The potential for locally available low-carbon calcined clay cement in Saudi Arabia – Peter Hoddinott

I've been coming to these conferences for maybe 15, 20 years. It is incredible how the themes have modified and changed over that time. But the last five years, it's nearly every single conference speech, every single booth is talking about decarbonization. Maybe it's less on the agenda here in Saudi, but elsewhere in the world, it is absolutely the issue for the boards of companies that make cement and concrete. So under that umbrella of decarbonization, there is an enormous amount of innovation taking place in this very, very slow, conservative sector. And very interestingly, we had Professor Dali yesterday talking about some of the areas of research that he is undertaking.

Sometimes these may seem rather far from the mass markets, but believe you me, there are times that this then explodes into a complete new area of opportunity for our industry. And one example of that where research and development of actually quite an old technology, which is clay calcination by Professor Karen Scrivener and subsequently Professor Fernando Marti´rena, together have created the idea of using limestone fillers together with calcined clay to create a very, very reactive, low carbon, low cost option for the industry. And that has created this worldwide buzz about calcined clay. Now, I'm actually involved in a big project in Western Europe.

I have some skin in the game, so of course, I'm quite interested in this on a personal level. But I've learnt from basically zero about this in the last few years. What I wanted to do today was share a little bit of that with you, especially as in Saudi, you now have three projects around this great city, which are focusing on calcined clay. And in neighboring Oman, more recently, three Ipiak containerized plants are being commissioned, and there was a recent LC3 day in Oman, which is showing that it works and actually goes ahead in this region. So what I want to talk about is the potential for low carbon and low cost calcined clay here in this great nation.

Now, this is somebody you all recognize, His Excellency. This is something back from, it's not old news, it's five years ago, but this is him setting out the policy objectives, the intervention of government as Amra put it in his great presentation. So headline there is His Excellency is pushing the whole economy towards net zero by 2060. Not perhaps as ambitious as other nations worldwide, but take into account this is a petro economy, it's really saying something. So he sets the agenda. His pledge in the nationally defined contributions was to reduce carbon emissions by 278 million tons of CO2 equivalent, it's enormous, versus 623 in 2023.

It's an enormous commitment, everybody, which the ruler has made. So this is now an ignorant external foreigner looking into this extraordinary market of Saudi Arabia. One, extremely fragmented, and this is a point that Amra made. You've got 16 players, not always the best of friends. You've got estimated scope one emissions, something of the order of 40 million tons a year. So a very significant carbon load. And you have this rather strange situation, which is now less and less common in the world, where you've got energy subsidies and energy quotas given to the cement industry.

And when that has resulted in some distortions, effectively, at least in my view, with high-capacity utilization to use the quotas. So that means that you have external clinker stocks, and you saw the numbers, 45 million tons of clinker stored in the desert, one year's supply. You get low levels of biogenic fuels, relatively speaking, but against international benchmarks. It's an OPC market. I'm a board member of Saudi Ready Mix. OPC is probably 95% of what's available. And you've got very low cash costs because energy is so low, and that results in some major distortions. So you've got these low prices, but EBITDA margins are very high, 40 plus against 30 elsewhere.

So this sort of creates an idea that this is ultra special, but it does have those tensions that Amra talked about. If it was me, I would take away the subsidies, which is happening sequentially, and bring the market back into more normal international norms for energy, and that opens up whole ranges of areas for cost reduction and innovation. But that's just me. Paradoxically, also, you've got this situation that the binder content in concrete is super high here, very high. And steel contents in concrete construction are unbelievable. I've seen construction sites here where there's so much steel put into the structure, it's impossible to insert the concrete.

It just doesn't get in between the steel. Crazy. Huge high cost and it actually creates structures which are not necessarily that competent. So project owners I talk to in Saudi say, "Yep, we want low-carbon concrete, sure, but we do not want to pay more. We want to have our cake and eat it." Exceptions are Aramco and PIF. So that's just a profile. So one of the crazy things here, which I haven't seen for many, many, many years, is that you have the classic decarbonization lever of using SCMs like slag and ash. It just doesn't work here. Why? Because OPC, with a carbon footprint of about 750 kilos a ton, has a delivered price of somewhere around 250 to 300 riyals. $55. Boom. It's not a lot.

Elsewhere in the world, it's 100, 150. But then look at GGPFS and PFA, with much lower carbon footprints, and what do you have? You have prices delivered within the kingdom, which are close on twice the cost of OPC, and that's because of this distortion around energy. So unlike other markets, there's no real incentive for concrete companies and project owners to use low-carbon SCMs. It's obvious. So as Bob Dylan said, the times they are a-changing. You've got now some progressive removal of the subsidies. Where that's going to, I know not, but there's been two or three tranches taken out. There's a pivot to natural gas because that's lower carbon, very good. Costs are rising.

That's evident, and you're seeing that come through with cement prices with some tensions that Amra was talking about. But overall trend is upwards. Okay. Aramco and PIF are leading the way on the low carbon. There's- In the market, some project owners are now using lead ratings to inform the way they source materials for projects and going for gold and platinum, and that, in some cases, is forcing the issue towards higher cost SCMs against OPC. But you've got two new slag grinding stations being built as we speak. One here near Riyadh and one near Yanbu, two million tons a year each. That's by Cesco. That's going to have a pretty significant effect on this market.

And at the same time, the international demand for GGBFS and ash is rocketing because it's all been sucked into areas with high carbon pricing, like Europe. You get Japanese and Far Eastern slag being transported across the planet into Europe because slag is very low carbon. So there's a lot happening. So how can this great industry here contribute to that valid 2030 decarbonization objective? So there's a clue. We heard it yesterday that KSA's economic transformation on the 2030 places local supply content and localization programs at the front of its growth strategy. It's extremely logical, everybody, and that you then lead to the local content and government procurement authority.

In this market, we want to find solutions which are local, not importing slag and ash. So let's look under our feet. This is a classic source of where you can actually change the game. And in Saudi, there are three natural resources which can be used for SCMs. They're local, they're low cost, and they're effective. The first is limestone. I won't go into that right now, but limestone's day is coming big time. It's a really good decarbonizer. You need to make some adjustments to water-cement ratios and admixtures. There's loads of it here in KSA. Natural pozzolans mostly concentrated around the west, Yanbu, and Medina, and so on. I've used them all over the planet in my time.

They are also a very good decarbonizer. Why? Because all the CO2 was emitted millions and millions of years ago. But I want to concentrate on this new area, this new buzz of calcine clay, because there are high kaolinitic clay content clays in this kingdom, particularly around here, and that's why City Cement is in partnership with up to three cement tower projects around Riyadh. So that's today's focus, the calcine clays. All those naturally occurring minerals are here with low carbon contents. It's a no-brainer, everybody, that they should be exploited. Global buzz on calcine clay, this is exploding, I promise you, all over the planet. It's not just Oman and around Riyadh.

It's happening through Europe, through West Africa, all the way through Latin America. I had a calcine clay plant in Brazil in the early 2000s. And then, of course, in Russia, it's been there for a long time. The difference, everybody, is the addition of limestone filler and the effect that creates in terms of concrete performance. It is exploding, everybody, and it's great to see that KSA is part of that game. So why this global buzz? Well, it's really very simple. You have a product which is called LC3 colloquially down here. In EN 197, the European cement standard, it's called CEM 2 CM.

It contains 50% CEM I, so you still use CEM I for half of the product, 30% calcine clay, and 20% limestone. Again, limestone is a really big part of this. And when you look at what that delivers you in terms of the carbon content, it's around 420 kilos per ton. It's very similar to a 50% slag, 50% OPC blend. Very attractive. Even better, it's lower cost than OPC because the calcination process is a much lower temperature, it's lower fuel consumption, and then you stretch the calcine clay with low-cost limestone. So it's a very well-known technology. It's been around for absolutely decades and decades and decades. Typically, you want around 40% kaolinite.

That's the old number for a 42.5 cement. But I promise you now, that threshold is coming down and down and down. People are now making good calcine clays with 20% kaolinite. And I've mentioned the CO2 emissions, and typically an LC3 50, 50% OPC is a cash cost $10, $20, not in the KSA, but outside, lower than for a CEM 2. So how does it work? I didn't know this, so this is just quite interesting. I won't go into all that detail, but effectively, a clay is laid down in layers when you get down to the microscopic level, and those layers are either one-on-one layers or two-to-one layers. I won't bother you too much with that.

But joining them up, there's hydrogen molecules, and that makes a clay really slimy and a bit icky. When you take that clay, particularly with high kaolinite, but also with other clay minerals like illite, mineralite, and you apply heat to it, not as high as clinkering, which is 1,400 degrees C, but 650 to 850 degrees C, the water in between those layers gets attacked by the heat and is broken out. It's called dehydroxylation, and the structure of the clay then crushes and crumbles. It becomes very reactive.

That is what makes this such an interesting product, because that very reactive material, you then add limestone, and that improves the performance of it in concrete, and you end up with something which is very interesting and exciting. There's lots of detail there. The master at whose feet I sit is somebody called Fernando Martirena. He's a Cuban professor. This guy is absolutely brilliant, and he has published loads and loads and loads on it. There's more detail there. I don't want to go into all that. The previous rule of thumb on 40% kaolinite, as I said, is falling. And now, the projects that I'm seeing are at 35% plus, some down at 20% to 25% kaolinite.

And the reason for that is that the technology is absolutely exploding in this area. I have never seen how this can take place so quickly. But even things like dredge sediments, tunnel arisings are being used now for calcine clay. Sorry, I'm going the wrong direction. My apologies. So some of the basics, what happens effectively is that blue line there, which shows what happens in terms of the performance, is when you dehydroxylate. And as you look at the bottom area, that takes place somewhere around 650 degrees C, as you can see.

The resulting reactivity, and this shows the reactivity here, peaks depending on the clay, on the one one to two one content, somewhere around 850, generally speaking. But there is an issue, and that is there's a lot of iron in clay, and so you often have a big problem that you end up with a red product. Now, this is not so attractive unless you want pink buildings, which in Switzerland, this is what they do now. They have a lot of this material for pink buildings. But a lot of the reason for that is the oxidation and reducing conditions in the process. And if you find a way to convert from magnetite to hematite, you can actually reverse that.

So the way you do that is that you maintain a situation of having a pink or an orange pigmentation. You use a reducing atmosphere during cooling. It's not so difficult, and some of the tech, which you'll see, lends itself to that. Performance-wise, this is an OPC. The red line there is the 28-day strengths. You can see that the PC or the OPC and LC350 have pretty similar performances. Early strengths, though, are an issue, and you may need to use more admixtures if you're into concrete products. And in the standards, this is the European standard, that arrived in light speed in Europe. I couldn't believe how that came around so quickly.

And you can see 50% clinker is the minimum that is permissible in the CEM II/CM. This is for ASTM 595, and there you have a binder with anything greater than 35% clinker. So depending whether you're EN or ASTM, this is already in the standards. What happens long-term? Well, this is Professor Masranna in a beach with lots of rocks in Cuba, and he put there in 2014 these blocks of concrete made with OPC and with LC350. I will not insult your intelligence by telling you that the blocks here on the left-hand side are the ones which were made with LC350. They're highly resilient to chloride attack. So lots of options.

You can take an existing kiln, and you can convert it into a clay calcining unit. That's what's happening, for example, in Portugal with Cimpor. You can build a brand-new flash calciner, a bit expensive. That's what's been done in many parts of the world, in France by Vicat and by CBC Ghana. The positives and negatives, rotary kilns, you all know, very forgiving piece of kit. You can operate in most weathers. It allows you to put in fairly high moisture content material, straightforward color control. Negative, you get lower reactivity with rotary kilns and higher energy consumption. Flash calciners, much more artistic and hard to manage equipment.

You need to pre-dry because if you put wet material into the top of a flash calciner, you're just going to bung it up. But you do have a very good and high reactive product. But there's lots more. If you haven't got waste heat recovery, you can take the high temperature heat from an ordinary clinker kiln, divert it through your tertiary air duct into a reactor, which is what this is. This is from VDZ in Germany, and you can use that heat to calcine clay at the side of the kiln. The CO2 footprint of that is virtually zero. Very, very clever idea because the temperature of the exhaust gases from a cement kiln are much higher than the 850. So very, very simple.

Then you've got completely new tech. This is called MechaClay by Polysius. This uses a mechanical milling effect to activate and dehydroxylate the calcined clay. It's energy-consumptive, yes, but if you use sustainable energy, zero carbon. And you can get clays much, much lower than 30% to be reactive. This is from a different industry, from metal processing. This is a multi-hearth kiln, where the material cascades down through the kiln, and you apply energy to the outside of this kiln. Very, very old technology. This is also being now adapted for calcined clay. Low cost, very flexible, and you can put it in in units. And then here in KSA, what's being used is a CEM tower.

It has some similarities. You nodulize the clay, you insert it in the top of the tower, and then it cascades down through a series of plates where you apply heat at the middle section, and out of the bottom comes your calcined clay. Very, very low CO2 and energy consumption. Extremely interesting technology. In Oman, this is what they're using. It's APIAC containerized plant, extremely cheap. You can buy one of these for, say, 100,000 tons a year of calcined clay for about $7 million from Portugal. Bit more energy-consumptive, but very quick to make it happen. Go to Oman to go and see it in action. And what happens? What's the payoff? Well, much lower CO2, much, much lower.

You've got very big use of limestone, makes the cost go right down, and you end up with a carbon reduction and cost reduction, which is very interesting. There are some KPIs there. In the left-hand column, you've got calcined clay, either in flash or horizontal kiln. Much less raw materials, much lower fuel consumption, much lower electricity consumption, much lower CO2 than the ordinary clinker that you get in the EU, for example. This shows other operating KPIs. You can look at those at your leisure. And this shows some of the CapEx examples from elsewhere in the world. So the ones you see in Oman here, they're on 100,000 tons, including all the peripheries, it's $15 million.

And they're now putting in their third line in Oman. But you can see the costs are quite modest against the big brute of a clinker kiln. And that was a bit surprising. So conclusions. The race is on, everybody. SCMs, I'm telling you all, are coming, and they are going to be very, very important in the next 50 years. He who gets ahead in SCMs will win. Will win. And what happening in this country? This stuff, if the energy subsidies are indeed removed, this suddenly becomes front and center in your strategy. So it's promising, low cost, low carbon. You need to work on customer acceptance. There's a very interesting potential here in KSA to use the waste heat.

You keep your clinkering at capacity today, and you just have this in the side of the main clinker line, and you use the waste heat, and you produce a calcined clay. Very, very, very interesting low-cost, low-carbon solution. It could have an impact on clinker capacity in the years to come, but I promise you, in Europe, I wouldn't be surprised to see clinker capacity being reduced by 50% or even 60% as SCMs really take off. So ladies and gentlemen, that's a snapshot of a new bit of tech, a new buzz for our industry. Thank you for listening to me, and I would be delighted to take questions.