CemWeek Magazine, Issue 6

CemWeek CemWee MAGAZINE

GLOBAL CEMENT INDUSTRY. KNOWLEDGE.

DECEMBER / JANUARY 2012

CemWee CemWee BMWeek SETS THE STAGE

CIMPROGETTI

BULK HANDLING

Interview with Liviero Collarini, Managing Director

ENERGY PRESSURES

Shipping & cement trade

A Challenge Where You Don't Expect It

2011 "Person of the year" Key events of the year Regional surveys

News

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Analysis

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Market Coverage

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Interviews

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People Moves

Letter from the publisher and editor

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

New Year. New Challenges. New “Things.”

Happy New Year! Here at CemWeek Magazine, we remember 2011 as the year our global executive-level coverage of the cement industry launched in magazine form and the subsequent debut of India Cement and Construction Materials. The year was filled with the after-shocks of the global economic crisis and saw new dynamics take shape in the global cement sector. The outlook remains clouded and while the challenges facing different market segments and stakeholders are different, it is clear that 2012 will remain a year to navigate carefully.

In this issue, we take the opportunity to look back at some of these industry events that had a big impact on not only 2011 but also how 2012 will shape up ("Year in Review" feature on page 18). In a similar vein, we look at individuals that had a particularly significant impact on the industry. Perhaps their contribution is not exclusively limited to 2011, but for different reasons we think that they typify, crystallize or represent the key events of the year. These include Markus Akermann (Holcim), Filaret Galchev (Eurocement) Narayanaswami Srinivasan (India Cements) and our Person of the Year, the Dangote Group’s Aliko Dangote.

The end of 2011 saw the CW Group release what has become the industry standard— its annual Business Sentiment Surveys for India, the Americas, and the Middle East and Africa. “Cement Has Feelings, Too” on page 26 highlights global differences in business strategies, operational focus and prevailing optimism for the sector as revealed by industry insiders.

“Uncertainty Looms over Cement Shipping Industry” (page 42) provides insight on how optimistic vessel orders following the 2007-2008 shipping boom could mean trouble for 2012 shipping prices. In our Leader’s Comment feature, Cimprogetti speaks with CemWeek about the lime sector: the differences in lime and cement markets and emerging industry trends (page 14).

In 2012, the CW Group looks forward to being the industry source for analytically based research and in-depth sector coverage, and the CemWeek Magazine, as our forum, will serve an important part in sharing our views and thoughts on the industry. The CW Group also has some interesting new initiatives in the pipeline that will continue to drive our coverage and role as the go-to source for the cement sector. As always, we welcome your feedback on this issue and suggestions for future content. Contact us at editor@cemweek.com.

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Robert Madeira

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JENNIFER RIDGEWAY project editor

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Claudia Stefanoiu Diana Heeb Bivona Mihai Musatoiu Uys Leo de Jager contributing writers & researchers

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CONTENTS FEATURES 4 person of the year Aliko Dangote is our 2011 person of the year Profiles on nominees Marcus Akermann (Holcim), Filaret Galchev (Eurocement) and N Srinivasan (Indai Cements) 18 Year in Review 2011 has set the stage for an eventful new year 26 Research Findings from the 2011 Business Sentiment Surveys

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person of the year

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Energy and fuel costs weigh on gulf cement sector

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cement has feelings, too

DEPARTMENTS Leaders Comment 14 Oliviero Collarini talks Cimprogetti lime business Analysis 24 Energy and fuel costs weigh on gulf cement sector Regional Reports 30 Europe, Middle East & Africa 34 Asia Pacific 35 South Asia 36 America

From our Industry Partner 38 Building materials update 42 Focus – Uncertainty for cement shipping industry Updates 44 Boral’s Silent Expansion 49 AUCBM Conference, a conversation with engineer Al-Rousan 53 South Africa’s Competition Commission findings unresolved Projects & People 46 Notable projects 50 People on the move

Data Share Performance 52 Overview of stock performances for cement companies

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Uncertainty Looms Over Cement Shipping Industry

E-Magazine is nice, but print copy nicer?

Subscribe to the CemWeek Magazine’s print edition and have it mailed directly to you. Contact CemWeek at sales@ cemweek.com to make arrangements.

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

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NUMBERS IN BRIEF CW Group Cement Plant Equipment Indices:

3Q2011 equipment orders and backlog turn a corner In Issue 4, the CW Group launched its CemWeek magazine coverage of cement plant equipment tracking indices. Our Dec/Jan issue follows the growth trend trajectories through 3Q 2011.

Cement Equipment Order Intake index After a partial recovery registered in 2Q 2011 followed the lowest quarterly value since 4Q 2009, the CW Group Cement Equipment Order Intake (CEOI) index climbed further. Cement equipment companies had anticipated the 3Q 2011 increase even in the second quarter, when large orders again started to be placed by cement companies.

CEMENT EQUIPMENT ORDER INTAKE INDEX (CEOI); (4Q2009=100) 150

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The CEOI rose to 126.2 in 3Q 2011, a 37.8 percent increase versus 2Q 2011 when the index reached 91.6. Even with the positive evolution, however, these three quarters of 2011 are still below 2010 volumes for the respective period. Companies complain of equipment order reductions and delays in contracts that continue to affect results. A few of the countries reporting such challenges are Egypt, Libya and Tunisia.

Cement Equipment Order Backlog index Following four consecutive stagnant quarters (beginning July 2010 when the CW Group Cement Equipment Order Backlog (CEOB) index was virtually unchanged with an average of 105.3) the CEOB index rose in 3Q 2011 to 115.2. The third quarter value is the highest since the inception of the index in 4Q 2009.

CEMENT EQUIPMENT ORDER BACKLOG INDEX (CEOB); (4Q2009=100) 120

100 Q4 2009

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Q1 2010

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Q3 2010

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As the global cement sector’s executive-oriented analytical journal, CemWeek Magazine at the conclusion of 2011 turns the focus on some of the most defining leaders in the sector with our cement industry “person of the year.” The CemWeek editorial team solicited input from industry professionals and colleagues which resulted in a list of leaders with mixed backgrounds, styles, geographies and career stages but all with a shared sense of industry-changing achievement.

Our Cement Industry Person of the Year is Aliko Dangote, the Nigerian boss and creator of Dangote Cement, a company which he consolidated this year into Africa’s largest cement maker.

Dangote invests heavily to expand in foreign markets, and his empire is now reaching 14 African countries. Because his cement business is developing so fast, he is also building infrastructure across the continent to support growth.

With profits climbing more than 20 percent and investments of several billions of dollars into future cement factories, Aliko Dangote and his cement business have a more than promising future.

The 2011 runners up are significant personalities in the business as well. Markus Akermann, the retiring leader of Holcim, is an artist of bringing cut cost policies in harmony with simultaneous development. Filaret Galchev, a Russian billionaire with high ambitions, is laying ground for his Eurocement Group’s expansion towards the West, while Narayanaswami Srinivasan, the managing director of India Cements, is doing wonders on the huge but sluggish domestic market with a turnaround performance this year.

In the following, we uncover a bit of what lies behind the successes of some of the most influential people in the cement industry this year.

FEATURE

Dangote Cement's

Aliko Dangote

Spinning Cement into Gold in Africa 6

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The year 2011 was rewarding for Aliko Dangote and his cement business. Dangote integrated his cement investments across Africa and established his company as the largest entity on the Nigerian Stock Exchange, with a market value of US$10 billion The cement maker plans to raise funds in a London share sale before the end of 2012, a US$3.9 billion investment, as it moves to more than double output to 50 million metric tons by 2015 from an estimated 20 million tons this year.

Dangote is building eight new plants across Africa and constructing cement import terminals in five countries. With his strategic goal to build substantial new capacity in Africa's growth economies, Aliko Dangote is voicing ambitions to become one of the leading cement producers in the world.

Dangote Cement, Africa’s biggest cement producer, is cruising ahead. The company announced a 23 percent profit increase for the January-September period, thanks to higher cement sales. Net income for the period increased to 92.8 billion naira (US$589 million), from 75.3 billion naira a year earlier. Revenue climbed 19 percent to 173.8 billion naira (US$1.1 billion).

“We strongly believe in the future growth of the African economy and of continued growth across the whole of Africa. The level of our investment here and in other markets is a clear proof of this,” Dangote told CemWeek. “The fact that Africa offers one of the highest returns on investment (ROI) in the world is an additional incentive for any discerning investor who can take calculated risks.”

Early mornings, long hours Aliko Dangote works 12 hours a day, beginning at 5 a.m. no matter what time he goes to bed. His motivation comes from a desire to give people jobs as well as to create an African success story. He admits that Nigeria is still plagued by corruption, but shows nevertheless a great confidence in the future. “Nigeria

is the best place to invest, one of the best places to make money all over the world. It is actually the best kept secret in terms of investment,” Dangote said in an interview for CNN. How did he grow his business to this size? He is a self-made entrepreneur who started in 1977, at the age of 20, with a commodities trading company. He summarizes briefly what happened since then: “We picked good timing, we knew where we were heading, and we had a vision.” Despite corruption allegations, Dangote kept his name clean and steadily built his empire.

Dangote remembers that as a child he was quite aggressive, meaning that he always wanted to make money. His future success, however, came as a surprise even to himself: “Things have turned out to be much better than I thought. Even ten years ago I did not expect that the group would go this way.”

Fast growing cement business Dangote Cement announced in October 2011 its plans to set up a US$400 million plant in Ethiopia, in the Oromiya region.

The plant is expected to produce two

million tons per year, and the project should be finalized in the next two years.

Also in October, Dangote said he will spend about 2 billion CFA francs (US$4 million) to start a new cement factory in the Democratic Republic of Congo that is expected to have an initial capacity of 1.5 mtpy. If demand for cement increases, the plant could upgrade to a 2.5 mtpy capacity.

Dangote Cement has not yet announced when construction would begin in the DRC, but another plant, with a yearly capacity of 500,000 tons, is planned in Sierra Leone with construction slated for 2013. In addition, the company announced in September that it eyes an investment of US$115 million in Cameroon. A plant will be built in the economic center of Douala to produce about 1.5 mtpy of cement.

Aliko Dangote’s aggressive expansion is not always seen with good eyes, of course.

His intention to enter the Senegalese market, for example, was criticized this summer by worried competitors. "In Senegal, there is no room for a third player," said a top executive of Ciments du Sahel, which annually produces 2.4

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FEATURE million tons of cement, roughly the annual need of the domestic market. With a third cement producer in the market, the two current competitors—Sococim and Ciments du Sahel—may reach an overproduction of one to two million tons each between 2012 and 2015.

Dangote Cement has invested 250 billion CFA francs (US$505 million) in a plant based in the Thies in Pout region in western Senegal and intends to start operations by the end of the year.

Dangote wants to come up with 2.5 mtpy of cement, of which 60 percent should be sold in Senegal.

According to Dangote, “Our long term ambition is to develop 46 million metric tons of production and terminal capacity in Africa by 2015. We want to become a truly pan-African champion in the sector, capable of competing globally with the largest cement companies in the world.”

Richest man in Africa It is said that every Nigerian has heard Aliko Dangote’s name. The man who has been called “the golden child of Nigerian business” is now worth about US$13.8 billion, wealth built on businesses which span across many sectors of the Nigerian economy. He is active in sugar, flour, textiles, telecom and many others, with cement standing out as the pearl of the crown.

Dangote’s current project is to further extend his consortium across Africa.

His empire, which generated revenues of US$3 billion in 2010, already reaches 14 African countries: Nigeria, Benin, Cameroon, Cote d’Ivoire, the DRC, Ethiopia, Gabon, Ghana, Liberia, Senegal, Sierra Leone, South Africa, Tanzania, and Zambia. His corporation accounts for about 30 percent of the Nigerian Stock Exchange by market value.

Dangote’s fortune surged by more than 550 percent in the past year, making him the world's biggest gainer in percentage terms and Africa's richest individual for

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the first time. He is 54 and married with three children.

Faster than national economy Since his company is expanding faster than Nigeria’s economy, Dangote has to consider investing in the national infrastructure as well. “It is in my best interest to contribute towards the growth of Nigeria first, before contributing to my own company, because my own company has limitations,” Dangote has said. “Nigeria must do better for Dangote to do well in terms of business.”

To support his cement business, he plans to construct rail track from its facilities and connect it to the national railway.

According to an October report, Dangote made this decision because the cost of transporting bulk goods such as cement in the country was still a problem.

"The challenge is taking our goods from the factory to the ports, and since there is no railway system, it makes transportation of bulky goods burdensome,'' an executive manager of Dangote’s Lagos cement operations explained. Additionally, Dangote would also establish a vessel freight to boost the exportation of goods to the Economic Community of West

It is in my best interest to contribute to the growth of Nigeria first, before contributing to my own company - Aliko Dangote African States (ECOWAS) markets, the manager added.

When he received his 2011 Business Leader award, Aliko Dangote spoke about the future of the continent as a new era in terms of business environment. “Reforms are changing the face of doing business in the continent,” he said. “Over 84 percent of economies in sub-Saharan Africa have implemented regulatory reforms making it easier to do business. There are still challenges to doing business in Africa, but there is hope. This is a new Africa.

Governance is much better. Yes, there is corruption and it is still an issue. But looking at where we have come from, things are getting better and fast.”

More cement factories on the way The African expansion is far from being over. Dangote Cement says it plans to build more units in Africa in the coming years and has named Gabon, the DRC, Algeria and Tanzania as potential destinations. Dangote has chosen European and Chinese technology for the construction of its planned cement plants. He selected a consortium of Chinese state-owned AVIC International Beijing Company and Germany’s KHD Humboldt Wedag, an alliance which has already built 13 cement plants across the world, as an effective combination between high quality and low cost.

The company expands in the home market as well. It will spend about 50 billion naira (US$309 million) to upgrade its Gboko plant to a four million ton annual capacity by 2012, up from the current 3.5 mtpy. Including ten million tons of capacity in Obajana and six million in Ibese, the company’s cement production will hit 20 million tons in 2012.

Considering that Nigeria’s cement need is about 17 million tons per year, “by implication, what Dangote Group alone will be producing will be far more than the country’s demand,” the Dangote Group said in a November statement.

“That will set the pace for exportation of our products which will lead to increased products, more revenue for the company and better returns for the shareholders.”

For Aliko Dangote, the focus is not his own achievements but a larger future for Africa: “We are motivated to create an African success story because we believe that entrepreneurship, especially our own home-grown African entrepreneurship, holds the key to the future economic growth of the continent. Africa is gradually taking its destiny in its own hands rather than wait for investors from outside. Investment in the real sector of the economy is the only way that our continent can achieve the much desired accelerated growth and development that we have yearned for.” BMWeek CemWeek CW Group BMWeek BMWeek

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FEATURE holcim's

Markus Akermann balance, build, innovate

CHF 21.65 billion in revenues, a 2.5 percent increase, and CHF 1.62 billion in profit.

Markus Akermann began his career at Holcim in 1978 and spent the last decade at the helm of the cement giant, steering the company through turbulent times since the global crisis sparked in 2008 STRATEGY: CUT COSTS, EXPAND Akermann retires in early 2012, and perhaps the toughest challenge of his career has come toward its conclusion, in the need to balance cost cutting measures at Holcim with ambitious expansion projects already in place. “We will commission new plants until the end of this year and we will have to staff them, but cost cutting measures will remain in place," he acknowledged in a May 2011 statement.

This deft CEO is keeping an eye on the future as he orientates the company towards quick development in emerging markets.

“Building materials is a very local business. This is true for cement—the product Holcim has been identified with since its foundation a hundred years ago—as well as aggregates, the twin leg which we have strengthened over the course of the last decade,” notes Akermann. “If you want to be successful as a global player you have to pay utmost attention to building capabilities and developing skills at the plant end from operator level through the ranks of line management.”

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Holcim, already a geographically diverse giant (it has subsidiaries and affiliates in over 70 countries worldwide and production facilities at approximately 2,500 locations), has over the past three years alone commissioned almost 30 million tons of cement capacity, primarily in fast-growing emerging markets, e.g. India, Mexico, Russia and Azerbaidjan, but also including asset renewal in the U.S. with the flagship plant in Ste. Genevieve. Similar development is underway in Indonesia and Brazil. At the same time, Holcim takes a more defensive position on developed markets like the U.S. and Spain, where it closed some of its plants in the last years.

The last part of his mandate finds Akermann fighting higher fuel costs and a strong Swiss franc, which bite into profits. The company’s operating profit fell 12 percent year-on-year to CHF 669 million (US$747 million) in the third quarter, while sales declined 6.1 percent to CHF 5.32 billion, a fifth consecutive quarterly decline. In 2010, the company reported

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Long, successful career Akermann earned a degree in business economics at the University of St. Gallen in Switzerland in 1973 and studied economic and social sciences at the University of Sheffield in the United Kingdom.

He began his professional career in 1975 with the former Swiss Bank Corporation.

Then, in 1978, he joined Holcim, where he was active in a number of roles including Area Manager for Latin America and Holcim Trading. Akermann has been a member of the Holcim Executive Committee since 1993, and CEO since 2002.

When Markus Akermann retires, he will be replaced by Bernard Fontana, former CEO of Aperam, a company recently spun-off from ArcelorMittal. Despite difficult economic times, thanks to Akermann’s steady hand, Fontana will captain a ship already on course for the future.

“If there is a secret of success in Holcim it is its attention to grooming excellence in its people,” Markus Akermann told CemWeek. “Strength, Performance, Passion— the core values of the company—are what we nurture in our people. This dedication will drive the company forward in good times as well as in difficult ones as we face right now.” BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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eurocement's

filaret galchev exporting russian ambition After developing Eurocement into a regional power and one of the world’s Top 10 cement makers, Filaret Galchev is realizing ambitions to strengthen the company’s international influence. He recently bought out partner Georgy Kransyansky to become sole owner of this international, vertically integrated manufacturer of cement and other construction materials From coal to cement Today, at age 48, Filaret Galchev is worth about US$3.5 billion. He has a Bachelor of Science in Engineering from the Moscow Institute of Mining and holds dual GreekRussian citizenship. He is married and has two children.

In the 1990’s, Galchev created Russia's largest coal-trading company. He went on to invest in cement and acquired the Stern Cement plants and cement facilities from Inteko. Eurocement Group is now the largest producer in Russia with a 39 percent share of the market, according to the company’s own estimates. In 2008, Galchev bought his way into Swiss rival Holcim when he paid US$1 billion to grab a six percent stake.

Growth powered by Russia’s development Eurocement Group is an increasingly influential regional player, with 17 cement plants across Russia, Ukraine and Uzbekistan, as well as several concrete mix plants, concrete goods factories and aggregate-mining quarries. Eurocement currently has capacity to produce as much as 38 million metric tons of cement, and the company plans to expand capacity to 50 million tons by 2015.

One engine for the company’s future growth is the domestic market, where large infrastructure projects will be available in the following years: the development program in Moscow, the Winter Olympics in Sochi in 2014, the APEC summit in Vladivostok in 2012

and the 2018 World Cup, which will be hosted by Russia.

Another key growth driver in Russia’s cement market is investment in transportation infrastructure. Russia’s road network is significantly inferior to most developed countries and there are several government projects aimed to improve this situation. The government plans to invest US$1.6 trillion in transport through 2020, and there will be an increase in demand for cement to build roads and landing strips.

Raising the stakes in Europe Besides his plans to list Eurocement on the London Stock Exchange at the end of 2011 or early 2012, Filaret Galchev has the potential to increase his influence on the European market. His latest project is to strengthen control over Holcim, part of Swiss billionaire Thomas Schmidheiny's empire.

In September 2011, Galchev increased his participation in Holcim from 6.5 to 10.1 percent. Thomas Schmidheiny responded a month later by increasing his own participation from 18 to 20.1 percent.

Nonetheless, Galchev’s influence is on the rise inside the Swiss cement giant, and press reports indicate that Holcim’s board is now considering whether or not to grant a board seat to its Russian shareholder. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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FEATURE india cement's

Narayanaswami Srinivasan Cruising forward on a sluggish Indian market Narayanaswami Srinivasan, an industrialist from Chennai, has been responsible for leading one of India’s top ten cement makers, India Cements, into the 21st century The company, founded in 1946 by Srinivasan’s father and grandfather, T. S. Narayanaswami and S. N. N. Sankaralinga Iyer, employs about 7,500 workers.

Srinivasan took over as Vice Chairman and Managing Director of India Cements in 1989. Under his supervision, the company had a successful 2011 despite the difficulties on the Indian cement market.

A chemical engineer by training, Srinivasan is a post graduate from the United States’ Illinois Institute of Technology.

Srinivasan served as the President of the Madras Chamber of Commerce and Industry from 1996 to 1998 and is a member of the Executive Committee of Federation of Indian Chambers of Commerce and Industry (FICCI).

Besides cement, cricket is one of his passions. Srinivasan is the newly-appointed President of the Board of Control for Cricket in India and owns, through India Cements, the Chennai Super Kings cricket franchise. "When cricket doesn't do well, cement does," he has said, referring to India Cements’ 400 percent profit growth in the first quarter this fiscal year.

Stepping Up In Difficult Times Srinivasan, along with family members, owns 25.32 percent of India Cements.

During the summer of 2011, Srinivasan specifically has increased his stake to 0.14 percent from 0.05 percent, by paying Rs. 1.89 crore (US$365,000). The stake increase comes as India Cements’ stock has been under pressure, along with other South India cement makers, on deterio-

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rating fundamentals and sluggish demand in the South.

Srinivasan says cement companies have built capacities, generated employment, and helped the nation grow. According to Srinivasan, the cement sector receives a disproportionate share of blame for increases in overall construction costs.

"I was selling cement at Rs 280 per kg two years ago and at Rs 290 now. Cement makes up only 12 percent of overall construction costs," he said in a recent interview. He does not think cement demand will pick up in the short term. "I'll be surprised to see if cement demand picks up in the near term, but I'm not going to drop my prices," he said.

Turnaround performance Srinivasan is leading the company through an increasingly difficult market.

Despite the uncertain marketplace, India Cements began this fiscal year with a four-fold rise in net profit at Rs 102.03 crore in the first quarter, ending June 30, 2011. Moreover, the company further improved its performance in the second quarter, announcing in November 2011 that it had generated a net profit of Rs 69.71 crore in Q2 2011 against a loss of Rs 33.63 crore in the same quarter last

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year. Net sales for the period increased by 29.53 percent at Rs 1092 crore.

"It is a good performance considering the capacity overhang in the south (with 100 million tons), sluggish demand and cost increases,” Srinivasan said. “We expect the bottom line to be much better this year due to higher realization, though demand will be sluggish in the current quarter due to monsoon and recovery prospects in the last quarter."

In a November press conference, Srinivasan stated that the company would focus on profitability rather than volume.

During his more than two decades of leadership at India Cements, Srinivasan has proven his ability to adapt to a changing marketplace. BMWeek CemWeek CW Group BMWeek BMWeek

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LEADERS COMMENT

BUILDING MATERIALS THE LIME INDUSTRY and

Oliviero Collarini, Managing Director of Italy-based Cimprogetti, spoke with CemWeek about industry trends, competition from copies, and the differences between the lime market and cement

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Many of our readers hail from the cement sector. Could you help explain the similarities and differences between the lime and cement sectors, beyond the obvious product differences?

The main difference does come down to the product, as lime is substantially a basic chemical with a wide range of different applications while cement is a building material.

From a pure technical point of view, calcium carbonate is the raw material from which lime and cement are produced, but while cement (as a finished product) is a blend of several components, lime is the result of a single process treatment in the kiln (burning).

The table below shows an approximate split of the major uses of lime in the modern industry, and one can see that the application of lime as a building material is limited to less than 15 percent on a worldwide basis.

Because of the several industrial fields of application, the lime distribution network and the clients are also different from cement.

The technical characteristics and the physical form and grain size are specific for every lime application. The steel industry normally requires lumps (of approximately two inches), while agricultural applications would prefer a finer granulated material. The environmental industry requires lime in fine powder form, both as Quick lime or Hydrated lime.

How do you describe your market segment from an equipment vendor perspective, and who are the big lime customers? Why don't we see the big cement companies as involved in the lime space?

In addition to what we’ve already discussed, the big customers especially in the emerging economies are also directly the end users—steel mills, aluminium smelters, power plants, chemical industries, etc.—as there is no merchant production of lime in such a quantity and quality to satisfy their needs.

In the western world, on the contrary, end users can buy from the market because there are major lime producers that serve those industries from their several plants spread over the territory.

35% 28% 13% 8% 7% 4% 5%

Metallurgy Environmental uses Building materials Chemicals Precipitated CaCO3 Pulp & Paper Miscellaneous uses

Oliviero Collarini

However, the fact is that lime applications are so many and so different one from another that it would not make economic sense for a cement producer to get involved in all of those industrial sectors.

The cement industry is based on large scale production targeting a single market (the building industry) with a 2010 world estimated production of 3,100,000 x 103 tons, according to the USGS 2011 mineral commodity summaries.

Lime, with a 2010 production of 310,000 x 103 tons, is serving many more industrial sectors but with quantities ten times smaller.

Does the lime industry follow a similar geographic growth profile and Chinacentric global demand to that of the lime sector?

Lime consumption has always shown a modest but consistent yearly increase (2 to 3%) on a worldwide basis as a result of the industrialization of emerging countries, which offsets the production reduction in the United States and Europe.

Emerging markets are the real future for our business. China was and still is a good area, where we have several active projects for large size (500 to 600 tpd) lime kilns.

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LEADERS COMMENT How important is the India lime market to you, and how is it different from that of other markets?

India is worth a separate mention, as it is our largest market at present, and we are working on a total of 15 lime kilns in the country.

Most of the units are the well-known TwinD patented design for a capacity of 300 to 400 tpd. Two larger units are the new TwinD for a capacity of 500 tpd, while five units are the brand new design RD 15 and RD 12, respectively, for 600 tpd and 500 tpd, featuring round crosssection and “pillarless” refractory lining design.

Our customers are mostly the major steel makers of India. In the private sector, we serve names such as Essar or Jindal groups. In the public sector, we are currently supplying lime kilns to several plants belonging to SAIL (Steel Authority of India).

Furthermore, in the last few months we have received the first couple of orders from the non-steel private sector. This is a real breakthrough, as the level of investment for a modern lime kiln was out of reach for the smaller investors in the past.

It is one more proof that the lime industry is now evolving fast in India.

An Indian lime association is also on the way to be constituted, and that is another clear sign of the potential of this industrial segment.

Are Chinese equipment vendors competing effectively yet in the lime space?

How do western companies remain competitive?

The answer is yes and no. We are suffering some unauthorized copies of our lime hydration equipment, which is relatively simpler in design and does not involve any high temperature process.

For lime kilns, we are aware that there are a very few local copies, but the actual results are very poor, as the technology is more complex.

All major customers (again steel makers) keep buying the originals, as the risk of affecting the steel production as a result of buying a “copy” lime kiln is too high and is not balanced by the potential savings, which represent a fractional figure of the overall investment of a new steel making line.

What are some of the new things that are being done on the lime side to improve CO2 and other emissions?

As CO2 emissions are inherently connected with the lime production process (CaCO3 + heat → CaO + CO2), reductions can only come from an enhanced burning process and by using alternative/ renewable fuels.

Cimprogetti strictly follows the voluntary guidelines (based on Directive 96/61/EC, also known as Integrated Pollution Prevention Control - IPPC) of the European Commission for the reduction of kilns’ heat consumption and emissions into the atmosphere: CO2, NOx, SO2 and CO. How big is the replacement market versus the new plant market and how has that evolved? What is the trend in upgrade projects?

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The replacement market is typical of the western world where there is a significant overcapacity in the existing plants. Replacement normally targets a higher fuel efficiency, safety and a reduced number of operating personnel required for the plant operations.

As previously stated, our major markets are nowadays in the Far East, where there are mostly new installations built. Hence the ratio of replacement versus newly built, in the case of our company, may be some 30 percent replacement and 70 percent new plants.

Finally, what is Cimprogetti's strategy going forward, and what sort of news can we expect from Cimprogetti in the next year or two?

The use of diversified and renewable fuels as well as the reduction of emissions into the atmosphere are the key issues for the years to come.

A higher attention to specific lime qualities production (rather than looking for multipurpose kilns) may generate further business in the future. Smaller units may be needed, especially when they are targeting a wider use of alternative fuels coming from renewable sources. BMWeek BMWeek BMWeek

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FEATURE

An Eventful Year 2011 Sets Stage for Dynamic New Year

The New Year provides an opportunity to reflect on some of the previous year’s most fundamental and industryaffecting events. For us here at the CW Group, 2011 will be remembered as the launch year for CemWeek Magazine.

When the first issue released in early 2011, the magazine quickly became the magazine of choice for those in the industry looking for executive-level, in-depth and analytically based research and sector coverage. With the magazine so well received, we turned our attention to another endeavor, and a second magazine, India Cement and Construction Materials (ICCM) was launched in the fall of 2011 to better track the world’s largest cement market, excluding China. While both events were “big news” for us, other stories dominated industry news, and the CW Group takes this opportunity to revisit a few of those

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global highlights Purchase of Cimpor The 2010 purchase of a majority stake in Portugal’s largest cement manufacturer by two major Brazilian groups received the green light from antitrust regulators.

The Brazilian competition authority in February approved, with limitations, the purchase of Portugal's Cimpor by Votorantim and Camargo Correa. Brazil's Companhia Siderurgica Nacional (CSN) had launched a prior bid for Cimpor in 2010. The bid failed, precipitating the change of ownership.

Under the new structure, Camargo Correa became the majority shareholder with 32.9 percent of the capital, followed by Votorantim with 21.2 percent. The BCP's pension fund held ten percent, 10.7 percent was held by Manuel Fino, and Caixa Geral de Depot held 9.6 percent.

The two Brazilian cement makers entered talks to buy out the remaining stakes in Cimpor, valued at US$2.1 billion, in October. Camargo was interested in taking over Cimpor’s operations in Brazil, while Votorantim was looking to consolidate

the assets of the Portuguese-based company outside of Brazil.

Chinese-German Cooperation Trade relations between the Chinese and Germans were in focus in the first part of the year with the signing of a cooperation agreement between CATIC Beijing Company and KHD Humboldt Wedag.

The partnership agreement was viewed as a win-win. For CATIC, it allowed the company to increase its cement activities worldwide and bid on jobs they could not in the past, and for KHD it was expected to double its market exposure, allowing access to the substantial Chinese cement market.

The strong relations between Germany and China resulted in an estimated US$140 billion in trade volume in 2010.

Germany, the largest investor in the Chinese economy, has contributed much to the economic development of the country and looks forward to more opportunities.

Debt Reduction In March, reports continued to indicate

that Lafarge was facing lingering challenges in reducing its debt of roughly EUR 14 billion. In its 2010 annual report, the company had hoped to reduce its debt in 2011 by EUR 2 billion. However, because of its inability to do so and the ongoing crisis in the Middle East, where 40 percent of the company’s operating profits are generated, Standard and Poor’s (S&P) changed the credit rating of the company to BB +. The new rating suggested that the company’s debt securities were of a “speculative nature” and unsuitable for investors.

To reduce its debt, Lafarge decided to halve its dividend payout to EUR 1 per share and speed up the sale of some assets. It sold more than half of its gypsum operations to the Etex Group, among others, and sold a portion of its U.S. cement and ready-mix plants to Cementos Argos.

In November, Lafarge announced a new EUR 500 million cost-reduction program to address its debt and in December put its South African cement unit on the market. The company hopes to fetch US$700 to 800 million from the sale.

Quatar World Cup

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FEATURE highlights from the americas Rule Changes The U.S. Environmental Protection Agency (EPA) continued to propose a variety of changes under the Clean Air Act. In addition to proposed changes to boilers and certain incinerators that were expected to affect various industries, the EPA pushed forward with proposed new mercury emission and clinker storage rules, meeting industry resistance along the way.

The Portland Cement Association challenged the proposed new mercury emission rules, saying the rules were too restrictive and based on flawed data. A lawyer for the cement industry told a federal appeals court the cement industry predicts the rules may cost US$3.4 billion and shutter 18 of 100 plants.

The Portland Cement Association also mounted a judicial challenge regarding the new emissions standards on the storage of clinker, saying the proposed standards were arbitrary and that their adoption in fact violates the federal Clean Air Act. A federal appeals court appears to agree, temporarily blocking the new rules from taking effect.

A three-judge panel issued the order blocking rules governing the storage of clinker pending further EPA review.

While the agency previously conceded it hadn’t given enough notice of the new standards, it had refused to delay enforcement.

Assets Purchased Also in the United States, Cementos Argos obtained regulatory permits to purchase certain assets of French-based Lafarge. Assets valued at US$760 million included a cement plant in Roberta, Alabama with an installed capacity of 1.6 mtpy of cement, a cement plant in Harleyville, South Carolina with an installed capacity of 1.1 mtpy of cement, and a clinker grinding unit in Atlanta, Georgia with installed capacity of 500,000 tpy.

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KHD and AVIC sign agreement

Argos also bought 79 concrete plants in Georgia, South Carolina, Alabama and Florida with an installed capacity of 3.3 million cubic meters of concrete per year, as well as 347 concrete mixer trucks, fiveferrous terminals (three in Georgia, one in Mississippi and one in North Carolina) and a seaport in Mobile, Alabama.

With the acquisition, the installed capacity of Argos in the U.S. was expected to reach 3.2 million tons of cement and about ten million cubic meters of concrete a year.

Rebranding Strategy Camargo Correa repositioned its cement unit as InterCement, a move that the company claimed signified its desire to become a more global brand. The change was accompanied by the creation of InterCement Participacoes, the holding company for the cement business, bringing together operations in Brazil and other countries.

InterCement has more than 16 plants and five thousand employees. The company’s brands, Cauê Cement Brazil and Loma Negra, were to be maintained after the relocation. Furthermore, the company has operations in Angola and

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Paraguay and owns approximately 33 percent of Cimpor.

Brazil’s Growing Demand Brazil's cement industry was expected to rise eight percent in 2011 on the back of a government social housing program and accelerated building ahead of the 2014 World Cup and Olympics. According to the National Union of the Cement Industry (SNIC), Brazil’s cement industry experienced four years of strong demand but would likely see slower growth rates— more consistent with the economy— moving forward. While events like the 2014 World Cup and the Olympics would boost the sector, other programs such as the Growth Acceleration Program (CAP) and housing construction would sustain the cement industry.

Regionally, the northeast Brazilian state of Paraiba was expected to become the country’s top cement producer given the number of manufacturing facilities being built. Brennand, Cimpor and Elisabeth have invested more than US$1.2 billion in the area, which is rich in cement raw materials. Capacity was projected to increase by 7.5 million tons by 2014.

highlights from europe & russia Historical Lows Spain’s cement association, Oficemen, expects cement consumption in Spain to contract even further in 2012, reaching lows seen 40 years ago. Volumes were expected to drop eight to ten percent in 2012. Meanwhile, 37 plants across the country were operating at only around 54 percent of capacity. Spain was not the only country to break new volume lows, however, with Greece and Portugal also struggling. The brighter view was that some core markets seemed to have stabilized and even displayed nascent volume recovery.

Developments in Eastern Europe Partners French-based Lafarge and Austria’s Strabag unveiled a EUR 270 million cement plant in Királyegyháza, Hungary in September. The plant, which produces 750,000 tons of clinker and one million tons of cement each year, is projected to reach full capacity in two to three years. It was the first new cement plant built in Europe in 30 years and was expected to create 3,500 jobs, injecting an annual HUF 2.5 billion into the Hungarian economy.

Additionally, HeidelbergCement started operating a modernized kiln line in its Polish cement facility at Górazdze. The new line, which is the largest and most modern cement plant of HeidelbergCement in Europe, has a 6,000 tpd clinker production capacity.

Sale Heats Up The announcement of the sale of Basel Cement attracted top players in the Russian cement industry. A 75 percent stake in the company went up for grabs, initially attracting industry leaders like Eurocement, Mikhailovcement, CRH, and Lafarge. Bidding, however, quickly heated up as more companies expressed interest.

CRH originally offered to buy a controlling stake in the company for US$500 to 600 million in its efforts to enter the Russian market. CRH is expected to emerge as the most likely buyer as their offer is closest to the company’s real valuation.

Lafarge had offered to buy Basel’s Serebryansky plant for US$450 million, but management was not interested in selling assets, only shares.

highlights from middle east & africa Qatar Ramps Up Long-term demand in the country was expected to increase in the next five years in preparation for the 2020 World Cup Games. Estimating the average demand for cement at 4.8 mtpy between 2012 and 2017, Qatar National Cement announced that it was increasing its capacity by 0.93 mtpy to 5.36 mtpy and revealed plans for another special mill for grinding slag, which is used in the production of blended cement.

Possible Volume Growth Bottleneck Analysts remained positive regarding the

outlook for the Saudi Arabian cement industry in 2011, citing good demand growth and stable prices. The cement sector experienced strong growth during 2Q11, with the revenue and net income of the nine listed companies increasing by 23 percent and 21 percent YoY. This was due to a combination of strong sales volume growth (15% for the listed companies) and a six percent increase in cement prices.

While sales remained strong in the third quarter, increasing seven percent to 10.3 million tons, concerns arose by the end of

the year that a lack of fuel supplies from Aramco might lead to lower production volumes for some Saudi cement makers in 2012. Because of this, cement makers say they may not meet their production target of 51 million tons this year and may instead be five million tons short.

Operations Interrupted Continued political unrest throughout the Middle East and North Africa took its toll. In Libya, Asamer shut down all three of its plants in February at the start of the country’s civil war. Later in the year, it an-

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FEATURE nounced it hoped to restart operations at all its Libyan facilities sometime in 2012.

Portugal’s Cimpor and Denmark's Aalborg Portland temporarily shuttered production at Egyptian units, due to growing unrest. Aalborg Portland stopped operations at its Sinai plant, reporting it was unable to procure supplies to continue production. Meanwhile, Cimpor announced it had halted production in Egypt, sending the majority of its expatriates home. Cimpor resumed production two weeks later.

With a damper on investment throughout the region, sales and revenues took a significant hit for many companies. As sales decreased radically, Lebanese exporters faced continued difficulties in exporting cement to Egypt and Syria. Lebanon produces 6.5 million tons of cement per year, at an average price of US$92 per ton. With an annual domestic demand of five million tons, roughly 1.5 million tons needs to be exported. The ongoing regional unrest makes this no easy task.

Additionally, FLSmidth’s cement division was hit especially hard, with revenues falling 20 percent in the first six months of 2011. The progress for ongoing projects in Egypt, Tunisia, and Libya was delayed. The company was able to later return to full strength in Egypt and Tunisia, but the status of several of its large projects in Libya remained in doubt.

Sinoma equipment on the move Iran's government claimed it could produce 74 million tons of cement, making it one of the world's top ten cement producers. The country further plans to increase cement production capacity to 110 million tons. According to government officials, Iran is ranked fourth in Asia and ninth in the world when it comes to cement production.

Further Expansion Planned Nigeria's Dangote Cement confirmed the largest expansion of the year with its US$3.9 billion plan to build more units in Africa in the coming years. The firm named Gabon, Congo, Algeria and Tanzania as potential sites. Construction of the planned cement plants is to be undertaken by a Chinese state-owned con-

sortium of AVIC International Beijing Company and German’s KHD Humboldt Wedag International.

South Africa's Pretoria Portland Cement (PPC) is also looking to expand into foreign markets in order to boost its growth prospects, aiming to increase sales from the rest of the continent to 50 percent in the next five years. The contribution from Africa, excluding South Africa, has doubled in the past two years to about 20 percent.

Outside of South Africa, Zimbabwe and Botswana contribute the most to sales.

Mozambique, Zambia, Ethiopia, Southern Sudan, Kenya and the Democratic Republic of Congo have also been identified as future growth areas.

highlights from asia Aditya Birla in Talks In November, Aditya Birla initiated talks with the Jaypee Group to buy a portion of its cement business. Jaypee is selling part of its cement unit to raise funds to reduce its Rs 40,000 crore debt burden.

Aditya is reportedly offering to buy a majority stake in Jaypee’s cement business.

Negotiations were currently underway over management control and valuation.

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Jaypee earlier had hinted that it is looking to sell a part of its cement business and induct a strategic partner to reduce its debt but did not name the partner. Jaypee's cement business, valued at US$3.6 billion, was spun off into a subsidiary called Jaypee Cement Corporation with a current capacity of 8.5 million tons Mining Operations Green Lighted Lafarge finally secured the green light

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from India’s Supreme Court for its limestone-mining project in the East Khasi hills of Meghalaya bordering Bangladesh.

The Supreme Court found the revised environment clearances given to Lafarge by the Union Ministry of Environment and Forests (MoEF) were satisfactory in this much publicized cross-border issue.

In February, the “forest bench” headed by Chief Justice S H Kapadia had passed an order prohibiting the company from min-

ing in the forest since several local companies had caused environmental damage. Some organizations from Shella, the village in the vicinity, had opposed the mining and the revised clearance given by MoEF, but Lafarge defended its activity.

The company asserted it was excavating only wasteland and that there was no forest there. Additionally, the attorneygeneral argued there was an agreement between the governments of India and Bangladesh under which India was obligated to provide the land for mining.

The limestone mined in Meghalaya is conveyed to Bangladesh using a 17-km belt, and the US$255 million Lafarge Surma Cement project at Chhatak in Bangladesh is wholly dependent on limestone extracted from the East Khasi Hills.

Ambitious Housing Plan The Chinese government announced changes to its housing policy to meet the growing demand for homes in the country. It is pushing for the construction of affordable housing, particularly for the country’s provinces and autonomous regions, and is seeking to build seven million housing units in 2012. To facilitate this goal, the country intends to employ the "on-demand reporting, bottom-up" principle to determine the feasibility of construction projects.

Future of Cement Industry The Chinese government unveiled their second “Five Year Plan” for the cement industry. The primary thrust of the new plan is to increase cement production by ten percent, or 250 million tons, by 2015.

The government also plans to upgrade the country’s production facilities to improve efficiency. It also seeks to facilitate further industry consolidation as a way of improving the quality and development of the industry as a whole.

The country also seeks to eliminate most of the pollution associated with cement production, as well as reducing the industry’s carbon footprint by increasing

alternative production. Under the plan, China will eliminate 250 million tons of outdated cement production capacity between 2011 and 2015 to reduce emissions.

The industrial restructuring will result in an increase in the production quota of the country's top ten companies, which will represent 35 percent of the national total by 2015, up from 25 percent in 2010.

In the next five years, Chinese cement producers will reduce NOx and SO2 emissions by ten percent and eight percent, respectively.

Meanwhile, CO2 emissions per unit of industrial added value will fall by 17 percent by 2015.

Taiwan Manufacturers to Benefit The next five years should prove promising for Taiwan’s leading cement producers, including Taiwan Cement, Asia Cement, and Goldsun Development & Construction. Thanks to the projected supply gap created by China’s phasing out of 250 million metric tons of backward production cement capacity, Taiwan’s producers will have a significant outlet for its product.

With annual production of inferior cement reaching 350 million metric tons and the Chinese government prohibiting new cement plants, the production and sales of cement will improve in the years to come, ultimately benefiting Taiwan’s cement producers who have set up plants in China.

Institutional investors predict cement production in China will reach two bil-

lion and 2.5 billion metric tons in 2011 and 2012, respectively, with annual consumption of cement to peak at 2.4 billion metric tons during the 12th five-year plan, with no foreseeable disorder in production and sales in the years to come.

No Threat Existing cement makers in Indonesia do not feel threatened by investors’ plans to build new cement manufacturing facilities in the country. According to Urip Timuryono, Chairman of the Indonesian Cement Association (ASI), the entry of new players will not affect existing cement producers’ operations because the new plants will primarily be designed to fulfill the supply shortage in the eastern part of Indonesia.

The remarks came on the heels of several expansion reports. Lafarge announced plans to build a cement plant in Langkat, North Sumatra, capable of producing 1.5 mtpy of cement. Chinese firm Anhui Conch Cement Company pledged to invest US$2.35 billion to establish four cement plants in East Kalimantan, West Kalimantan, South Kalimantan and West Papua. In addition, another Chinese firm, China Triumph International Engineering, through its unit China National Building Materials Group, planned to build a 2 mtpy capacity cement plant in Grobogan, Central Java, for an estimated US$350 million.

Looking Ahead 2011 brought some fundamental corporate and market shifts, with the Western world struggling to climb out of the volume hole and only selectively succeeding. Much of the developing world barreled ahead, continuing to shift some of the tectonic plates in the global industry.

We expect 2012 to continue with interesting corporate activity and constrained markets forcing tough decisions as the squeeze intensifies. Though 2011 may go down as a year of bifurcated fortunes, the CW Group sees the hints of an inflection point in the year, setting the stage for an eventful 2012. BMWeek CemWeek CW Group BMWeek BMWeek

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ANALYSIS

Energy and Fuel Costs Weigh More on Gulf Cement Sector

Rising energy and fuel costs pose a serious risk to cement companies in the Gulf zone. Although profits rose by 8.8 percent year-over-year in 2Q 2011, it is not necessarily good news, since cement sector profitability dropped overall in the first half of the year by 4.7 percent year-over-year Increasing energy and fuel costs are pressuring companies to raise prices.

Demand for cement has fallen as projects near completion (for example many projects in the UAE), and analysts point out that supply is clearly outweighing demand.

Cement manufacturers will struggle to avoid increasing losses. They will likely not be able to pass increased costs on to the prices of current projects that are approaching completion but will look to do just that for new projects.

Rivals Pressure Omani Companies Oman Cement Company announced a 14 percent decline in revenue to OR 24.8 million in the first half of this year while profitability sunk to OR 7.3 million, a sharp 60 percent drop, mainly

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due to significant increases in operating expenses.

The company has seen its energy, gas and fuel costs rise steadily for the last three years, from OR 4.92 million in 2008, to OR 5.04 million in 2009 and OR 5.10 million last year.

Moreover, the costs of energy, gas and fuel make for an increasing share in the company’s total cost of sales. The bill increased from 9.9 percent in 2008 to 12 percent in 2009 and 17.5 percent last year. The high proportion in 2010 was, however, influenced by a sharp reduction of sales costs in 2010 from the previous year, by 30 percent, down to OR 29.1 million.

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Cement companies in Oman are being affected by the lower prices of rivals in the United Arab Emirates who manage to sell each ton for about four to five OR cheaper.

The Omani cement sector reported a 13 percent fall in cement prices in the first nine months of 2011 compared to the previous year, and a 19 percent drop since the end of 2010, the largest decline among other Gulf Cooperation Council (GCC) peers. Margins have also diluted for Oman’s companies, mainly due to the high cost of raw materials and a price war ignited by UAE cement companies which supply cement at a lower cost to the Sultanate.

It is noticeable that Oman Cement Company and Umm Al-Qaiwain Cement Company from the UAE manage to keep the energy bill significantly lower as a

ENERGY&FUEL COSTS ON THE RISE IN THE GULF (% OF OPERATION COSTS) 80

Union Cement Company Ras Al Khaimah Cement Company Gulf Cement Company

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Oman Cement Company Umm Al-Qaiwain Cement Company

0

2009

2010

proportion of total costs compared to other regional rivals. One of the ways to keep fuel costs low is to expand and improve clinker purchase operations.

For example, Oman Cement has been cooperating with the government to fund clinker imports and supply cement at lower prices.

UAE feels heat of rising costs At their end, companies in the UAE are also experiencing fuel and energy costs as a growing burden, especially since natural gas has become an increasingly rare and expensive resource.

Last year, the fuel and energy bill reached AED 111 million for Ras Al Khaimah Cement, with AED three million more than in 2009. The proportion out of total cost of sales also moved up, from 51.8 percent to 53.3 percent. The proportion is even higher if applied to costs derived only from energy and fuel, direct labor, direct materials, maintenance and other overhead—54.8 percent in 2009 and 57.6 percent last year.

Variation YoY

2010 at 58.5 percent, from 72.9 percent in 2008. Strictly for 2010, the performance was weaker than in 2009, when the proportion of fuel and energy was significantly smaller, at 51.5 percent.

The situation has deteriorated last year for Gulf Cement Company as well.

In 2010, the company gave away 52.6 percent of its total operating costs for fuel, electricity and water. One year before the percentage had been smaller, 48.2. Last year was better than 2008, though, when 55.8 percent of total sales costs paid for fuel, electricity and water.

The smaller Umm Al-Qaiwain Cement Company managed to decrease its electricity and water costs by 34 percent in 2010 in absolute numbers, compared to the previous year. On the other hand, the share out of total costs of sales has nearly doubled, to 4.9 percent from 2.6 percent. The low efficiency of the company’s spending on electricity is even clearer if one looks at the sluggish sales

—a whooping 64 percent drop from the previous year, down to AED36.8 million.

Saudi Arabia, profitability driver The net profit from cement operations in Saudi Arabia increased by 13.5 percent in the first half of the year. The cement makers are enjoying subsidized oil that helps them fuel operations. The government is thus helping the cement sector produce more cheaply; however, the country is also losing some opportunities as it does not export that oil.

The Saudi Arabian cement sector keeps a positive outlook due to a better demand supply situation as compared with other countries in the Gulf Cooperation Council (GCC), according to recent analyst reports.

On the contrary, the outlook for the UAE is negative, as the revenues of publicly traded companies dropped by 56 percent in the first six months of the year due to low domestic demand and fewer export opportunities in the region.

Cement prices in all the GCC countries witnessed a decrease except in Saudi Arabia and Qatar. Oman marked the largest decline in prices by 14.4 percent amid weak demand and stiff competition in the local cement market. BMWeek CemWeek BMWeek BMWeek

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Contact the CW Group for a comprehensive discussion of global and regional energy and fuel benchmarks developed as a part of CW Group Research’s benchmarking work.

Union Cement Company has cut in half its energy and fuel costs in 2010 compared to 2008, at AED 305 million.

The performance may seem spectacular, but the trick is that sales have also diminished by 50 percent for the period, while total costs of sales have dropped by 42 percent.

The good part is that the proportion covered by energy and fuel costs out of the total cost of sales has diminished in

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RESEARCH

CW GROUP RESEARCH

Cement Has Feelings, Too A comparative view of the 2011 cement industry surveys The CW Group has released its 2011 Business Sentiment Surveys, which every year query industry participants on developing trends and perceptions within the cement industries. Three separate surveys are carried out annually: India, the Americas, and the Middle East and Africa More than 700 responses helped to develop a clearer picture of the global cement industry during 2011 and for the upcoming year. Respondents reflect the full range of the types of firms that make up the wider cement industry, from cement manufacturers and equipment firms to industry traders and analysts.

Our surveys revealed changing business strategies, operations, sales and marketing activities, and other attitudes that impact the cement sector, from cost to capacity concerns and employment projections. Here the CW Group provides a comparative perspective of results from this year’s surveys.

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The Markets at a Glance The global recession has affected the cement industry in the last year. Established markets like the United States are experiencing difficulties, while emerging regions seem better positioned for sustained growth during the upcoming years. Brazil is one of the fastest-growing markets globally, with Africa and India following closely, although political unrest in Northern Africa and sluggish growth in India are still problems to solve.

India, the second largest cement market in the world after China, has experienced increasing demand—up 5.5 percent—in 2011. This is mixed news: positive because the market is still moving forward

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despite price drops and negative because the growth is only half of 2010’s ten percent rise for the sector.

In the Americas, considerable differences emerge between the North and the South.

The ongoing slowdown in the United States meant production in 2010 reached its lowest point since 1982 and almost half of the record level registered in 2005.

Central America also slowed, but production was in general stable. Meanwhile, the situation is much brighter in South America. The expansion of the regional economies led to steadily increasing demand, mainly from planned state expenditures on infrastructure development.

MOST SATISFIED WITH RECENT PERFORMANCE Country/Region

Percentage*

Brazil

85

Gulf (GCC**)

59

Sub-Saharan Africa

58

Turkey

53

India

51

The Americas

40

* Percentage of respondents feeling they recently performed well or excelent **GCC - the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE) Source: Comparative analysis of regional surveys

Moving all the way to the Middle East, cement makers are struggling with looming overcapacity, with the United Arab Emirates one of the most notable examples.

Its capacity reaches around 31 mpty, but production was expected to be only 13.5 mpty at the end of 2011.

In Africa, the North has interrupted its steady growth due to the effects of the “Arab spring.” Protests, demonstrations and conflicts affected demand in Egypt, Tunisia, Algeria and Libya. The Sub-Saharan region, however, is improving in terms of future expectations, with countries like Angola, Botswana, Nigeria and South Africa experiencing increasing trade and decreasing unemployment.

The “Optimism Map” Optimism has carried forward into 2011, but there is also some weakening in critical areas.

In India, the industry is still positive yet less optimistic than in 2010. Half of the surveyed organizations expect an improvement in 2012, 40 percent expect it to be much the same, and the rest expect a small decline in performance.

In the Americas, particularly in the South, there was a consensus that performance would be about the same or somewhat better in the coming year. Cement

makers were, however, less optimistic than other companies in the industry: 90 percent of those companies anticipating worse performance overall were cement makers, who made up 50 percent of the survey field.

In the Middle East and Africa, the most optimistic regions were Sub-Saharan Africa (SSA), the Gulf and North Africa, with 71 percent, 64 percent and 63 percent of respondents anticipating a “much better” or somewhat better performance for the near future.

Sentiment over Recent Performance India is satisfied in general with its latest performance. 51 percent of survey respondents think they have performed well or excellent, and only seven percent

believed they had done poorly. The general sentiment largely echoes industry expectations from the 2010 survey, when respondents anticipated growth for 2011.

In the Americas, sentiments differ greatly between North and South. In North America, only nine percent of respondents said that performance had been “good” or “better,” while 80 percent said that it was “ok” or “poor.” On the other hand, in Brazil over 85 percent said that recent performance was “excellent” or “good,” while 65 percent felt the same in the rest of South America.

The six states of the Arab Gulf Cooperation Council (GCC), namely Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and the UAE, indicated in a proportion of 33

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RESEARCH percent that business performance was “excellent,” while only 20 percent said the same in Other Middle East states and even fewer in the remaining parts of the region, including Turkey.

Regions that reported the industry was doing “excellent” or “well” include the GCC states (59%) Sub-Saharan Africa (58%) and Turkey (53%). At the same time, 46 percent of North African respondents mentioned results below expectations for the last period, a situation easy to understand given the political unrest that characterized most of 2011 in the region.

Expectations for the Future When it comes to expectations of improved profitability, the most optimistic respondents are those in the Gulf region, followed by Sub-Saharan Africa, India and South America.

In North America, only 30 percent of those surveyed expect profits to rise, whereas half of South American respondents had a positive profitability outlook.

Less than half of respondents (43%) in the Middle East and Africa agreed that their companies’ profitability will improve. Here, optimism is driven mainly by the GCC states and the SSA region, with 65 and 57 percent of respondents, respectively, betting on a rise in industry profitability. Among the most pessimistic

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countries are Turkey (21%) and North Africa (17%).

What key challenges face the industry in the upcoming year are seen differently across the world. In India, the two essential industry topics are controlling costs, which are on the rise, and improving domestic sales. highest hopes for better profits Country/Region

Percentage*

The Gulf (GCC**)

65

Sub-Saharan Africa

57

India

56

North America

30

South America

50

North Africa

17

* Percentage of respondents feeling their profitability will improve over the coming year **GCC - the Gulf Cooperation Council (Bahrain, Kuwait, Oman, Qatar, Saudi Arabia and UAE) Source: Comparative analysis of regional surveys

In North America there is a particular focus on environmental and regulatory issues driven by the new U.S. Environmental Protection Agency rules, as well as underlying profitability and excess capacity. Firms in South America stressed plant efficiency and, especially in Brazil, a shortage of skilled labor contributes to problems meeting existing demand

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Excess capacity, on the other hand, is the number one challenge in the Middle East and Africa, with 32 percent of the regional respondents indicating this as the main theme for the coming years, followed by increasing energy prices at 27 percent overall. The energy issue is particularly sensitive in Turkey and North Africa, with 40 and 33 percent, respectively, indicating it as the main challenge.

The expected evolution of employment numbers in the cement sector differs by region. Brazil and India are among the most optimistic markets of those analyzed.

In India, respondents expect to see overall employment increasing slightly in the coming year, with 13 percent expecting "a lot more" employment, 50 percent "a bit more" and 36 percent expect levels to "remain the same."

Brazil leads expectations in the Americas in terms of hiring numbers with an overwhelming majority (65%) expecting companies to hire “a bit more” and 13 percent predicting “a lot more.” The Americas overall expect the situation to remain the same. About 80 percent indicated that hiring would “remain the same” or be “a bit more.”

The Middle East and Africa experience cautious optimism and neutrality when it comes to projected hiring. Almost 90 percent of respondents think employ-

key challenges for 2012 Country/Region India The Americas

Top Priorities Improving domestic sales, controlling costs Controlling costs

North America

Increasing sales, environmental issues

South America

Meeting domestic demand

Middle East and Africa

Controlling costs, find new export opportunities

Source: Comparative analysis of regional surveys

ment numbers will “remain the same” or be “a bit more” for 2012. The most optimistic country in the region is Turkey, where 59 percent project “a bit more” hiring. In Other Middle East states, on the other hand, 29 percent of respondents expect layoffs.

An important indicator for the next year is how respondents view the evolution of their own careers. In general, all regions surveyed experience a feeling of stability and even slight optimism.

In India in particular, 67 percent of respondents expect their own career prospects to improve, and most others expect their careers to remain "probably the same." In the Americas, optimism is more cautious, with 45 percent of all respondents indicating their jobs would probably be the same. Nearly 40 percent (although only 30% in North America) indicated they were fairly confident their career would see a boost in the next 12 months.

The Middle East and Africa are quite optimistic as well, with 67 percent of respondents having a positive career outlook and just two percent perceiving their careers to be at risk. In SSA, 77 percent of respondents were highly confident or fairly confident regarding their careers in 2012, compared with 67 percent in GCC and Other Middle East states, 63 percent in North Africa and 59 percent in Turkey.

timent surveys is the willingness of companies to trade off future profits in order to reduce CO2 emissions. India is again a leader, with three quarters of companies acknowledging the importance of eco-friendly investments. Indeed, over 76 percent of Indian companies say they are prepared to give up a share of profits in order to improve the environmental impact of their businesses. In fact, nearly 65 percent said that it was either important or a top priority for the Indian cement industry to meet emerging US/EU emissions standards

respondents in the Middle East and Africa agreed. In this survey, the strongest positive response was obtained in Turkey (86%), followed by GCC states (72%) and SSA (66%). Opinions in North Africa were more or less evenly split (46% agree, 54% disagree).

In the Americas, the North and the South diverge in prioritizing lower emissions over profits. Here, 64 percent overall indicated the industry should sacrifice profits for lower emissions, but South America (including Brazil) was willing to prioritize lower emissions at a rate of 80 percent, whereas North America was split at 48 percent agreeing and 52 percent disagreeing.

No Clear Roadmap for 2012 More established regions face an uncertain 2012. North America will continue to face low production, while the Middle East will see its high capacities partly unused due to weak demand. Africa has great potential, especially in the SubSaharan area, but the North is still under the influence of political unrest that may continue to affect demand through 2012.

At the same time, North American companies were more likely to have identified environmental issues (16% as opposed to 8% of the rest of the sample) as their firm’s major concern in the coming twelve months. Overall in the Americas, half of all firms indicated it was “important” that they meet the latest emissions standards.

Brazil will still remain a dynamic market in the next year, with virtually all indicators on the rise, and sentiment is improving in other South American markets as well. India’s growth is slowing, but a general positive sentiment may help the world’s largest non-Chinese market continue to rise. BMWeek CemWeek CW Group Coal Week

When asked if they believe that their country’s cement industry should sacrifice profitability in the next few years in order to improve emissions and reduce CO2, an average of 65 percent of

Half of all Middle East and Africa respondents recognized that being on par with US/EU emission standards is important. Turkey is again the most concerned, with 78 percent of respondents perceiving it either as important or a top priority.

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Concern for Environment Another notable topic probed by the sen-

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REGIONAL REPORT:

up for the first eleven months, having increased by 16.8 percent, but exports declined 9.2 percent.

Cement makers in Lithuania were expected to post good results for the year.

Manufacturers also plan to raise cement prices due to more expensive inputs as well as increasing logistics and energy costs.

Italcementi sold its global concrete admixture and cement grinding aid business, which operates under the brand name of Axim, to Sika. Axim, which operates several production units and sales organizations in Italy, France, the U.S., Canada, Morocco, and Spain, generated sales of around CHF 75 million (EUR 61 million) in 2010.

Russia & the Baltic Countries Eurocement confirmed plans to commission a 600,000-ton cement facility in Voronezh by 2012. The plant is expected to start operations in May, with first production in June. Full production capacity, which is 2.2 million tons, should be reached by 2013. Ulyanovskcement implemented a 650 million ruble modernization plan that will allow its production capacity to expand in the coming years.

Expansion efforts include the purchase of two walking excavator EL 6 / 45 and 10/70 ES with a bucket capacity of six and ten cubic meters.

Europe European Union climate legislation will take its toll on the United Kingdom’s cement industry, as many companies will have to spend large sums of money to comply with the crackdown on carbon emissions. Cemex UK, the country’s largest operation, estimates it will cost an extra £ 12 million to reach compliance.

Reportedly, the new price tag has the company considering transferring its UK operations to Egypt.

Spain’s cement association, Oficemen, expects cement consumption to contract further in 2012 (an 8 to 10% drop), reaching levels seen 40 years ago. Currently, 37 plants across the country are operating at

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only around 54 percent of capacity. Toral Cement, a Cimpor unit, plans to cut production by 50 percent to 500,000 tons in 2012 based on the bleak outlook.

Bohler purchased Holcim’s cement facility in Loruns, Austria for an undisclosed amount. Bohler plans to expand in the area with a EUR 3 million investment to improve its position in Austria over the next two to three years.

The Polish cement industry hit its highest production levels in two decades thanks in part to continued economic stability.

According to a report by the Association of Cement Producers, production stood at 17.42 million tons. Cement sales were

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Inteko, which was sold earlier this year to Sberbank, will conduct an IPO in the first quarter of 2012. Proceeds will assist the company in increasing capitalization and improving business operations. One of Russia’s richest women, Yelena Baturina, sold her cement plants in southern Russia for an estimated US$557 million.

The buyer was billionaire Lev Kvetnoy, owner of Novoroscement.

The state-government of Belgorod, in an attempt to increase cement production in the area, is offering a variety of incentives to manufacturers, including a 4.5 percent income tax break.

The Russian government has promised to reduce its post-WTO tariffs on cement

imports. Currently, tariffs are set at five percent, but Russia plans to lower this to three percent in 2013.

The Federal Antimonopoly Service (FAS) allowed Siberian Cement to raise its stake in Angarsk Cement to 100 percent, while officials in the Ukraine gave permission for Switzerland’s second largest cement producer, Jura Cement Fabriken, a CRH subsidiary, to acquire a stake in Odessa Cement, although the company will be required to allow Odessa to retain 50 percent of its voting rights.

Also in the Ukraine, cement production over the last eleven months increased, with output between January and November of 2011 rising ten percent. This follows a 5.9 percent increase in cement production for the previous year. Production slowed in November as winter set in, recording only a 0.8 percent uptick.

Middle East The cement industry in the United Arab Emirates has seen a recent wave of merger and acquisitions activity as prices and demand continued to decline because of a slowdown in the property and construction markets. Net profits declined 86.6 percent to US$10.9 million in the first nine months of 2011.

With Oman’s construction and infrastructure markets enjoying an upswing,

Omani-based companies are especially interested in buying UAE cement manufacturers in order to benefit from the lower prices and ready-made capacity since Greenfield projects would generally take 12 to 15 months. For UAE cement manufacturers, hope lies in the expansion of export sales to GCC member states.

Manufacturers are focused on raising exports to 50 percent from the roughly 25 percent exported now.

regional report: europe, middle east, africa

Strong growth in cement demand is forecasted for Saudi Arabia following a 125 percent increase in the number of construction projects. The export ban had forced the closure of several cement production lines, but the boost in construction activity may alleviate this situation as the excess may be absorbed. Fuel interruptions may, however, delay new capacities and overall production in 2012. One report suggests that ongoing fuel problems with Saudi Aramco could delay around 4.5 million tons of new capacity from coming online in 2012.

Saudi Aramco previously announced it would not supply subsidized fuel to Yanbu Cement because of its failure to secure a fuel agreement for new production lines before starting construction. Saudi Aramco also refused to provide fuel supply for a new production line at Southern Province Cement.

Yemen’s cement market is stagnating as production has dropped by 70 percent since the beginning of 2011. The current political crisis has halted construction and infrastructure projects, and facilities are no long operating at full capacity due to higher input costs, particularly for fuel oil and electricity. Many manu-

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

PLANT

OVERVIEW

Ancap (Uruguay)

Upgrades to Ancap's Paysandu and Minas units will be completed by 2014, enabling units to produce a combined 1.1 mtpy of cement. The project includes modifying the process and energy matrix, lowering production costs, improving environmental impact and increasing capacity. COST: US$200 million

Holcim (Azerbaijan) Lafarge (Algeria)

Table available in the CemWeek Magazine Print Edition.

Garadagh cement is close to completing an expansion project carried out by Chinese CBMI Construction, moving the plant to dry cement production. Capacity will increase from 1.3 mtpy to 1.7 mtpy. COST: EUR 325 million.

Saqos state

Lafarge has entered a partnership with Cement Algeria to build a cement plant in Saqos state, 400 km east of Algiers. Completion of the 2 mtpy cement plant will take 12 to 16 months. COST: EUR 365 million

Lafarge (Russia)

Kaluga region

Lafarge (Uzbekistan)

Jizzakh regionwww.cemweek.com/subscribe Lafarge plans to build a 2 mtpy capacity cement plant in the Jizzakh region of Uzbekistan. The government has approved a preliminary feasibility study for dry cement. COST (est.): US$250 million

LSR (Russia)

Podolsk Cement (Ukraine)

Leningrad region

Lafarge has announced construction of a new cement plant in Kaluga. The 2 mtpy capacity plant will be built by Renaissance Construction.

Russia's LSR has opened production at a new unit in the Leningrad region with an initial capacity of 1.86 mtpy. Production at the plant is automated and can continuously monitor the quality of incoming raw materials, raw meal, clinker and finished cement.

Podolsk Cement is commissioning a 3mtpy new cement unit with modern equipment that allows the company to move from "wet" to "dry" production methods and limits emissions by 99.9%

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regional report: europe, middle east, africa

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

Cemtech Sanghi (Kenya)

PLANT

OVERVIEW

Yopougon area

The Ivory Coast has inaugurated a 500,000 tpy cement unit in Abidjan consisting of 5 hectares in the industrial area of Yopougon Center. Capacity can be expanded to 1 million tons of cement. COST: 20 billion CFA francs

Pokot

Construction is on schedule at a 1.2 mtpy cement plant in Pokot, with completion anticipated in two years. Materials are being imported from China and India and 100 acres of land have been purchased. COST: Sh12 billion

Dangote (Nigeria)

Dangote has earmarked N50 billion to expand its Gboko plant to 4 mtpy.

Dangote (Nigeria) JK Cement (UAE)

Table available in the CemWeek Magazine Print Edition.

Dangote will commission its 6 mtpy unit in Ibeshe. Upon completion of the third line at Dangote's Obajana plant, the company will have a total production capacity over 20 mtpy against 17 million tons of demand in Nigeria.

Fujairah Free Trade Zone

Oman Cement (Oman)

JK Cement has announced intentions to build a 600,00 tpy cement unit in the UAE. Capacity will be 0.6 mtpy of white cement with a provision to change over to 1.01 mtpy of grey cement. COST: RS 750 crore

Oman Cement seeks to increase its cement grinding capacity and has contracted www.cemweek.com/subscribe with China National Building Materials & Equipment to upgrade its Kiln-1 and modernize pollution control equipment for Line-1. Commissioning and performance trials for the 4,000 tpd capacity kiln have been carried out. Oman will take over operation of the new kiln in the fourth quarter. COST: RO 14.27 million

Yamama Cement (Saudi Arabia)

Yamama Cement Company announced the end of the executive management of an economic feasibility study to improve five older production lines from the current 5600 tpd clinker capacity to a 10,000 tpd clinker capacity.

tax the moment they purchase cement from the factories. This would increase the burden on small traders by increasing upfront costs. Meanwhile, the government also announced that it would be reviewing all previous privatization agreements, including those related to the cement industry, to ensure they were in no way disadvantageous to the country’s interests.

Cement consumption in Morocco increased by 9.25 percent, or 1.24 million tons, over the previous year, to reach 14.59 million tons in November. With an excess capacity of 1.5 mtpy, Morocco is looking for ways to further boost demand. The Libyan market may provide the solution, considering that roughly 24 million tons will be needed for reconstruction efforts. Considering that the second Atlas unit will come online in 2012, increasing excess capacity to three million tons, cement exporting may be a welcomed option.

Cement consumption in Egypt has recovered to 80 percent of pre-unrest levels.

Production, currently at 43 million tons, is expected to increase to 50 million tons this year. Builders are asking the government to step up the pace when it comes to construction and rebuilding of cement plants in order to reduce the country’s reliance on foreign imports. Cement prices have increased by 50 Egyptian pounds after companies almost unanimously agreed to raise prices.

facturers are intent on shifting to coal, which could lower production costs by as much as 35 percent.

Iran produced 46.5 million tons in the first eight months of the current Iranian calendar year (ending November 21), a 9.6 percent rise over the previous period.

Iran’s exports reached seven million tons

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in the first eight months of 2011 despite a historical level closer to two million tons.

Iran hopes to export ten million tons by the end of 2011. Its primary export markets are Iraq and Afghanistan.

In response, the Egyptian government started in December by setting a price of 400 to 450 Egyptian pounds per ton of cement. It also set a production minimum of 900 tpd for the country’s 19 cement manufactures. The government confirmed it would additionally raise the sales tax on cement from ten to fifteen percent in order to fund its new social health insurance scheme.

Cement traders in Jordan are criticizing a government plan to change the country’s sales tax system to require traders to pay

Syria’s cement industry is asking the government to intervene to limit cement imports to prevent dumping. The industry

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has requested quality testing on the imports. The sector is suffering from massive importation, which has led to a drop in prices and an erosion of margins.

Africa South Africa's Public Investment Corporation (PIC) received the necessary regulatory approval for its proposed merger with South Africa’s second largest cement company, AfriSam. PIC needed approval in order to proceed with a conversion of stock and share debt. In early December, PIC reached an agreement with a majority of the providers of senior debt to AfriSam in relation to a proposed restructuring of the company's debt. The restructuring will result in a significant deleveraging and has the support of over 85 percent of note holders.

Indian-based Aditya Birla may be interested in purchasing the assets of Lafarge's South African unit, Lichtenburg Cement Works, which is reportedly worth up to US$800 million. The sale of Lichtenburg Cement Works, one of the largest and most technically advanced facilities in the country, is being undertaken in order to reduce Lafarge’s debt load.

Algeria plans to boost exports, including white cement to the European Union.

The cement industry wants to double cement production from its current 16 million tons, and the government plans to modernize existing facilities and build several new cement plants. The government also announced plans to crack down on adulterated cement. Reports suggest that adulterated cement makers have copied the packaging materials of reputable manufacturers in order to pass off their products as genuine. Authorities warned that adulterated cement can weaken structures and added that hundreds of houses faced the possibility of collapse due to the use of substandard cement.

Cement manufacturers in Ethiopia oppose government plans to import more cement. Manufacturers believe local pro-

duction is more than adequate to meet demand. Some claim there is actually a glut in cement as more capacity comes online. Meanwhile, Uganda’s fledgling construction industry finds itself struggling with a cement shortage.

In December, South African-based Pretoria Portland became the first foreign company to buy equity (10% ) in Ethiopia’s Habesha Cement. Reports indicate that Habesha is in ongoing negotiations with an undisclosed buyer interested in purchasing up to a 30 percent equity stake. Habesha is the first Ethiopian company offering equity for the construction

of a cement plant. To date, it has raised around BR 405 million from Ethiopian investors, and it hopes to raise BR 700 million for the project.

In Nigeria, President Goodluck Jonathan commissioned a new 2.5 million ton cement plant built by Lafarge’s WAPCO unit. Meanwhile, China's FORSPAK has begun construction of a CFA 8.1 billion (US$16 million) cement plant in the Democratic Republic of Congo. The cement plant will be completed within ten months and will have an annual production capacity of 300,000 tons. BMWeek CemWeek

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China China’s cement industry is expected to enjoy solid long-term prospects despite a negative short-term outlook. The industry has taken a beating in recent months as the economy put a break on construction activity. Resurgence is projected but not likely to be seen until the second half of 2012. The government’s recent announcement to build seven million housing units in 2012 will likely contribute to an increase in cement demand, with demand forecasted to grow four percent in 2012. The government is expected to restrict supply to prevent a glut in the market, thus accounting for the only 0.6 percent increase in supply.

Anhui Conch increased its stake in Jidong Cement to 15 percent and Taiwan Cement acquired Chinese-based Tai Chang Group for NT 3.5 billion. Tai Chang, located in the southern part of Chengdu in the Sichuan province, where few cement plants are located, has seen a rise in cement demand because of largesize public works projects.

Indonesia and Japan Cement sales were expected to reach 46 million tons this year in Indonesia, a ten percent increase over the previous

year. The country’s economy is experiencing a growth spurt thanks in part to an uptick in infrastructure spending and construction activity. Construction activity is projected to boost cement demand by 15 percent. Gambling on the continued activity, Holcim announced plans to borrow as much as US$250 million to fund a new plant in Tuban for 2013. The funds would match the US$200 million already raised internally for the US$450 to 500 million project. The plant is expected to contribute 1.7 million tons of capacity, adding to the company’s existing 8.3 million tons.

Cement makers in Japan expect 2012 to be a good year as reconstruction efforts continue throughout the country. As of October, cement sales were up for the fifth consecutive months with sales hitting 381 million tons. Meanwhile, cement firms in Thailand were anxiously awaiting a green light to move forward with reconstruction efforts related to last year’s devastating floods. Siam Group estimates that reconstruction could boost its growth by at least five percent.

select PROJECTS IN THE WORKS: ASIA PACIFIC COMPANY (LOCATION) Anhui Conch Cement (Indonesia)

Semen Gresik (Indonesia) Semen Gresik (Indonesia)

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PLANT

OVERVIEW Anhui Conch, China's biggest cement maker, has been given regulatory approval to build a 1.55 mtpy capacity cement plant in Indonesia. A Hong Kong-based material firm will build the plant. Anhui Conch will fund US$378 of the total US$400 million investment.

Table available in the CemWeek Magazine Print Edition.

A 2.5 mtpy plant in Tuban will be online December 2011.

Sumatra

www.cemweek.com

www.cemweek.com/subscribe Plans are underway for a plant on the island of Sumatra consisting of two units to be built starting mid-2012 for a 3 mtpy capacity. COST: Rp 7 trillion

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Other Asia Pacific The cement markets in Korea and Vietnam remain depressed. In Korea, manufacturers are grappling with rising raw material prices and declining demand.

Cement makers report losses of US$1.5 billion this year as the global financial crisis continued to take its toll, halting numerous construction and infrastructure projects.

The cement industry in Vietnam had only reached 71 percent of plan in the first ten months of the year, with production at 39.4 million tons and sales at 39.1 million tons. A number of cement makers were reportedly on the brink of bankruptcy, and three VICEM units were recently sold to pay down debts. In the 2010-2011 period, VICEM experienced a loss of VND 220 billion (US$10.53 million), an event that has not happened in years. Many of VICEM’s member companies are expected to cut consumption by between ten and 20 percent.

Low infrastructure spending contributed to a seven percent drop in cement sales this year in the Philippines, where the government has frozen infrastructure spending in order to review projects for corruption, a rampant problem that the government has vowed to combat. Despite the drop, utilization rates held at around 60 percent. Prices also remained in check due to soft demand. BMWeek CemWeek BMWeek BMWeek

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also confirmed that the founders of Ambuja exited the company, having sold their 0.79 percent stake to Holderind Investment, a unit of Holcim.

Heidelberg, Ultratech and Reliance have expressed interest in the joint venture project, as have Zuari Cements, Bhavya Cements, JP Cements and Binani Cements. Selection of a partner could take two to three months.

India A recovery in India’s cement demand did not materialize in November as forecasted. A slowdown in infrastructure spending and two consecutive price hikes hampered recovery efforts. On average, cement prices were up Rs 10 for a 50 kg bag in November, with the eastern region experiencing the largest increase, followed by the North. Several larger manufacturers turned in solid results for November, with ACC, Ambuja and UltraTech reporting 14 percent growth in dispatches.

Despite dismal demand, political and weather related concerns, many analysts remain optimistic that the Indian cement industry will perform well. Demand is projected to grow 4.5 percent in 2012, slightly higher than 2011.

JP Associates is looking for a strategic partner. The decision comes after the company decided to separate its Andhra Pradesh and Gujarat plants from the parent company in order to reduce debt.

JP intends to maintain majority control but is open to selling a 26 to 50 percent stake in its cement operations.

RINL is looking for a partner to set up a three million ton capacity plant at Visakhapattanam and is willing to give up to a 74 percent stake in the project.

Aditya Birla initiated discussion with the Jaypee Group to buy part of its cement business. Jaypee is selling off part of its operations to raise funds to reduce its Rs 40,000 crore debt burden.

Reports suggest Aditya is willing to buy a majority stake. Jaypee reached a previous agreement to purchase a controlling stake in Andhra Cement. That deal, worth Rs 280 crore, will give Jaypee an 80 percent stake in Andhra.

The merger of Ambuja with Holcim received the approval of India’s high court.

The merger had previously received the approval of antitrust authorities. Reports

Other South Asia Cement manufacturers in Pakistan reported an impressive 107 percent increase in profits due to higher margins.

Manufacturers have been quick to pass on cost increases to consumers in order to maintain better margins. Average retention prices for Pakistani cement companies rose by approximately 31 percent with cement prices expected to remain firm. Overall dispatches were projected to grow by 5.6 percent annually to 33.2 million tons in FY 2012.

regional report: asia pacific & south asia

REGIONAL REPORT:

Cement exporters in Bangladesh are preparing to reap the benefits of dutyfree access to India’s northeastern states.

Businesses expect export volumes to double from the current two lakh tons exported annually to India. Finally, in Sri Lanka, port authorities approved the construction of a US$15.6 million cement plant by Pakistan's Thatta Cement Company on an industrial zone next to Hambantota port. No additional details were disclosed. BMWeek CemWeek CW Group BMWeek BMWeek

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select PROJECTS IN THE WORKS: SOUTH ASIA COMPANY (LOCATION)

PLANT

OVERVIEW

Holcim (Bangladesh)

Holcim has entered a deal with the Beumer Group's Enexco Teknologies to expand capacity by mid-2013, with an anticipated output of 7 lakh tons of cement per year.

Hundung Cement Factory (India)

Defunct public sector enterprise Hundung Cement Factory will be leased out as a private firm. Super Ores Factory, a partner of Satyam Group in Assam, has received permissions to re-establish the cement firm with a target capacity of 1500 metric tons per day, three times its previous capacity.

Jai Bhole Cement (India) JK Cements (India) Prism Cement (India)

Maharashtra

Haryana

Table available in the CemWeek Magazine Print Edition.

The government of Maharashtra has signed an agreement with Jai Bhole Cement for a 20 lakh ton per year capacity clinker plant, including a 72 MW captive power plant in Yavatmal district. COST (first phase): 1,502 crore

JK Lakshmi Cement will hike its installed capacity by 5.5 million tons by next year with new production lines to be completed by March 2012. Current production capacity is 4.8 mtpy. COST: RS 1,350 crore

Andhra Pradesh

The government of Andhra Pradesh has allotted 1,000 acres of land to Prism

www.cemweek.com/subscribe Cement for a 2 mtpy capacity cement plant in the Kurnool district. COST: Rs 5 billion

Rashtriya Ispat Nigam JV (India)

Vizag

Local and foreign cement makers have expressed interest in a proposed JV to set up a 3 mtpy cement plant for RS 1,000 crore. The proposed venture would use fly ash and slag from state-run RINL's Vizag plant, where capacity would be increased from 3 mtpy to 6.4 mtpy.

Reliance (India)

West Bengal

India-based Reliance Cement has submitted a letter of intent to build a 3 mtpy plant in Bengal. The company's first two projects, of 5 mtpy capacity each, would be built in Madhya Pradesh and Majarashtra. COST: Rs 500 crore

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REGIONAL REPORT:

Courtesy of Cemex

owes for income generated by the foreign investment of two subsidiaries. In more bad news for Cemex, Standard and Poor’s cut the company’s credit rating from a B to B- amid financial performance concerns, particularly in the U.S. and Spain, where the company is expected to continue facing sales volume and pricing pressures.

Cement prices in Mexico peaked in December, up two percent. The retail price of cement averaged 122 pesos per 50 kg bag. Prices were mostly up in all major cities except Tijuana and Chihuahua, where prices remained unchanged. Overall, cement prices in the country have increased 10.6 percent for 2011. All cement manufacturers have raised their prices with Cemex, Holcim and Montezuma leading the pack.

North America The Environmental Protection Agency’s new rules concerning the storage of clinker were temporarily blocked by a U.S. federal appeals court. While the EPA admitted it had not provided enough notice regarding the new standards, the agency had refused to delay enforcement of those rules. The Portland Cement Association’s position is that the new standards are arbitrary and that adoption of the proposed rules would violate the federal Clean Air Act. In sales and takeovers, it has been reported that Spanish-based Cementos Portland Valderrivas is putting Giant Cement, a subsidiary with operations along the United States East Coast on the market, and Vulcan faces a hostile takeover bid. Details on the Giant sale remain undisclosed, but the asking price is listed in the area of EUR 700 million.

Martin Marietta launched a US$4.74 billion hostile bid for Vulcan, which is heavily indebted to the tune of US$4.2 billion, resulting largely from its 2007 acquisition of Florida Rock Industries. In December, Vulcan sued Marietta, alleging the takeover bid was illegal and that the offer came after Marietta obtained highly sensitive, confidential information from Vulcan.

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Texas Industries terminated an agreement with one of its largest shareholders, Sawiris, successfully blocking a hostile takeover. Under an existing July 2010 standstill agreement, privately owned investment group NNS Holding and Nassef Sawiris, CEO of Egyptian-based Orascom Construction Industries, had agreed not to acquire more than 20 percent of Texas Industries’ outstanding shares.

Sawiris, through NNS, had approximately a 20 percent stake in the company as of March. News of the termination agreement sent company share prices higher.

The Portland Cement Association downgraded its cement consumption projections for the U.S based on the large volume of home foreclosures, tight lending standards, and weak new home prices. Cement was projected to see a 1.1 percent rise in consumption in 2011, 0.5 percent in 2012, but 7.4 percent in 2013.

The new numbers were roughly one-half of the association’s previous forecast. A rebound in cement consumption is not expected until 2014.

Heavily indebted Cemex plans to challenge a US$142 million tax bill. The government of Mexico asserts that Cemex

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Cemex, Mexico’s top cement manufacturer, says it is raising prices to cope with rising energy costs, which have been increasing for most cement companies due to significantly higher coal prices for the better part of the year.

Central America & Caribbean ADOCEM estimates that cement demand in the Dominican Republic has fallen 24 percent in the last five years.

Furthermore, despite ADOCEM efforts to achieve industry growth in 2011, the year is likely to end with a negative balance, resulting in six consecutive years of recession (2006-2011). At one time, the consumption rate per capita in the Dominican Republic sat around 400 kg per person, but it has dropped 30 percent to 280 kg. ADOCEM believes that if consumption rates are to increase, macroeconomic and investment policies must be targeted.

In Jamaica, Caribbean Cement Company (CCCL), which controls 70 to 80 percent of the Jamaican cement market, announced that it has seen signs of turnaround in the sector and will soon raise prices. The Jamaican cement market went into free fall in 2010, causing massive losses to the company. CCCL confirmed a price hike was imminent,

Cement consumption increased ten percent in 2011 over the previous year in Honduras. Home improvements, especially in the rural sector, contributed to the rise. While the increase in demand was good, the industry’s proposal to increase cement prices was not well received by many, including the government. Cement makers are set to increase the average price of a bag of cement by 9 lempira to 150 lempira. Manufacturers attribute the rise in prices to currency devaluation and increasing energy tariffs, fuel and inflation costs. The government claims manufacturers are fabricating these concerns and have threatened sanctions if prices rise.

South America Construction activity in Argentina is projected to pick up in 2012, ultimately boosting cement consumption. As a result, Portland cement is expected to set a new record at around 11 million tons. Similarly, cement production in Venezuela is set to break recent records as cement companies take advantage of the Community of Latin America and Caribbean (ECLAC) to ship its product abroad. Between January and September, sales of cement were just 5.5 percent below record-breaking 2009 numbers.

The Venezuelan government ended its standoff with Cemex, settling a longstanding disagreement related to the nationalization of the company’s interests.

Venezuela agreed to pay 75.7 percent of Cemex’s shares for US$600 million. Cemex received a down payment of US$240 million in December. The remaining US$360 million is to be paid in four parts.

regional report: americas

citing eroded profit margins. While the cement market did rebound in the third quarter, the improvement was not enough for CCCL to raise their current long-term market outlook.

select PROJECTS IN THE WORKS: americas COMPANY (LOCATION) Colacem (Canada)

Elizabeth Cimentos (Brazil)

PLANT

OVERVIEW Colacem Canada is proposing a cement plant to be built next to the existing Bertrand rock quarry near L'Original within three years. An existing plant in Grenville-sur-la-Rouge has operated since 2007. The new plant would create 128 direct jobs, 82 indirect and 90 trucking jobs. COST: US$225 million

Table available in the CemWeek Magazine Print Edition.

Alhambra

The new facility in Alhambra will be complete by 2013 and boasts advanced environmental measures to eliminate 99.99% of air pollutants and an automatic www.cemweek.com/subscribe truck loading system ("Caricamat") that eliminates human interaction with the cement.

try’s industry, specifically the nationalization of shares held in Soboce that, to date, have not been paid.

million plant in Parana. Construction on the 750,000-ton unit, set to begin operating in January 2014, will continue.

Six cement manufacturers in Brazil are under scrutiny for allegedly violating competition rules. The manufacturers—Votorantim Cimentos, Itabira Agro, Cia, Cimpor, Camargo Correa, and Holcim—have denied any wrongdoing. Cimpor acknowledged that if the government was successful in proving its allegation, it potentially faced a fine of up to 30 percent of turnover and would be forced to sell assets.

Peru’s cement industry may be in recovery, with the construction sector fueling the turnaround. Cement dispatches rose 1.68 percent to 7.5 million tons between January and November, and demand increased for the fourth consecutive month.

The construction sector is projected to grow by seven percent in 2012, which is likely to further boost cement demand.

The Brazilian state of Paraiba located in the northeast region is expected to become the country’s top cement producer given the number of manufacturing facilities being built. Brennand, Cimpor and Elisabeth have invested more than US$1.2 billion in the area, which is rich in cement raw materials. Capacity is projected to increase by 7.5 million tons by 2014.

Holcim confirmed that in late 2012 it would invest the funds for the second expansion phase of its Guayaquil plant in Ecuador. Holcim began improving the plant in 2010 when it invested US$120 million to raise annual cement production from 3.5 million to 5.4 million tons.

The expansion, which will take 24 months, will result in a 5,000 tpd line.

This will be the third clinker production line at the plant. Construction is set to start in December 2012.

Looking to the southern region, Portuguese Semapa, which owns Secil, is set to acquire a 50 percent share of Brazil’s Supremo Cimento for an undisclosed amount. Supremo Cimento had recently announced plans to building a US$340

Finally, Chile’s Cementos Bio Bio is looking for a buyer for its lime-producing unit, Sibelco Inacesa, and is willing to give up 100 percent ownership. Interest in the unit has been pouring in from around the globe. BMWeek CemWeek CW Group CW Group CW Group

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In Bolivia, Soboce called a shareholder’s meeting to look into Grupo Cementos de Chihuahua’s claim for compensation over shares held by the government. Investors decided to halt further investment in operations given events in the coun-

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SECTOR COVERAGE:

in prices reflects the slowdown in construction activity caused by economic uncertainty. Despite the slight slowdown, construction materials prices are still 6.2 percent higher compared to the same time last year.

Chinese construction companies, however, keep rising in an unofficial global hierarchy. China Railway Construction, China Railway Group and China State Construction—with a turnover of US$76.2 billion, US$73 billion and US$48.9 billion, respectively—are already more powerful than established European giants like France’s Vinci, with US$45.1 billion and Bouygues with US$30.7 billion, or similar companies in Germany.

The Chinese dominance is explained by a massive economic growth and the government’s spending program, which values especially investment in infrastructure and residential building.

India’s infrastructure sector keeps facing difficulties as the Indian economy continues to showcase signs of decelerated GDP growth.

The construction market continues to face challenges in Europe, where it recorded a slight decline of 1.3 percent year-over-year in September.

Amid financial difficulties which plague the U.S. and Europe, China remains the most aggressive player in the global construction market. Other fast growing economies, like India or Brazil, also pay tribute to current financial challenges and see their construction sectors struggling Construction MARKETS The global financial difficulties are currently balanced by big business opportunities, which are especially visible in mergers and acquisitions. The strategic return of financial investors in industries like construction and engineering have made possible a 28 percent rise in the global value of mergers and acquisitions.

During the period, around 44 big deals (worth US$50 million or more) were announced, reaching a total of US$18.5 billion, as opposed to the 38 deals worth

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around US$14.3 billion last year. Of the said transactions, around five “mega deals” were worth over US$1 billion apiece. During the quarter, deals concerning material manufacturers have accounted for 25 percent of deal activity.

Among the countries with the most dynamic markets are Poland, Sweden and Belgium: the three countries score best when comparing the current situation with pre-crisis markets. Poland, once a slowly developing agricultural country, is quickly picking up to become an economic power in Central Europe. Its construction sector is now at 138 percent compared to six years ago.

Looking closer at some of the main construction markets, the situation remains uncertain.

On the other hand, Portugal and Spain, two European countries also struggling with big sovereign debts, barely meet 64 and 44 percent, respectively, of the 2005 levels of their construction markets.

In the United States, the price of building materials trends slightly down, with a 0.1 percent drop in November. The drop

Concrete India is laying down a plan to shift from bitumen-based roads to concrete roads.

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the Italian pavilion at the Shanghai Expo, where the material was presented, the concrete was backlighted with multicolor LED lights.

Mexico-based Cemex has won a contract to deliver about 7,500 cubic meters of ready mix concrete for a railroad track at Puy-de-Dome, France. The project will allow the transportation of visitors to the highest mountain in the Auvergne.

Cemex had to make use of specialty materials like CXB C25/30 concrete for the platforms and floor slabs.

The United Kingdom concrete industry is at the forefront of sustainable building in the country, according to the annual Concrete Sustainability Performance report. It showed that 88 percent of concrete production has been “responsibly sourced” to the BES 6001 – Framework Standard for the Responsible Sourcing of Construction Products. The industry targets 85 percent of production sites to acquire the UKAS certified, Environmental Management Systems by 2012.

Carson Hill Concrete has launched a new concrete plant near Angel’s Camp, in California, U.S. The new facility is fully automated and has a capacity of 90 to 100 yards an hour. The company said that the new plant will help it become more competitive with regards to pricing, especially since they quarry their own gravel and sand.

Meanwhile, The College of Saint Charles in Milan, Italy, has developed in cooperation with Assobeton a new type of transparent concrete which can be used for various decorative applications. In

Gypsum and Lime European construction giant Lafarge is expected to receive 850 million euros for the sale of its South American and European gypsum assets to the Belgian company Etex Group. Lafarge will however retain a 20 percent interest after the deal.

Etex expects the deal to generate revenue of around EUR 1 billion.

International coal mining company AngloAmerican currently seeks to build

slow recovery in the us

Value of construction put in place ($ million)

Month

Value

October

798,530

September Table available in the792,107 CemWeek August July

Magazine Print Edition.

790,277

773,296 www.cemweek.com/subscribe

June

799,568

Source: U.S. Census Bureau. Data for October is preliminary

sector coverage: construction materials

The State Cabinet has already sought financial support worth Rs. 1,700 crore for the new roads, amid rising public complaints over poor road conditions.

inexpensive, eco-friendly housing using industrial waste. The company is mixing gypsum with cement to make “low cement” bricks for housing in the South African city of eMalahleni. The new bricks have several advantages over traditional heavy cement bricks, including a smaller environmental impact. About 400 houses will be built next year.

Limestone shipments in the Great Lakes area have increased 8.5 percent in October. Shipments from U.S. quarries increased 8.2 percent compared to a year ago, while loadings at Canadian quarries rose by 10.3 percent compared to a year ago. In the first ten months, the Great Lakes limestone trade stood at 23.4 million tons, a slight 2.1 percent decrease compared to the same period in 2010.

After nearly three years of efforts, U.S. homeowners affected by defective drywall reached a historic settlement with drywall manufacturers that may hit the US$1 billion mark. Knauf Plasterboard Tianjin has agreed to create a fund to pay for repairs at approximately 4,500 houses mostly in Florida and Louisiana but also in Mississippi and Alabama.

The defective drywall contained excessive sulfur, which caused metal pipes, wiring and even silverware and jewelry to corrode. Homeowners reported health problems such as coughs, nosebleeds and headaches. The case involved American houses built by Knauf, a German company, at Tianjin, a Chinese plant.

In Russia, Agrocomplex announced it reached an agreement with local authorities to build a new lime factory in the

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CONSTRUCTION & MATERIALS BY BMWEEK.COM

Tula region. The deal includes the development of limestone deposits in the Venevsky area, as well as the construction of a plant to cover lime and mineral powder production.

Aggregates In France, three major groups are fighting to secure more aggregate quarries, in anticipation of a shortage by 2030. Lafarge, Vinci and Bouygues France compete for resources to build roads, homes and of-

as recipients of the National Ready Mix Concrete Association's (NRMCA) 2011 Safety Award. The competition is a safety performance and award program aimed at fostering safe practices at ready-mixed concrete plants across the country. The 2011 contest received 879 individual plant entries.

“Green” building The first International Green Construction Code (IgCC) has been approved, setting mandatory baseline standards for green building design and construction. These include energy and water efficiency, building waste, site impacts and materials. The final code is expected to be published by May 2012.

In Canada, Montreal’s Équiterre, an environmental group that focuses on sustainable development, announced it would investigate the need for aggregate standards in Quebec, in collaboration with a new Ontario-based group with a similar mandate. Environmental groups are now raising other concerns, including greenhouse gas emissions, air pollution, and threats to water quality and quantity.

Meanwhile, Cemex announced it has developed new thermal walls as a sustainable insulation solution. The company’s thermal walls are special, double walls which provide superior internal insulation. The walls use concrete admixtures which are made from natural and renewable materials.

fices, according to the National Union of Aggregates.

In the UK, granite from Lafarge’s Mountsorrel Quarry in Leicestershire will cover the needs of Network Rail’s tracks for the next five years. The new contract has the company supply ballast and other crushed rock material. Lafarge has been working with Network Rail for the last 20 years.

Aggregate Industries US, a member of the Holcim Group, announced that six of its facilities located in the United States’ Midwest region have been recognized

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Innovative methods Modular construction will be used to develop one of the tallest prefabricated towers in the world, the B2 condominium building in New York. The tower is expected to rise up to 32 stories and cover 340,000 square feet of residential space.

According to the project’s developers, the method costs around 15 to 20 percent less than a traditional pre-cast system and produces 70 to 90 percent less waste.

In Wales, a plastic bridge capable of supporting traffic was constructed by a consortium led by Vertech. The 90-foot thermoplastic bridge is the first of its kind in the European construction sector. It

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No. of construction hours worked Spain and Portugal pull down European market

Poland

138.98

Sweden

129.34

Belgium

118.5

Slovakia

113.99

Table available in the CemWeek Magazine Print Edition.

Germany

113.25

Finland

107.99

France

106.87

Austria

104.15

…

Malta

88.46

Romania

84.85

Hungary

82.2

www.cemweek.com/subscribe Lithuania 82.17

Greece

79.36

Bulgaria

76.14

Portugal

64.64

Spain

44.22

EU 15

83.05

EU 27

88.14

Source: Eurostat data for 3Q2011, compared to 100 points-median base in 2005

weights around 50 tons and it spans the River Tweed at Easter Dawyck.

Also in plastic, a group of activists proposed a new method of building houses in order to resolve the national housing problem in Nigeria. The “environmentally smart” method makes use of sandfilled plastic bottles, with each bottle weighing around three kilograms. The structure is also said to be fire proof and earthquake resistant. It is also has the capacity to maintain a constant temperature of 18 degrees C. The method was developed to produce houses with zero carbon emissions. The Development Association for Renewable Energies is building a prototype.

In Paris, France, a team of scientists has developed a new construction material said to have exceptional strength while being very flexible. It can be molded and reshaped in a process similar to glass manufacture. The team, led by researchers at the Laboratoire Matière Molle et Chimie in France, recently patented the material and plans to release it commercially. BMWeek BMWeek BMWeek

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FOCUS

Uncertainty Looms Over Cement Shipping Industry

In 2007 and the first half of 2008, business was good in the bulk dry shipping industry. The demand for bulk shipments outstripped available shipping capacity, prompting shippers to order more vessels. The additional ships, which are due for delivery this year, would have eased uncommonly high shipping rates brought on by a surge in bulk dry trade.

Now, instead, they risk softening existing shipping rates, making the near term outlook in trade uncertain BALTIC EXCHANGE INDEX The London-based Baltic Exchange’s Baltic Dry Index, simply referred to as the BDI, tracks global shipping prices of dry cargo, such as cement, iron ore and grains, along 26 international routes. It is measured on a time-charter and voyage basis and covers four ship sizes, each with enough shipping capacity to have an effect on the overall market.

international shipbrokers who submit daily indications of international freight costs; the greater the demand for shipping of dry bulk material (versus the number of available carriers), the higher the associated shipping costs. It serves as an important forward indicator of economic activity since it is influenced by factors at the early stages of global commodity chains.

Contrary to its name, the Baltic Exchange has little to do with the Baltic Sea or surrounding countries. Established in 1744, its origins can be traced back to the Virginia and Baltic Coffeehouse which was located in London’s financial district.

In August of 2007, the BDI rose to a record high of 7166 points. Shipping rates had become uncommonly competitive due, in part, to a shortage of bulk dry cargo vessels. Over the course of the next few months, until the index reached a peak of 10,719 points in May 2008, ship owners ordered more bulk dry cargo

The index is compiled by a number of

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vessels to compliment their existing fleets.

It would have eased shipping prices and, presumably, kept the shipping industry growing at a healthy rate.

Then, from June 2008, the index declined with increased rapidity, bottoming out at just over 747 points in December of that year. It has since recovered, but only just, with the index growing to its highest since 2008 to 3903 points in November 2009.

Despite the index remaining more or less steady over the last couple of months, troubled times are far from over. The danger now is a softening of already low shipping rates as those bulk dry cargo vessels ordered in 2008 are now due for completion.

Effects on the Cement Industry In 2010, approximately 76 percent of the cement/clinker trade was moved by sea. This figure represents development within the cement trade and has remained constant for a number of years. However, the cost of shipping dry bulk cement across the world varies and is influenced by external factors that influence the general shipping industry as a whole.

At the end of December 2011, the demand for iron ore dropped to its lowest since 2002. Iron ore is the biggest dry bulk material in terms of volume to be shipped across the globe. A drop in demand for shipping capacity has an adverse effect on shipping rates throughout the industry—a positive for cement exporters and traders, but a potential risk for manufacturers in nascent markets.

According to industry sources, rates for supramax vessels—supramax and handysize class vessels are the most

commonly used vessels to ship cement— will drop to an average of US$9,500 a day in 2012. It is expected that bankruptcies will increase among owners of supramax vessels, since breakeven is between US$18,782 and US$24,587 a day (based on 8-year financing and US$5,000 daily operating costs).

The cement industry itself is set to gain additional shipping capacity, with ten specialist carriers—most of them 15,000DWT and more—totalling 166,200DWT. The world’s cement carrier fleet currently consists of 95 selfunloading vessels (totalling 0.93DWT) and 331 specialist cement carriers (totalling 1.8 million DWT).

2012 Outlook for Cement Industry Asia will remain one of the biggest importers but, along with Europe and Central and South America, won’t show any significant signs of growth. Africa and North America are the only two global regions earmarked for significant growth this year.

BDI as Forward Outlook Indicator Ship Classification

Dead Weight Tons (DWT)

Capesize

100,000+

Panamax

60,000-80,000

Supramax

45,000-59,000

Handysize

15,000-35,000

building materials

According to an industry report, experts believe that the shipping industry is bottoming out. The industry has been deteriorating more rapidly than anticipated and, with an additional shipping capacity of 11.9 percent (approximately 72 million DWT) of the total volume of the bulk fleet, it seems that it will reach its lowest point in the first quarter of 2012.

Perhaps the only saving grace for the shipping industry is the hope that Chinese growth exceeds economists’ expectations. In 2011, London-based Clarkson revised its expectation for Chinese iron-ore imports three times, five percent higher than their first estimate.

Should this occur, China, one of the world’s biggest iron ore importers, will be able to fuel favorable conditions which could increase the demand for shipping capacity, subsequently driving shipping rates higher.

Another possible solution is the scrapping of old vessels. At present, 11 percent of the general global fleet is older than 20 years. Should this step be taken, it can help offset the new additions to the global fleet, thereby mitigating a drop in shipping rates. But the decision is a difficult one; the demolition value for a capesize-class vessel dropped 47 percent to just over US$3 million in 2011.

In the medium term, things look less bleak. The Deutsche Bank Hong Kong noted that shippers will be forced to exercise more discipline as they move into negative cash flow. Forecasts by industry analysts add to the optimism, stating that the world cement trade will increase from an estimated 169 million tons in 2011 to approximately 206 million tons by 2025. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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UPDATE

Boral’s Silent Expansion

An Australian business with annual sales worth A$4.7 billion (US$5 billion) and over 15,000 employees worldwide, Boral has inked several acquisitions in 2011

ustralia’s largest building and construction materials supplier, Boral, has been making silent yet steady progress in the deal making space. In the cement sector, Boral operates 135 sites and employs more than 4,100 people on the home market, Australia, but also in Indonesia and Thailand. Asia is the next expansion frontier for the ambitious company.

Shopping spree In the first important deal of the year, Boral purchased Wagner Group’s concrete division for A$173 million (US$183 million) in April. It is a deal that CEO Mark Selway says will improve his company’s ability to tender resource projects, particularly in oil and gas.

Boral acquired Wagner's network of large fixed concrete plants and five of its quarries, its 60 percent stake in a fly ash joint venture and its concrete pumping and bulk transport operations. The operations generated total revenue of A$115 million last year.

Through the deal, Boral has secured operations that produced 374,000 cubic meters tons of concrete through 19 sites in FY 2010. The acquisition adds scale to Boral’s concrete business and fills gaps in key growth corridors of the company’s existing South East Queensland footprint.

Boral has said that the deal also includes arrangements to augment future cement supply positions.

"By bringing this into our portfolio, it offers a footprint right where the action

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Boral Financials (A$ million) 5,000

Net Profit Revenues

3,000

1,000

-1,000

FY2010

is, so we are pleased about that,” Boral’s CEO Mark Selway stated. "From a market share viewpoint, Wagners have currently got about 50 percent of the aggregate or concrete share of the Darling Downs region and we have very little."

Wagner will continue to operate a projects business supplying on-site concrete, transport and contract aggregate crushing services and retain a very significant property portfolio, the company said.

In a separate deal, Boral bought the quarry and concrete assets of Sunshine Coast Quarries in July for A$81.5 million (US$86 million), a business set for a 50 percent revenue increase (at A$32 million) in FY2011.

Joint Venture No More While it already has a stable position in the United States as the country’s largest brick and clay tile manufacturer, Boral is

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FY2011

FY2012 (Est)

now making significant moves in Asia. In August, the company gained full control over Asia’s largest plasterboard maker, taking advantage of excellent growth prospects in the region.

The move that opened Boral’s doors to a fast growing business in Asia is the buyout of its Lafarge Boral Gypsum joint venture, with the Australians taking over the 50 percent previously owned

by French partner Lafarge. Announced on August 17, 2011, the deal is worth EUR 429 million and is expected to be concluded by the end of the year.

The deal will increase Asia’s contribution to Boral’s earnings from five to 14 percent and earnings from plasterboard from eight to 17 percent. The Australian conglomerate will gain control over the joint venture’s 20 plants in eight countries. More importantly, Boral will now enjoy a 45 to 55 percent market share

control to 50 percent. During the following years, revenues went up over US$500 million, and both the Australian and French partners considered the venture buyout.

It Takes Leadership Boral’s current chief executive, Mark Selway, secured the deal in favor of the Australians. Lafarge’s ongoing financial difficulties helped settle the matter, but Selway deserves his share of merit.

Indeed, this deal was Selway’s fifth acquisition since being appointed CEO in February 2010. At the time, he promised both to improve the company’s efficiency measures and to look toward expansion.

A key product that Selway hopes to bring into the fast-growing Asian market is fly ash. The move is logical since Boral is the leading producer of fly ash in Australia and the United States, but the idea has been criticized by skeptics who point out that Boral does not have the same history in product innovation as, for example, rival James Hardie. Critics also say that the price paid for Lafarge’s share in the business was too high and will not provide a return on the investment any sooner than five years.

Notable Boral 2011 Acquisitions Assets Bought

Transaction Value

Lafarge Boral Gypsum

A$ 429 mil.

Sunshine Coast Quarries Wagners Construction Materials

Location

Announced

What Boral bought

Asia

August 17

The 50 percent owned by Lafarge in the Asian plasterboard joint-venture

A$ 81.5 mil.

Australia

July 19

Construction operations

A$ 173 mil.

Australia

April 15

The largest independent construction materials business in Queensland, Australia

in several Asian markets, including South Korea, Thailand, Indonesia, Malaysia and Vietnam. Boral holds five and 25 percent, respectively, of market share in China and India, Asia’s two largest markets.

materials

assets

and

Boral’s complete buyout of the Lafarge joint venture was not so much a sudden action as a well-prepared process. When the venture was founded in 2000, Boral controlled only 27 percent of the US$200 million business. In 2003, it increased

Boral has yet to decide on the future of its U.S. subsidiary, which has been recording losses due to the sluggish housing segment following the global economic crisis. The U.S. market used to bring more than 20 percent of Boral’s group earnings, but the weak housing market has brought that share down to nine percent, underlining the company’s need to expand in growing regions like Asia.

Selway’s next move is as yet unclear.

According to a September report, Boral may choose to sell off its units in Indonesia and Thailand, but a possible U.S. sale was also rumored. Only the coming months will tell. BMWeek CemWeek

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PROJECTS & SUPPLIERS FLSmith announces two new orders FLSmidth has announced orders in Brazil that include equipment for the Caxitu project, a new greenfield cement plant in Paraiba State near the town of Joâo Pessoa, and for a new kiln line project at the Cezarina cement plant in Goias State, 130 km from Goiania.

The Caxitu project includes circular limestone storage, a longitudinal storage and reclaimer system for raw materials and a similar system for additives, longitudinal storage for petcoke, an Atox raw mill, a Tirax coal mill, an in-line calciner preheater system and a Rotax kiln and SF cooler. The Cezarina project consists of a complete pyro line including an Atox raw mill, a CF silo, an in-line calciner preheater system, a Rotax kiln and an FLSmidth Cross-Bar cooler.

FLSmidth will also supply air pollution control systems for the two projects, featuring the latest pyro technology for burning and utilising waste fuels.

"Brazil is continuously investing heavily in development projects, both to support upcoming events such as the FIFA World Cup and the Olympic Games and to provide housing and build infrastructure, and this order enables FLSmidth to maintain its leading role in supporting Brazil's rapidly expanding cement industry, and

maintain close ties with our long term customer Cimpor", Group CEO Jørgen Huno Rasmussen comments.

The order will contribute beneficially to FLSmidth's earnings until commissioning in 2013.

Sinoma tech passes appraisal test China's Sinoma says its cement grinding technology recently passed an appraisal.

According to the firm, the cement finish grinding roller mill technology and application project was achieved using basic research, semi-industrial tests and industrial trials to address the stability of the mill material bed.

The results ensure smooth feeding and reliable operation of the mill and address other key technology problems. The project successfully developed a TRMK4541 cement vertical roller mill system for Vietnam Cement. In Fukuyama, 5000 tpd new dry process cement production lines have been running 18 months. The system is designed for stability, small vibration, low wear, and low power consumption (28 kwh/t). The process allows simple, fast switching of cement varieties, particle size and moisture adaptability.

Diamur develops new cement bags Diamur announced that they have developed a new line of 25 kg cement bags

that promise to be both ecofriendly and save money.

The bags can be perfectly stacked in plastic-wrapped pallet loads and are designed to stay stable even after the plastic has been removed. To stabilize the stacks of bags, the company uses Lock n’ Pop, a liquid adhesive that is applied to the exterior of the packages during stacking operations to create stack stability and reduce the amount of stretch wrap required per pallet. This product is a water-soluble adhesive that loses its tack once it is separated from the packaging material and leaves no residue.

The advantage of plastic packaging over paper bags is that the mortar keeps longer and can withstand rain. It also is easier to recycle the plastic bags because regular paper bags always contain plastic liners that can complicate straightforward recycling processes. Moreover, plastic packaging is less inclined to enable cement dust release.

The bags may be stacked up to eight per layer and five to nine layers per pallet.

Pallets weighing between a ton and 1,600 kg are moved from the palletizer to the hooding equipment. A single stretch hood with a lower-gauge film is needed to protect the loads prior to shipping.

2012 Loesche Round Table in Republic of Korea For the very first time, a Loesche Round Table took place in Daejeon, Republic of Korea. 88 participants from the cement industry as well as the power generating, iron and steel industries attended the event.

Topics were widespread and included, besides the presentation of Loesche technology, the latest corporate developments in the cement, industrial minerals and power generating industries.

The Chinese Loesche subsidiary, Loesche Mills Shanghai, introduced its new production site in Shanghai. Icheon Material presented operational experiences of a Loesche mill LM 46.2+2 S, which were collected at the facility in Dangjin.

To conclude the two-day event, participants were invited to a local wine tasting at the first Korean vineyard.

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Diamur began producing 25 kg primary bag sizes in 2008 and currently supplies about 80,000 tons per year for shipment throughout Belgium, France and the Netherlands.

Loesche wins mill, engineering orders Hormigones Transex in Santiago awarded the contract for a LM26 2+2C/S cement mill in Puente Alto, Chile to Loesche. Loesche Automation was charged with providing electronic and automation engineering An order for an LM46.2+2 C/S vertical mill from Loesche by Semen Baturaja (Persero) in Palembang, Indonesia also included a Loesche Automation contract for electronic and automation engineering.

Both orders included the medium voltage switching system and main drives were also supplied, as were the MCCs and low voltage main distribution. The orders cover the necessary I/O cabinets and the instrumentation and process control circuits.

Loesche Automation has also been charged with project management, commissioning and monitoring, and training services. Delivery for both projects is scheduled for May 2012 and commissioning is anticipated for March 2013.

BIG ENERGY SAVINGS FOR HUAXIN Founded in 1907, Huaxin Cement is both the oldest cement manufacturer in China —its products built the Three Gorges and Danjiangkou dams—and one of the country’s leaders in sustainable production and industrial ecology. As a result, Huaxin Cement has become a model in China’s Circular Economy (CE) initiative.

The CE initiative requires companies to minimize their consumption of resources, reduce their emission of pollutants, and recycle waste and byproducts in their production processes.

Part-owned by Holcim, Huaxin Cement produces 1.8 million tons of cement and

FIVES FCB CONTRACTS WITH HOLCIM With the goal to increase capacity at its cement plant in Barroso in the Brazilian state of Minas Gerais, Holcim has entrusted Fives FCB with a contract to construct a new clinker production line. The contract was signed in October 2011. The project concerns the supply of a 4,500 tpd production line, from crushing to clinker silo and cement silos. It will feature the latest technologies developed by Fives FCB and aimed at reducing energy and water consumption and NOx emissions.

The new line will also enable Holcim to increase cement production at the

site by 2.6 million tpy under optimum environmentally friendly conditions.

The contract includes detailed engineering of the plant as well as civil design, supply of mechanical and electrical equipment, plate works, steel structures, and technical supervision during erection and commissioning. The raw grinding plant will be equipped with a Horomill 4400 grinding mill associated with a TSV classifier, and the burning line will feature a 5-stage preheater with a Zero-NOx precalciner and a 72-meter long rotary kiln.

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PROJECTS & SUPPLIERS 75 gigawatt-hours of electricity a year at its Zigui plant in Hubei province. The power is generated using waste heat from the production process and by collecting and incinerating the debris that floats past the plant in the nearby Yangtze River.

Huaxin Cement had its “circular” production profile in mind when it recently installed a new 2-kilometer downhill conveyor belt to transport crushed limestone from a nearby mine to a storage yard at the plant. With the use of a multidrive provided by ABB, Huaxin Cement saves 1.6 million kilowatt-hours of energy a year, equal to US$138,000 in monetary savings. Downhill conveyors are demanding applications because continuous braking is necessary to prevent excessive belt movement as it proceeds downhill. The Hubei conveyer is 1,965 m long and descends an elevation of 320 m at a 10.7 degree incline. The belt is powered by two 500 kW motors controlled by an ACS800 multidrive with a regenerative supply unit that feeds energy back into the grid.

The drive provides dynamic control of the speed and torque of the motors and enables soft starting and stopping of the conveyor belt. Soft starting eliminates mechanical stress during startup and prevents the material from spilling and the belt from folding. During downhill operation, the drive harnesses the energy produced by the conveyor system and feeds it back into the cement plant’s power network.

Adelaide Bighton Chooses Siwertell Cargotec has won an order to supply Adelaide Bighton Cement with a Siwertell SSL 700 screw-type ship loader. Siwertell ship loaders use screw conveyor technology in combination with belt conveyors and aeroslides to handle virtually any dry bulk cargo. Adelaide Bighton supplies cement, lime and pre-packaged dry blended products to the South Australian market and exports cement to Victoria and clinker to Queensland. The company chose the Siwertell unit for its environmental credentials.

Cemex Bagging Innovation Cemex UK has invested US $5.5 million in a new cement bagging plant at its Rugby plant site in Warwickshire. The new plant was built following customer consultation and accommodates requests for cement bagging in plastic or paper. Up to one fifth of all Cemex customers use new plastic packaging.

The plant incorporates an Aroda Arovac bagging system. Once filled with cement, any air in the bag is sucked out creating a vacuum before sealing.

This system has the many environmental advantages with bags

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“Our enclosed Siwertell system ensures minimal environmental impact for the owner,” said Bertil Anderson, Sales Manager, Bulk Terminals. “It has the advantage of being able to handle both cement and clinker. The old arm system will be removed.”

The new Siwertell unit will be located at the Birkenhead Plant in the Port of Adelaide, South Austrailia. It will have a capacity 900 tph for cement and 600 tph for clinker. BMWeek CemWeek CW Group Coal Week BMWeek BMWeek

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being both air and water tight, which extends the shelf life and keeps the cement fresher. Conventional plastic bags can be used, saving on the amount of additional plastic needed to make them waterproof.

“Plastics bags offer many benefits. As well as increased shelf life, the Cemex bags are stronger so for everyone, from us as producers, through logistics, to the merchant and onto the builder, the bags are less likely to tear and therefore there is less wastage,” says Matthew Wild, VP Commercial Cement, Building Products and Logistics. “From the moment the cement leaves the bagging plant, there is an economic as well as an environmental benefit.”

CONFERENCE

UPDATE

Arab Cement Outlook:

A Conversation with Engineer Ahmad Al-Rousan at the AUCBM Cemweek’s Anthony Fitzgerald talks with engineer Ahmad Al-Rousan, Secretary General of AUCBM

At the very well-attended and successful Arab Union Cement and Building Materials (AUCBM) conference in Amman, Jordan, Secretary General of AUCBM Ahmad Al-Rousan shared some views on the recent political upheaval in the region and its effect on the Arab world’s important cement industry. Given the ever-changing situation in Libya, Egypt and Syria in particular, Al-Rousan was refreshingly positive.

CEMENT CONSUMPTION GROWTH According to Al-Rousan, in Morocco and Algeria the growth of cement consumption continues to be excellent, with several new projects either under

construction or discussion. Algeria has opened its cement industry to the outside world, with over a third of plants having private sector and foreign involvement.

This has to lead to healthy and transparent competition. Morocco, too, is open to foreign investment in the sector, with the same foreseen benefits.

In Tunisia, there are at least two major projects under way, and a large boost to Tunisian cement exports is expected when Libya begins reconstruction. It goes without saying that when the Libyan government is fully established, there will be huge growth in that market.

Egypt, after 17 percent growth in the preceding year, is not unexpectedly flat.

However, it is worth reminding ourselves, Al-Rousan points out, that plans for 12 new cement plants are on the cards and awaiting a more settled situation.

Jordan has a comparatively small consumption of around five million tons annually but with an 11 million ton capacity has a great opportunity to export to Iraq when eventual reconstruction projects are approved.

Syria is of course unsettled at present, but its capacity of eight million tons normally feeds a consumption of over ten million tons. Ahmad Al-Rousan told Cemweek that he sees no reason why the situation there should not be resolved, and the cement business will continue to thrive and be healthy.

OPTIMISM FOR OUTLOOK All in all, as Mr. Al-Rousan readily acknowledges, the so-called “Arab spring” has undoubtedly led to a levelling out of consumption, but the basic housing and infrastructure needs of a large and fast growing population across the region will have to be met, and the Arab world’s cement industry will continue to thrive and grow under whatever governments emerge. BMWeek CemWeek CW Group BMWeek BMWeek

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PEOPLE MOVES Bolivia: Coboce announces changes The Cooperative Bolivian Cement Industries and Services (Coboce) has announced changes to its board of directors that include the appointment of three new directors and two alternates. The new directors are Ivan Villa, Jose Antonio Rojas, and José Alfredo Ovando. The two alternates are Grover Jimenez and Walter David Jimenez.

Isidoro Miranda CEO Lafarge Spain

Lafarge Spain appoints CEO Isidoro Miranda, deputy general manager of the Lafarge Group, has been appointed CEO of Lafarge in Spain, a position newly created to respond to the proposed reorganization of the Group to strengthen its focus on markets and customers.

To date, Isidoro Miranda serves as copresident of the Cement Division within the Lafarge Group, Executive Committee in Paris. Miranda’s appointment as CEO of Lafarge in Spain is effective January 1, 2012 and requires the development of a new organization of cement activities, aggregates and concrete in close collaboration with Jean-Carlos Angulo, CEO Lafarge operations assistant.

Holcim appoints Ambuja CEO to Area Manager Onne van der Weijde, currently CEO of India-based Ambuja Cements, has been appointed Area Manager and a member of the senior management of Holcim effective January 1, 2012. He remains CEO of Ambuja Cements and reports directly to Executive Committee member Paul Hugentobler, responsible for South Asia / ASEAN excluding the Philippines.

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Eastern Province to elect new board Saudi Arabia’s Eastern Province will elect a new set of board directors next year and has informed its shareholders of the move. The meeting will take place on January 29, 2012 and is open to all shareholders of record. To make way for the elections, the meeting will also discharge the current board of directors.

Willimann to leave Holcim Germany According to reports, Reto Willimann will be leaving Holcim Dotterhausen.

The 60 year old general manager will remain active with the company until his retirement in 2013. Willimann began his career in 1985 as the general counsel of Holcim Switzerland. In 2006, he was chosen to become the CEO of Holcim’s cement facility in Southern Germany.

Volyn Cement appoints new CFO Volyn Cement has announced the appointment of its new Chief Financial Officer, Evgeny Shcherbakov, to the position which has been vacant since July.

Shcherbakov officially took the job on December 1 and will have a three year term. He replaces Stanislav Lukin. Prior to Volyn Cement, Shcherbakov worked at ABA Astra.

FLSmidth appoints new Group CFO Poul Erik Tofte, Group Chief Financial Officer (CFO) of FLSmidth since 2003 will resign by the end of March in order to seek new challenges, according to a company statement.

Ben Guren will be appointed to the position, effective no later than 1 July 2012.

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Alexander Tutsek, Rufratechnik Group, dies at age 84 In September 2011, Alexander Tutsek, owner of the Refratechnik Group, passed away at the age of 84. With remarkable farsightedness, Alexander Tutsek expanded the original company “Steinwerke Feuerfest Karl Albert”—founded in 1950—into a global enterprise with an annual turnover of about EUR 400 million and 1500 employees worldwide. Today, Refratechnik is the world's market leader in the field of basic bricks and turnkey installations in the cement industry, as well as a systems provider primarily in the steel and aluminium industries.

Headed by Dr. Bernd Scheubel, Dr. Rainer Gaebel, and Ms. Silke Denecke, Refratechnik Holding will continue to monitor and steer the Group's operational and strategic orientation. Legal successors are the nonprofit Alexander Tutsek Foundation and a family foundation. Business operations will be conducted by the companies Refratechnik Cement in Göttingen, Refratechnik Asia in Hong Kong, Refratechnik Steel in Düsseldorf and Baymag in Calgary, Canada. In this way, continuity of the Refratechnik Group will be ensured in all respects.

Ben Guren, age 51, is a state-authorized public accountant who graduated from the Norwegian School of Economics & Business Administration in Bergen. He is a Norwegian citizen and has since 2007 been Group Vice President Finance, IT & Legal of Jotun Group, Norway. From 2006 to 2007, Ben Guren acted as CFO of Helly Hansen Group and from 1989 to 2006 was partner in KPMG, Norway. BMWeek BMWeek BMWeek

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DATA SHARE PERFORMANCE

As of January 3, 2012. All share prices in local currency Company (Exch)

52 WEEK HIGH

52 WEEK loW

% from 52Hi

% from 52Lo

50d Mov Avg

200d Mov Avg

% from 50d Mov Avg

% from 2000d Mov Avg

ADEL BRTN FPO (ASX)

3.54

2.22

-17.51%

31.53%

2.94

2.82

-0.55%

3.56%

BORAL LTD FPO (ASX)

5.73

3.13

-35.43%

18.21%

3.61

3.74

2.46%

-1.04%

TITAN CEMENT (Athens)

18.36

9.32

-35.19%

27.68%

-

-

N/A

N/A

INDIA CEMENT (Bombay)

112.75

62.10

-39.25%

10.31%

70.19

71.57

-2.40%

-4.29%

JK CEMENT (Bombay)

153.90

96.05

-33.95%

5.83%

102.31

107.70

-0.65%

-5.61%

PRISM CEMENT LTD. (Bombay)

59.85

35.75

-35.51%

7.97%

41.38

42.98

-6.72%

-10.19%

SAGAR CEMENT(BSE (Bombay)

169.90

115.00

-15.30%

25.13%

138.95

137.59

3.56%

4.58%

SHIVA CEMENT (Bombay)

8.42

4.90

-38.84%

5.10%

5.40

5.97

-4.60%

-13.80%

FLSMIDTH & CO. (Copenhagen)

542.00

255.20

-34.67%

38.75%

330.90

339.93

7.01%

4.17%

WEST CHINA CEMENT (Frankfurt)

0.32

0.09

-56.25%

53.85%

0.13

0.16

11.77%

-10.69%

SHANSHUI CEMENT (HKSE)

10.20

4.25

-49.41%

21.41%

5.53

6.93

-6.71%

-25.50%

ASIA CEMENT CH (HKSE)

7.34

2.81

-49.59%

31.67%

3.59

4.71

3.05%

-21.43%

ANHUI CONCH (HKSE)

56.90

17.90

-60.28%

26.26%

24.17

29.10

-6.50%

-22.33%

INDOCEMENT TUNGGA (Jakarta)

17,900.00

10,700.00

0.84%

68.69%

15,845.70

15,291.40

13.91%

18.04%

HOLCIM INDONESIA (Jakarta)

2,325.00

1,650.00

-5.38%

33.33%

2,029.14

1,988.58

8.42%

10.63%

SEMEN GRESIK (PER (Jakarta)

11,450.00

7,250.00

-3.06%

53.10%

9,904.29

9,304.48

12.07%

19.30%

TONGYANG CEMENT & (KOSDAQ)

2,760.00

797.00

-10.14%

211.17%

1,459.26

1,262.88

69.95%

96.38%

ASIA CEMENT (KSE)

49,600.00

31,100.00

-27.82%

15.11%

33,602.90

38,209.90

6.54%

-6.31%

LAFARGE MALAYAN C (Kuala Lumpur)

8.11

6.06

-11.96%

17.82%

7.75

7.52

-7.88%

-5.10%

YTL CEMENT BHD (Kuala Lumpur)

4.85

3.80

-8.04%

17.37%

4.76

4.40

-6.32%

1.26%

CIMPOR R (Lisbon)

5.55

4.50

-6.31%

15.53%

5.04

5.12

3.25%

1.64%

STEPPE CEMENT (London)

59.86

30.00

-44.70%

10.33%

34.66

34.94

-4.51%

-5.28%

CEMENTOS PORTLAND (MCE)

17.19

6.72

-58.00%

7.44%

7.92

10.01

-8.81%

-27.88%

GRUPO CEMENTOS (Mexico)

49.00

38.00

-8.57%

17.89%

43.09

41.52

3.97%

7.89%

BUZZI UNICEM (Milan)

11.01

5.45

-34.33%

32.66%

6.63

7.05

9.13%

2.54%

CEMENTIR HOLDING (Milan)

2.35

1.28

-34.47%

20.50%

1.59

1.72

-3.03%

-10.22%

ITALCEMENTI RSP (Milan)

3.97

1.68

-48.11%

22.33%

1.95

2.29

5.85%

-10.01%

CRH PLC AMERICAN (NYSE)

25.16

14.17

-20.15%

41.78%

18.26

18.19

10.04%

10.48%

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

11.05

2.27

-48.60%

150.22%

4.77

5.27

19.05%

7.71%

EAGLE MATERIALS I (NYSE)

33.22

15.36

-20.62%

71.68%

23.28

21.43

13.25%

23.03%

TEXAS INDUSTRIES, (NYSE)

46.45

21.89

-33.22%

41.71%

27.95

33.27

10.99%

-6.75%

CIMENTS FRANCAIS- (Paris)

77.49

53.42

-21.54%

13.82%

57.73

63.06

5.31%

-3.58%

LAFARGE (Paris)

48.76

22.29

-43.00%

24.73%

26.04

30.25

6.73%

-8.10%

ANHUI CONCH CEMEN (Shanghai)

43.05

14.68

-64.51%

4.09%

16.34

20.97

-6.50%

-27.15%

FUJIAN CEMENT CO. (Shanghai)

14.70

6.75

-48.64%

11.85%

8.56

10.73

-11.77%

-29.61%

CHINA SINOMA INTL (Shanghai)

50.50

15.20

-70.18%

-0.92%

18.36

24.13

-17.99%

-37.59%

HUAXIN CEMENT CO (Shanghai)

5.48

1.51

-69.15%

11.91%

1.80

2.13

-5.80%

-20.60%

SIAM CEMENT -F- (Stuttgart)

10.54

6.58

-14.14%

37.62%

8.83

8.75

2.47%

3.45%

TAIWAN CEMENT TWD (Taiwan)

49.45

29.00

-28.01%

22.76%

33.88

37.87

5.07%

-6.00%

ASIA CEMENT CORP (Taiwan)

48.30

28.25

-29.61%

20.35%

32.60

36.78

4.30%

-7.56%

CHIA HSIN CEMENT (Taiwan)

20.30

11.15

-41.38%

6.73%

12.45

15.71

-4.42%

-24.23%

LUCKY CEMENT TWD1 (Taiwan)

9.20

5.05

-42.28%

5.15%

5.49

6.34

-3.33%

-16.19%

HOLCIM N (VTX)

76.90

42.11

-31.99%

24.20%

50.36

51.87

3.85%

0.82%

HEIDELBERGCEMENT (XETRA)

54.00

23.92

-35.94%

44.64%

30.66

32.84

12.80%

5.31%

KHD HUMBOLDT WEDA (XETRA)

8.24

4.17

-34.70%

29.02%

5.11

5.16

5.24%

4.18%

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UPDATE

SOUTH AFRICA

Anti-Trust Case Unresolved South Africa’s Competition Commission is still sorting through accusations of price-fixing and cartelisation against AfriSam, Pretoria Portland Cement (PPC), Lafarge Industries South Africa and NPC-Cimpor. While AfriSam and PPC have been working with the commission to limit any future fines, Lafarge SA and NPC-Cimpor have not yet responded to the allegations CLAIMS OF ANTI-COMPETITIVE MARKET The four cement manufacturers were subject to a year-long investigation prior to a 2009 raid by the commission. According to the commission, the four companies have been engaged in what it described as ‘anti-competitive’ conduct that includes price-fixing and market allocation as well as controlling the supply of cement extenders. PPC was allegedly also accused of abuse and dominance after it had foreclosed a number of independent cement blenders.

The commission said that such behavior could substantially increase the cost of the country’s infrastructure program, which could have adverse effects on the developing economy.

The commission’s suspicions were first aroused while researching the South African infrastructure sector. It noted that producer prices of cement “have been increasing in tandem every six months”

at levels above the producer price index (PPI) despite varying demand and input costs. It said the four cement producers implemented price increases of roughly six percent on average.

To date, Lafarge and NPC-Cimpor have not approached the commission with similar applications. If found guilty, both companies may be fined up to ten percent of their annual revenues.

THE COMPANIES RESPOND AfriSam has since reached a R124.9m settlement agreement with the commission, representing three percent of its annual revenue—far below the fine threshold but, according to the commission, indicative of AfriSam’s “material cooperation.” This comes after AfriSam admitted to entering into agreements and arrangements with PPC, Lafarge and NPC-Cimpor to divide markets and fix the price of cement.

Rumors have since emerged that Lafarge, which has recently faced both wage disputes and increased competition in the growing South African market, is looking for potential buyers for its South African outfit despite still being under investigation.The French cement maker is eyeing an estimated US$700 to 800 million deal to help alleviate its EUR 14.3 billion (approximately US$18.6 billion) debt. Potential bidders are said to include India-based Aditya Birla Group, which currently owns India’s largest producer of cement, UltraTech Cement. The alleged sale of its South African outfit will help Lafarge reach its debt-offset target of US$2.6 billion. BMWeek CemWeek CW Group

PPC was the first to admit to the existence of a cartel, and the company’s application for conditional leniency has been approved, exempting it from a hefty R168m fine should no other evidence of unlawful conduct be found.

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

India rules the headlines, with the U.S. and China also in the spotlight for CemWeek.com readers. Developments in Egypt, Saudi Arabia and Russia continue to catch our attention, along with increased interest in Indonesia, South Africa and C么te d'Ivoire.

IN THE NEXT ISSUE

FEATURE: The 2011 numbers for orders, project completions and company performance The strange world of concrete ships LEADERS COMMENT Marc Lambert, CEO of PEG, Switzerland RESEARCH India: supply-side 2011 and market update

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BUZZ TOP 15 STORIES

CEMWEEK.COM

Re-orgs, mergers and lots of Indian cement. The most popular stories on CemWeek.com: 1.

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Aditya Birla in talks with Jaypee India capacity passes 310mm ton threshold Ultratech Cement to build unit in West Bengal Lafarge reorganization may hit workforce Ambuja Cement founders exit the company Cementos Portland puts Giant Cement unit on the block Lafarge to undergo reorganization Report: Aditya Birla may be in line for Lafarge SA assets Holcim Brasil orders world’s largest vertical roller mill Indian cement industry seen to have positive outlook Indian cement demand to grow in 2012 JP Associates looking for strategic partner for cement unit Ambuja, Holcim merger allowed JK Cements to hike capacity to 5.5 mm tons Greece: Titan lays off workers due to poor economy

sector

equipment

loss

brazil

major

southern

lafarge ministry markets likely board government costs

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fuel

energy factory

minister

work

2012 increased

development reached project products

plants pollution adds

portland

director

order

raise

2.

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capital

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improve africa

built

area

saudi ensure

alexandria economy continue kiln domestic average

manufacturers

performance

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daily

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association

completed

power

revenues

plans

coal increases

dinars

national egypt

infrastructure consumption activity investment

control

good

growth

exports waste

flsmidth

competition

bank

managing

BMWEEK.COM

The Martin Marietta deal makes waves. Here's what you're reading on BMWeek.com: Shareholder to sue Vulcan board over Martin Marrieta deal Fifth Shingle Recycling Forum held India to shift to concrete roads Lafarge, Etex merger to supply gypsum board systems to Lithuania Probe to look into Martin Marietta bid for Vulcan Lafarge to swap operations with Martin Marietta Cemex credit rating downgraded Transparent concrete developed Materials, commodities prices rise in Abu Dhabi High Concrete Group launches new product Fitch has stable outlook for EAMA building materials market Drywall settlement to hit $1 billion mark Saudi Arabia reports unused infrastructure funds France: Firms fighting over limited aggregate supplies Sandvik enters partnership with Flanders

environmental

agreement

company’s

TOP 15 STORIES

1.

region

days

known

builders

deal cemex

proposed

engineering martin

2012

green

cubic

global

planning

sales

activity

remain meters

energy

square

lafarge

contract

land

chief

quality

country’s

rate

operations

recently

operation

housing facility rise

mining

infrastructure

gravel

aggregates

concrete

quarry

operating

china

growth sector continue government

project

improve

value

aggregate

price

equipment

areas

standards

product

products order

public

region

bridge declined

proposal

costs ready

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economic

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include economy court index india work drop gypsum facilities results environmental homes spending employees houses says decline

development

residential

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worth

vulcan

sustainable

develop

investment

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water

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road despite

revenue

RESEARCH

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Global Cement Retail Price Report

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Global Cement Volume Forecast Report

Cement Plant & Capacity Monitor

Statistical update on key cement markets worldwide

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Current and outlook for cement volumes

Tracking new cement plants and expansions

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