CemWeek CemWee MAGAZINE
GLOBAL CEMENT INDUSTRY. KNOWLEDGE.
DECEMBER / JANUARY 2013
CemWee Tale of Two Countries the Middle East & North Africa CemWee BMWeek
Leader’s Q&A
Dr. Luis Farias CEMEX
Value Engineering as a Strategic Mode
CW Group Research
News
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Analysis
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Logistical Challenges of South America
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
Guarded Optimism The start of each new year offers us an opportunity both to reflect on what has happened over the course of the past year and to anticipate the year that lies ahead. It marks a time to take stock of where we are and to move forward. Although cement industries have languished in countries such as Greece and Spain, and have showed signs of slowing even in hot spots such as India, many within the industry continue to express guarded optimism that 2013 will prove to be a year of solid growth and profitability. We at CemWeek publications also are optimistic that this year will prove to be a better one. Change, as they say, is inevitable, and it is neither good nor bad. How we react to that change determines whether it will be positive or negative. We remain guardedly optimistic that the industry will continue to find ways to embrace positively the inevitably changing global economy and to flourish. On that optimistic note, this issue includes an interview with the VP for Energy and Sustainability at global-leader CEMEX, Dr. Luis Farias. CEMEX has led the charge for cleaner energy and alternative fuels in the industry since the early 1990s and continues to play a key role in the industry’s future development of clean energy. We touch base with Dr. Farias on CEMEX’s future energy plans. Also featured is the second article in the CW Group series on cement company energy. The CW Group proposes a strategic Energy Model framework that addresses the broad topic of energy for cement companies. Finally, in addition to our department coverage, we look at the logistical challenges unique to South America and ponder the economic slowdown witnessed in Brazil during the third quarter of 2012. As we move into the new year, we would love to hear from our readers on what you would like to see more of in our magazines. We welcome your feedback, suggestions and article contributions. Feel free to contact us at editor@cemweek.com.
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CONTENTS FEATURES 4 energy management series Value Engineering as a Strategic Mode 9 SURVEY 2012 MEA Cement Business Sentiments Survey 10 LEADERS COMMENT Dr. Luis Farias, VP for Energy & Sustainability at CEMEX 16 COUNTRY SNAPSHOTS Brazil: Recovery Forecasted
16 10 DEPARTMENTS Numbers in Brief 2 A Tale of Two Countries Research 18 CW Analytics Webinar: Middle East & North Africa Regional Focus 22 Logistical Challenges of South America
From our Industry Partner 36 Building materials update Projects & People 40 Equipment & notable projects 41 People on the move
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Regional Reports 26 Europe, Middle East & Africa 31 South Asia 32 Asia Pacific 34 Americas
B
BMWeek
cbi
brazil & latam
V Brazilian Cement And Lime Conference
cement business & industry Sheraton WtC ♦ SÃo paulo, brazil ♦ February 27-28, 2013
Cement Business & inDustRY (CBi) BRAZiL & LAtAm 2013 harneSSinG potential CeMent inVeStMent in latin aMeriCa The joint V Brazilian Cement & Lime Conference and 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. The program will take a dual-track business and technical approach to issues around: ■
Brazil and Latin American cement – an unstoppable force? 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? ■
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.
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GLOBAL
For attendance, speaking opportunities or general questions about the conference please contact the CBI Client Service team at sales@gmiforum.com or via phone at +1-203-516-7424.
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NUMBERS
IN BRIEF
A Tale of Two Countries Brazil and Saudi Arabia: two of the world’s major demand pockets separated just by a lagging market sentiment?
Saudi Arabia is without a doubt in a steep expansionary phase from the perspective of both cement demand and cement capacity. The number of cement plant construction projects announced in recent months and their magnitude resemble in part Brazil’s market evolution from 2011. However, even though Brazil softened its cement capacity projections in 2012, both countries currently expect similar incremental cement capacity additions, with no tempering expected for Saudi Arabia. INCREMENTAL CEMENT CAPACITY (TONS) 50
Saudi Arabia Brazil
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-10
2009
2010
2011
2012
2013
2014
2015 Source: CW Group Research
The two markets are driven by transient demand in the form of sporting events for Brazil and impressive governmental investments for Saudi Arabia. Projected growth rates for cement consumption are impressive, with Saudi Arabia taking the lead. While the Brazilian market may not bring all its planned projects to fruition due to its subdued utilization rate, the Saudi Arabian market still demonstrates there is room for boosting capacity, as the industry is forecast to operate at full capacity at least until 2017. INCREMENTAL CEMENT CONSUMPTION (TONS) 50 Saudi Arabia Brazil 25
0 2009
2010
2011
2012
2013
2014
2015 Source: CW Group Research
Note: The analytics presented in this article represent extracts from CW Group’s 2012 Market Updates for Brazil and Saudi Arabia. Go to http://www.cwgrp.com/research-a-analysis/research-reports.html to learn more. 2
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FEATURE
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E n e r g y M a n a g eme n t s e r i e s
A short view on value engineering using a strategic mode for energy management In this second article in the CW Group series on cement company energy, the CW Group takes a step back and presents a possible strategic model for looking at the big topic of energy. The proposed Energy Model framework is a reflection of not radical proportions, but rather a steadfast belief in a precise, methodical and structured approach to right-engineering this central function to cement companies.
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A POTENTIAL ENERGY MODEL FRAMEWORK
Organizational model Stakeholder involvement Vertical integration
FUELS
ORGANIZATIONAL
ELECTRICAL
PROCESS
ENERGY MODEL
Supply chain Operational model
TECHNOLOGY Asset management Generation choices Fuel choices
CW Group Research
Cement company executives are well aware that they must do something to manage their energy costs. At a minimum, the mantra is “minimize” — this is motherhood and apple pie for a cement company. But beyond the basic cost-oriented mission, the CW Group, working with clients worldwide on energy related projects, from strategy to energy audits, sees plenty of opportunity for many companies to build more holistic and comprehensive approaches to managing energy. While “energy management” certainly includes basic building blocks such as procurement and energy efficiency initiatives, we argue that companies must adopt much more robust energy strategies in order to achieve long-term, sustainable financial and operational goals. In fact, we believe that in a more competitive world, energy is indeed no longer
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something that can just be “audited,” “saved” or “procured.” A company’s total energy management framework reflects how the company handles the demands of its internal and external constituencies and linkage points; it also supports an internally consistent alignment with corporate, environmental, alternative fuels, raw materials, operations and logistics strategies, among others. Achieving excellence in “energy efficiency” means that companies need to change from a tactical and reactive operating model and start thinking more strategically about how to view energy. The concept of “energy management” needs to be moved from a procurement-driven function to a strategically oriented model able to integrate longer views into tactical and operational energy decisions.
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While such combinations of actions are likely neither radical nor on their own entirely surprising, the CW Group firmly believes that many cement groups can make material long-term, sustainable improvements to their energy models by adopting a methodical course to untangling energy management policies, procedures, sourcing, assets and planning. Understanding CW Group’s Energy Model will assist organizations in systematically framing the discussion around energy management and efficiency opportunities, and will provide a unified view on the energy area. If not THE model, A model The CW Group advocates using a formalized model to frame the energy management discussion. This model has evolved somewhat over the years based on input from multiple cement groups and energy
traders; it also has been informed through consulting work conducted for our global clients. The model is a point of departure and should be adapted to specific client situations. The model is loosely based on a people, process and technology foundation, refined through a multi-spoke set of dimensions that help further inform the construction of the strategic model. The principal dimensions include strategic and organizational decisions, the way the company establishes its processes as a result of these decisions, and how the company executes these strategies at the operational and technological level. Looking at energy management through this prism helps to explain how companies differ in terms of their energy management strategies and to understand the bottom-line results of such efforts. The approach has the benefit in that the model is agnostic to differences in geography, operational integration and business size. Furthermore, it can be easily applied to other industries, whether these are in the construction segment or not.
the group, a clear definition of roles and responsibilities that follows a systematic decision-making framework is key. But organization, as envisioned in this model, is not only about people. It’s also about principal policy items, including the level of vertical integration and the company’s energy business portfolio, and how to manage energy-related assets together
in order to ensure a long-term viability of the strategy. Companies must commit to community involvement and lobbying and put these activities at the top of their energy agenda. Platform The key elements included in this category are the enablers, or supporting
“Embedding an energy team into the organization is unquestionable.” with energy structure to support an integrated strategy and allow for optimal resource allocation. While the role of internal stakeholders is key in shaping the organization’s energy strategy, involvement of external stakeholders is essential to successfully implement it. A well-conceived stakeholder management plan has to be put in place
platform, for a successful approach to an energy-management strategy. From the CW Group perspective, the energy model can be constructed around these fundamental processes: an energy sourcing platform, in line with the strategic objectives, that leverages company value in securing better contract terms and developing long-term value creation options; “smarter” tactical decisions, and an opti-
Resources Successful implementation of an energy agenda heavily relies on receiving strong leadership from top management and making sure that all employees understand that energy plays a major role in the company’s financial success. It also bets on key changes in the organizational structure to better support the achievement of the strategic objectives and a critical look at the external environment. Embedding an energy team into the organization is unquestionable. But the composition, structure and number of members of the team will depend on the size of the company, its management style and other factors. The energy team is the core group behind the implementation of the energy agenda across the organization and the establishment of a consistent energy strategy across functions. Within
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FEATURE
mized supply chain/logistics framework to generate efficiencies and controllable energy costs. All these processes must converge to ensure delivery of a comprehensive energy strategy and enable the technical elements. Efficiency This area starts with how committed a company is to optimizing its assets and investing in improvement initiatives, which is a clear indication of how willing it is to explore the best combination of energy alternatives. Whether the company actively pursues alternative fuels and adopts multiple power generation sources is a critical factor in assessing the effectiveness of its energy strategy.
Companies need to develop a long-term plan to reduce in a rigorous manner wherever possible the energy consumption of the existing manufacturing infrastructure, leverage cost effective assets and include renewable fuels as an integral part of the overall Corporate Energy Strategy. A reality check With numerous global and national energy initiatives flying around, be they championed as objectives, programs or other by organizations such as ISO, UN, WBCSD-CSI, Cembureau or the U.S. EPA, it can be confusing to tease out the differences among them. But ultimately, irrespective of which of these or
“...the CW Group advocates a tangible and explicitly articulated energy strategy and management model for creating shareholder value.”
other programs, or your own corporate objectives, that your organization trains its sights on, the CW Group advocates a tangible and explicitly articulated energy strategy and management model for creating shareholder value. It is not “just another energy program.” No, it is about digging deep in the organization to uncover all energy-related nodes and shepherding them into a tight and disciplined program that realizes value today as well as into the future by setting and managing the internal energy agenda. As management consultants, we see way too many examples of companies excitedly (and in our view, sometimes naively) embarking on “alternative fuels.” “cogeneration” or “energy audit” projects without having a proper CEO-level strategy in place for managing the entire fuel portfolio, from electrical to fossil fuels and newer options such as alternative fuels, waste heat recovery etc. Many companies believe that they already have the “boring” old fuels figured out and push down the management to procurement, with management merely tracking the financial impact that the CFO reviews. We say, “Wrong, wrong!” We strongly advocate taking a step back to look at energy, using a formalized review and strategy development process, starting with the CEO and board. We confidently say that this approach will allow you to isolate and identify areas to improve, if not fully rethink, your energy management approach. This is a topic that will just keep getting more and more complex in light of new environmental, fuel supply-demand and power schemes and a faster-moving industry where gentlemen’s agreements are going the way of the dinosaurs. BMWeek CemWeek CW Group BMWeek BMWeek
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SURVEY
Guarded Optimism Expressed for months ahead The CW Group recently released its third annual Middle East and Africa Cement Business Sentiment Survey. The survey provides a snapshot of emerging and developing regional themes from those working in the region.
The CW Group’s 2012 Middle East and Africa Cement Business Sentiment Survey marked the third year the survey has been undertaken. The group collected data via survey from respondents hailing from key industry contributors throughout North Africa, Sub-Saharan Africa (SSA), the GCC States, other Middle East countries and Turkey. Respondents self-reported affiliations with major industry players such as Lafarge, Holcim, Dangote and Asec, to name a few.
HOW WILL THE NEXT 12 MONTHS PERFORM COMPARED TO THE LAST 6 MONTHS?
10%
Somewhat worse
50%
About the same
30%
Somewhat better
10%
Much better
The survey highlights the sentiments and experiences of individuals working within the African and Middle Eastern cement sectors and provides a snapshot of emerging and developing trends that have dominated the African and Middle Eastern cement sectors in recent months, along with those themes likely to be important in the short-term. A wide range of topics, including possible company priorities and dominant themes in 2013, were addressed. For example, analysis of this year’s survey data suggests there are some areas for guarded optimism over the previous year, with roughly 90 percent of respondents expecting the industry to perform “about the same,” “somewhat better” or “much better” over the next 12 months. This sentiment also supports the expectation among the majority of respondents that capital expenditure budgets would likely remain about the same. Respondents also indicated that the most important theme for the next 12 months would be controlling costs, while the biggest challenges would be profitability and energy prices. BMWeek CemWeek CW Group
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Our proven technology and process know-how allows us to provide
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LEADERS
COMMENT
CEMEX Pioneers in Clean Energy and Alternative Fuels
For over a decade, Mexican-based global cement manufacturer CEMEX has led the charge for cleaner energy and alternative fuels in the industry. CemWeek touched base with Dr. Luis Farias, VP for Energy and Sustainability at CEMEX, about the company’s achievements and the role it is playing in the industry’s future development of clean energy.
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LEADERS COMMENT
Cemex Dominican Republic
CEMWEEK: CEMEX has been a pioneer in the use of clean energy and alternative fuels for over a decade. Can you elaborate on some of the more notable initiatives undertaken? FARIAS: If we go back further than a decade, to the early nineties, we recognized that petroleum coke — then considered as a low-value residue of the refining industry and mostly untapped in the Americas — could replace fuel oil and coal in our cement kilns. We undertook an ambitious program to transform our kilns to use petcoke and became one of the largest users of petcoke in the world. Moreover, during the last decade we have worked relentlessly to improve our production processes and to foster the socialization of specialists across our different regions to introduce a wide range of cleaner, less-CO2 intensive fuels in our fuel mix. We have achieved concrete progress in the use of solid recovered fuels, obtained from processing commercial and industrial waste, tires, used oils and different biological and agricultural residues. Overall, we are proud of having achieved in 2011 a company-wide
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thermal substitution rate of 24.7 percent, which is industry-leading, up from only five percent in 2005. Our achievements in clean energy go beyond fuels. In Mexico, we have developed a 250MW wind farm that supplies more than a fourth of our electricity for local requirements, while in Germany we have co-developed a waste-to-energy plant to supply one of our cement plants. CEMWEEK: Can you describe CEMEX’s global energy strategy and how the group manages its global portfolio and needs across fuels and power? FARIAS: Our strategy has three axes — to reduce the carbon intensity of our products, to transition towards lowercost fuels and to achieve price predictability — that allow us to plan and manage our profitability in the long term. While petroleum coke was for a long time a key element that provided low costs and price stability, we now see alternative fuels as the cornerstone of our strategy as it contributes to all three targets.
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High substitution levels bring certain challenges in terms of organization. In our industry, a specialized team typically manages the purchasing of primary fuels centrally, and CEMEX is no exception. However, as we improve our thermal substitution rate, fuels procurement becomes more and more a distributed responsibility because the sources of alternative fuels (AF) are more fragmented, and regulations are not homogeneous from one to another. We see nonetheless that some markets in Europe are maturing, and we believe this will lead in the medium term to an increased international trade of alternative fuels, in which some degree of centralization can bring benefits from scale and internal flexibility. We are preparing to be a leader in this field by entering into strategic alliances with leading waste management companies and offering a supply to other cement companies. In terms of electric power, we aim to achieve price stability through long-term purchase agreements that are linked to a specific power plant, such as the development of our Eurus wind farm in Mexico.
CEMWEEK: Are alternative fuels managed as a part of the fuel strategy or separately, and how do you manage the strategy? FARIAS: Alternative fuels are a key part of our energy strategy, and therefore we have declared a company target to reach 35 percent substitution by 2015. To reach such a high substitution rate requires the sharing of best practices through the externalization of the acquired knowledge and promoting socialization through meetings and discussions. To achieve this, CEMEX has launched an Alternative Fuels and Biomass company-wide community as one of our six key “global initiatives.” This ensures high involvement and support from the Executive Committee of CEMEX, and enthusiastic participation from process engineers, fuel managers, operations and maintenance managers, to agree on best practices and share experiences with different equipments and materials. The technical and market competence we have developed has allowed us to deepen our understanding upstream in the chain, and in collaboration with waste management companies, to obtain materials with the required specifications to achieve higher substitution levels. CEMWEEK: With regard to the cement industry, what challenges to clean energy and alternative fuel development do you see on the horizon?
benefits of alternative fuels from the resource conservation, financial viability and environmental performance viewpoints, they react favorably and support us in progressing in our programs, so this challenge can be effectively overcome. Another challenge we see is that as our industry progresses in the use of alterna-
attractive returns on investment. Extrinsic incentives such as tax rebates, feed-in tariffs or certificates are often needed to make a project financially feasible, and cement producers are generally not accustomed to manage those risks and undertake investments outside of the building materials industry. Furthermore, the
“Our achievements in clean energy go beyond fuels.” tive fuels, it will enter into stronger competition with other industries that have lower quality requirements or additional incentives to co-processing, which has been the case with RDF combustion facilities in central and northern Europe. As market logic dictates that such facilities will be built, we have joined efforts with a utility to build a waste-to-energy plant next to one of our cement plants. This allowed us to take advantage of the price stability and lower grid charges that we could achieve, hence turning a challenge into our benefit.
divergence of support mechanisms across borders is a challenge to foster alternative fuels and renewable energies. For instance, in developing nations it is often the case that waste is disposed of with little control, so the technical, financial and market barriers to introducing solid recovered fuels must be overcome based on a mid-term vision rather by expecting an immediate cost advantage against primary fuels. A similar challenge exists for renewable energies, whereby parts of the world that possess abundant solar and wind resources apparently lack the fiscal and regulatory frameworks to promote Another important challenge to introduce renewable generation; however, even in clean energy in our industry is to achieve those cases, good opportunities exist for
FARIAS: The use of alternative fuels (mostly residues from other activities) in a cement kiln is considered as an energy recovery or a co-processing activity, subject to stringent regulations that differ by jurisdiction. While effective and strongly enforced regulations are essential to earn the trust and license to operate from our stakeholders, slow permitting procedures and reservations with respect to new valorization concepts often hinder the adoption of alternative fuels in our industry. In our experience, once local authorities and communities understand the
Cemex Germany
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LEADERS COMMENT
"Alternative fuels are a key part of our energy strategy."
Cemex Costa Rica
whomever can place all the right pieces together. CEMWEEK: Can you elaborate on how CEMEX has been effective in integrating sustainability into its business strategy? FARIAS: CEMEX has developed a sustainability model that comprises three objectives: enhance our value creation, manage our footprint and engage our stakeholders. To fulfill these objectives CEMEX has identified seven priorities that define the main global initiatives that we are undertaking to enhance our performance to create sustainable competitive advantages and reinforce our social license to operate. They include sustainable construction, infrastructure development, affordable housing, carbon strategy, biodiversity and environmental management, support of local communities and engagement with all of our key stakeholder groups. The focus on these priorities ensures that decisions at many levels in the company, from CAPEX allocation to development of new concrete products to mineral reserve management, are taken with due consideration to our expected short- and
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medium-term performance targets. We believe that the long-term success of our business is intimately linked to embedding sustainability into our strategy and our day-to-day operations. CEMWEEK: CEMEX recently announced it would participate in a Clean Energy Fund. Can you explain the fund’s purpose and timetable? FARIAS: Mexico is incredibly rich in resources to generate clean energy, but barriers such as a deficit of access to financing and of project development expertise have prevented the country from exploiting adequately its potential. With this fund, which is expected to raise US$300 million by April 2013, we believe that up to US$1 billion worth of clean energy projects can be developed. CEMWEEK: What role will CEMEX play in the fund? FARIAS: CEMEX will act as manager of the fund, identifying clean-energy investment opportunities and offering its experience in all the phases of the development cycle of a project, from initial planning to negotiation and closing of transactions, capital structure optimiza-
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tion and operation. We will also participate with a minority equity stake in the sponsored projects, not exceeding 10%. CEMWEEK: Have specific projects already been identified that will be carried out by the fund? FARIAS: The first project we have identified is a wind farm in northeastern Mexico, similar in scale to the Eurus project we have successfully sponsored in Oaxaca State. Other projects are in earlier stages of analysis and development, and will be announced in due time. BMWeek CemWeek BMWeek BMWeek
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Biography: Dr. Luis Farias has served as the Senior Vice-President for Energy and Sustainability at CEMEX since 1991, and has led the development of selfsupply projects such as TEG and the Eurus Wind Farm. Dr. Farias holds a bachelors in physics from Monterrey Tech and a PhD in metallurgy from Imperial College, and completed his postdoctoral research at McMaster University.
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COUNTRY
SNAPSHOT
RECOVERY FORECASTED FOR BRAZILIAN ECONOMY Brazil’s economy exhibited a noticeable slowdown in the third quarter of 2012, dropping to 0.6 percent. It represented a significant drop from the high of 2.5 percent witnessed just three short years ago. Will the government’s latest intervention efforts turn this sluggish economy around?
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hough still considered one of the largest economies in the world, Brazil’s economic growth has slowed considerably at 0.6 percent in the third quarter of 2012, coming from a high of 2.5 percent just a short three years ago. While it has shown gradual improvement over the past year, it is the worst performance among the BRIC group of developing markets, which include China, Russia and India. In comparison, China registered a growth of 7.6 percent while Russia and India were at 4 percent and 5.5 percent respectively, for the same period. Brazil survived the largest worldwide credit crisis, but it is now growing less than the U.S. economy. Government Economic Policies Hampering Investment President Dilma Rousseff ’s fiscal management has been under fire the past year with volatility scaring off investors. Investment dropped another 2 percent the last quarter, declining once again for the fifth consecutive quarter. The most actively traded Brazilian stock, Petrobras, is down by 23 percent, while Vale SA and Itau Unibanco fell 14 percent and 16.6 percent, respectively. The MSCI Brazil Index declined 8.67 percent in 2012 compared to the 13.6 percent improvement in the MSCI Emerging Markets index. Investment is now at 18.7 percent of GDP versus 30 percent for Peru in 2011 and 27 percent in Colombia and Chile. The government’s latest intervention in the economy involved the enforced slashing of electricity rates effective this year. With several power concessions scheduled to expire, companies will need to cut rates if they intend to renew their contracts to operate dams and electricity distribution networks. With electricity rates considered the third highest in the world,
the Brazil government’s target was to cut the average tariff by 20 percent to relieve consumers and spur the manufacturing sector. The intervention translated to hundreds of millions of dollars in losses in the past months from power company investments, from over $15 billion wiped off the book value of Brazilian power companies, attributed to the prospect of substantially lower profits. Despite interventions to devaluate the Brazilian Real and lower interest rates to historic lows, high business costs still kept investors at bay. Unemployment is low at 5.3 percent, meaning higher wages for companies by keeping employees longer. Moreover, the lack of skilled laborers results in companies having to hire qualified workers at a much higher cost. Infrastructure likewise failed to keep up with development, translating to higher transit costs for producers and manufacturers. Changes in Fiscal Policy at Transition Period Though changes in economic policies appear to be ineffective at present, many local and foreign investors still believe the country has laid the foundation for solid growth in the future and is currently in its turbulent transition period. While Rousseff ’s interventions suggest unpredictability, they also show her ability to stand firm against left elements in her own party as well as her willingness to stimulate economic growth by inviting the private sector to become involved in the much-needed infrastructural changes. Most of the changes were targeted to encourage the manufacturing sector, which has been stagnant the past half decade. With the new policies, the sector grew by 1.1 percent in the third quarter of 2012,
its best since 2010, together with the fastest expansion rate in two years. Moreover, lower interest rates are expected to further boost consumer confidence and spending while the 27 percent devaluation of the Brazil Real since August this year will shield and protect local industries from imports. Economic Growth Forecasts Remain Optimistic Despite criticism from other sectors, the government remains confident that measures to promote economic growth will prove successful in the coming years. As Brazil continues to prepare for the hosting of the 2014 World Cup soccer tournament and the 2016 Olympic Games, the government intends to introduce more incentives to the construction industry. Aside from the tax breaks that will be extended, the government will offer the construction sector about US$1 billion in low-interest working capital as well as extended payment terms. According to Brazilian Finance Minister Guido Mantega, the lackluster thirdquarter results still indicate future growth and improvement. Mantega noted that increasing sales of cement, along with construction materials, cardboard and transportation on Brazilian roads, are good indicators that the economy is expected to do better in the coming quarter. Civil construction covers half the investment in the country, and any stimulus directed towards that sector will encourage investment. Even with the continued improvement in consumer spending due to higher income and lower credit, growth is expected at less than one percent in 2012. Nevertheless, Nomura Securities predicts growth at 3.5 percent for the next two years. BMWeek
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RESEARCH
CW Analytics Webinar:
Middle East and North Africa Market dynamics are changing at a rapid pace. To help cement producers and traders, fuel suppliers, equipment vendors and shippers to better position themselves and capture new opportunities, CW Group is sharing some of its views with clients and the public in the form of webinars. The webinars are high-level by definition and limited in scope as they are the CW Group’s “information bursts” or conversation/thought starters that our analysts and consultants are happy to discuss further off-line. We share here some of the concepts from one of our most recent analyst webinars that highlight some of the ideas shared at the CW Group’s Middle East Cement Strategy, Finance & Trade Summit that was hosted at the board room of the Jumeirah Emirates Towers hotel in Dubai on November 27 and 28, 2012.
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he cement industry in the MENA region has seen unprecedented growth in recent years following favorable economic conditions and large infrastructure development projects. In anticipation of buoyant demand, cement producers across the region were encouraged to invest in capacity expansion projects. With domestic consumption lagging behind expectations, the significant overcapacity will transform the region from being a net importer to a net exporter. Africa, a close neighbor and a natural export mar-
tion. At the level of the more mature cement markets, there is a divergence into booming and challenged markets. On one end, the nations mired in active conflict (e.g., Syria) have naturally seen demand plunge, but past excesses are still reverberating in others (e.g., the UAE). At the other end of the spectrum, some nations’ production capacity is bursting at the seams (e.g., Saudi Arabia). North Africa Although with significant variations, there is still a general consensus that the
NORTH AFRICA 2013E CEMENT CONSUMPTION
Egypt
Libya
Tunisia
Algeria
ket for MENA, will become the key target. However, in the short and medium term, MENA will continue to face competitive challenges to penetrate the African market, as countries in that region are dealing with their own supply and demand imbalances by building a significant number of new cement plants. Bifurcating fortunes? The MENA region remains a complex and diverse market landscape with some areas still plagued by uncertainty and unrest, while others focus on reconstruc-
Morocco
cent and reach almost 17 million tons in cement consumption. At another end, Libya is projected to experience the highest increase as it continues to recover from the harsh market conditions of 2011 when the industry declined by 81.8 percent. Libya still requires over 3 million tons in imports as the companies continue to operate at unsatisfactory utilization rates. After completely reforming its cement industry in 2009, Algeria remains the sole
CENTRAL MIDDLE EAST 2013E CEMENT CONSUMPTION
Iraq
North African cement demand is forecasted to increase by at least 5 percent in 2013. Egypt is expected to post the lowest growth rate, given the still unstable political and economical environment. Even in these conditions, the country’s cement consumption is likely to exceed 52 million tons by the end of 2013. Morocco represents yet another market that experienced a turn for the worse in the second half of 2012, which will lead to an overall decline for 2012. The positive prospects are about to re-emerge in 2013 when the market is forecasted to increase by 5 per-
Syria
Jordan
under-supplied market of North Africa. In 2013, the country will still need to be supplied with almost 3 million tons of cement from external sources. In order to gain self-sufficiency, the state-owned cement company, GICA, announced plans to invest US$4 billion to reach 29 million tons in cement capacity by 2020. Central Middle East The three main Central Middle East countries — Syria, Iraq and Jordan — face many different challenges. Syria is surrounded by a gray cloud of uncertain-
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FEATURE ty; Jordan is expected to post only moderate increases for the medium term to come. On the other hand, Iraq is not necessarily concerned about growth rates as the country experiences booming cement demand expected to increase by more than 10.5 percent CAGR between 2012 and 2015. Iraq is more affected by efficiency issues given its outdated cement infrastructure and lack of operational expertise. An erratic and insufficient power supply will continue to be an issue for the Iraqi companies, especially considering that new cement plants are in different stages of construction. Dangote Cement, Lucky Cement and an undisclosed Korean company already announced plans to enter the Iraqi market. More recently, the Lafarge-managed Karbala cement plant was offered a US$70 million rehabilitation loan by IFC. Gulf States The Gulf countries reflect once more the diversity of the region. Saudi Arabia holds the uncontested leading position in the region with booming cement demand fueled by the impressive government investment in infrastructure and housing. The double-digit growth envisioned for 2013 will drive the cement demand in the vicinity of 60 million tons. Conversely, the United Arab Emirates (UAE) is struggling with a 40 million ton cement capac-
ity industry that is currently operating at around 35 percent utilization rate. However, the UAE market is expected to rebound as construction projects are re-initiated. Yemen is another country found in distress with minimal production values expected for 2012 due to strikes and unrest. Trade impacted MENA continues to be an important cement trade region, with the Central Middle East area detaching as the net importer. Iraq drives most of the imports with around 11 million tons imported in 2012. The expectation is that in 2013 the country’s cement imports will be situated around 13 million tons. However, Iraq remains a closed playground due to its landlocked location and logistics issues. The North African region is pressured by the Mediterranean countries that are fervently looking for exporting markets, especially after the Nigerian government imposed an importing ban for all cement products. Africa remains a trading opportunity for the depressed regional markets as the major threat coming from Saudi Arabia is not expected to materialize in the near future. However, cement producers and traders should keep a close look at
the Kingdom’s supply-demand balance. Although the current Saudi export ban holds the entire output within its borders, a potential hiccup of the impressive forecasted demand growth could change the trading footprint for good. Fuel remains an issue MENA countries are highly dependent on natural gas and other oil-derived fuels. Supported by large government subsidies, prices in the region are still relatively lower and more stable than in other regions. Despite the fact that MENA ranks top in the world in oil production and holds about 45% of global gas reserves, major concerns have risen as cement producers in some countries have repeatedly reported shortages in fuel supply. As natural gas shortages have become more acute, governments are getting more involved. Some are considering measures to increase fuel prices; others have turned to imports to fulfill unattended demand, while yet others are considering both. In the United Arab Emirates, the disparity in supply and demand created a shortfall that boosted imports of natural gas and skyrocketed production costs. In Egypt, government announced plans to issue a tender to import gas as well as a gradual increase in fuel oil prices. Undoubtedly, these increases will face resistance, and local authorities, under pressure of public opinion, will likely delay any changes in gas pricing policies. The current price of natural gas in the MENA region ranges from US$0.75 per million BTU in Saudi Arabia to more than US$2.00 per million BTU in North African countries. It is anticipated that gas prices will remain at current levels in the short term but recurrent gas shortages will definitely put upward pressure on prices in the region. Overall, the supply scenario appears discouraging for the cement industry, especially for new capacity coming online in the short term, and could force producers to take the brunt of a natural gas increase or turn to other possible sources of energy. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek
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REGIONAL
FOCUS
Logistical Challenges
of South America
Logistics in the cement industry remains an important cost factor regardless of location, as transporting a bulk commodity like cement can be a costly affair. Each region deals with its own specific logistical challenges. For South America, its challenges are as diverse as its geography. he vast geography is among the biggest logistical challenges of the region. High mountain ranges, deserts and tropical rain forests wreak havoc with transportation. Distances between major cities are long, and connectivity is poor. The lack of efficient rail/river transport systems throughout the region makes roadways the primary mode for cement transport, which is neither efficient nor cost effective. Growth Fueled by Infrastructure Spending The regional cement market has exhibited strong growth in recent years. The construction markets in several key countries have shown positive growth with marked increases in residential and infrastructure
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projects. The trend appears to extend at least into the short term, with governments in Peru, Colombia and Brazil announcing heavy investment programs for the coming year. Brazil in particular is investing heavily in its infrastructure development. In August, the government announced its largest-ever stimulus package of US$66 billion on infrastructure projects to help the country prepare to host the 2014 World Cup and the 2016 Olympic Games. Further, R$278 billion will be invested in the National Housing Program, accelerating construction industry growth and consequently driving demand for cement. With regard to transport infrastructure, investments in Brazil have occurred un-
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der the Planned Investments PAC I and PAC II. PAC I launched in 2007 and earmarked R$650 billion for infrastructure, of which 50 percent of the projects have concluded. PAC II, the second phase of this plan, involves an investment of R$959 billion over six major infrastructural areas. In particular, the investment will benefit the upgrade or development of 8000 km of roads, 8000 km of railways and nine highways, ports and airports. The rail and road transportation areas alone will see an investment of R$105 billion. This is good news for the Brazilian cement industry, which not only will see an increase in cement demand, but also will hopefully see an eventual easing of the logistical bottlenecks the region has
historically endured. However, in the interim, the rise in cement demand could leave some cement manufacturers scrambling to find the added logistical support needed to meet the rise in consumption. Major Logistical Bottlenecks Many of the region’s key economies are experiencing strong economic growth, but that growth is potentially endangered by high logistics costs. These high costs are largely attributed to regional differences in existing infrastructure, an underdeveloped rail network, high harbor fees and difficulties associated with the development of the Amazon region. Other constraints include poor performance of customs and border agencies,
low quality of logistics services and lack of reliability in delivery times of incoming shipped goods. Given that the most efficient form of transport for bulk cement is by water, this is where the biggest challenge lies for South American cement manufacturers, as the continent is largely truck-based. The port facilities are not as well developed as in some other regions, and the same holds true for the railroad facilities. Therefore, the majority of transport in the region occurs via roadways. In Brazil, for instance, nearly 96 percent of transportation takes place by road, while rail and river modes account for roughly less than three percent each.
Brazil has only 29,000 kilometers of railways, mostly in the states of SĂŁo Paulo, Minas Gerais, Rio de Janeiro and Rio Grande do Sul. Generally, the railways are poorly developed, and in some parts, in bad condition. The use of different track gauges in different parts of Brazil adds to the problem by hampering compatibility. Brazilian harbors charge fees that are substantially higher than in major ports like Hamburg, Singapore and Antwerp. Several also have significant problems such as limited handling capacities, reduced navigational-channel depths and inadequate highway and rail connections. Throw in poorly trained personnel and a
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lack of parking for trucks, and transporting by water is not as attractive of an option. Add to that the reality that many of the region’s key economic centers are located more than 200 kilometers from the coastal areas, and water transportation for bulk cement is not always viable. Despite the less-than-satisfactory infrastructure support for the rail and river transport sector, logistics still might have been economical in the region for the cement industry if the road transport infrastructure was of the highest quality. Unfortunately, this is not the case throughout most of the region, and Brazil in particular. About 26 percent of the country’s highways are in excellent or good condition. Strong regional differences mark Brazilian transport infrastructure. While there are several well-built highways in the economically powerful southwest and south, the picture in the northern Amazon region is starkly different. In many states in Brazil, road conditions are bad, particularly internal roads, making the transport of cement from manufacturers to retail/distribution and construction sites time-consuming, costly and highly inefficient. The situation is similar in Chile, where heavy government regulation has left its mark on the country’s transportation sector. While the highways, which are the primary mode of transportation, are in good condition, they do not effectively connect southern Chile to the central region. Railroads, under state control, are a very small part of the transportation system, as are the ports, also owned by the government but managed by independent companies. In contrast, Argentina has a fairly welldeveloped infrastructure system in comparison to several other Latin American countries, but it is in desperate need of improvement. The country’s railways have deteriorated over the last few decades, with many key routes inoperable.
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Many of Argentina’s major ports are on the Atlantic coast, with very little freight transported through the domestic waterways. Moving Forward Logistical improvements are a necessity if growth rates are to be sustained in South America. Without significant improvements to transport infrastructure, global competitiveness becomes an issue. As with other industries in the region, cement companies will struggle to maximize their logistical efficiencies within existing limitations, but may find it necessary to invest more heavily in finding
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long-term solutions. Many may choose to follow the path of other companies such as U.S.-based Dow Chemical, which joined with a group of Argentine companies and the country’s port administration to invest US$15 million in restarting the railway line connecting Bahia Blanca’s industrial complex to the Buenos Aires port. The 800 km long route had been out of service for more than 20 years, but was vital to Dow’s growth in the region. With government spending on transport infrastructure always fluctuating, the key to logistical improvements may lie in more private-public partnerships such as this. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek
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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 and equipment vendors are indispensable in understanding changing market conditions, monitoring the latest cement prices staying up to date on new cement capacity projects, among many other key outlook and competitive dimensions. The reports are available on an annual subscription basis. Contact us at sales@cwgrp.com to learn more. Global Cement Market Data Service
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REGIONAL REPORT: nical Seminar in Dusseldorf. Dr. Daniel Strohmeyer (Process Technology department, LOG) moderated the one-day session where six lecturers presented an up-to-date overview on grinding technologies.
EUROPE Mittal Investments purchased £285 million worth of Lafarge and Anglo American assets in the UK. The agreement includes a plant in Derbyshire, which is one of the largest cement facilities in the country. The sale is expected to calm competition concerns, allowing the Lafarge and Anglo American joint venture to go ahead. Mittal Investments, owned by Indian steel tycoon Lakshmi Mittal, will pay £272 million for the assets, including up to £30 million based on performance over the next three years. In addition, an estimated £13 million, which relates to working capital of the divested assets not transferring with the business, will be released as funding to the new joint venture. A sale of assets was the principal condition to receiving final clearance from the Competition Commission for the formation of a joint venture to combine Anglo American’s and Lafarge’s cement, aggregates, ready-mixed concrete, asphalt
and asphalt surfacing and maintenance services and waste services businesses in the UK. Completion of the JV now is expected in early 2013. The UK-based Mineral Products Association (MPA) offered a cautious welcome to the Secretary of State for Energy and Climate Change’s statement that it is looking at exempting energy-intensive industries from the cost of “contracts for difference,” subject to state-aid approval. While the government has not said exactly which sectors will be exempt, they do acknowledge the important role cement has to play in building the infrastructure for a low-carbon economy and the need to ensure that energy-intensive businesses remain competitive and do not relocate to other countries. In September, the Loesche Training Center invited 30 people (customers, suppliers and colleagues from subsidiaries) from all over the world to its first Tech-
Swiss Holcim indicated it may look to unload some assets because of a greater-than-expected slowdown in Europe. According to one report, Holcim may consider swapping some assets with competitors, given market conditions. Thirdquarter profit missed analysts’ estimates because of restructuring at sites such as Hungary and Spain. Also, Holcim booked write-downs totaling 47 million francs (US$49 million) for its European business. France is moving to end partial free allocation of emissions for greenhouse gases, replacing it with a fee system starting in January. The government says this will allow it to meet its European obligations to reduce emissions. The European Emissions Trading Scheme allows the trading of CO2 emissions. In France, it potentially will affect 1,200 facilities. Each manufacturer must have a sufficient number of allowances to cover its emissions of CO2. It also can sell other allowances it does not use. These quotas, which previously were allocated for free, now will need to be paid in part. Lafarge may accelerate sales of its assets in a bid to trim its debt further, while keeping capital expenditure flat, reports Reuters. The company wants to cut debt to 10 billion euros by next year. The world’s largest cement maker intends to limit spending to 800 million euros again in 2013, but said the number could be higher if it manages to exceed this year’s target of 1 billion euros of disposals. The group has 12.2 billion euros of debt. Italian cement group Buzzi Unicem is betting on growth in emerging markets, with 70 percent of its EBITDA coming from Russia, Mexico and the United States. Potential investments for Buzzi seem to be directed towards regions with
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high growth and profitability such as Russia and Mexico, where it is expected that the company will reach full capacity utilization by 2013 (in Russia) and 2015 (in Mexico). Reports suggest the company also may take advantage of a potential recovery in Europe with 15 percent of EBITDA in Germany and the large exposure to Italy. Italcementi has announced a plan, dubbed “Project 2015,” to reorganize and strengthen its activities in Italy. The company says the move comes after a
thorough evaluation of the difficult market trend of building materials in Italy, where cement consumption has fallen to levels not seen since the late sixties. According to the report, Project 2015 will be implemented during the 2013-2014 period. The company’s objective is not only to rationalize its Italian production facilities and distribution but also to act on the central structures of the group and its commercial network. Portugal’s Cimpor refinanced its consolidated debt by about 810 million euros,
select PROJECTS IN THE WORKS: EUROPE & RUSSIA COMPANY (LOCATION)
OVERVIEW
Holcim Wolski Plant/ Russia
Holcim to invest EUR 350 million for the reconstruction and modernization of its existing plant. The project includes the installation of a new "semi-dry" production line with a capacity of 4,500 tpd.
Omsk Cement Plant/ Russia
Omsk Cement is planning to start production at its new cement plant by January next year. The company is also building a new production terminal, which is nearing completion.
Khanty Region/Russia
The government of the Khanty-Mansi Autonomous Area - Yugra expects to launch construction of a 1.45 mtpa cement plant in 2013. Full funding for the program will be allocated from 2012-2020, and is worth 620 million rubles. Implementation of its activities will start in January 2013.
Table available in the CemWeek Magazine Print Edition.
Volga Cement/Russia
Volga Cement is building a new cement plant in the Volsk region, which is set to start construction in 2013. It will have an installed capacity of 1.0 mtpa.
Eurocement Group/ Russia
Agreement signed to build a new cement production line to be located at the company's existing plant in Nevyansk. It will have a capacity of 1.3 mtpa and should be completed in three years.
Eurocement Group/ Russia
Construction on a new Eurocement production line in the Sverdlovsk region is projected to be www.cemweek.com/subscribe completed by 2015. The line will have a capacity of 1.3 mtpa, increasing cement production in the area to 4.7 million tons per year. The project is worth 12 billion rubles.
Altcom/Ukraine
Altcom is planning to launch its first cement plant in the Crimean Alttsem by the middle of next year. The plant is under construction near the village Priozernoye in the Leninsky district of the Autonomous Republic of Crimea. The production capacity of the first plant will be about 2.0 mtpa clinker, while the entire plant capacity will trend around 3.6 mtpa of clinker.
Devnya Cement/ Bulgaria
New line for the production of cement clinker is going up at the Devnya Cement plant. It will have a capacity of 4,000 tons per day and use the dry method of production. The total investment amounts to 160 million rubles.
Spanish cement manufacturers estimated the impact of the power sector reform adopted by the government on the cement industry will cost the industry at least 50 million euros in 2013. According to Juan Béjar, Chairman of the Oficemen (Cement Manufacturers Association of Spain), companies estimate they will see an increase of 16 percent on their electric bill, which in turn constitutes 18 percent of total production costs in the industry and 32 percent of variables. Béjar stated that the reform would “inevitably” lead to plant closings and personnel adjustments.
regional report: europe, middle east, africa
increasing the average maturity of the financial liabilities of the group for about 3.5 years. The news comes after Cimpor reported losses of 165 million euros between January and September.
Oficemen also confirmed that cement consumption in Spain would close the year down 33 percent, the fifth consecutive double-digit decline for the country. The group expects demand in 2013 to contract by 20 percent to reach values similar to those recorded in Morocco or Ecuador. Consumption figures for 2012 and the initial forecasts are also looking bleak. Estimates suggested the year-end would be associated with a decrease in consumption of 12 percent, a figure that has been tarnished by Spain’s entry into an economic recession, cessation of investment in public works and the surplus of unsold new homes. Béjar warned that the next year will be an additional adjustment of production capacity and employment for many companies. He also pointed out that some companies are considering removing their factories in Spain and transferring to other countries. Polish cement demand fell 14 percent in October, according to figures from the Association of Cement Producers. Cement production totaled 1.536 million tons, down from 1.899 million tons in the previous year, a 19.1 percent drop.
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Russia & Baltic Region Russian cement demand has increased, and with companies trying to service local demand, it has cut into export volumes. According to one new market research report, a fall in exports of Russian cement in volume terms in 2011 almost reached the 2008 level of 59 percent. The Russian Federation exports cement to many countries. The bulk of Russian cement goes to the Ukraine, while Azerbaijan is set to consume more than a quarter of Russian production. Turkmenistan’s share was less than 0.7 percent of Russia’s exports. These three countries accounted for over 95 percent of all Russian exports of cement. In the first half of 2012, the Ukraine imported 31 percent more cement than in 2011. Russian cement makers are set to submit a set of proposals to governments in Russia, Belarus, and Kazakhstan as measures to cut the proliferation of cheap imported cement. Eurocement and other cement makers say that in other countries, there is an excess of cement, priced significantly lower than the domestic market price in the three markets. The cement industry has invested US$1112 billion for equipment and modernization. Moreover, imported cement does not meet the required characteristics of the building authorities in these three countries. The industry warned authorities of its impact on building safety, and likely will take advantage of Russia’s accession to the WTO, as well as the opportunity to establish a customs union with Belarus and Kazakhstan, to defend their interests.
In recent years, the growth of the share of cement produced by the dry method, which is more energy-efficient, was due to the commissioning of new modern production lines in such companies as Shchurovsky cement plant, Mordov Cement, Tulatsement and YUUGPK. Belarus increased cement production in the first ten months of the year by 6.4 percent to 4.134 million tons. Meanwhile, the government says two new cement plants will come onstream soon. The total capacity of the two lines, PRUE Belarusian Cement Plant and Krasnoselskstrojmaterialy, which will be introduced in Belarus, should amount to 3.6 million tons of cement per year. MIDDLE EAST Saudi producers warned that the country is on the verge of a real crisis in cement
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In related news, Saudi-based traders asked the government to increase fuel supplies to enable them to expand their production lines. The traders say the increased output will help them cope with the expected increase in demand, as the government embarks on large-scale housing projects. UAE cement prices are set to rise in January, as suppliers factor in increased trans-
select PROJECTS IN THE WORKS: MIDDLE EAST COMPANY (LOCATION)
OVERVIEW
Oman Cement Company/Oman
The Oman Cement Company plans to expand its capacity by installing a new mill at its plant. Projected capacity is 150 tons per hour.
Qassim Cement Company/Saudi Arabia
Qassim Cement has announced plans to increase its production capacity by installing a new production line which will add 5,500 tpd of cement production.
Saudi Cement/Saudi Arabia
The Saudi Cement Company will move to replace three of its old cement mills as part of an upgrade. The old mills could produce 360 tons per hour while the new ones will have an expanded capacity of 440 tons per hour.
Bagel Cement/ Yemen
Bagel Cement confirmed it is expanding production by installing a new line. Completion of the new production line is around 60%. The new line will contribute to increase the production capacity of the plant to 1.2 mtpa of cement and will cost 113 million riyals, plus an additional 16 million riyals for the coal system.
TCC/Saudi Arabia
Russian Realty reports that of Russia’s more than 180 production lines equipped with rotary kilns, most have service lives stretching from 30 to 50 years. Despite the positive trends in the elimination of technological backwardness in cement production, the share of lines that use wet production method remains very high, which results in high costs of fuel and energy resources in the production of cement.
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in the event of a continued incremental increase in domestic demand. They expected 2012 demand to hit 54 million tons, and this may be detrimental to the market in the sense that the lack of production capacity to cover the growing demand is still a problem. In the last four years, there has been a significant increase in cement demand ranging between 8 and 12 percent annually.
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Table available in the CemWeek Magazine Print Edition.
TCC will install a new cement mill with a capacity of 4,000 tpd. The unit will begin production in www.cemweek.com/subscribe the second quarter of 2013.
OVERVIEW
Arabian Cement Company/Egypt
Meetings continue regarding the first gray cement factory to be located at the Sheikh Fadl industrial zone in the Minya province. The proposed plant will sit on an area of one million square meters with a construction cost of LE 1.2 million, and is scheduled to open early next year and produce 2.0 mtpa.
Unknown/Egypt
Government has approved the construction of a cement factory in New Valley. No other details available at this time.
Unknown/Egypt
Government announces bid to build a new plant that will have an initial US$450 million in projected investments. The new plant will be built in Abu Zenima.
Minya Province/ Egypt
A new cement plant is slated to be built in the Minya province, which is scheduled to start operations in early 2013. The construction cost of the plant is US$350 million, and it will have an installed capacity of 2.0 mtpa.
Dire Dawa/Ethiopia
The town of Dire Dawa opened its second cement plant. The cement factory has a combined production capacity of 1,500 tpd. Total investment cost was BR 307 million.
Brazzaville/Congo
The Congo has inaugurated a new cement plant in Brazzaville, built with loans from China. The plant can produce 3,600 tpd of cement.
DAO GROUP/Uganda
Groundbreaking ceremony held for new plant being built in Budaka. The plant will produce 5,000 tpd of cement. Project investment is US$150 million.
PPC Zimbabwe/ Zimbabwe
PPC Zimbabwe will spend a minimum of US$200 million on building a new cement processing plant with a www.cemweek.com/subscribe 1.0 mtpa capacity in the Mashonaland Central Province.
National Cement/ Kenya
National Cement will open a Sh11.9 billion plant in 2013. The new plant will have an annual capacity of 1.65 mtpa, pushing its total capacity to two mtpa.
HeidelbergCement/ Ghana
HeidelbergCement has commissioned a new cement mill with an annual capacity of 1.0 mtpa at its Tema cement grinding plant. The capital expenditure amounted to EUR16 million.
Secil Lobito/ Angoloa
SECIL is set to build its second cement factory in Angola to increase production from the current 280,000 tons to 1.8 mtpa. The firm will invest US$180 million in two phases. Construction of the new plant near its existing Lobito plant should become operational three years after the start of construction.
Mutliple Companies/ Cameroon
Four cement makers have lined up projects in Cameroon, and plan to start building units next year. The firms are Cimencam, Cimaf, Dangote and Afko. Cimaf is building a plant with a production capacity of 500,000 tons in the industrial area of Bonabéri in Douala. Dangote Cement is building a plant on the ban ks of the river Wouri in Douala. The plant will have a production capacity of one million tons extendable to 3 million tons. Afko Cement, a joint venture between Korean operators and Cameroon announced the construction of a factory in the town of Limbe in the southwest region.
Algeria
The government of Algeria is reportedly seeking foreign partners for the construction of eight new cement plants. The goal is to increase the country's production capacity to 30 mtpa and reduce imports.
Table available in the CemWeek Magazine Print Edition.
portation costs. Local traders confirm this represents a total increase of approximately 5.5 percent. Aggregate will rise to 7 dinars, compared with about 6 dinars, an increase of approximately 16.6 percent, amid high demand for all building materials. The market is experiencing a shortage in building materials supply because of increasing demand. At the same time, the high cost of transportation will lead to an increase in prices later. The President of Jordan’s Cement Association, Mansour al-Banna, reported cement consumption declined during the first ten months of 2012 by 12 percent,
reaching 3.3 million tons compared with 3.75 million tons during the same period of 2011. He says cement prices are still at a standstill despite the rise in fuel prices recently. According to a report by the association, the price of one ton of cement is at almost 105 dinars per ton. Jordan-based White Cement disagrees with the government’s recent plan to allow cement imports to enter the market, saying such a move would adversely affect its operations. The company reported it currently supplies the market with 60,000 tons of white cement and warned the Minister of Industry and Trade, Dr.
Hatem Halawani, of the consequences of allowing imports from other Arab countries. The General Manager of White Cement, Khaled Tarawneh, stressed that the company covers the local market needs, and noted the additional difficulties the company has faced when exports to Syria, a major market for the company, were stopped. Iran will become the world’s third-largest cement producer by the end of the current Iranian year. A senior Iranian official says the country’s cement output experienced a remarkable increase after inauguration of several cement production plants in recent years. The report also indicates that Iran plans to further increase its output to 83 million tons by opening more plants in the near future.
regional report: europe, middle east, africa
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Exports were also up, with Iran exporting nearly 9.4 million tons of cement and clinker in the first eight months of the current Iranian calendar year. This is a 30 percent growth compared to the same period last year, according to the IRNA News Agency. More than 8.2 million tons of cement and 1.1 million tons of clinker were exported. Iraq, Central Asia, the UAE and Afghanistan were the main destinations for the exported cement and clinker. AFRICA Dr. Abdul Azim Mahmoud, head of the Committee on Human Development and the local administration of the Shura Council, says new cement plants in Egypt are stalling because of the lack of gas supplies in the market. Mahmoud says there are many problems standing in front of industrial development in Egypt, including the need to one-stop shop, which he says hampers development plans. In related news, the Egyptian Petroleum Authority says the government has decided to delay the increase in diesel prices for the industrial sector until January 2013. The announcement came amid concerns over strong protests by factories that had threatened to raise the prices of their products in the event they were not consulted in the decision-making
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regional report: europe, middle east, africa process. Dr. Hisham Qandil, the Prime Minister, issued a decree, which raised the sale price per ton of fuel oil by 130 percent, from 1,000 pounds per ton to 2,300 pounds per ton.
pay, it may freeze the assets of firms such as Sahel, Sococim and Sabodala Mining. When some companies refused to pay, the government moved to fine those companies.
Cement production in Algeria is now at 18 million tons. While a remarkable development, it still remains below the ever-growing needs of the market. The need for cement has greatly increased over the past decade with the launch of major projects included in government plans such as the east-west highway, rail, dams and various projects to build more than 2.5 million homes. At current levels, the market still has a cement deficit of 3 million tons, according to estimates by Group Industrial Cements Algeria (IPAC), which began a process of importing cement to fill this gap.
Unrest in neighboring Mali has affected cement dispatches in Senegal as Mali is one of its top export destinations. In the third quarter of 2012, dispatches were down 19 percent, of which domestic sales were down 11 percent and export sales decreased by 5.7 percent.
The Senegalese IRS decided some time ago to create a new tax on companies specializing in mining and cement. The new tax is 5 percent of the turnover the company’s profits, and companies are objecting. The government has, however, reiterated that if the companies do not
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Four cement makers have lined up projects in Cameroon, and plan to start building the units next year. The firms are Cimencam, Cimaf, Dangote and Afko. Cimencam, the current leader of the Cameroonian market, has an annual production of 1.6 million tons, and is a subsidiary of the French group Lafarge. Meanwhile, Cimaf is a Moroccan operator, which is building a plant with a production capacity of 500,000 tons in the industrial area of Bonabéri in Douala. Nigeria’s Dangote Cement is building a plant on the banks of the Wouri River in
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Douala. The plant will have a production capacity of 1 million tons extendable to 3 million tons. Afko Cement, a joint venture between Korean operators and Cameroon, also announced the construction of a factory in the town of Limbe in the southwest. Officially, the demand for cement in Cameroon is estimated at about 2 million tons, but the Ministry of Industry plans to add 8 million tons by 2015, due to the launch of numerous structural projects announced by the government. Pretoria Portland Cement says it is eyeing four new opportunities in African countries in line with its strategy to increase its revenue generation beyond South Africa. This follows the company’s investment of US$12 million (R105 million) cash in July to obtain a 27 percent stake in the Habesha Cement Share Company in Ethiopia. The Industrial Development Corporation (IDC) simultaneously invested US$9 million for a 20 percent equity stake.
Pakistan’s National Highway Authority (NHA) has changed its policy and will be charging transporters double toll rates and forcing them to cut down the load of goods, a move that will likely have an upward effect on cement prices in the country. Sources suggest this decision will push the price per bag of cement between RS 10 and RS 30 across the country. Pakistan-based cement makers have asked Pakistan Customs and Pakistan Railways to beef up security along the Wagah border and strictly check the wagons carrying cement from Pakistan to India. The request comes after India con-
Demand from India’s rural areas has hiked cement production in the country. Cement production has seen a 7.4 percent growth during the first six months of the current financial year. Within the eight core industries, which have a combined weight of 37.9 percent in the Index of Industrial Production (IIP), cement has recorded the second-fastest production growth. Coal at 8.3 percent emerged as the fastest-growing sector during the first six months.
fiscated narcotics in some consignments. The All Pakistan Cement Manufacturers Association pointed out that four such incidents came to the forefront in the past few months when Indian Customs seized some quantity of heroin from cement consignments sent from Pakistan. India’s Commerce and Industry Ministry announced it would take up the issue of cement companies “getting penalized” for idle excess capacity with the Competition Commission of India (CCI). The CCI had slapped RS 6,307 crore in penalties on 11 cement makers. The industry body CMA was also fined RS 73 lakh.
select PROJECTS IN THE WORKS: south asia COMPANY (LOCATION)
OVERVIEW
OCL India/India
OCL India is looking to raise as much as US$40 million from the IFC to fund its new 1.35 mtpa cement plant in West Bengal. The plant will be located in the village Kulapachuria, Salboni subdivision. Construction is expected to take 27 months and it will be operational by January 2014.
India Cements/ India
India Cements wants to add 3 mtpa of fresh capacity by expanding two of its units in Tamil Nadu. The brownfield expansions are at Dalavoi and Sankaridurg. The company plans to construct a new line that will add over 2.55 mtpa to the existing 2.16 mtpa capacity at Davaloi, hiking total capacity at the plant to 4.71 million tons.
JK Lakshmi Cement/India
JK Lakshmi plans to spend Rs350 crore to restart its idled plant in Udaipur to hike its installed capacity. This will add nearly 1.4 mtpa to existing capacity.
JSW Cement/ India
JSW Cement will double its production capacity by March 2013 by commissioning two more mills. The commissioning of the plants will increase production to 4 lakh tons per month from 2 lakh tons per month.
Lanco Industries/India
Lanco Industries intends to build a cement plant with a capacity of 300,000 tons pear year. The board has approved a project with an estimated cost of US$22.7 million.
Lucky Cement/ Sri Lanka
Lucky Cement intends to build a 500,000 metric ton grinding plant in Sri Lanka.
Holcim Sri Lanka/Sri Lanka
Holcim Sri Lanka Lanka will invest US$20 million to develop grinding capacity at the Ruhuna plant in Galle. Grinding capacity will be increased by 600,000 tons once the work is completed in 2013. At present the production stands at 400,000 tons per annum.
Table available in the CemWeek Magazine Print Edition.
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regional report: SOUTH ASIA
REGIONAL REPORT:
Sri Lanka says it wants cement production to increase in the country, as demand for the material is on the rise. The government indicated that the pace of overall infrastructure development in the country is on the rise. In 2011, cement production was more than 2.4 million tons and valued at RS 18,920 million. Cement production in 2012 was 1,737,365 million tons and valued at RS 1,999,832 million. Local cement production is only 48 percent of the country’s requirement. According to the report, in 2011 Sri Lanka imported 2,576,495 million tons of cement at a cost of RS 36,828 million. In 2011, the consumption of cement in the country was 5.02 million tons, which is an increase of more than 4.8 percent over the previous year. The Kazakh State Statistics Agency announced in a news release that from January to November of 2012, the total output of local cement makers hit 6.1 million tons of cement in Kazakhstan, an increase of 13 percent compared to the same period last year. Uzbekistan also reported a rise in production for the first nine months of the year. According to the government, cement production increased by 3 percent compared to the same period last year, up 5.2 million tons. The country now has six cement plants with a total installed capacity of about 7 million tons. In particular, the largest cement producer in the country, Kizilkumcement, produced 2.5 million tons of cement. JSC Akhangarancement produced 1.176 million tons.
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REGIONAL REPORT:
Cement prices in China have continued to decline, and are down 0.5 percent. However, industry analysts generally believe that the demand for cement will improve in 2013. The Guotai Junan expects cement demand growth of 7.3 percent in 2013. Guoxin Securities is more optimistic that 2013 cement demand in infrastructure and urbanization will help to maintain a growth rate of more than 8 percent.
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China’s rapid urbanization will boost cement demand in the future. Data shows that, as of the end of 2011, China’s urbanization rate reached 51.27 percent. The rate of urbanization in developed countries is generally close to or higher than 80 percent, similar to Malaysia, the Philippines and other neighboring countries in per capita income.
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According to international data, the urbanization rate typically stabilizes when reaching 70 percent. This means that more urbanization is likely in China’s future. The government says urbanization is the greatest potential for China to expand domestic demand, enabling it to maintain economic growth and promote the strategic development of the main line of various reforms. Finally, news came that China’s Ministry of Industry and Information Technology (MIIT) and the Ministry of Finance jointly issued a notice to all localities to eliminate backward production capacity for 2013 for 19 industries including cement. Myanmar’s cement industry is expected to strengthen in the coming years, with analysts predicting it has huge potential for growth. There are 14 cement plants in Myanmar with a combined capacity of
COMPANY (LOCATION)
OVERVIEW
Max Manufacturing / Burma
Max Manufacturing to increase production at its plants with a recent agreement with a Thai company. Daily cement production capacity at its plants, now at 500 tons, will rise to 2,600 tons by the end of this year and 4,200 tons in 2014. The deal involves the renovation of two existing cement factories located close to Naypyitaw.
Siam Cement / Indonesia
Siam Cement is set to build a cement factory in the Lebak district, Banten province in Indonesia. No other details available at this time.
Bosowa Maros / Indonesia
Bosowa Maros is building a new 5.2 mtpa clinker unit which will be completed by 2014. It is expected to cost up to US$310 million and be completed within 20 months.
Vanda Prima Listri/Indonesia
Vanda Prima Listri will build a cement plant in Central Jakarta, and will spend Rp1.4 trillion to build it. If realized, the cement production per year is expected to reach one million tons.
Holcim Philippines/ Philippines
Holcim Philippines will spend US$400 million to build a 2 mtpa plant in the Philippines. The new plant is expected to be operational by 2016 and will boost the cement firm’s current production capacity of 7.5 mtpa.
Suhgd Cement/ Tajikistan
Suhgd Cement has opened a new plant in the northern part of the country. The enterprise is able to produce 100,000 tons of cement per annum. In the future, the company plans to increase production capacity of the factory to 1.0 mtpa, becoming the largest cement producer in the country.
Tatarstan region/Tajikistan
A new 2.2 mtpa plant may soon rise in Tajikistan's Tatarstan region. The installation of the plant is seen to ease the shortage in the local cement market.
CNBM TALKO Cement/ Tajikistan
The Government of Tajikistan has approved a joint venture company, CNBM TALKO Cement, to build what it calls the www.cemweek.com/subscribe largest cement plant in Central Asia. The plant capacity is reportedly 3.0 mtpa.
SCG/Vietnam
Thailand's SCG will invest an additional US$2 million to expand the production of gray cement by 100,000 tons per year. SCG Cement has acquired 99% stake in Cement Factory Buu Long Dong Nai which has a capacity of 50,000 tons per year and plans to upgrade the facility with an investment of US$5.5 million.
TEE International & Ayeyarwaddy Cement/ Myanmar
TEE International has inked a MoU with Ayeyarwaddy Cement to develop and operate a cement plant in Myanmar. The new JV company will invest in a 3,000-tonne integrated cement plant will TEE holding the controlling stake.
Siam City Cement/ Myanmar
Siam Cement will build a plant in Myanmar's Taninthayi region starting in 2013.
Siam City Cement/ Cambodia
Siam City Cement has agreed to partner with Cambodia's Chip Mong Group to construct a new cement plant inthe Kampot province of Cambodia by 2015. The feasibility study was ordered in December to construct a plant with an annual production capacity of 1 to 1.5 million tons. Cost for the new plant estimated at US $200 million.
Table available in the CemWeek Magazine Print Edition.
3.5 million tons per year. Demand is 6 million tons. The first cement plant with production capacity of 200 tons per day was set up in Myanmar in 1935. Since then the cement business has expanded moderately but is still insufficient to meet demand. Myanmar imports 2 million tons of cement per year from Thailand, Indonesia and India. Thailand’s cement demand will exceed this year’s target as the government continues to put money into large-scale infrastructure projects. It will grow more than 8 to 10 percent thanks to continued government investment in mass transit projects, says the Thai Cement Manufac-
turers Association (TCMA). According to its report, all eight local cement producers now expect that consumption will grow by 12 percent over last year’s 25.5 million tons. The TCMA pointed out that 12 percent growth would be triple last year’s rate. Vietnam’s Ministry of Finance told the Prime Minister that government guarantees for the repayment of foreign loan guarantee projects were approximately US$1,365 billion, and spanned 16 cement projects. Of these, four of the 16 have a current balance of US$228.75 million, and are having difficulty making repayments. This is because some large share-
holders have not arranged the necessary funding for the cement plants, and now are relying on government help. Poor demand and overcapacity also have come at a difficult time for the industry. According to statistics released by the Japan Cement Association (JCA), production rose by 3.8 percent to 4.521 million tons in October, the fifth consecutive month to show growth. Japan’s domestic sales grew 3.6 percent to more than 3.6 million tons, showing growth for the tenth consecutive month. Export volume growth was also up at 4.9 percent or 874,000 tons for the third consecutive month.
regional report: ASIA PACIFIC
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Reports have indicated that Holcim plans to scale back its Australian operations and close as many as 30 plants in the country. The Australian Financial Review reports that Holcim is poised to lay off 150 staff after a review into its Australian operations. Holcim Australia Chief Executive Mark Campbell said the cuts were linked to softening market conditions in the building sector. Meanwhile, in New Zealand, Holcim’s unit is planning to acquire land for coal mining operations, even as its proposed cement plant stalls. Reportedly, the company is now working on a proposal to construct and operate a new manufacturing plant at Weston, in the South Island, but Holcim’s capital projects manager, Ken Cowie, stated, “the project is on hold and further consideration is not expected until sometime in 2013.” Philippine cement sales were expected to record robust gains in 2013 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 said these are record high growth rates since in the past few years sales usually had grown 3 to 4 percent since 1997. Ordonez said growth is being driven by strong public infrastructure spending, up from a low level last year.
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REGIONAL REPORT: of the various new technologies that will be necessary to implement the revised standards.
Irish-based CRH projects a boost from post-Sandy reconstruction work in the U.S., but doesn’t expect an immediate bump because its material operations in the region have been hampered. The additional weakness in the European markets also is likely to affect 2012’s full EBITDA, which the company is indicating will be roughly three percent lower at EUR 1.6 billion compared to 2011. The forecast of the Portland Cement Association (PCA) for the U.S. suggests a 7.5 percent jump in cement consumption for 2012. The organization’s November projection is up 50 basis points from summer. The increase, however, does come with caveats, primarily the resolution of the fiscal cliff issue before the deadline.
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If this is resolved, the PCA expects the economy to grow and cement consumption to increase, but if the delay in addressing monetary issues extends into the first quarter of 2013, the organization warns it could cause significant harm and at least a 2.7 percent drop in consumption. The PCA also recently announced that it was welcoming the revised Portland cement NESHAP final rule released by the EPA, which will provide PCA members, and the cement industry in general, the additional time needed for compliance with the revised standards. The PCA considered such time essential to properly completing the planning, engineering, permitting, testing and construction
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Cemex launched two new products in the Mexican market. “Extra” reduces the possibility of cracks appearing, and “Impercem” is billed as reducing moisture and waterproofing costs. The new cements are directed to countries where domestic construction is less than professional. Cementos Argos is projecting a 9 percent increase at the end of the year, thanks to a surge in Colombian infrastructure and growth in housing. The Group Argos also is celebrating port authority approval of the merger between its group and El Bosque Docks, which will provide Argos with seven port terminals. Meanwhile, Holcim is planning to invest US$600 million in a new plant in Colombia. The company has ordered a feasibility study for a 2 million ton capacity plant. Domestic cement production in Peru is expected to increase 13 percent in 2012 on infrastructure and private building activity. Over the last six years, production has averaged a growth rate of 9.1 percent.
Cement demand has increased 170 percent over the last ten years in Bolivia. To meet expanding demand, Coboce has announced plans to expand. Considering its plant has been running at 100 percent of real capacity for the last five years, the move was to be expected. Also announcing plans for expansion was Francesa, which wants to hike production capacity by 1 million tons by 2013. This would double company capacity to 2 million tons.
Venezuela’s Minister of Industries indicated that the country’s cement industry could produce 13 million tons of cement in 2013, but that will not be enough to meet consumption, which the National Alliance of Cement Workers (Antracem)
sees as growing to 17 million tons. To address the gap, the government indicated it plans to hike cement production to cut its reliance on imports as it gets ready to embark on a major construction drive to build 350,000 homes a year.
regional report: americas
Just in the first half of 2012, production was more than 5.6 million tons, up 20.7 percent.
Amid expansion news came word that Bolivia’s Supervisory Authority and Social Control of Business (AEMP) had decided to fine several Bolivian cement manufacturers for what it called a lack of competition. Soboce, Francesa, Coboce and Itacamba were fined a total of 70 million bolivianos. Coboce warned that the financial penalty assessed against it by the AEMP could negatively impact the production of cement, the payment of bonuses for 2012, imported inputs and the construction of its new plant in the town of Irpa Irpa. Similar news came out of Argentina, where a federal court upheld a 310 million pesos fine against the Association of Portland Cement Manufacturers, Juan Minetti, Loma Negra Ciasa, Cementos San Martin, Cementos Avellaneda and Petrochemical Comodoro Rivadavia for cartel behavior. Also in Argentina, builders expressed optimism that a rebound in the market would occur in 2013. An increase in government investment ultimately encouraging mass housing construction was cited as the reason. Brazil’s construction industry is expected to grow 4 percent in 2012, and advance estimates for 2013 show a growth rate of 3.5 to 4 percent. The rate of growth is still lower than 2011’s 4.8 percent, but a decline in business investment and public infrastructure investment has taken its toll.
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OVERVIEW
National Steel Company (CSN)/ Brazil
The National Steel Company (CSN) will invest US$1 billion to increase its production capacity from 2.4 mtpa to 5.4 mtpa by building three more plants and a second unit of clinker in Minas Gerais.
Lafarge/Brazil
Lafarge will build its second plant in the state of Rio de Janeiro, Santa Cruz. The company will spend US$66 million on a plant with an estimated 750,000 ton per year capacity.
CPX/Brazil
CPX is building a 800,000 tons per year facility in the city of Lajedinho in Chapada Diamantina. Investment expected to total roughly US$500 million.
Fancesa/Bolivia
Fancesa is looking to increase its cement production capacity to 1.0 mtpa of cement by 2013, and is hoping to double its capacity to 2 mm tons. The factory can currently produce 800,000 tons of cement, which could increase by around 300,000 tons this year with the launch of a new kiln.
Holcim/ Colombia
Holcim plans to invest US$600 million in the construction of a new 2.0 mtpa plant in Colombia.
Gloria Group/ Peru
Gloria Group is lining up to build a cement plant in Cusco at an investment worth upwards of US$300 million. The group also recently announced that in 2013 it would begin operating two cement plants www.cemweek.com/subscribe in Juliaca, built for an investment of US$10 million.
ANCAP/Uruguay
ANCAP will start construction of a cement plant in Uruguay this year, with an investment of US $160 million. The new cement plant will have an annual capacity of 750,000 tons of production that mostly will be sold in the Brazilian market.
Table available in the CemWeek Magazine Print Edition.
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SECTOR COVERAGE: Construction-related production dropped by 2.6 percent in the Eurozone and by 5.8 percent in the EU27 zone, in September. For 2013, experts forecast stagnation, while a slight improvement is predicted in 2014. Meanwhile, the Middle East is developing its transport network, with MENA (Middle East and North Africa) countries investing up to US$190 billion to fund rail construction projects in the area. “The most significant investments are being made in the Gulf, which is currently the least well-served part of the region in terms of rail, but where government coffers have benefited from high oil prices over recent years,” said Andrew Price, chief economist, Halcrow, and member, Transport Economists’ Group. The new railway network, which is expected to be finished in 2017, will link the six member-states of the Gulf Cooperation Council: Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and United Arab Emirates. Remaining in the Middle East, Iraq, Dubai and Qatar also have major development plans. Iraq needs up to US$1 trillion over the next 10 years to rebuild its crumbling infrastructure and battered economy. “Much of that money could come from Iraq’s rocketing exports of crude oil, but some will have to come from foreign and domestic direct investment,” said investments chief Sami al-Araji.
Growing costs for construction and the maintaining of transportation systems trouble the U.S. building industry. In Europe, building activity is shrinking, while South America and the Middle East are more dynamic, with Brazil, Qatar, Iraq and Dubai has unveiled several large-scale construction projects, such as a new city Dubai preparing for new large-scale construction projects.
U.S. contractors are in danger of losing their long-term viability if building costs continue to go up. Costs of finished homes continue to be high, as prices of construction materials and fuels climbed over the last year. Also in the U.S., the responsibility for maintaining transportation systems seems to be shifting to state and local gov-
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ernments, due to the lack of long-term funding from the federal government. In Europe, Euroconstruct, a network of 19 institutes of economic forecasting, reports that the total construction market in 15 Western and Eastern European countries will shrink by around two percent this year.
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development that could cost US$10 billion. The project envisages 100 hotels, the world’s largest shopping mall, parks, art galleries and exhibition centers. Another project, a US$2.7-billion leisure complex of five theme parks, will be developed soon after. Qatar has also announced tenders for major infrastructure projects. The wave of new projects, meant to prepare the region for the 2022 World Cup, will be discussed at the Qatar Projects 2013 con-
2011
2012
2013
2014
GDP
1.7
0.2
1.3
1.6
Total construction output
0.0
-2.1
0.4
1.7
Note: Data represents annual % change Source: Euroconstruct forecast data for the EC-19 countries: Austria, Belgium, Czech Republic, Denmark, Finland, France, Germany, Hungary, Ireland, Italy, Netherlands, Norway, Poland, Portugal, Slovak Republic, Spain, Sweden, Switzerland, United Kingdom.
ference to be held in February, in Doha. The conference’s agenda will include announcements of new tenders, bidding and awards, which are expected to reach US$30 billion in the next few years. In South America, Brazil is also embarking on large infrastructure projects. The country has started laying concrete for the Generation Group 4 (GG4) unit at a power plant in Rondonia, and it is planning to lay nearly 800,000 cubic meters of
concrete. About 400,000 m3 of rock out of 700,000 m3 have already been excavated, officials say. Concrete Moving to Russia, a new concrete plant will be built in St. Petersburg. Unisto Petrostal, a Russian construction group, will build a 15,000-square-meter new plant producing reinforced concrete structures in Murino. Work is set to begin in 2014.
The Novosibirsk region has inaugurated a new concrete plant with a total value of almost US$100 million. The capacity of the new plant allows building more than 300,000 square meters of housing per year. In the United States, a new concrete and asphalt plant is about to be built. AMAC company has been given the go-ahead in Southampton County, Virginia. Supervisors unanimously agreed to rezone 20 acres for the project estimated at US$4 million to $6 million.
sector coverage: construction materials
Construction and economic growth (Europe)
The U.S. concrete market reported a new acquisition when Central Concrete Supply bought Bode Concrete and Bode Gravel. Bode Gravel and Bode Concrete operate two ready-mixed concrete plants, including one new portable plant, and 41 mixer trucks in the San Francisco area,
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CONSTRUCTION & MATERIALS BY BMWEEK.COM
struct. EU building permits for housing units will be reduced by one percent this year to 42,800. By 2013, that is expected to dip further to 41,400. Because of the increase in property prices, multi-story residential construction development was relatively dynamic. As the housing subsidy is scarce, grants in this area in 2013 will fall an average of four percent, to 22,900.
and produced approximately 243,000 cubic yards of ready-mix concrete in 2011. The transaction is worth at least US$24 million. Meanwhile, China’s equipment maker Zoomlion has unveiled the world’s tallest concrete pump. The pump has a reach of 101 meters with a seven-section boom, the last four sections being made of carbon fiber. The huge superstructure was built by Scania in Sweden. The pump’s 15.5-meter chassis, powered by a 620 hp V8-engine, is probably the longest ever built by Scania. Gypsum and lime In Northern Europe, Finnish limestone manufacturer Nordkalk stated its disappointment after a court order forced it to stop work at Ojnareskogen lime mine. The firm said the suspension of work at Ojnareskogen means their quarry expansion proposal needs to wait for approval. The firm will have to stop the construction of the new pit until the court has considered the issue. The legal process is expected to take between six months and one year, and during that time the company is not allowed to continue operations at the site. Meanwhile, Finland has been struggling with a gypsum pond that was leaking wastewater and had to be sealed. Talvivaara mine’s gypsum pond had a main leak that has been plugged, but another smaller rupture has emerged nearby. Although the leaks have been patched up, officials said waters near the plant showed a dangerously high concen-
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tration of uranium and other metals that could kill fish. In Japan, the government was fined JPY1 billion after a lawsuit started by asbestos victims. The court says the government must compensate former construction workers suffering from diseases caused by asbestos, such as lung cancer and mesothelioma. The damages suit against the state and 42 construction-material makers was filed by a total of 337 people, including former workers in Tokyo and nearby areas, and their relatives. Australian-based Luhr Filter will secure a filter supply deal for a lime producer. The firm will design, deliver and manufacture the equipment for handling the waste gas from an inclined rotary kiln exhaust upgrade. Luhr’s project includes the design and manufacture, in Melbourne, of filters, hoppers and support structures, as well as design of exhaust stack and related access. Aggregates In Europe, the home construction market is contracting, according to Eurocon-
Contraction is reported in the UK too, specifically on the asphalt market. The UK asphalt industry is likely to fall by more than 15 percent in 2012, wiping out recovery that the industry had enjoyed in both 2010 and 2011. The fall has been due to the completion of a number of major road schemes, reduced local authority expenditure on roads and a sluggish economy, analysts say. A further decline in the market during 2013 can be expected. A BDS Marketing report is forecasting an additional drop of eight percent on current demand, by the end of next year. The slow economy might have, on the other hand, a positive effect in the recycling aggregates market in the UK, analysts say. The use of recycled aggregates in England grew up to 20 percent of the total aggregates industry there. Around 530 static sites in the country have an aggregates recycling plant. Together, these plants produced around 37 million tons last year. Meanwhile, in Abu Dhabi the monthly prices for 13 different groups of materials fell in September, according to the government’s data. The value ranged from a 0.1 percent drop in the price of aggregates continued on page 46
Construction Industry Forecast 2013 (U.S.) Indicator
Value
Evolution (y-o-y)
Total construction starts
$483.7 bn
6% 20%
Single housing
$150 bn
Manufacturing building
$12 bn
8%
Commercial building
N/A
12%
Electrical utilities building
N/A
-30%
General public construction
N/A
-1%
Source: McGraw-Hill 2013 Construction Forecast
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EQUIPMENT
& NOTABLE PROJECTS
HOLCIM INKS CARGO DEAL Trimble reports it has inked a pact with Holcim Services (South Asia) to deploy the Trimble Trako Fleet Management and Visual Cargo solutions in their outbound logistics fleet, which transports cement to destinations across India. The Trimble solution will provide Holcim better visibility into its transport logistics operations to help increase fleet productivity, improve operational efficiencies, enhance fleet and driver safety and meet tight delivery timelines. According to a news report, Trimble will provide the Visual Cargo solution to Holcim’s ACC and Ambuja Cements plant operations and the GPS/GPRS based Fleet Management solution for use by their contracted transport vendors. Visual Cargo provides advanced dashboard and reporting features that allow logistics managers to easily monitor, track and manage delivery exceptions. SINOMA SECURES CONTRACTS Sinoma International Engineering inked a US$207.5 million deal with Indonesia’s Bosowa. The project includes engineering design, equipment supply and project management for a 3,000-ton-per-day unit. The contract duration is 24 months. Sinoma’s Equipment Group also secured an equipment deal for a turnkey production line in Kazakhstan. The spare parts will be used for operations at an undisclosed plant, in accordance with the requirements of the standard cement, machinery and electrical engineers on the site. It also will provide a diagnosis of the whole production line equipment and help craft a spare-parts procurement plan. FLSMIDTH’S RUSSIAN DEAL FLSmidth has won a contract worth approximately DKK200 million from the Russian company Kaluga Cement Plant
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to supply additional equipment for their cement plant currently under construction in Kaluga province, some 300 km southwest of the Russian capital of Moscow. This contract is an extension of the one that FLSmidth won in 2011 from Kaluga Cement Plant for the supply of a complete cement plant. The order will be booked by the cement division and will contribute beneficially to FLSmidth’s earnings until commissioning in 2014. KHD TO UPGRADE ITALCEMENTI’S REZATTO PLANT The Italcementi Group (ITC) recently awarded KHD a contract to upgrade and redevelop its historic Brescia Rezzato plant. The upgraded plant, situated in the environmentally sensitive Lake Garda region, will have to adhere to very strict emissions, noise and other environmental requirements, while simultaneously ensuring highest levels of availability and low investment costs. The Rezzato plant, built in 1964, is rich in tradition and history, and is a strategic industrial site in Italy. It was designed by Italcementi Chairman Giampiero Pesenti (father of Italcementi CEO Carlo Pesenti)
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during his tenure as an engineer. In keeping with the history and tradition of the site, the project is scheduled to be finished in 2014, in time for Italcementi’s 150th anniversary. Upon project completion, the plant will be the most efficient and eco-friendly cement plant in Europe. OCR FOR BAG INSPECTION Vision Systems has installed a device that uses an optical character recognition (OCR) tool to verify that the codes are printed on cement bags for quality control in Croatia. The Croatian manufacturer installed inkjet printers from Croatia-based Info on their packaging lines. However, because the cement manufacturing line is a very rough production environment where cement dust can fill the air, the date printing was not always successful and some bags of cement went to market without them. To monitor the results, the In-Sight system was connected to a Cognex VisionView 700 operator interface panel so that the operators could monitor the process. It was also connected to a programmable logic controller (PLC) over a Modbus interface, which compared the characters on the bags with those in its database. BMWeek BMWeek BMWeek
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PEOPLE Board Asks CEO to Stay Raysut Chairman Sheikh Ahmed bin Abdullah Al Ibrahim said that the board had unanimously agreed to ask Mohammed Ahmed Al Dheeb to remain as the Group Chief Executive Officer of the company. Following the board’s plea, Al Dheeb agreed to rescind his resignation. Support for EAPCC’s Naikuni Kenya has expressed support for the retention of Titus Naikuni to the board of East African Portland Cement (EAPCC). Naikuni becomes the first of the unsuccessfully ousted directors from EAPCC to seek a fresh term at the company amid talk that the government, which owns 25.3 percent of Portland Cement, is keen on having fresh faces on the firm’s board. According to the report, he has served on the board since July 2007 and was one of the eight directors that then-acting Industrialisation Minister Amason Kingi ousted on December 22, 2011, accusing them of poor governance. “All the directors who offered themselves for re-election were elected,” Mark ole Karbolo, the Chairman of EAPCC, said. ARM Appoints New Director Former capital markets regulator CEO Stella Kilonzo has become the first woman to be appointed a director at Kenyabased Athi River Mining Cement. “Stella Kilonzo brings a wealth of experience to the ARM board in areas of finance, corporate governance, economic and social policy advocacy, and institutional capacity building,” ARM said in a statement signed by its CEO Pradeep Paunrana. FLSmidth’s New CEO Thomas Schulz will be appointed new Group Chief Executive Officer (CEO) of FLSmidth and is expected to take up his new position no later than June 1, 2013. Schulz, 47, is a German citizen and has since 1998 been part of Sandvik (Svedala Industries). He currently is President of
Sandvik’s construction business area and a member of Sandvik’s Executive Management Group, based in Sweden. From 2005 to 2011, Schulz was based in Germany, Sweden and Singapore as President of Construction and Senior Vice President of Mining and Construction. He holds an MSc and a PhD in engineering from the Technical University of Aachen, Germany, with a dissertation in mineral mining and quarrying. Lafarge-Tarmac Execs Appointed Jamie Pike has been appointed as NonExecutive Chairman, Cyrille Ragoucy as CEO and Guy Young as CFO of the joint venture that will combine Tarmac’s and Lafarge’s cement, aggregates, readymixed concrete, asphalt and asphalt surfacing and maintenance services and waste services businesses in the United Kingdom. The appointments are subject to the completion of the joint venture, and it is anticipated that the joint venture will commence operations in early 2013 once final clearance is received from the Competition Commission. Cohrs Named Head of PCA The Portland Cement Association (PCA) Board of Directors elected Cary O. Cohrs as Chairman during the association’s fall board meeting in Washington, D.C. Cary Cohrs Cohrs succeeds Aris Papadopoulos of Titan America. John Stull, President and CEO of Lafarge North America, was elected Vice Chairman. Cohrs is the current President of American Cement, a joint venture of CRH’s Oldcastle Materials and Trap Rock Industries based in Sumterville, FL. President
of American Cement since 2005, he has decades of experience in the cement industry. In 2000, he was appointed Vice President of Operations for Florida Rock Industries, where Cohrs also served as plant manager and construction manager. Management Let Go The management team at the muchdelayed Cerro Azul cement project in Venezuela has been let go by government overseers, reports El Nacional Ricardo Menéndez, Minister of Industry, decided to remove from the presidency of the company Rafael Lugo and dismissed all eight members of the board. The Comptroller Committee of the National Assembly launched an inquiry in December 2011 into the delays in the project after receiving a request from one of its members, opposition deputy Rodolfo Rodriguez. The parliamentary investigation began after El Nacional published a report that identified irregularities such as abandonment of port machinery and violation of labor laws designed to protect the integrity of Venezuelan workers. Director Deported ZAMBEZI Portland Cement operations director Daniela Ventriglia has been deported to Italy by the immigration department for being “a danger to the peace of the country,” reports the Lusaka Times. According to the report, Zambezi Portland Cement Operations manager Mwamba Kayula confirmed that Ventriglia was flown to Italy. NEW MANAGING DIRECTOR The Board of Directors of Najran Cement Company has appointed Mohamed bin Sultan Abu Ela as managing director. The new position is in addition to his current position as head of the Governing Council for the company. He now takes the leadership role of the company and also becomes a member of the board of directors of major factories for mining held by the company. BMWeek CemWeek CW Group
DECEMBER / JANUARY 2013
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FLASHBACK News flow on CemWeek.com last two months (darker red shows higher news volume)
GLOBAL SPOTLIGHT All eyes are on India as the world's second largest cement market is fined by the competition authorities. China, Spain and the United States also make the headlines on CemWeek.com continued from page 40
and sand to a 25 percent fall in the price of wires and cabling used in apartments. The prices for wires for smaller buildings and residential towers fell by 15 percent and 9 percent respectively, while the price of steel dropped by 10.7 percent. The price of waterproofing products was one area that witnessed an increase in prices — up by 15.7 percent compared to the previous year. Green and innovative building A first in the United States: in California, Axion International opened the first bridge made of 100 percent recycled consumer and industrial plastics. The 25foot pedestrian construction is the first known bridge on the West Coast with a superstructure and fencing made of recycled plastic. The bridge is located in Santa Rosa Valley.
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In the northern part of the continent, Alaska green-lighted glass use for building projects. Alaska will allow crushed glass to be recycled into the gravel used to strengthen roads. The engineers will focus on identifying how to process household waste glass into a long-lasting construction material. The Carbon Leadership Forum (CLF) has announced the first American environmental footprint standards, also known as Product Category Rules (PCRs), for concrete mixes. “Reducing the carbon footprint from concrete is one of the most significant actions that the building sector can take,” said Ed Mazria, founder and CEO of Architecture 2030, a U.S.-based environmental advocacy group focused on protecting the global environment.
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In New Jersey, Recycled Energy Development (RED) and National Gypsum (NGC) have opened a combined heat and power project at NGC’s Burlington site, which produces approximately 3.4 megawatts of clean electricity. In India, a company launched new solutions for speedy road repairs. ACC Concrete presented two new solutions to meet the burgeoning need for speedy road repairs, and introduced UTWT24 and Speedcrete products to respond to the demands for instant road surface overlay and repair in India. The products can be laid in depth ranging from 100 mm-150 mm for road sections. The new products allow roads to be trafficked within 24 hours and 8 hours respectively from the time of application.
BUZZ TOP 15 STORIES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
Takeover speculation over CRH Holcim signals it may sell off assets in Europe TEE to build cement plant in Myanmar India’s Lanco to set up cement plant Mittal buys Lafarge-Tarmac UK venture Kenya cement firms wary of Dangote’s growing muscle Lafarge clocks in weaker quarter Expanded cement plant inaugurated in Congo Egypt cement prices rising as truckers strike Egypt’s ASEC Cement to expand production to 10 mm tons Egypt: New cement plant opening in Minya India’s JSW to double cement output Spain: Industrry decries higher energy taxes Germany shows the way in new cement technologies Sinoma inspects progress at Ethiopia project
TOP 15 STORIES 1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. 13. 14. 15.
VM Materials reorganizing Illinois lining up bids for major highway construction projects Fitch has stable outlook for US building materials next year UK leads Euro construction growth Fletcher Construction gets fined Oman lines up multi-purpose investment project Kansas drops Martin Marietta mine as contract supplier Portugal’s PTN declared insolvent US EPA fines Carmeuse for environmental violations Italy: Concrete demand continues to tumble Philippines: Opascor to invest in new port equipment US construction spending hits 37-month high in October Vale rallies amid expectations of commodities rebound FLSmidth unveils succession plan Report: Martin Marietta may push friendly offer for Vulcan
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CONfERENCE:
cement business & industry
AFricA
JOHANNESBURG ♦ MARCH 27-28, 2013
The Cement Business & Industry (CBI) Africa Conference, which will be hosted in Joahannesburg, South Africa on March 27 and 28, 2013, will create a new platform connecting the cement industry, analysts, technologists and other stakeholders from Africa and all parts of the world. Africa has been experiencing strong growth in the majority of its cement markets for the past 15 years. This has led to quite a dramatic evolution of the industry on the continent resulting in new entrants coming into the market as well as increasing interest from multinationals and great development opportunities for existing players.
The program will take a dual-track business and technical approach to issues around: ■ Opportunities and challenges in North and Sub-Saharan Africa ■ Investments, finance and expansion programs ■ Environmental performance and alternative fuels ■ Cement trading, logistics and handling ■ Cement fuels: coal, petcoke and energy improvements
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