The privately owned Spanish conglomerate Grupo Essentium, run by Susana Monje, having earlier successfully sold its share of the Spanish cement and aggregates joint venture that it had with Orascom to Lafarge, is now in the process of re-entering the cement market in a big, and more direct way by building three greenfield integrated cement works on the Mediterranean Rim. And it is aiming to do so in markets that are already getting very crowded.
Essentium has reportedly formed Universal Çimento, which plans two build two new 2Mta integrated works in Turkey: the first in Bileçik, Marmara region set to come on-stream in 2011 and the second in Osmaniye province, southern Turkey with a completion date in 2012. It appears odd for a new entrant, in what must be regarded as currently one of the least attractive cement markets in the world, in view of increasing over-capacity and with a high level of market fragmentation. While some production of the Osmaniye works would be aimed at export markets in Iraq and Syria, Essentium would be a late entrant into these markets, where considerable investment is already in-hand. Turkish domestic demand is expected to drop by close to 10 per cent this year to some 38Mt. Exports have grown, but at the expense of margins, and amounted to over 7Mt in 1H09, just in excess of the volume exported for the whole of 2006.
In Morocco, Essentium aims to build an integrated works with a grinding capacity of some 2Mt near Nador in the Oriental region, ostensibly for completion in 2011 or 2012. The four existing Moroccan producers are all expanding capacity and two domestic new entrants are building three new plants with a combined capacity of 5Mt to be completed in 2011.
So where is Grupo Essentium going to sell its cement?
Essentium has also announced that it intends to build a 1Mta grinding plant in Estonia, presumably using clinker from either Morocco or Turkey to produce cement and will probably use this Estonian base to sell into nearby St Petersburg markets. Susanne Monje had earlier noted that Essentium did not intend to run these plants as wholly-owned operations but would identify partners to take suitable levels of participation.
An alternative scenario has Susanne Monje selling the three new cement works in a completed or nearly completed, state to existing producers and once again banking the cash. However, it might be difficult to find buyers for the next 2-3 years, while if she does aim to produce cement, being able to sell it at a price that covers financing costs might prove even more problematic.