its own TV station, according to press reports in South Africa. The new channel will be a dedicated channel for stakeholders, but also for the professional and do-it-yourself market, was launched in the country. Concrete TV will help solve industry-specific challenges, highlight its successes and react to industry news, ac-

GYPSUM AND LIME A special combination of limestone and sand will help create a new concrete type in Germany, a local researcher announced. The new material, called “Celiment,” was created after 15 years of research by a team led by Peter Stimmerman and reportedly offers many advantages to traditional cement.

In the UK, Lafarge Plasterboard has changed its name to Siniat, following its acquisition by the Etex Group and marking the start of a new chapter for the company, which has operated in the UK and Ireland plasterboard market for 25 years.

Etex bought the company in November 2011 and the new name took effect on October 1. The rebranding will include new packaging and literature for end users and partners, and a new website.

sector coverage: construction materials

The East still alive in a struggling Europe

In Russia, Eletsizvest is celebrating more than a century of limestone operations.

The company will be modernizing and upgrading existing machinery in the coming years. The company went public

In the Gulf region, an economic report released recently states that construction is expected to grow by 13 percent, reaching a value of US$65.5 billion in 2012, indicating that the UAE has the largest share of the total construction and reconstruction market in the region by 48 percent, followed by Saudi Arabia with 33 percent.

CONCRETE Remaining in the Middle East, concrete demand continues to rise, with two of the region's biggest construction markets, Qatar and Saudi Arabia, leading the charge. Massive investment in Qatar's construction sector on the back of strong economic fundamentals will trigger demand for cement, analysts predict.

In Europe, one of the concrete markets that suffers most because of the financial crisis is Spain. Data shows prepared concrete production in Spain was at less than six million cubic meters in the first quarter of the year, or a 29.1 percent drop from

cording to one of the channel’s producers.

“Traditional communication channels are losing their efficacy and, in a connected world, there is an inevitable trend towards next-generation, on-demand multi-media content delivery,” the producer said.

The channel is targeted at contractors, architects and associations, as well as suppliers of ready-mix concrete, cement and materials, and aims to cover all aspects of the concrete and construction industry.

in 1992 and has since worked on the reconstruction, modernization and introduction of advanced technologies, the local press reports. This year, it is celebrating 112 years of operation.

An area proposed for a limestone quarry in Sweden may be turned into a national park. The Environmental Minister recently began discussions with the Environmental Protection Agency on a possible national park in northern Gotland - right next to the area where Nordkalk

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CONSTRUCTION & MATERIALS BY BMWEEK.COM

Cheapest 15 places to build - 2012 COUNTRY

COST INDEX*

India

21

Taiwan

24

Indonesia

29

Bulgaria

36

Morocco

37

Tunisia

39

Vietnam

39

China

40

Macedonia

41

Malaysia

42

Romania

42

Portugal

43

Latvia

46

Serbia

46

Saudi Arabia

46

*All values are relative to the cost comparison index in UK (value = 100); Source: EC Harris Research 2012, International Construction Cost Report

plans to break limestone. If there should be a national park in the area, it would affect the conditions for a future quarry significantly.

AGGREGATES Sales of crushed rock and sand and gravel aggregates declined by 10 and 15 percent, respectively, in the second quarter, in the U.S., according to recent industry data. Sales of the value-added products of ready-mixed concrete and asphalt fell by 13 and 16 percent respectively, the Mineral Products Association said.

The UK aggregates market has seen lower volumes this year and may be reversing last year's gains. Last year, the production of sand and gravel and crushed rock was around 160 million tons, while this year, production is likely to fall to around 145 million tons. This would be a level not seen since the early 1960's and only half of what the market achieved at the height of the boom in 1989.

Dramatic news continues to come from Spain, where a recent report revealed that the aggregate production has fallen by almost 70 percent in the period 2007-2011, sliding from 500 to 173 million tons.

GREEN AND INNOVATIVE BUILDING Researchers say that bamboo holds the promise of becoming a significant material in the construction industry in the future. Bamboo grows extremely quickly, reaching maturity three times faster than hard woods and is renowned for a strength that is comparable to steel.

However, inherent drawbacks currently prevent the widespread use of the material. Bamboo has limited durability when exposed to UV rays and humidity, and its thin walls and empty internal diaphragm imply that it has poor fire-resistance.

British researchers working in cooperation with the National University of Colombia, the Andes’ University and the

Industry experts say that U.S. aggregates firms have a bearish outlook for the rest of 2012, expecting results that may be even worse than 2009.

The aggregates and concrete figures are indicative of a significant decline in construction activity in the U.S., particularly new construction activity. The decline in asphalt sales reflects a decline in road construction and road maintenance activity.

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Colombian Bamboo Society are trying to develop an understanding of the anatomy and structural applications of bamboo in order to modify it to overcome these limitations while maintaining its unique mechanical properties.

Meanwhile, Cemex has announced the launch in the United States of Fortium ICF, a new construction material specifically engineered to reduce the time and material needed to build vertical concrete wall systems.

According to the company, the new material employs cutting-edge advancements in mineralogy and nanotechnology to improve the performance of concrete at a microscopic level, and eliminates fully up to 75 percent of the steel reinforcement typically required for vertical concrete construction.

In the UK, Lafarge Aggregates & Concrete has obtained re-certification for its Carbon Trust Standard, after its energy saving initiatives slashed carbon emissions by 16 percent over the last five years. The Carbon Trust Standard is the world’s first carbon award which requires organizations to measure, manage and reduce its carbon emissions and make real reductions YOY. First certified in 2010, Lafarge was able to show further positive steps on cutting carbon emissions in the two years since.

A professor of buildings and facilities of the University of Arizona has created a revolutionary new kind of lightweight underground tube called InfinitPipe, which could revolutionize the industry, according to press reports.

Instead of conventional concrete or steel in the center, the new pipe used lightweight plastic with a honeycomb structure, in a way similar to how materials are produced in the aerospace industry. The new system could lead to the creation of pipes to carry water, oil and gas, which are even stronger than conventional steel pipes or concrete. BMWeek CemWeek CW Group BMWeek BMWeek

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EQUIPMENT

& NOTABLE PROJECTS

CONTRACT EXTENDED ASEC Engineering reports winning a second ten-year contract for the technical management of Misr Qena Cement. "We are very pleased to have won renewal of this contract, as we feel that this is a clear endorsement of ten years' hard work by ASEC Engineering in Qena," said ASEC Engineering Chief Executive Officer Mohamed Galal Yakout.

ASEC Engineering provides technical management services for 12 kilns with a total output of 16 million tons of clinker per year. Two of the production lines that ASEC Engineering manages are outside Egypt, namely in Syria and Jordan.

NEW RAILCAR Brazil-based Randon Participacoes with MRS Logistica have designed a new model of railcar, the FLT Sider for transporting pallets of cement. The product is the latest addition to other products designed within the consolidated partnership between Randon and MRS since 2008.

Among the many innovations, the railcar can transport expanding bigger and higher volumes of cement bags, as well as new transport mechanisms which add greater safety in transport and operation of loading and unloading. Other features include movable walls, work in securing the load, providing greater safety in the transport of cement, as well as retainers mobile for the side, which will assist in fixing lateral loads, ensuring safer operation.

The prototype will test for three months in the railway network of the country's new southeast rail.

DEALS INKED Air Products has secured a contract with Cemex to provide five of its Spanish cement plants with its Prism on-site oxygen generators and oxy-combustion system. The proposal outlines the installation of a Prism vacuum swing adsorption oxygen generator coupled to a back-up tank. The new system is expected

to generate savings at each operating site while reducing energy consumption and CO2 emissions.

Cemex also confirmed in September that it expects to save US$1 billion over the next decade in a strategic agreement with International Business Machines Corp.

(IBM) to outsource business process and information technology services.

The agreement marks another step in Cemex's long-running efforts to cut costs and increase efficiency since the 2008 global crisis that brought about a drop in earnings and forced the company to rescheduled US$15 billion in bank debt.

Roberto Chaverri, Cemex's former vice president for corporate information technology, and recently named vendor management office vice president, said Cemex had estimated that the services included in the agreement would have cost the company US$2 billion over ten years to carry out in-house, "so we're saving practically half."

Savings will begin in 2013 with a little over US$50 million, with additional

annual savings estimated at slightly over US$100 million in subsequent years, Mr. Chaverri said in a telephone interview. The switch will involve some layoffs at Cemex, although how many is as yet undetermined, and IBM could take on a number of Cemex employees, the official added.

EXPANDED SUPPLY CHAIN COVERAGE Colombian-based Cementos Argos has expanded its use of the JDA Supply Chain Strategist, including an Inventory Analysis module, helping the company to continue making more intelligent and more informed decisions about its supply chain investments. Argos has been using Supply Chain Strategist (SCS) in support of multiple processes since 2006.

Argos uses Supply Chain Strategist to model supply, demand and capacity across its sophisticated global network, helping it make intelligent decisions that match shifting customer demand with available regional capacity. As a result, the company is better able to analyze decisions such as the construction of new distribution centers, strategic investments

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PEOPLE production and human resources departments. Former Bamburi Cement and Athi River Mining employee Engineer Charles Charo is the new Head of Production Operations. John Ole Kimanjoi has been appointed the Head of Human Resources and Administration. Other appointments include a new Production Manager, Joseph Kombo, who was promoted from process manager, and James Mutisya, who is the new Maintenance and Projects Manager.

UNDER NEW LEADERSHIP Timlyuysky Cement Plant, a subsidiary of HC "Sibtsem" has elected a new chairman, Lydia Ugryumova. Lydia Ugryumova came to work for the company after graduating from the Tomsk Polytechnic University in 1972. She used to be Head of Planning and the Economic Department.

NEW R&D DIRECTOR Carlos Espina has been appointed as Director of Research and Development at LaFarge, as of October 1, 2012. He will be based at Lafarge's Research Centre near Lyons, which is the world's leading construction materials research laboratory with more than 250 researchers of 12 different nationalities.

Mr. Espina was formerly Chief Executive Officer for ArcelorMittal Méditerranée, a position he had held since July 2009.

He began his career in the United Kingdom as a Researcher at AEA Technology. In 1995, he joined the R&D Centre of Aceralia Corporación Siderúrgica as Manager of the Product Applications Engineering Department before becoming Vice President of Intellectual Property, knowledge management and artificial intelligence upon the merger with Arcelor

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in 2002. Within the Arcelor Mittal Group, he successively held the positions of VicePresident in charge of R&D, Europe and Vice-President in charge of R&D, Automotive.

TAKING OVER Sinoma Vice Chairman Yu Shiliang took over day-to-day operations at the China based Sinoma after the sudden death of its Chairman Tan Zhongming in September. According to reports, Tan, who was in his late 50's, apparently died of a heart attack while in France for a company roadshow.

STAFFING CHANGES East African Portland indicates changes to its staffing are looming as part of its plan to boost efficiency at the cement maker. As part of its plan, the EAPCC has appointed two managers to head its

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In Spain, Lafarge has assigned Miguel Angel Urbano as plant manager of Sagunto (Valencia). He began his career with the company in 2005 and to date has served as director of Lafarge Reliability in the UK. Urbano replaces Abascal Rafael Menendez, who has become director of safety and health of Lafarge Spain.

South Africa's Pretoria Portland has installed Busi Legodi as the new General Manger in charge of its Jupiter plant in Germiston. Legodi has been with the company for 17 years, having started out at the Hercules plant in Pretoria as a laboratory assistant. As GM, her responsibilities will encompass planning, leading, organizing and controlling all the activities of the cement factory to ensure that cash flow return on investments is optimized.

Holcim Philippines has named Eduardo A. Sahagun, current senior vice-president, to be CEO effective January 1, 2013. This is after some resignations at the top. Incumbent President Magdaleno B. Albarracin, Jr. and Chief Operating Officer Roland van Wijnen are scheduled to leave their posts this Dec. 31 and Jan. 31 next year, respectively.

NEW VP OF SALES CERATECH recently announced that Vance Pool had joined CERATECH USA as Vice President of Sales to focus on expansion of their U.S. sales operations. Pool most recently managed South Central business development and field operations for the National Ready Mixed Concrete Association (NRMCA), with previous leadership roles at Blue Circle Cement, Fibermesh, and W.R. Grace serving the cement, concrete and admixtures markets.

NEW MANAGING DIRECTOR A TEC GRECO announced the appointment of Ulrich Kuegler as Managing Director - COO (Chief Operating Officer), effective August 2012. Mr Kuegler, former Corporate Project Execution and General Coordination Manager at Loesche (Germany) will bring his extensive senior management experience to the Austrian pyroprocess specialist.

mercial responsibility for projects – both in selling and project execution - in order to release and support internal contact persons responsible for the technical processing of customer inquiries. At Loesche Automatisierungstechnik, Mr. Huster will take over responsibility for all long-term clients and develop new market potentials for LAG in Luenen to further increase sales. The active support of ongoing and future projects of Loesche in Duesseldorf and their subsidiaries worldwide will be another important activity of Mr. Huster.

Mr. Huster will be the contact person for all clients of Loesche Automatisierungstechnik whenever a partner or support in automation projects is required.

Continued from page: 43 (Equipment & Notable projects)

and optimized sourcing based on quantities, cost and requirements.

Argos' use of SCS has resulted in a return of investment of more than 500 percent, with several projects resulting in more than US$1 million in savings.

CUTTING EDGE TECHNOLOGY UK based Sacci is using an Insitec on-line laser diffraction particle size analyzer for its production of cement.

The equipment is being used at its site in Tavernola, Italy, for process control of the cement mill, to enhance product quality and reduce the time that operators spend on process control. The use of real-time particle size data to automate the milling circuit that produces finished cement has liberated operators to focus on higher value work.

According to the report, at the same time it has significantly improved product consistency. "Before we installed the Insitec we relied on offline particle size data to control the milling circuit," observed Alessandro Mazzucco, Plant Quality Manager.

Dr. Daniel Strohmeyer

Andreas Huster

LOESCHE CHANGES IN LEADERSHIP As of July 1, Mr. Andreas Huster joined Loesche Automatisierungstechnik (LAG) in Luenen to take over sales management.

Mr. Huster is 37 years old, married and formerly responsible for distribution, sales and marketing of automation technology at Miebach group in Dortmund.

In addition to the acquisition and support of all national and international clients, Mr. Huster will focus on the com-

One year upon taking his leave, Dr. Daniel Strohmeyer returns to the Rhine area and has taken over the position as Head of Process Technology (PT) at Loesche starting September 2012. The former sales manager will dedicate himself to the challenges as head of Process Technology (PT). Together with his team, he will initiate and lead F&E projects to further develop the Loesche technology and its proven and new applications in various industries. The optimization of the mill as well as of plant components with a focus on the quality of the products produced with vertical roller mills and on the overall plant performance are further missions of the PT department. BMWeek CemWeek BMWeek BMWeek

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At the plant, particle size data are used to automatically vary the speed of the classifier used to separate the milled cement into a fine product stream and a coarser recycle.

NEW CEMENT UNLOADER Cementos Portland Valderrivas invested EUR 1 million in the acquisition of a cement unloader with the latest technology to speed up bulk discharges from ships in the port of Ipswich terminal, one of two that the group has in the United Kingdom. The downloader mobile (mobile road ship unloader) was supplied by the Dutch company Van Aalst and has ability to download up to 5,000-ton boats at a CW Group Coal Week nominal rate of 225 tons per hour. BMWeek CW Group CW Group

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

GLOBAL SPOTLIGHT All eyes on India as the world's second largest cement market is fined by the competition authorities. China, Spain and the United States also make the headlines on CemWeek.com Continued from page 39

In 2014, Cementos Molins will launch a cement plant in Uruguay to supply southern Brazil. The new cement plant that will produce 750,000 tons of cement per year will be located in Otazo and its construction is expected to last 18 months.

The plant will be owned 60 percent by Cement Artigas, Molins subsidiary in Uruguay, 20 percent by Brazil's Votorantim, and another 20 percent by the state society Uruguayan National Fuel, Alcohol and Portland (ANCAP).

Bolivia’s Fancesa plans to increase its production by 40 percent with the installation of a new plant, estimated to cost $230 million and will be completed in 2015. Soboce is also planning to invest US$160 million for the installation of a cement factory in the town of Yacuses Germán Busch Province in the state of Santa Cruz. Soboce executives say the 48

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plant will respond to increased demand for cement in the domestic market, and mainly to the demand for construction in the eastern capital. The factory will have a production capacity of 600,000 metric tons (MT) of clinker and 750,000 tons of cement, which will provide the market with 1.25 million bags a month.

While it is good news that cement production in Venezuela is expected to trend at eight million tons this year, reports of continuing strikes have tampered the news somewhat. Cement workers are threatening further strikes if they fail to reach a compromise with the government about better wages and improved working conditions. Orlando Chirinos, coordinator of the Cement Workers Alliance (Antracem), said the disappointment reigns in the working class seeing no response to their needs. Worker representatives

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have met with management to negotiate various social welfare proposals but the progress of the agreements has been slim.

After five years of investigation, the Prosecutor of the Administrative Council for Economic Defense (ProCADE) in Brazil has recommended the government condemn the six largest cement companies in Brazil for forming a cartel, which it suggests existed at least from 2002 to 2006.

Involved in the investigation were cement giants Votorantim Cements, Lafarge, Cimpor, Camargo Corrêa (InterCement), Cement Company Itambé, Holcim and Itabira Agro Industrial Group Nassau.

Together, these companies account for 90 percent of the domestic cement. Lafarge was excluded from the process after a deal with Cade and payment of US$43 million. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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BUZZ TOP 15 STORIES 1. Reliance starts production at new grinding unit 2. Egypt to transfer cement plant 3. CW Group Global Outlook for 2012 Reaffirmed, 2013 Expected to Reach 3.991 Billion Tons 4. Egypt: Cut in energy subsidies to affect cement prices 5. Votorantim starts construction of new cement plant 6. Dangote is 'most certified firm' in Nigeria 7. Huaxin Cement acquires Dazhou Wanyuan Cement 8. Egypt: GOCC to wait for court's final ruling on Assiut 9. Serebryanskoye commissions cement plant in Russia 10. Egypt: Lafarge says water rate hike to affect prices 11. Cementos Argos hammers out new CBA 12. Poland's Odra orders new mill 13. India's Reliance Group launches cement brand 14. Iraq's cement co suffering from imports 15. HeidelbergCement unit in Ennigerloh repaired

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TOP 15 STORIES 1. Report: Argentina may face construction slump 2. Saint Gobain to build plasterboard unit in Russia 3. Australia's Boral looks to upgrade IT infrastucture 4. WYG to shutter Irish unit 5. Quality of Kaliningrad road project questioned 6. Zero Energy breaks ground on Coralville concrete plant 7. Lafarge Plasterboard now Siniat 8. Martin Marietta urged to make fresh bid for Vulcan 9. Cemex supplies RMC to wind farm project 10. Spain's readymix concrete production stumbles 11. German researchers create 'green' concrete 12. Iraq: Kirkuk Province working on 1,500 service projects 13. French ready mixed concrete expands 14. UK lines up stimulus measures for construction industry 15. Carmeuse planning to build a plant in Jacksonville

completed

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continue contract contractors costs countries county crane cranes data deal decline development director earnings economic engineering equipment government housing firm builders buildings built chief china commercial

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RESEARCH

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

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