Introduction

The Latin American cement market has seen troubled times in recent years. Its largest market, Brazil, has lurched from one political crisis to another, dragging its economy into the doldrums. Its construction sector has been particularly scandal-plagued – with disastrous consequences for its cement industry.

It is also true, as Raluca Cercel, CW Associate at CW Group pointed out in a recent conversation with World Cement, that Latin America is not a homogenous market but a number of smaller local markets each driven by their own separate conditions: “Brazil is doing something; Mexico is doing something; Chile is doing something else. It is really a conflicting market in that sense.”

The major players

Taking a birds-eye view of the sector, the Latin American market is dominated by three majors: Swiss multinational LafargeHolcom, as well as locally-based CEMEX (Mexico) and Cementos Argos (Colombia). Adding in the Brazilian giants, Votorantim and Intercement, these account for over half of a total installed capacity in the region of around 250 million tpy. Of these, LafargeHolcim is the largest player, operating 30 integrated clinker production lines plus grinding plants in the region. These have a total capacity of 39.3 million t and 2017 sales volumes of around 24.9 million t.

Votorantim follows closely behind LafargeHolcim with the same number of plants and capacity of 36 million tpy (out of a total global capacity of 52.8 million tpy). This is heavily weighted towards its Brazilian home market, however, where the company has capacity of 34.3 million tpy across 27 plants.

In the wider Latin American market, Votorantim operates just three plants, in Bolivia and Uruguay, with capacity of 1.7 million tpy. The company does not release sales volume data. In addition, the company owns a 49% stake in Cementos Avellenada in Argentina, which has a total installed capacity of 3 million tpy.

Brazil is also home to Intercement, which operates a combined 21 integrated clinker production lines plus grinding plants across Brazil, Argentina, and Paraguay. These plants have a total combined capacity of 28.2 million t with 2017 sales volumes of 14.7 million t.

Mexico-based CEMEX and Colombia-based Cementos Argos each operate 15 integrated clinker production lines plus grinding plants. The Colombian company has installed capacity of 13.4 million t and 2017 sales of 10.4 million t; data for CEMEX was not available.

This tightly held market structure does not allow for much margin for error by the companies involved: “a bad move in one market – for example by lowering the price and ruining everyone’s market share – and the other players will retaliate in another market,” explained CW Group’s Cercel. “You don’t have that many small companies that can actually make a difference in terms of market share and pricing.”

The markets

Brazil

Brazil is by far the biggest market for cement in Latin America: it is also the region’s biggest headache. Despite some positivity heading into this year, demand appears to have declined by around 5% to May. “With Brazil, it always seems like there is a glimmer of hope, and then chaos is waiting around the corner,” said Cercel. “It’s something we have observed not only now but for several years.” A sure sign that domestic demand has not been performing as well as cement companies would want has been a recent upswing in cement exports. Although not huge amounts – certainly not on the scale of Mexico, for example – the fact that exports are ticking up “points to the fact that cement manufacturers are trying to get rid of production by any means possible,” noted Cercel. The most recent “chaos around the corner” came in the guise of a truck drivers’ strike, which caused cement companies to miss deliveries and highlights one of Brazil’s chronic weaknesses: its transport infrastructure.

It is in this weakness however – as well as the fragmented regional nature of Brazil’s cement market – that there may be opportunity to succeed, explained Cercel. “If you invest in a sub-region that is not very well catered for [in terms of cement production] and that other cement manufacturers from other regions cannot deliver to, and if you can leverage those conditions in a region where demand is increasing, you could be successful in Brazil.”

There might also be an end in site to the cycle of falling demand – although not until 2020 at the earliest. “Best case scenario, sometime in 2020 we are going to see a recovery in the construction market and the construction companies that have been involved in the huge scandals over the last two years going to back to work,” said Cercel.

Mexico

Moving to the second largest cement market in Latin America, political change is again likely to play a deciding role in how the cement market fairs. The country has recently been convulsed by the election of populist Andrés Manuel López Obrador (AMLO) to the presidency. In a research note written before the election, BMI Research noted that AMLO’s election would lead to an increased likelihood of a boost to government spending on infrastructure and housing construction.

“AMLO’s programme contains a number of measures that would direct more funds towards public construction investment,” the research firm said, adding that an “improving fiscal situation (supported by rising oil revenues) and the Peña Nieto government’s successful austerity measure will provide more room for public infrastructure investment from 2019.” “He’s a populist with a populist agenda,” said Cercel, who notes a risk to business in AMLO’s presidency. “I think he will increase corporate taxation – and that will definitely effect the profits of CEMEX, Grupo Cementos Chihuahua (GCC), etc.”

This could lead to a rise in cement prices, as the producers aim to pass on the impact of any tax increase to consumers. But this is by means a simple exercise in Mexico: in spring, producers tried to increase prices but were forced to back down after any outcry from both the government and construction companies. The less-friendly business environment – coupled with anaemic demand growth – could also push Mexican companies into the US market. CEMEX and GCC are already present there: CEMEX operates 11 cement plants and more than 50 distribution terminals in the US, while GCC has four cement plants and 22 cement distribution centres. More may follow as companies become more “aggressive in diversifying their business into the US,” said Cercel.

On the project side, CEMEX recently grabbed headlines with the opening of the Centro de Control Cemento (C3): a monitoring and remote control centre from which the company can operate its cement plants, kilns, and grinding mills across Mexico. C3 also monitors a cement plant in Colombia, as well as one in the US. The system’s uninterrupted monitoring provides information about each stage of the production process, as well as the performance of equipment installed in the cement plants, allowing C3 operators to not only monitor but also take immediate corrective actions in coordination with the company’s local operations staff.

Elsewhere, Cementos Fortaleza – a subsidiary of Elementia, which is partly owned by Mexico’s richest man, billionaire Carlos Slim – signed the last acceptance certificate on its new clinker production line at the Tula cement plant in April of this year. The new line has a capacity of 3300 tpd (1.5 million tpy of cement), raising the company’s cement capacity in Mexico to 3.5 million tpy.

The new line was supplied by Fives Group on an EPC basis.

The contract for new line was signed in May 2015 with clinker production beginning in July 2017. The plant features three identical FCB Horomill 3800 mills, one for raw meal grinding and two for cement grinding. The 300 tph raw meal section is completed by an FCB TSV Classifier 6500 BF, as well as a 27 500 t prehomogenisation storage, additives storage, and 7500 t raw meal blending silo. The two FCB Horomill 3800 for cement grinding have a capacity of 125 tph each. The cement grinding operation is completed by two FCB TSV Classifiers 4500 HF, two Fives TGT filters with a capacity of 130 400 Nm3/hour at 80°C, and a Pillard HeatGen System hot gas generator system.

Petcoke grinding is handled by an FCB B-mill with FCB TSV Classifier.The pyroprocessing line includes an FCB Preheater, FCB Zero-NOx Preca with Pillard PRECAFLAM burner, 4.4 m dia. x 66 m FCB rotary kiln, Fives NEO Filter, and Pillard NOVAFLAM burner. A 79.5 m2 clinker grate cooler completes the line.

Independent Mexican cement producer, Cooperativa La Cruz Azul, is also expanding its cement production at its Lagunas and Hidalgo plants. In both locations, the company is establishing a new clinker production line with both Loesche and Fives Group contracted to supply mills to the two sites.

Loesche will supply what will be two of the largest coal/petcoke grinding mills in the Mexican cement industry to the Hidalgo and Lagunas plants. The two mills are based on Loesche’s four-roller design with modular construction and throughput of 65 tph. In addition, Loesche will supply the complete plant equipment, including process gas filters, mill fans, inertisation units, explosion protection valves, kiln gas cyclone separators, and feed screw and drag chain conveyors, as well as the complete electrotechnical equipment. Commissioning on the two mills is planned to take place in mid-2019.

Meanwhile, Fives Group has been awarded two contacts for the engineering, supply, construction, and commissioning of the raw meal grinding plants at Lagunas and Hidalgo. The grinding plants will be supplied on a turnkey basis and each include one FCB Horomill and one FCB Classifier. The Hidalgo raw meal grinding plant will have capacity of 280 tph, while the Lagunas plant will have capacity of 300 tph.

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