WORLD: Big emitters in cement sector join forces to decarbonize production

Sixteen of the world’s largest cement companies –an industry notorious for its high carbon emissions – backed a plan at the climate summit Wednesday that would see their industry shift toward the use of de-carbonization technologies.

The announcement represents something of a coup in a climate summit that has lacked a focused discussion on de-carbonizing industry, despite warnings from the UN’s Intergovernmental Panel on Climate Change that deploying technologies to achieve this are critical to limiting global warming to 2 degrees Celsius.

“The IPCC has indicated and we believe that keeping down emissions in the future will be far more expensive without carbon capture and storage technologies,” said Bellona President Frederic Hauge. “This makes cement companies real movers in employing capture technologies.”

Cement, as earth’s second most frequently used commodity after water, accounts for 5 to 8 percent of anthropogenic CO2 emitted worldwide, according to various estimates, making the industry a major source of global warming comparable in climactic impact to steel.

That puts emissions from cement production at 3.9 gigtatons annually, according to International Energy Agency, or IEA, figures.

Rob van der Meer, public affairs director on global environmental sustainability for Germany’s giant Heidelberg Cement, told Bellona that his industry had “no choice” but to use carbon-capture technology “if the world is to stay within the 2C temperature rise.”

“We have a carbon problem, yes,” van der Meer said in an interview with Bellona at the Le Bourget negotiations center. “There is simply now way to produce cement without carbon release.”

But he said that, according to objectives laid out by the IEA in its Cement Technology Roadmap of 2009, the worldwide cement industry would work to decarbonize its emissions to the tune of 17 million tons per year.

Though the plan envisions such measures on every continent where cement is produced, van der Meer said IEA studies indicate that most of those reductions would first have to occur in Europe.

The conundrum for the industry, he said, is that you can’t simply demand that cement production simply wind down – it’s too necessary for too much.

Indeed, the demand for cement is so pervasive that by 2050, van der Meer said each person on earth would “consume” about 500 kilograms of cement, equivalent to 2 cubic meters of concrete per year.

Further, cement and steel alike are crucial for the infrastructure that will support the shift to renewable energies such as solar and wind that the Paris Climate Summit is pushing to power the world by the end of the century.

“Cement is important for building wind farms, especially those that are offshore,” said van der Meer.

It also plays an enormous role in building dams for hydro-electric power.

“There’s a certain buffer of carbon emissions that will always occur with cement production that you can’t go below,” said Keith Whiriskey, Climate Technologies Project Manager for Bellona Europa. “The process for making cement produces a lot of CO2, so the best thing to do is trap it.”

Whiriskey said that making cement involves breaking up limestone with acid at temperatures of 1000 degree Celsius releasing calcium, oxygen and carbon.

Van der Meer said sticking points to moving the de-carbonization project forward in Europe center around low carbon prices in the European Union’s Emissions Trading System, or EU ETS, and that, by turn, threatens the commercial viability of using pricey carbon capture technology – and van der Meer insists it’s pointless to move on such projects unless there’s a profit to be had.

“The reality is that industry doesn’t invest in something just because it’s an interesting new technology,” he said. “So the EU needs to create the proper business conditions for it.”

For the moment, the real innovations in capturing and trading carbon are happening elsewhere. Jonas Helseth, director of Bellona Europe, said the EU has so far failed at this, and risk losing de-carbonizing technologies to other parts of the world.

Boundary Dam, the one-year-old carbon capture and storage unit in Saskatchewan, Canada, cost €1 billion, just as a first blush of how costly up front investments in such projects can be. But the price of a second unit slated for construction at the coal-fired power station is estimated to cost at least a third less.

Texas oil drillers have long known the worth of using CO2 for enhanced oil recovery, or EOR, which involves pumping the greenhouse gas at high pressure into nearly depleted oil wells to bring hidden hydrocarbons to the surface.

And China’s pilot carbon trading programs are second only to EU ETS, according to a World Bank analysis. China’s anticipated national market, however, would regulate 40 percent of the country’s economy, surpassing EU ETS and covering 3 to 4 billion tons of CO2 worth up to $65 billion by 2020.

And van der Meer says Heidelburg will be all to happy to operated in that lucrative market.

“If there is not a business case for [trading CO2] in Europe, then we will move where there is a business case for it,” he said.

Hauge pointed out that would be a loss for Europe, but that it would still end up netting the planet 17 million fewer tons of CO2 per year, which jibes with IPCC recommendations to deploy decarbonizing technology.

One place in Europe where cement production with carbon capture for which Heidelburg has high hopes is the company’s NORCEM production unit in Brevik, Norway. The Norwegian government has provided €50 million in investment toward the NORCEM project, which will act as a blue print for Heidelburg’s future production plants with carbon capture.

Combining the use of biofuels at the plant with carbon capture is expected to significantly reduce the facility’s CO2 emissions, with the end goal being complete carbon neutrality.

“We have a vision that our product in a life-cycle perspective will be carbon neutral by 2030, and we believe that carbon capture from cement production is an important part of and long step toward achieving this vision,”Gunnar Syvertsen, CEO for Heidelberg Cement Northern Europe said in a 2013 statement.

What’s gotten stickier here in Paris than the notion of carbon capture is transportation and storage of CO2 after it’s caught.

Whiriskey said geologic storage of CO2 has faced opposition from many environmental groups, and has barely been mentioned in high-level discussions at all.

Van der Meer said Heidelburg will do the catching, but someone else has to keep what they pull down – such as oil companies.

But Whiriskey said this is a natural division of labor: Heidelburg can make the investment to catch the CO2 before it fouls the atmosphere, but the oil industry is the one that possesses the geological know-how to safely store carbon and keep it from seeping back into the atmosphere.

Bellona will therefore continue tracking a course for carbon storage.

“We have to take the IPCC recommendations for CCS seriously,” said Hauge. “We may end up standing alone in this, but we’re not going to back away from a problem just because it’s difficult.”

PAKISTAN: CEMENT INDUSTRY – GRAVE ISSUES NEED TO BE ADDRESSED

During July to November 2015, cement industry has posted a growth of 15.64 percent in domestic sales compared with sales during same period of last fiscal year. Domestic despatches rose to 12.2 million tons during this period against 10.56 million tons during same period of last fiscal. Exports during July to November 2015 recorded a massive decline to 2.56 million tons from 3.45 million tons during last year i.e. by 25.73 percent. The overall situation during first five months of current fiscal year showed a growth of 5.46% compared to the same period of last fiscal year. Quantitatively the total despatches by cement industry were 14.77 million tons from July 15 to Nov. 15 against 14 million tons during corresponding period of last fiscal year.

Analyzing zone wise despatches, the north based cement mills despatched 10.17 million tons to domestic markets during July to November 2015 that was 14.6 percent higher than the despatches during same period of last fiscal. Exports from north however declined during this period to 1.63 million tons i.e. by 25.24 percent over last fiscal that were 2.18 million tons. In southern region, the cement mills experienced even more growth in domestic markets as against despatches of 1.69 million tons during July to November 2014, the domestic dispatches increased by 21.09 percent to 2.04 million tons. However there was a definite slump in exports that declined by 26.58 percent to 0.93 million tons from 1.26 million tons during the corresponding period last year.

The upward trend in domestic consumption of cement this fiscal continued in 5th straight month; at the same time exportscontinued to lose global markets. Cement dispatches to domestic markets during the month of November 2015 were 2.843 million tons compared with 2.369 million tons during same month last year showing an increase of 20%. Exports during November 2015 were 0.533 million tons against 0.66 million tons during November 2014 showing decline of 19%. Total despatches during November, 2015 were 3.376 million tons compared to 3.028 million tons during same month last year showing increase of 11.49 percent. The despatches in November were the highest in past five months.

APCMA spokesperson regretted that government planners are still lacking to check unregulated import of Iranian cement in the country at under invoiced rates. The same cement, he added, is finding its ways in the Afghan markets in which our share has been reduced by 20.63% during the first five months of current fiscal year. He said that we are still facing the dilemma of Iranian cement despite reaching to various decision makers to suspend imports of Iranian cement into Pakistan from Balochistan by road and railway due to under invoicing and the connivance of custom authorities. The locally producedcement is fast losing its market in the areas adjacent to the Iranian border and the coastal areas of Balochistan. The industry has suggested that a strategy should be in place to protect the local cement industry against smuggling of Iraniancement coming into the country. Government should also make it mandatory to get the quality certification of Irani cementby PSQCA otherwise it should not be allowed to enter in the country.

He added that due to high cost of doing business in Pakistan, Pakistani cement industry is losing competitiveness to other countries such as Iran, UAE and India and has appealed for reduction in energy costs, removal of GIDC imposed on gas,abolition of custom duty on coal and additional incentive of 5% on export of cement.

VIETNAM: Major change anticipated for VN cement industry

The merger of Lafarge Vietnam and Holcim Vietnam, the two big cement manufacturers, is expected to be wrapped up by December 2015. 

Lafarge has advantages in technology research and Holcim has achievements in developing brands. The merger will present a strong rival to other manufacturers. 

Nguyen Cong Minh Bao, a senior executive of Holcim Vietnam, at a meeting with the local press, stated that the two manufacturers would strive to become the leading enterprise in the building material industry.

In July 2015, Swiss Holcim and French Lafarge announced the merger to become LafargeHolcim, present in 90 countries with 2,500 cement plants. 

It is still unclear if the ‘marriage’ of the two manufacturers would give birth to a new cement brand in Vietnam. However, an analyst commented that the two ‘tigers’ j will be even stronger, like ‘tigers with wings’.

He said the merger will force other cement manufacturers to strengthen their competitiveness and undergo restructuring to become stronger as competition will increase because cement productivity is on the rise.

According to Nguyen Van Thien, former chair of the Vietnam Cement Association, Lafarge’s cement plant in Vietnam has the capacity of 500,000 tons a year, but it make the right move when merging with Holcim because it will be able to cut production costs.

Thien noted that existing cement plants, which are numerous and small, should also merge in order to become bigger and more powerful. In Thailand, Malaysia and Indonesia, for example, there are only about 10 manufacturers in each country. Vietnam has up to 60 cement plants, big and small, and they have to compete fiercely with each other.

In 2014, as the domestic real estate market froze, the cement oversupply became even more serious. This forced cement manufacturers to boost exports to reduce inventory volumes. 

A report showed that Vietnam put out 71 million tons of cement products last year, but only 50 million tons were sold in the domestic market. Cement manufacturers hope 71-73 million tons would be consumed this year, a modest increase of 4-7 percent compared with 2014.

Nguyen Quang Cung, chair of the Vietnam Cement Association, also thinks that cement manufacturers should undergo a restructuring process, and merger and acquisition should be encouraged.

Cung said some cement manufacturers are merging and creating the Vietnam Cement Corporation (Vicem). These include Ha Long, Song Da and Song Thao Companies.

CHINA: Government work group steps in Shanshui Cement offices

A government work group has stepped into the offices of Shandong ShanshuiCement Group Co Ltd., whose Hong Kong-listed parent declared default on 2 billion yuan($312.5 million) debt last month, amid an intensifying boardroom battle.

The work group led by a deputy mayor of Jinan, capital of eastern Shandong province whereShandong Shanshui is based, aims to ensure stability at the cement manufacturer, which isone of China's largest and employs more than 22,000 people across various provinces,Xinhua learned from a government source.

Shandong Shanshui is the operating unit and a wholly-owned subsidiary of Hong Kong-listedChina Shanshui Cement Group Ltd, whose entire board was thrown out a week ago.

In a Dec 3 disclosure on the Hong Kong stock exchange, the new board of China Shanshuisacked the board of Shandong Shanshui, appointed new directors and changed articles ofassociation of Shandong Shanshui.

The new directors then released a statement via a law firm that they should be the legalmanagement of Shandong Shanshui.

But in a Tuesday disclosure on the Shanghai Clearing House, Shandong Shanshui,apparently still led by its original board, said the Dec 3 decision was illegal and, therefore,ineffective.

Article 17 of the Rules for the Implementation of the Law on Foreign-Capital Enterprisesstates that the articles of association of a foreign-capital enterprise shall become effectiveafter the approval by the examining and approving government organ.

The original board-led Shandong Shanshui cited the article, saying that China Shanshui's Dec3 decision violated the rules, since the change of articles of association had not beenapproved by a government organ.

The original board-led Shandong Shanshui said it was suing China Shanshui for spreading"false information," including the change of board and articles of association of ShandongShanshui, in a court of Jinan. It added that the court has agreed to hear the case.

Sources close to the original board said the government work group had instructed ShandongShanshui to maintain the status quo, and will guide major decision-making, implement worksafety measures, and prevent violent incidents.

INDONESIA: Cement Sales Indonesia Climb 4.7% (y/y) in November 2015

Cement sales in Indonesia climbed 4.7 percent (y/y) to 6.1 million tons in November 2015 supported by rising cement sales in all regions apart from the Moluccas and Papua. Widodo Santoso, Chairman of the Indonesian Cement Association (ASI), said domestic cement demand rose sharply in November despite seeing some rainfall (which usually leads to delays in development of infrastructure and other construction projects). Santoso says this rise is due to improved government spending on infrastructure projects.

Growth in cement sales were highest on Sulawesi, Bali & Nusa Tenggara and Sumatra as demand rose due to the start of power plant and smelter construction in these regions.

Year to date, Indonesian cement sales stand at 55.6 million tons in the January-November 2015 period, up 1.9 percent from the same period last year. Santoso expects cement sales to remain strong in the last month of the year, hence full-year cement sales may reach 61.5 million tons, up 2.5 percent (y/y) from 60 million tons in 2014.

Optimism about the cement industry also stems from the start of two new cement factories: Semen Jawa (with an annual cement production capacity of 1.7 million tons) and Semen Merah Putih (annual production capacity of 3.6 million tons). Furthermore, Semen Bosowa and Semen Bima are also expected to expand production capacity before the year-end. In the first quarter of 2015, many domestic cement producers curtailed output as demand had weakened. In the first half of the year cement demand mostly originated from the property sector, not from major infrastructure projects.

Indonesian brokerage Danareksa Sekuritas expects cement sales to grow further in 2016 due to the government's push for infrastructure development. However, the country's property market is expected to remain sluggish and therefore growth of cement sales will most likely not see double-digit growth.

JAPAN: Japan's cement makers boost Asia-bound exports

Japanese cement producers are turning to exports to compensate for sluggish domestic demand. The latest numbers suggest their strategy is paying off.

"Japan's cement exports are growing," Akira Fujisue, a senior official of the Japan Cement Association and senior managing executive officer of Sumitomo Osaka Cement, told reporters in November. He pointed to good business prospects in Singapore and other Asian markets.

Indeed, cement exports in October surged 58% on the year to 871,000 tons -- partly due to a decrease in production a year earlier while factories were being refurbished. Exports also registered year-on-year growth from November 2014 through July 2015. 

Thanks to increased demand in Asia, the Japan Cement Association estimates exports in fiscal 2015 -- through this coming March -- will rise 6% to 10 million tons. 

Cement sales in Japan are on the decline amid a slowdown in public works projects. The association now estimates domestic demand at 44 million to 45 million tons for fiscal 2015, down from a previous estimate of 46 million tons. This would mark the second straight year with a fall in demand.

Construction companies have also been shifting to building methods that require less cement, shrinking the market further. The bleak outlook at home is spurring cement makers, which have been exporting around 15% of their output, to try to ramp up shipments abroad. 

Port, road and other infrastructure projects are underway around the region. Shipments to Singapore, in particular, have risen because of highway construction there. Demand in Hong Kong is robust as subways and highways are being built.

Against this backdrop, Taiheiyo Cement has boosted its storage capacity in Singapore by 50%, to 74,000 tons. The company is pushing a high-end product in the city-state -- a mixture of regular cement and coal ash. A hit in Asian and other emerging markets, it does not crack easily when turned into concrete.

Mitsubishi Materials, meanwhile, aims to raise its supply capacity in the U.S.

Strong demand is keeping export prices high. Major Japanese cement producers and Asian buyers have negotiated export prices of $40 to $45 per ton for fiscal 2015, in free-on-board terms. That price level is roughly the same as last year's; prices had been rising since 2010.

VIETNAM: Cement export target misses mark this year

While the cement industry was struggling with an excess of supply over demand, exports, which were considered a solution to boost consumption, failed to meet expectations.

Cement and clinker exports in 11 months of this year dropped by 27 per cent over the same period last year to roughly 15 million tonnes, far below the target of 20 million tonnes for the full year.

The cement industry faced harsh competition from China, the world's biggest cement producer, which accounted for 60 per cent of the world's total output and selling at lower prices.

Luong Quang Khai, chairman of Viet Nam Cement Industry Corporation (Vicem), which held a 35 per cent share of the domestic market, said that Vicem's cement export could only meet 60 per cent of the full year's target. Vicem set goal of exporting 3.5 million tonnes cement and clinker this year, the same as last year.

Khai said that Vicem did not want to lower prices to boost exports as doing this would affect other procedures and the entire industry.

A representative of The Vissai, the country's leading cement exporters, said it would be difficult to achieve the same cement export results as the previous year.

Previously, the Ministry of Construction estimated that total cement sales would reach between 72 million and 74 million tonnes this year, up 4 per cent over 2014, in which exports would be at around 20 million tonnes.

The ministry forecast that cement exports would fall to around 16 million to 17 million tonnes next year and the total cement sales would be between 75 million and 77 million tonnes.

To date, there were 76 cement production lines in the country with a total design capacity of 81.56 million tonnes per year which would then increase to more than 98 million tonnes in the next five years. As a result, the industry was anticipated to continue facing an excess of supply over demand in the domestic market.

The ministry urged cement producers to reduce production costs and improve its distribution network to lower prices.

MALAYSIA: CMS Cement to raise cement prices by 4.6% on average

CMS Cement Sdn Bhd, a subsidiary of Cahya Mata Sarawak Bhd, announced that it will adjust its cement prices upwards by an average of 4.6% effective Jan 1, 2016, due to the depreciation of the ringgit. 

In a statement issued on Tuesday, CMS said it will increase the prices to maintain the quality of its cement manufacturing and supply businesses, among others. 

It added that the sustained depreciation of the ringgit since January 2015 had created an unprecedented increase in the cost of cement production, as over 60% of the key raw materials used to make cement namely clinker and gypsum are bought in US dollars. 

In addition, the equipment and spare parts for machinery and all shipping costs are paid for in US dollars. 

As at mid-November 2015, the ringgit recorded a 24.8% year-to-date loss, and a 30.9% deprecation over the same period last year. 

CMS said the steep decline resulted in major increases in raw material prices since early 2015.

“Our commitment is to the state’s growth and in order for us to achieve this vision, tough but essential measures need to be implemented. At group level, we have absorbed the significant impact of the unfavourable foreign exchange rate since the beginning of the year. Various strategic measures have been implemented to control our production costs, however the increase in costs due to the major decline in the Ringgit has seriously impacted the cement division and the group’s profitability. If continued, this will not allow us to fulfil our long term commitment to the growth of the state,” said Cahya Mata Sarawak group managing director Datuk Richard Curtis.

NEW ZEALAND: Holcim dome: 22,000 tonne of cement arrives in Timaru

Holcim's $50 million cement dome at Timaru's port is set to be fired up.

The company's first Timaru-bound order, 22,000 tonnes of cement, was being unloaded from the Esperance Bay ship on PrimePort Timaru's specially-constructed No 2 wharf on Wednesday.

Holcim capital projects manager Ken Cowie said the cement order, from Kanda port in Tokyo, was the first in-bound shipment for the company in Timaru.

Cowie said the Holcim-owned Milburn Carrier II, which will ship out-bound orders from Timaru, was scheduled to arrive in port for the first time later in December.

The Milburn Carrier II's home will be Timaru and it will be berthed on the south side of the No 2 wharf.

The 30,000 tonne cement silo facility was now in its completed form and no radical changes would be made to it, Cowie said.

The bright white would not be painted with a Holcim logo and would not be allowed to be painted in any way by the community either.

But if the council or members of the public were interested in shining light displays onto it, Holcim could be open to that, Cowie said.

When the pipes installed to the top of the dome were flushed for the first time, some rusty water had stained a part of the top of the dome.

This was not likely to happen again and Holcim hoped to have it cleaned soon, Cowie said.

PrimePort chief executive Phil Melhopt said the No 2 wharf was almost completed and ownership of it had been handed over to the port by Downer.

The only main part of the project that had yet to be completed was a widening of the land end of the wharf, which would allow trucks to drive onto it, Melhopt said.

"It's good to see the vessel arriving without incident and to see it safely secured on the wharf," Melhopt said. "We're pleased to have the project 99 per cent done."

Melhopt said he understood Holcim were aiming for 18 in-bound vessels a year to Timaru.

INDIA: Southern cement players better placed

Despite the Chennai flood and cement price corrections in South India, the stocks of south-based cement players have not seen a deep correction. Ramco Cements, Dalmia Bharat and India Cements, which have significant exposure to Tamil Nadu, are trading at Rs 371, Rs 782 and Rs 83, slightly lower than levels seen in November end. While the demand and realisation in the current December’15 quarter have remained soft in South India leading to correction in cement prices (estimated Rs 10-20 a bag), recent unexpected rains have led to some dip in sales volumes. This may result in cement companies reporting a much softer December quarter performance feel analysts, but cement demand is likely to get a major push thereafter.

The damage done by excessive rains will lead to a pickup in construction activities and there will be a push from government side too. While analysts had been anticipating a turnaround and boost from March’16 quarter, the recent events may add to upsurge in demand leading to an increase in capacity utilisations. The capacity utilisations have been at close to 60 per cent levels in the South compared to all India average of more than 70 per cent. The South India players thereby are once again in a sweet spot, feel analysts.

Cement prices in South India had gained about Rs 5-10 a 50 kg bag in October’15, but could not sustain and fell by Rs 3-5 a bag in November mainly on account of moderate correction in Bangalore and Kerala markets. Average cement price were ruling at Rs 350-355 a bag (down a per cent over previous month and up 14 per cent year-on-year) as per Reliance Securities channel checks at the end of November. With torrential rains impacting Tamil Nadu and adjoining states too, further pressure is likely to have come now. Analysts at Karvy say that heavy rainfall in Tamil Nadu and coastal Andhra Pradesh are playing a key role in sluggish demand in near-term. Nevertheless, cement prices in South India will bounce back sharply, feel analysts, adding that now the state government will also allocate more for developing Chennai infrastructure and other parts of Tamil Nadu. This coupled with expected boost in infrastructure spending in Andhra Pradesh and Telangana, which are working hard to boost investments in the states, should lead to revival in cement demand.

Analysts at Reliance Securities say that at the current market price, they have Buy recommendation on UltraTech Cement in the large cap space while in mid-cap space Ramco Cements is their pick from south centric players. UltraTech being a pan-India player will also benefit from a recovery in South, while Ramco is likely to be a major beneficiary. India Cements, too, would benefit from this boost in demand. Analysts at Angel Broking like both Ramco Cements and India Cements. However, the stress on the balance sheet is what keeps the street sentiments under check.

Analysts at Nomura in their note a few days back had said, “As we adjust our target price for India Cements with CSK (Chennai Super Kings) valuations and incorporate our changes in earnings estimates to reflect better pricing in south India, the stock appears fairly valued”. They had target price of Rs 87. Amongst others to be looked at is Dalmia Bharat Cement that has adequate capacities in Tami Nadu and Andhra Pradesh. The company should benefit from growing cement demand. Analysts are positive on the stock even as it has seen sharp run up and almost doubled in a year.