The UK is on a plateau of economic and construction growth. Despite the strong demand for cement and related construction materials, this unsettling situation is likely to continue for some time, given the uncertainty surrounding the exact terms of Brexit, which is now just nine months away. The following describes the development status of the UK cement industry in 2017-2018 from the aspects of macro-economy, major enterprises, mergers and reorganizations, technology and innovation.
I. Macroeconomic
There is still uncertainty about the impact of Brexit on the future shape of the economy, which has led to stagnation in the growth of economic activity in many areas of the UK economy, especially in the construction sector. Economic fundamentals are very strong: housebuilding remains an urgent need, and housing policy and major infrastructure remain key spending commitments on the Government's priority list. The university is also continuing to build academic facilities and student accommodation. However, private investment spending in the commercial, office and industrial sectors, as well as in high-end luxury housing in London, was flat or even falling.
The demand development of the whole country is not balanced. Analysis by the Mineral Products Association (MPA) shows wide variation in the economic recovery across the country since the recession. Sales of concrete in London are up 50% since 2007, while all other regions are at least 20% below 2007 levels, with some seeing a fall of as much as 54%. In August 2017, an article in the Construction Index summarized the situation. While the industry-wide trade survey showed 17 consecutive quarters of growth, the output data for the second quarter of 2017 showed a 1.3% decline (source: ONS), the biggest drop since 2012. Meanwhile, the IHS Markit Purchasing Managers' Index (PMI) showed that both industry workloads and orders were on the rise.
The UK economy shrank between the second and fourth quarters of 2017, the first time it has contracted for two or more consecutive quarters since 2012, according to the Office for National Statistics. However, there was a large increase in the first quarter of this year, which may smooth the economic growth throughout the year and mislead the outside world to observe the British economy. More recently, the economy shrank by -3.4% in January 2018, the worst level since June 2012 (-3.9%). Construction output fell 3.3% in the first quarter of 2018, partly due to winter weather in February and March.
The IHS Markit/CIPS construction PMI has hovered just above the threshold since mid-2016. Since the middle of 2017, PMI has fallen below 50 twice.
Table 1: UK Construction Purchasing Managers Index (PMI)
Reports from building products point to a slowdown in sales and an expected decline. The latest forecasts suggest growth will stall in 2018 due to political uncertainty and the fallout from the collapse of Carillion, a major construction company. Output is expected to grow by 2.7% in 2019 and 1.9% in 2020. Infrastructure and residential remained the most positive sectors, although 90% of manufacturers reported higher raw material costs.
In the third quarter of 2017, MPA data showed a year-on-year and month-on-month decline in demand for building materials. The most recent full-year figures for 2017 showed that sales of concrete, crushed stone, sand and gravel were all flat, with only mortar showing an uptick. Cement sales data has not yet been released, but from the sales of concrete, it may be similar to the above trend.
II . Performance of major companies
Cemex's cement sales in the UK fell by 6% in 2017 and its average selling price rose by 1%. The sales of aggregate and concrete also show the characteristics of volume reduction and price increase.
CRH has revealed little about the operations of its UK subsidiary Tarmac, apart from pointing out "bad weather" in the first quarter of 2018 in its latest report.
Bernd Schiefele, chairman of Heidelberg Cement, said that the company's sales of cement, cement, gravel and sand reached a new high in 2017. However, the performance of the UK segment has been affected by the uncertainty caused by the EU referendum, with sales falling across all product lines.
In its 2017 report, Lafarge noted a decline in earnings in the UK segment due to project delays and a general economic slowdown.
Breedon, as the only cement producer focused on the UK market, acquired Hope Building Materials in 2016. Full-year revenue in 2017 was 746 million euros, up 7% year-on-year, pre-tax profit was 84.5 million euros, up 52% from 2016, and concrete sales increased by 99%.
III. Merger and Reorganization
One of the developments in the UK cement industry this year has been the creation of Breedon Cement, whose parent company, the Breedon Group, has also been transformed into an integrated minerals company. After the acquisition of Hope Building Materials, Breedon Aggregates also built its own cement production line and acquired a cement import company in the northeast of England. The division's branding was revamped in July 2017, with "Breedon Cement" signifying the growing size of its cement industry. This was followed in December 2017 by the announcement of the acquisition of Humberside Aggregates and the announcement of a proposed asset swap with Tarmac. Breedon will take over four quarries and an asphalt plant worth 18.9 million euros, while 27 concrete plants will be replaced by Tarmac and another 5.6 million euros will be paid. The acquisition proposal, which is likely to receive regulatory approvals, has been revised following a hearing in February 2018. Stafford shire Concrete Ltd was also acquired in April 2018.
Breedon Group's acquisition of Lagan Cement in Ireland was settled in April 2018. At this point, the Breedon Group controlled cement production in the Republic of Ireland and the United Kingdom, while the expanded Breedon Cement business included plants at Hope Cement and Kinnegad, as well as the Sherburn import business.
Other mining groups have also made acquisitions and sales, though on a smaller scale. Lafarge's UK subsidiary acquired Kendall Group in February 2018, which operates aggregate terminals in Putmouth and Shoreham seaside and five concrete plants in Hampshire and Sussex.
[Page]
IV. Investment
Hanson's €23 million project at Padeswood is currently the main investment in the UK cement industry to expand production facilities. As the capacity of the four old mills is significantly lower than that of the kilns, Hanson has to ship the clinker out for grinding and bear all the environmental and logistical costs. Hanson submitted a scheme application to Flintshire County Council in August 2017 for the construction of a new plant. The new equipment will be a reusable 0.65 Mt/yr vertical roller mill, which is expected to be fully commissioned in 2019. Hanson will mothball three old mills while retaining one for continued use, and the company has promised to invest in new rail loading facilities.
Tarmac commenced installation of the 0.5Mt/yr vertical mill at Dunbar in April 2018, with the project to be completed by July 2019.
Other smaller investments, such as Ecocem Ireland, invested 2.5 million euros to open a second import station in Hilness, Medway Port, southeast England. Ecocem is currently importing bulk abrasive blast furnace slag to the UK from its new plant in Dunkirk, France.
V. Scientific Research and Innovation
Although there is less investment in the industry, there is more emphasis on innovation. Lafarge-owned Aggregates Industries is likely to claim a leading position, having appointed Pablo Libreros as Chairman of Growth and Innovation in September 2017 to further promote products through Lafarge. In January, Aggregate Industries launched its 2018 Innovation Strategy, setting out its priorities for the coming year, with key areas including robotics, artificial intelligence, virtual and augmented reality, digital engineering, off-site construction, blockchain and more. The company has partnered with Open Energi, which has just launched its Dynamic Demand 2.0 platform, which uses artificial intelligence to connect, aggregate and optimize energy assets to reduce energy costs. The company has also publicly indicated that driverless technology may be applied in the future.
Cemex has kept a relatively low profile, introducing a number of major innovations in the past few months. In September 2017, the company announced its participation in the EU-supported EPOS project, which aims to achieve cross-sector symbiosis. The project highlights case studies on how waste from other industries can be used to improve efficiency and promote sustainability. As part of the project, the South Ferriby plant in the UK has been working to integrate waste from chemical company Ineos into the cement production process. In March, Cemex claimed to be the first company to successfully operate a cement plant by remote control. Cemex, based in Monterrey, Mexico, can track real-time operational data from 14 cement plants, 25 kilns and 86 pulverizers in three countries. Cemex Go, which enables operational ordering and real-time tracking, was launched in 2017 and is currently being trialled by 12 customers in the UK.
Tarmac has just introduced an innovative tracking system in its fleet designed to improve efficiency and customer service.
In a project similar to the EPOS project, HeidelbergCement has signed a three-year cooperation agreement with the European Molecular Biology Laboratory to exchange scientific and technical knowledge in areas such as emissions reduction and restoration, and "innovation in general.". Lafarge has also appointed a new research and development team leader, with Dr. Heike Faulhammer taking up a position at Lyon's Global Research and Development Center in July 2017.
VI. Logistics
Transportation and logistics have been the focus of investment, more to improve safety and efficiency. Quinn Building Products highlights its new sales approach. The company's "hybrid flow" combines heavy cement or concrete blocks with lighter insulation, allowing its fleet to avoid idle space and operate at full capacity.
VII. New products
Many of the new product lines over the past few months have been related to packaged cement, tied to changes in branding and appearance. The aggregate industry company has developed six new products. TerraCem, launched just a few weeks ago, is the UK's first hydraulic binder for soil stabilisation. Quinn Building Products launched three lines of bagged cement in the spring of 2018, including general purpose cement, premium cement and super cement.
VIII. Sustainability.
For the past 20 years, the UK and its regulators have focused on sustainability, which is quantified in the MPA's annual sustainability report. The UK is now regarded by the European Union as a prime candidate for replacing coal with renewable energy, particularly wind and solar.
2017 was the greenest year ever, according to National Grid. The rise of renewable energy broke 13 clean energy records this year. In April 2018, for the first time, coal was not used for 72 consecutive hours. In addition, Carbon Brief data shows that in 2017, carbon dioxide emissions fell for the fifth consecutive year, and the current level is 38% lower than in 1990. Emissions fell 2.6% in 2017, driven by a 20% reduction in coal-fired power generation.
Despite this, the 164-page Clean Growth Strategy, published in October 2017, has been challenged by the Committee on Climate Change. The committee warned that the target was likely to be missed, especially if there was no funding for the introduction of carbon capture technology in heavy industry.
Following China's recent ban on the import of waste, the UK Recycling Association commented that we do not have a UK market, which is likely to have an impact on the supply of alternative fuels for the cement industry.
浙公网安备33010802003254号