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Welcome arrow Articles arrow Miscellaneous arrow Cementing the Best Deal
Cementing the Best Deal PDF Print E-mail
By Jeff Heselwood

Image Cement is yet another commodity that is frequently taken for granted.† Essential for construction around the world, whether for residential housing, office blocks, bridges, roads and a host of other applications, cement cannot be ignored.† Indeed, cement - or concrete - is the most commonly used construction material in the world.

It was in 1824 that Joseph Aspdin, a British stone mason, obtained a patent for a type of cement he produced in his kitchen. The inventor heated a mixture of finely ground limestone and clay in his kitchen stove and ground the mixture into a powder to create a hydraulic cement - one that hardens with the addition of water. Aspdin named the product portland cement because it resembled a stone quarried on the Isle of Portland off the British coast. With this invention, Aspdin laid the foundation for today's portland cement industry.
Portland cement, the fundamental ingredient in concrete, is a calcium silicate cement made with a combination of calcium, silicon, aluminium, and iron. Producing a cement that meets specific chemical and physical specifications requires careful control of the manufacturing process. Generally, the required raw materials consist of combinations of limestone, shells or chalk, and shale, clay, sand, or iron ore which are mined from a quarry near the plant.

 

China and India

Around 45 per cent of the world's cement is produced in China, which is perhaps unsurprising given the vast country's immense infrastructure upgrades in recent years.† China is the major producer, as well as the largest user and exporter of the commodity.

There are around six principal cement producers in Hong Kong, including Hong Kong-listed mainland producer Anhui Conch and the newly listed West China Cement, but Green Island and China Resources Cement Holdings are two of the largest. China Resource's principal activities are manufacturing and distributing cement and concrete products. Its operations range from the excavation of limestone, to the production, sale and distribution of cement and cement products, clinker and concrete. The Group has 11 clinker production lines and 31 cement grinding lines.

Green Island Cement (Holdings) Limited is a wholly-owned subsidiary of Cheung Kong Infrastructure Holdings Limited.† Green Island Cement was founded in 1887 at Tsing Chau (Green Island) in Macau. The group now operates the only integrated cement plant in Hong Kong and has two cement and concrete operations in South China. The shipping and mining activities together form the arms of the group to maintain its interest in South East Asia. In addition, the Group is also actively seeking other business opportunities in environmental development. In addition to ordinary portland cement, GIC produces high early strength and low alkaline cement in Hong Kong and cement products are traded under the brand names of Emerald, Golden Eagle, Special Green Island, Jade

The company handles the ocean shipping transportation of raw material required by the cement operation. Materials include limestone and clinker using Handymax and Panamax size vessels.

India ranks second in terms of global cement production, with cement companies adding nearly 11 million tonnes capacity during the period April-September 2009, taking the total installed capacity to around 231 Mt by September 2009.

With the boost given by the government to various infrastructure projects, road networks and housing facilities, growth in the cement consumption is anticipated in the coming years. According to Jyotiraditya Scindia, India's Minister of State, Ministry of Commerce and Industry, cement production could rise to 236.16 Mt in 2011 and touch 262.61 Mt in 2012.

According to the Cement Manufacturers' Association, cement despatches were 14.13 Mt in December 2009, showing a growth of 13 per cent as compared to 12.48 Mt in December 2008. During December 2009, cement production was 13.91 Mt, registering a growth of 13 per cent as compared to 12.31 Mt in December 2008. Between April and December 2009, cement production totalled 116.01 Mt while cement despatches totalled 115.31 MT.

A few of the leading manufacturers are the UltraTech/Grasim combine, Dalmia Cements, India Cements and Holcim.

Worldwide, the United States ranks third in cement production, where 39 companies operate 118 cement plants in 38 states.

In 2009, about 70 million tonnes of portland cement and two million tonnes of masonry cement were produced at 107 plants in the United States. Ongoing plant closures left the year-end plant count at 101. Cement was also produced at two plants in Puerto Rico. Sales volumes fell sharply, but prices fell only modestly; the overall value of sales was about $7.3 billion. Most of the cement was used to make concrete, worth at least $40 billion. About 72 per cent of cement sales went to ready-mixed concrete producers, 13 per cent to concrete product manufacturers, 7 per cent to contractors (mainly road paving), 3 per cent to building materials dealers, and 5 per cent to other users. In descending order, Texas, California, Missouri, Pennsylvania, Alabama, and Michigan were the six leading cement-producing States and accounted for about 50 per cent of U.S. production.

 

Indonesia

Indonesia's cement output rose 13 per cent in the first quarter of 2010, as construction increases in the country and as the economy bounces back from the global financial crisis. Analysts said they expected cement sales to grow at about the same pace as the economy this year, after flat growth last year.
The data from the Indonesia Cement Association (ASI), which was uploaded to the website of PT Semen Gresik, the country's largest cement producer, showed that domestic cement sales totalled 3.36 million tonnes in January, compared to 2.97 million tonnes in January 2009.
"The January numbers are cogent with the demand shift to outer Java," Katarina Setiawan, head of research at PT Kim Eng Securities, said in a report, noting that sales in Java grew by 11 per cent year-on-year compared to 16 per cent outside Java. She added that said she expected cement sales to grow 6 per cent this year, roughly in line with most forecasts for domestic economic growth.
In 2009, cement sales grew by just 0.9 per cent, with the total national consumption recorded at 38.41 million tonnes.
Anton Gunawan, an economist at PT Bank Danamon, said the global economic crisis caused cement sales to drop sharply from May 2008 to February 2009. But for this year, Anton said, "There is a clear trend of economic recovery that will boost cement consumption."
Anton added that lower interest rates and the government's plans to speed up its infrastructure-development program would boost demand for cement from the construction sector.
Sonny John, an analyst at PT Samuel Sekuritas Indonesia, supported the view that cement sales would grow by about 6 per cent this year, saying demand would be supported by improving consumer-purchasing power, lower interest rates and the government's fast-track electricity generating programme.
The government has predicted that the economy will expand by 5.5 per cent this year, up from the 4.5 per cent growth recorded in 2009. Growth in 2009 was supported by better-than-expected exports and resilient consumer spending.

Meanwhile, Switzerland's Holcim, the world's second-largest cement-maker, has announced it will build a new plant in Indonesia, boosting annual capacity in the country by about 15 per cent.

Holcim said in a statement in early May that it will invest $450 million to build the plant in the island of Java, which has registered the Indonesia's highest volume growth for 2009 cement consumption. The plant is expected to go into service in the first half of 2013.

 

Australian Cement Industry

Australia's cement industry comprises three main producers: Adelaide Brighton Ltd, Cement Australia and Blue Circle Southern Cement. Their operations are located around Australia, and include 15 manufacturing sites, 10 mines and 74 distribution terminals. Cement plants are located in regional centres or in small rural communities making it a significant regional employer. In 2008, the industry employed 1852 people and produced over nine million tonnes of cementitious materials, with an annual turnover in excess of $1.97 billion.


Japan, Taiwan and UAE

Japan has a long history of producing cement beginning in 1875.††The Japanese cement industry has 18 cement companies, 32 cement plants and their clinker production capacity as of 1st April 2009 is approximately 63 million tonnes.

Cement plants are concentrated at Chugoku and Kyusyu areas where lime stone is abundant. The cement produced in these areas is transported to Kansai and Kanto area by vessels which are the major cement consuming areas.

Taiwan Cement, the largest supplier in Taiwan, produces some 25 million tonnes per annum of cement and is also a manufacturer of ready mixed concrete products for distribution throughout Asia, the Middle East, and the U.S.

Taiwan's second cement manufacturer is Asia Cement (China) Holdings Corporation.† The company currently produces 20 million tonnes per annum but has plans to increase capacity to 30 Mt by 2014.† The Hong Kong-listed company was initially incorporated in March 1957 and recently acquired 70 per cent of Wuhan Xinlingyun Cement.† It is exploring other potential acquisitions, aiming to become one of the top ten mainland cement producers by 2014.

Considering the rate of commercial expansion in the United Arab Emirates, cement is still having a tough time, reports the UAE Cement Association.

The UAE cement industry is seeing lacklustre sales with ex-work prices ranging between Dh180 and Dh220 a tonne and delivered prices from Dh200 to Dh210 per tonne, despite the January decision by the UAE Cement Manufacturers Association move to fix prices at around Dh240 in Dubai. The market is beginning to pick up in terms of construction of projects but the pricing situation is expected to change in the near future, according to industry sources who did not wish to be named.

"Prices are around Dh210 and Dh220 per tonne for ex-works. Prices of 50kg bags stand at Dh12 but we hear of different prices in the market such as Dh12, Dh15 or Dh25," a senior industry official told Emirates Business. "Some players are selling for as low as Dh180 to Dh220. The prices in Abu Dhabi will stand higher by around Dh10 to build in for the transportation costs." He added that the CMA s prices were not followed by the industry.

Many companies are trying for exports to East Africa, Qatar and Bahrain. The majority is focused on clinker exports since the companies in Ras Al Khaimah are having enough of clinker stocks and clinker shipment is easier than bulk cement.

A senior industry official said: "In Abu Dhabi, which is less affected by the slowdown in the construction sector, cement will be priced at Dh250 per tonne, whereas in Dubai it will be sold at Dh240 per tonne. In the Northern Emirates, where most of the factories are located, cement will be priced at Dh220 per tonne."

 

The Philippines

At the turn of the 20th century, the Philippines was a country standing on shaky ground but eager to restart its economy after nearly 400 years of Spanish colonial rule. † † †

While most edifices during the Spanish era were made of natural stone, the Philippines undoubtedly teemed with limestone and shale - the essential raw materials in cement manufacture. Early historical recollections point to rich limestone deposits in Montalban and Binangonan, both in Rizal province, just outside Manila.

In 1914, the first cement factory was put up in Binangonan by a group of Manila businessmen, bringing in German technicians, and importing machinery from Germany's Krupp Group.

The country's first cement plant, which was capable of producing 600,000 bags a year, was instrumental in building the first concrete structures in Manila. But its operations were cut short when the plant was shut down and confiscated by the Americans in 1919.

Through a public bidding, the plant was sold to Ynchausti y Cia in 1925 but was subsequently acquired by Don Vicente Madrigal in 1928, who repaired and eventually renamed it Rizal Cement. At that time, Rizal Cement was the sole supplier of cement in the country, apart from sources of imported cement from Japan.

Four years earlier, in 1924, the Philippine government along with C.F. Marley put up the country's second plant - the Cebu Portland Cement Corp. (CEPOC). It subsequently increased its capacity from three million bags per year in 1938 to six million bags.

More recently, while the Philippines was less severely affected by the Asian financial crisis in 1997 compared with Thailand, South Korea and Indonesia, the effects were nonetheless devastating. For the domestic cement industry, the crisis left a lasting mark.

After the upbeat years of the early 90s, cement manufacturers planned on expanding their capacities as real estate and construction picked up along with the Philippine economy. But all their expansion plans - most of them based on foreign-dominated loans - had to be set aside when the crisis struck.

Many Philippine cement companies had to address the fall in demand and
the enormous debt many of them had contracted in the process of expanding their business. The answer to their debacle - take on multinational cement companies as partners.† These include French giant Lafarge, the UK's Blue Circle - also owned by Lafarge - Cemex of Mexico and Holcim from Switzerland.

In 1999, Lafarge acquired Republic Cement, one of the oldest in the country. In 2001, following its acquisition of Blue Circle, Lafarge became the world's leading cement producer and the Philippines' largest cement conglomerate in terms of capacity and sales.

Three years later, Lafarge would consolidate operations of Republic and its subsidiaries - Fortune, Premier, Iligan, Mindanao Portland, FR and Lloyds Richfield - with Continental Operating Corp., a wholly-owned unit of Lafarge Cement Philippines.

Around the same period, Holcim - the erstwhile global leader prior to Lafarge's acquisition of Blue Circle - formalised its entry in the Philippine market when it acquired Union Cement shares. Since 1974, Holcim had been represented in the country by Alson's Cement Corporation. Holcim currently operates two plants in Luzon (Norzagaray in Bulacan and Bacnotan in La Union) and another two in Mindanao (Lugait in Misamis Oriental and Davao City). Meanwhile, Holcim has also acquired the Australian interests of Cemex which adds to its overall profitability.

This year Holcim has reported a $62m loss (SFr68m) due to its lack of buoyant sales in Europe and the United States, together with an unusually harsh winter in parts of Europe which prevented construction projects proceeding.† Its Asian operations, however, are expected to report favourable results.

 

Conclusion

It appears that as the global economy returns to health, consequently construction is resumed in the majority of Asian countries.† That, in turn, ensures that cement will once again be a great demand and the companies that have expanded their production facilities despite the recession of the previous two years will be poised to capitalise on the explosion of infrastructure projects.†

 
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© 2018 Jeff Heselwood. All rights reserved.
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