A time of change

Regional market and industry review

GIH's Hettish Karmani, gave a detailed review of the GCC cement industry

Hettish Karmani, Global Investment House (Kuwait), kicked off the first session of the meeting with a detailed review of the GCC cement industry. GDP in the region is expected to grow at 5.9 per cent in 2011 as oil prices rise on the back of political tensions. Although around 25 per cent of construction projects still remain on hold, particularly in Dubai, active projects amounting to around US$1.6tn in value are currently underway. Mr Karmani expects annual cement demand in the GCC to exceed 81Mta over the 2011-17 period. On the supply side, GCC capacity is noted to have doubled over the past four years, shooting up from 55Mta in 2006 to 110Mta in 2010 (led by Saudi Arabia with a capacity of 52.8Mta and the UAE with 40.8Mta). Excess supply currently amounts to 28Mta, most of which is concentrated in the UAE, which now has a massive 20Mta capacity surplus. Regional utilisation rates have fallen, down to around 65 per cent, while cement prices have similarly softened YoY since their peak in 2008, averaging around US$65/t. Ultimately, the focus now turns to the UAE and to whether it can export sufficient surplus to offset the crippled domestic market.

Widening the scope further, Ankur Agarwal of Nomura International (Dubai) provided an expert analysis of the global cement industry, stressing the contrasting trends between the rapidly-growing emerging markets versus the recent decline in the developed markets. This two-speed growth presented the global majors with a challenging year in 2010 as they strived to deleverage their balance sheets through cost cutting and capex reductions alongside capacity rationalisation in developed markets. While margins appear to have troughed in 2010, they remain a concern in emerging markets in the near term, according to Mr Agarwal. This is due to the combined pressure of high energy costs and high food inflation (particularly relevant in emerging countries where a very high percentage of income is spent on food). In the longer term, Mr Agarwal observed that further scope for consolidation in the global industry exists, particularly in the fragmented markets of China, Russia, India, Indonesia, Brazil, South Africa and Nigeria. However, if the opportunity isn’t seized by the traditional majors, then the door will be left open for major domestic operators to take the initiative and even emerge as a modern-day Cemex to expand well beyond their domestic markets.

The presentation by Ahmed Hussein of Cairo Investment Holding (Egypt) focussed on the situation in Egypt and was eagerly anticipated by producers and suppliers alike, all keen to assess the potential for this important market going forward. Mr Hussein provided an upbeat assessment of this country’s recent performance and future expectations. GDP will be dragged down in 2011, due to the disruption in economic activity, but will stop short of recession. Pre-contracted works will insulate the construction sector from a sharp fall in the short term. Cement consumption, which grew by 3.5 per cent in 2010 to 49.5Mt, is now expected to contract in 2011 by 3.1 per cent to 48Mt, but recover to 8.3 per cent in 2012. Thereafter, it is expected to reach double-digit growth levels with a CAGR of eight per cent over next five years. Massive housing and infrastructure demand combined with strong demographic drivers underpin this bullish view – but as Mr Hussein acknowledged in the Q&A session, much still depends on the pace of political reform. Under this positive scenario, Egypt will experience a deficit in supply by 2014-15, thereby favouring the introduction of new capacity by this time.

Evaluating industry investments

Michel Folliet, chief industry specialist for the International Finance Corporation (USA), talked about the financing of cement projects in emerging markets where cement is undersupplied and finance is often difficult to arrange with mainstream banks. The IFC cement portfolio consists of US$1.4bn investments in 26 countries and includes a strong mandate to promote environmental standards through its investments. An emphasis is placed on funding projects that utilise best practice technology, such as five- or six-stage pre-heaters, vertical roller mills or Horomill for grinding and waste-heat recovery power generation systems for energy effiiciency. Projects supported by the IFC should adhere to benchmarks limiting CO2 emissions to a maximum of 650-750kg/t cement.

Michel Folliet talks about cement financing

Soumen Karkun, Holtec Consulting (India) led delegates through the hypothetical investment appraisal required to determine the best option between establishing capacity in western India versus coastal Africa. Mr Karkun demonstrated a range of advanced analysis techniques, including competitive analysis and forecasting alongside analytic hierarchy process (AHP) as a means to solve complex investment decisions.

Project overviews

Cemtech was pleased to welcome back Giorgio Bodo, CEO of ASEC Cement (Egypt), who presented a candid examination of the challenges of launching the new 1.5Mta greenfield Al Takamol cement plant in Sudan, which involved navigating between the perils of the financial crisis, international sanctions and a lack of electricity supply. Happily, the newly operational plant has expanded its market share to 26 per cent and now aims to be the country’s cement leader. Paolo Bossi, managing director of Sinai White Cement, then led delegates through developments which have transformed the company into a state-of-the-art white cement producer with 1.2Mta capacity and worldwide sales in 28 countries.

Other experts were on hand to share their knowledge, including Luc Rudowski of Polysius (France) who impressed delegates with his whistle-stop tour of many of the production lines installed by the company throughout Africa and the Middle East (see ICR April 2011 for full report), while Ferdinand Pecson of NLSupervision (Egypt) revealed how to successfully outsource plant operations and maintenance and still achieve world-class performance. Loïc Pottier of Fives FCB (France) ended the first day’s presentations by exploring the financial savings to be made from efficient project execution, with case studies from Qatar Cement’s Umm Bab Line 4 construction and Titan Cement’s Beni Suef Line 2 in Egypt.

Technology advances

Dr Daniel Strohmeyer of Loesche (Germany) opened the second day of the conference, showcasing a new stand-alone grinding plant that is able to operate without hot gas generator and with zero water injection, resulting in an environmentally-sustainable solution with lower operating costs, as illustrated by two recent case studies from India.

Cemtech's exhibition enabled delegates to network

Fernando Pozo, Cemengal (Spain), gave a case study of the construction of a complete grinding station, including 140tph OPC ball mill, at the Lafarge Tangier plant, which went on to win ‘Best Grinding Station’ award from Lafarge Group worldwide.

Heinrich Höse presented a fascinating overview of the material handling solutions supplied by Aumund Group (Germany) to Holcim’s Ste Genevieve’s ‘mega’ plant in the USA – and the first single kiln production line to break the 13,000tpd barrier.

Dick Boarder of Cement Consultancy Associates reported on a recently- completed study that examined the potential for fossil fuel substitution by alternative fuels (AF) in the Egyptian cement industry, which currently relies on subsidised gas (80 per cent) and HFO (20 per cent). In essence, the financial drivers needed for alternative fuel projects in Egypt are still weak and waste management infrastructures are not yet established. However, a target of 30 per cent fossil fuel replacement is considered achievable in Egyptian kilns – a level which would require 4Mt of alternative fuel annually sourced from maize, rice straw, cotton stalks and RDF. Mr Boarder showed that for an AF project using 100,000tpa waste straw in bales, a three-year payback would be achievable, but would require a gas price increase of about 50 per cent.

Dr Stefan Seemann presented KHD Humbolt Wedag’s proprietary COMFLEX roller press comminution system, characterised by a flexible layout that is easily scalable from single to triple unit configurations, and able to achieve low specific energy consumption. In fact, according to Dr Seemann, a COMFLEX system used for raw meal and cement milling in a 7000tpd capacity line could achieve a daily saving of up to 37.1kWh, equivalent to US$2.08m per year, compared to the next most efficient grinding system, the vertical roller mill.

Next up, Thomas Marx of ABB looked at energy optimisation options for cement plants, including the ABB Heat Recovery System. This system operates the Organic Rankine Cycle to use low-temperature (from 170°C) waste heat sources to generate low-cost electricity. Such a system can achieve a potential annual electricity cost saving of up to 10 per cent for an investment outlay of between US$3m-6m/MW.

Cement trade update

The afternoon session turned the spotlight on trading and shipping. Kerim Tuncay of HC Trading told delegates that the Mediterranean Basin markets would import a total of 15.3Mt of clinker and cement in 2011, though the main market of North Africa will be undermined by recent political events. Total exportable supply in the Med is estimated at 24.3Mt, leaving a 9Mt surplus which must be diverted to other regions, including West Africa and even South America.

Following closely on, Joel Grau Lara of Clarksons provided an update on current dry bulk freight market. The freight market is driven primarily by the three main commodity markets of iron ore, coal and grain transportation, with cement only accounting for three per cent of overall dry cargo sea trade. Robust fleet growth since 2009 has put strong pressure on freight rates, with the Baltic Index averaging just 1282 in 2011, versus 2761 in 2010. Spot rates for Handysize vessels, commonly used for cement transportation, fell from US$16,428 in 2010 to US$10,457 in the first two months of 2011.

Production advances

Stephan Oehme of Claudius Peters presented the latest advances in bagging plant technology, including options equipped with low-maintenance turbine filling system and ultrasonic valve sealing system that enables dust-free bagging and delivery of completely clean bags for the end client, which is of particular value in the bagged retail market.

Dr Anton Eichinger of Austroplan introduced a modern maintenance management system for cement plants, complete with benchmarking and specially-designed to achieve optimum plant availability at minimum total maintenance cost.

Bill McDougall of Castolin Eutectic presented case studies demonstrating the application of nano alloy technology to massively increase the lifetime of critical wearparts throughout the cement plant, from VRM components to hotdisc combustion devices.

Last but not least, P Rajendran of Chemtrols (India) demonstrated the benefits of gas conditioning in the top cyclones. Case studies illustrated how a high-pressure water mist spray is used to reduce excessive temperatures in the cyclone, improve collection efficiency and reduce downstream fan operating power – ultimately increasing plant capacity.

Exhibition

Under the Dubai night sky, the Cemtech Gala Dinner was

an apt farewell to another successful Cemtech event

A large exhibition area featuring 25 world-class equipment suppliers enabled delegates to explore new equipment options and network with colleagues from across the region. In line with Cemtech’s emphasis on hospitality and networking, two evening receptions were held in the exhibition area in a relaxed and informal environment.

Extended technical programme

For those delegates able to stay a third day, Cemtech arranged an extended programme. This included a technical workshop led by Dr Michael Clark, technical consultant of International Cement Review, whose online CemNet e-Learning courses have helped transform access to high-quality technical expertise in recent years. The well-attended workshop examined strategies to lower CO2 throughout the cement production process, both in the production of clinker and Portland cements.

For those looking to see the UAE’s largest cement plant in operation, a visit to the Union Cement Company’s facilities in the emirate of Ras Al Khaimah – the country’s cement production hub – was arranged. The tour allowed delegates to assess operations at UAE’s largest plant, including its 10,000tpd kiln line which was built by Sinoma subsidiary China National Building Material Equipment Corporation and entered into service in 2007. Recently, UCC, which is located adjacent to Saqr Port, has now emerged as one of the largest exporting plants in the region. Later, Cemtech delegates enjoyed a spectacular banquet held at Ras Al Khaimah’s Golf Club, kindly hosted by HE Sheikh Yasir Al Qassimi and HE Sheikh Rami Al Qassimi.

Cemtech offers its sincere gratitude to all speakers, exhibitors and participants who made this event such a success, particularly those who made the switch from Cairo. We look forward to our next regional conference in February 2012.

Article first published in International Cement Review, May 2011.