Canada's sustainable goals
Canada’s cement industry is well established and is a home to many of the global producers. While production has dipped in recent years, modernisation is on the minds of plant owners. Tougher environmental legislation has been introduced south of the border and Canadian producers are seeking to improve their carbon footprints in several ways.
Canada’s political fragility is causing some alarm for many economists as the country continues to see its government under pressure. Prime Minister Stephen Harper and the Conservative minority government are warning that the opposition parties are putting the economy at risk by rejecting the budget and threatening to trigger an early election.
However, there is no aspiration at present from the Bank of Canada to raise interest rates, which have remained at one per cent since September 2010. The recovery is not that strong and interest rates might threaten growth and some advisors are suggesting that they are unlikely to be raised until July.
Meanwhile, many of the provinces are seeking ways to make budget cuts and keep economic growth on track.
Canada’s GDP spiralled downward by 2.4 per cent in 2009 but recovered to grow by three per cent in 2010. Going forward the IMF see GDP falling slightly to around 2.6 per cent in 2011. A reduced government fiscal stimulus and a slowdown in the USA will be the likely causes of the weaker economic growth this year.
Currently inflation is not a significant barrier to growth. The Bank of Canada recorded inflation at 1.6 per cent in the 4Q10 and will be hoping that it remains well below its target of less than two per cent during 2011.
While Canada has an ageing demographic, its numbers are routinely swelled by an influx of immigrants. Its population in 2009-10 had reached 34m, while the annual growth was estimated at 388,000 people. It is significant that of this growth, the immigrant share represented approximately 270,000 people or 69.6 per cent.
In addition it is argued that an economic shift is taking place towards western Canada and the provinces of Saskatchewan, Alberta and British Columbia. These provinces are the net receivers of immigrants and while it is unlikely to be automatic, infrastructure and construction is likely to follow the demographic trend in years to come. Discussions are already underway regarding the high-speed railway link between Calgary and Edmonton, which is a sign of the changing population movements. The job market has not seen significant fluctuations and continues to hover around eight per cent with a slight fall towards the end of last year.
According to the Private and Public Investment publication, total spending on new construction in Canada in 2011 is expected to be CAD240.6bn (US$1.47bn), an increase of 3.6 per cent versus 2010. While that seems substantial, it will be a smaller increase than the year before. The 2010 YoY increase in new construction was 13 per cent, but to place things in perspective, total capital spending on construction nationwide in 2009 declined 12.7 per cent.
In 2010, the Canadian construction industry was to some extent underpinned by residential and government-led economic stimulus programmes, although these dissipated during the second half of the year. Government construction spending was 20.9 per cent higher than in 2009. The provinces of British Colombia as well as the city of Edmonton in Alberta were strong for residential construction seeing an increase of 40 per cent, which was particularly beneficial for the Lehigh works (HeidelbergCement Group).
Meanwhile, commercial construction only saw slight improvement on 2009 levels. Infrastructure spending was state supported and road building schemes were a high priority. The 2010 Vancouver Winter Olympics was a major beneficiary as it saw the city council spend CAD729m (US$762.2m) out of a total budget of CAD961m on infrastructure and operations. A total of CAD73.8m went on competition venues. An estimated CAD120.9m was allocated to non-competition venues such as a streetcar demonstration line, road repairs and theatre renovations. The biggest amount went on civic infrastructure at the Olympic village. The city spent some CAD299.8m on a waterfront park, community centre, heritage facility and 252 units of social housing.
Future growth may depend more on attempts to further lower corporate tax than to anything else. The Cement Association of Canada (CAC) is supporting the planned corporate tax reductions in boosting the competitiveness and growth of the private sector, both of which it says are critical to the continued economic recovery and job creation. CAC applauds the findings of Seventh Report to Canadians on the Implementation of the Economic Plan and the federal government’s reduction of the rate from 18 to 16.5 per cent. The report indicates that several billion dollars have been successfully invested in critical infrastructure projects across Canada.
Meanwhile, the government has more than doubled its capital formation spending from CAD30m in 2003 to CAD65m in 2010. Public spending on infrastructure was being increased even before the global financial crisis set in as Canada’s infrastructure has been in need of investment. But it is developments in the financial sector that have contributed to the rise and present slowdown of infrastructure spending. “One of the most important trends affecting Canada presently is the budget deficits affecting certain provinces,” says Matt Griffen, head of global energy solutions and co-head of global infrastructure finance with Scotia Capital. “This has resulted in the delay of projects in some provinces and a review of project structures in others, with a particular focus on reducing long-term financial costs.”
A solution has been found in the trend towards financing of projects through public-private partnerships or P3, which allows risk and the financial burden of investment to be spread between the public and private sectors. During the second round of competition for the CAD1.25bn P3 Canada Fund, nearly half of the 73 applications were for municipal projects.
Future areas of investment
The Federation of Canadian Municipalities (FCM) and the Canadian Construction Association (CCA) have been lobbying hard to tackle Canada’s CAD123bn municipal infrastructure debt. While the government has committed to creating a long-term public infrastructure plan there is no new stimulus funding earmarked in the 2011 budget.
The areas where spending will continue through 2011 include improvements to the core national highway system, short-line railways, short-sea shipping, regional and local airports, broadband and convention centres. Among the major highway projects is the Turcut interchange in Quebec costing CAD3bn, which will run onto 2018, and the CAD2.6bn Port Mann 37km highway project, which will be completed in 2013. Edmonton, Alberta, will also receive a CAD1.42bn ring road to be completed in 1Q11. Hydroelectric projects will account for the biggest infrastructure spend in the coming years and include the CAD6.5bn Havre-Saint-Pierre 1550MW complex on the shores of the Romaine River, Québec and the CAD6.2m Lower Churchill Hydro project, in Newfoundland and Labrador.
Housing is the other major area where construction has picked up since 2009. The Bank of Canada records that the new housing price index has risen more than two per cent YoY. Residential building permits have also increased and were valued at CAD43,471.3m in 2010 up YoY from CAD34,708.1m, while YoY non-residential building permits were valued at CAD28,974.2m in 2010 up YoY from CAD26,341.3m. Housing starts have been fairly consistent peaking at 202,000 units in 2Q10 with levels expected to drop off slightly during 2011 and the best quarterly figures predicted by Statistics Canada at around 175,000 units.
Canada’s total cement consumption in 2010 rose by around 10.3 per cent to 8.8Mt. According to forecasts from the US-based Portland Cement Association (PCA) this is likely to become a single-digit increase in 2011. The PCA’s autumn forecast suggested cement demand will increase 9.9 per cent for the whole of 2010 followed by a downside-adjusted 2.5 per cent growth in 2011 as the residential market softens and infrastructure spending eases.
The PCA also recalled that the Prairies provinces (Alberta, Saskatchewan and Manitoba) led the growth in cement demand in 2010 with an increase of 15 per cent, followed by the Atlantics (10 per cent) and Ontario (nine per cent). Cement volume growth in Québec is expected to slightly exceed seven per cent, followed by British Columbia at just under six per cent.
Last year, Holcim benefitted from higher cement consumption levels in the Ontario and Québec markets. Indeed, the largest populations and the key cement demand in terms of volume are located in Ontario and Québec.
The country’s cement demand, according to the Freedonia Group’s study is projected to annually climb 1.6 per cent through 2013 to reach 12.9Mt, a slowdown from previous years.
However, the demand for blended cements is on the increase. Lafarge is the main supplier of fly ash cement (type CH and CI), while granulated blast furnace slag cement (type S) is produced by Lafarge, Holcim (Grancem) and St Marys Cement. The latest innovation in the market is Portland limestone cement (type GUb-8SF), a blended cement with lower clinker content. Hydraulic cement (type GU) is also popular and is manufactured by most of the domestic producers.
The Canadian cement industry contains 16 integrated cement works with a total capacity of some 15.6Mta (see Table 1). Lafarge is the largest cement producer with six plants and a capacity of 5Mta, controlling some 33 per cent of the market. The second largest producer in the market is Votorantim (2.4Mta), which owns St Mary’s Cement with production facilities in St Marys and Bowmanville. Holcim is also present in the market having fully acquired the Joliette and Mississauga plants of the former St Lawrence Cement group in 2007 and now has a capacity of 3.3Mta. HeidelbergCement operates two plants at Edmonton and Delta with a combined capacity of 2.3Mta through Lehigh Inland and Lehigh Northwest, respectively. Italcementi is active both through its 1.1Mta Essroc Picton plant and its 50 per cent joint venture with Ciment Quebec at St Basile (0.9Mta). The newest entrant to the market is Colacem Canada which operates a 0.28Mta plant at Kilmar. The only white cement producer is Federal White Cement in Woodstock, Ontario, which has a 190,000tpa long dry kiln and a 0.63Mta preheater kiln.
|Table 1 – Canadian cement plant capacity|
|Ciments Québec St Basile
|Federal White (white cement)||Ontario||0.8|
|* Grancem - Holcim's ground granulated blast furnace slag|
|Source: ICR Research|
Regionally the strongest concentration of cement facilities is in Ontario where 46.5 per cent of the production capacity is situated. The area has seven cement plants, which include the facilities at Picton, Woodstock, Bath, Mississauga, Browmanville and St Marys. This region is obviously a key indicator for cement consumption with the major cities of Toronto and Ottawa in the local vicinity.
Canada also has a number of cement distribution terminals in operation. Lehigh Inland has six terminals in Bamberton in British Columbia, Calgary, Kamloops, Regina, Saskatoon and Winnipeg. St Marys Cement operates the CBM terminal at Port Windsor, Ontario. Essroc also has a Port Windsor terminal with twin 4500t storage silos. Lafarge owns terminals in Calgary, Grand Prairie and Edmonton in Alberta, Victoria in British Columbia, Mitchell Park and Whitefish River terminals in Ontario, Toronto, Montréal in Québec, Havelock and Miramichi in New Brunswick plus the Regina and Floral terminals in Saskatchewan.
Cemex’ Charlevoix plant, located on northern Lake Michigan, USA, also supplies the Owen Sound terminal with bulk type 10 Normal Portland cement which is distributed in central Ontario via pressurised bulk tanker trucks.
There has not been a great need for increased capacity in Canada although Lafarge set out plans to upgrade the Exshaw plant in 2009 by virtually doubling its capacity from 1.3Mta to 2.2Mta. The need to raise capacity was related to Lafarge’s desire to supply the western and northern tier markets. Lafarge wants its cement deliveries to reach North Dakota, Alaska and western Ontario.
The project will entail the retirement of Kiln No 4 at the plant and the introduction of Kiln No 6. The new kiln line requires public consultation and a review by Alberta Environment and is scheduled for completion in 2012. It is hoped that the use of alternative fuels will be sanctioned on the new line and that the plant can trial the use of sawdust from trees affected by pine beetle infestation.
Lafarge decided this was a good time to go a head with the CAD600m upgrade and modernisation programme at Exshaw as the slowdown in domestic production allowed more time for maintenance and repair at its facility.
FLSmidth has experienced some delays in transporting the new grinding table for the vertical roller mill for Exshaw, from its manufacturing plant in Texas up to Alberta in Canada. Many US states received budgets for road construction last summer as part of the US stimulus package which slowed down the movement of this large piece of industrial equipment. The plant has already received the gear box for the new mill and other new equipment will include a baghouse and an ammonia injection system to reduce NOx emissions.
It should be noted that in 2008 Lafarge Woodstock plant shut its kilns, which had a capacity of 0.55Mt, but still operated as a grinding and packaging facility. However, in 2009 Lafarge finally closed the plant in Ontario.
Economic pressures forced the closure with the fall-off in demand for the construction industry in USA and Ontario major contributory factors. With the added pressure of high energy prices, corporate officials indicated the Woodstock plant was at a “serious disadvantage” when compared with other Lafarge facilities in “neighbouring jurisdictions”. The plant also failed to obtain permission to utilise alternative fuels, which would have helped it to reduce the plant’s carbon footprint.
The Canadian cement industry is pushing forward its sustainability initiatives, particularly in the areas of alternative fuel and energy usage. Independent market research by ecoEnergy in 2009 summarised that energy use in the sector is dominated by coal and petcoke consumption, which accounted for 80 per cent of the purchased energy.
At Holcim’s Joliette plant, dried municipal sewage sludge, old asphalt shingle and treated wooden and plastic materials were recently added to kiln firing, while at the Mississauga facility the use of petocke was increased during 2010.
Energy Farm project
Lafarge has also been progressing in the area of secondary fuels. The Bath plant underwent biomass trials in September 2010 with full-scale combustion of agricultural biomass including hemp, sorghum, willow, switchgrass and oat hulls. The results are currently being analysed under the next phase of the Energy Farm project for publication in June 2011. The award-winning project was launched in 2008 and utilises a wide variety of non-food energy crops planted on Lafarge and neighbouring lands that have been subjected to a practical study for their possible fuel usage in the cement industry.
The plant is not only interested in low-carbon replacement fuels from an economic point of view but will make a life cycle assessment of the biomass crops, including considerations about water use, landscape issues, biodiversity and energy efficiency. It will also assess kiln energy efficiency and look at waste heat in fuel processing and electricity generation. On conclusion of the trials, Lafarge aims to have a green fuel standard in place.
The Energy Farm project is just one of the four initiatives in Lafarge’s Cement 2020 programme – a collection of integrated, multi-partner explorations seeking practical, sustainable recommendations that could be implemented by the global cement industry by 2020. The second is a WWF-Lafarge local project focusing on the wide-ranging policy aspects of the move to biomass fuel. The third is a recently awarded Asia Pacific Partnership project enabling the Bath project to be evaluated from an international context. The fourth project is a Queen’s University-driven biomass project ‘Biomass for sustainability’ funded by the Ontario Centres of Excellence.
Meanwhile, at Lafarge’s Richmond plant, in collaboration with the Urban Wood Waste Recyclers Inc, the staff has created a new fuel that combines waste wood from construction and demolition along with small amounts of non-recyclable plastics. The fuel, which is principally a biomass fuel, will reduce the plant’s dependence on coal and help reduce its greenhouse gas emissions.
Portland limestone cement
During 2010 a number of Canadian cement plants introduced a new Portland-limestone Cement (PLC) with lower clinker content after several years of testing. The first utilisation of this cement was carried out by Lafarge Cement near its Brookfield facility in Nova Scotia, in 2009, when it successfully reconstructed a section of road with the new cement manufactured at the nearby works.
The plant hopes that the new blended cement will reduce its annual greenhouse gas emissions by up to 76,000t by 2015, which is the equivalent of planting some 375,000 trees or taking 10,000 cars off the road. By using raw limestone and blast furnace slag as clinker substitutes the Brookfield works will lower its clinker content by some 20 per cent.
The clinker factor of Canadian cement was recorded at 83 per cent in 2008 and the increased use of PLC should reduce this figure. The Canadian Standards Association has revised its A3001 specification to allow cements to contain up to 15 per cent limestone from the previous five per cent to encourage the production of PLC. The new cement type reduces greenhouse gas emissions associated with existing cement manufacture by approximately 10 per cent. So far the use of PLC has been approved for building use in British Columbia, Ontario and Quebec. The industry is moving to have PLC recognised in the Leadership in Energy and Environmental Design (LEED) building rating system enabling cement producers to win orders for LEED green building certified projects and to qualify for LEED credits.
The cost of the Brookfield blended cement project is estimated at CAD1.5m and includes the installation of additional material storage and handling equipment. Lafarge is to receive an ecoNovaScotia Environmental Technology Programme grant of CAD670,000 to help fund the plant conversion.
Meanwhile, the University of Brunswick will conduct and validate research of the performance of the new cement while Carbon Sense Solutions Inc will certify the emissions reductions at the plant.
Holcim Canada also began the first Canadian field trials of PLC with the Ontario Ministry of Transport (MTO) and the University of Toronto in September 2010. Trails were performed using the new PLC in constructing a concrete barrier wall for one road and a pavement section on the exit lane of Highway 401.
Algae fuel project
In a pioneering project, St Marys Cement has been targeting ways to lower its CO2 emissions with the help of Pond Biofuels which are using emissions to produce high value biomass from microalgae. The aim is to capture the CO2 and gas emissions in the stack and turn this waste into a nutrient-rich algae slime that can be dried to make a biomass fuel for the cement kiln. If successful the trial will be of great interest to the global cement industry in providing a sustainable fuel and lower emissions. The trial equipment was fitted in October 2009 and while the current system extracts just one per cent of the exhaust stack gases for the algae-making process, it is hoped that this will shortly be raised to use one third of the exhaust gases.
Canadian domestic cement in 2010 cost approximately CAD135.12/t, 1.7 per cent up on 2009 figures, which were around CAD133/t. Lafarge reported that the higher prices in Canada somewhat mitigated the decline in cement prices south of the border in the USA during 2010. The Canadian dollar also appreciated against the euro during the fourth quarter.
Canadian export prices to USA in 2010 were around US$83.73/t CIF and US$81.21 FOB, slightly down from US$84.66/t CIF and US$88.07 FOB in 2009.
Bowing to weak demand in the USA, 2010 exports of Canadian cement and clinker were slightly negative, 0.6 per cent down versus 2009 levels. Of the 3.42Mt of cement and clinker exports in 2010, 99.5 per cent were designated for the US. The more interesting metric is the increase in Canada’s share of US cement imports. Typically, Canada contributes to roughly 20 per cent of US imports. However, that share grew to 36 per cent in 2008 and to 50 per cent in 2009 and 2010 amplifying Canada’s position during the US economic downturn. On a monthly basis, cement exports volume growth during 2010 was intermittent and sporadic with six months of declines offset by six months of gains, yielding the nearly flat market for the year. Ed Sullivan, the PCA’s chief economist, is forecasting a rather mild 1.4 per cent increase in US cement consumption this year and in this context, expectations are for Canadian exports to the US to reflect only a mild increase. Of additional concern is the effect of environmental legislation on the US cement industry suggesting that Canada’s surplus capacity could play a more prominent role in servicing the US market in the future.
The outlook for the Canadian cement industry is certainly one in which producers are seeking more modern and energy-efficient plants. There is a greater need to reduce dependence on fossil fuels with higher alternative fuel substitution rates. Blended cements and in particular the PLC type product will gain market share in the coming years, especially if this type of cement becomes popular for green LEED construction projects.
If the CAC and the Ready-mixed Concrete Association of Ontario (RMCAO) can convince the MTO that concrete roads are more efficient and a cheaper option to asphalt roads, it is likely that domestic producers could win some large road contracts, but cement has not been the prime choice in the past in this respect. Hydro electricity projects are likely to maintain the largest share of cement consumption in construction going forward.
The rise in the share of cement exports to the USA during the downturn in construction activity is impressive, and says much for the competitiveness of Canadian cement, which was able to maintain volumes in spite of the decline in consumption levels. The industry will be hoping that as the US market gradually returns to growth over the coming years, export volume growth will also return.
Article first published in International Cement Review, May 2011.