Supply Capacity of Construction Materials (Cement, Ready Mix Concrete, Aggregates) Ulrich Aumuller,...

Supply Capacity of Construction Materials (Cement, Ready Mix Concrete, Aggregates)

Ulrich Aumuller, Lafarge Readymix & Aggregates

2 RPF, Ulrich Aumuller, Nov. 20, 2007

South African Construction OutputSouth African Construction Output


2006 Estimated Value of Building and 2006 Estimated Value of Building and Construction: R160 billion.Construction: R160 billion.

Residential Building

R66 700 million

Residential Building

R66 700 millionNon-Residential Building

R38 300 million

Non-Residential Building

R38 300 millionConstruction

R55 000 million

Construction

R55 000 million

Total Building

R105 000 million

Total Building

R105 000 million

Total Building and Construction

R160 000 million

Total Building and Construction

R160 000 million

Cement comprises roughly 8,5% of the total value.

Source: LHA Market Survey for C&CI, August 2007


Growth in the Construction Industry was, since mid 2006

increasingly driven by Non - Residential and Construction and will

continue to do so

1000

6000

11000

16000

21000

26000

2000

Q1

Q2

Q3

Q4

2001

Q1

Q2

Q3

Q4

2002

Q1

Q2

Q3

Q4

2003

Q1

Q2

Q3

Q4

2004

Q1

Q2

Q3

Q4

2005

Q1

Q2

Q3

Q4

2006

Q1

Q2

Q3

Q4

2007

Q1

Val

ue

Rm

-15

-10

-5

0

5

10

15

20

%

Value Rm % Y-on-Y Growth

1000

6000

11000

16000

21000

26000

31000

2000

Q1

Q2

Q3

Q4

2001

Q1

Q2

Q3

Q4

2002

Q1

Q2

Q3

Q4

2003

Q1

Q2

Q3

Q4

2004

Q1

Q2

Q3

Q4

2005

Q1

Q2

Q3

Q4

2006

Q1

Q2

Q3

Q4

2007

Q1

Val

ue

Rm

0

5

10

15

20

25

%


1000

6000

11000

16000

21000

26000

31000

36000

41000

46000

51000

2000

Q1

Q2

Q3

Q4

2001

Q1

Q2

Q3

Q4

2002

Q1

Q2

Q3

Q4

2003

Q1

Q2

Q3

Q4

2004

Q1

Q2

Q3

Q4

2005

Q1

Q2

Q3

Q4

2006

Q1

Q2

Q3

Q4

2007

Q1

Val

ue

Rm

-20

-10

0

10

20

30

40

%


Building Residential

Building Non-Residential Construction



South Africa Infrastructure Investment:South Africa Infrastructure Investment:2007 Budget Figures2007 Budget Figures

Public infrastructure investments grow at CAGR of 7-8% above inflation

State budget understates trend: investments of parastatal sector (i.e. ACSA) and public-private partnerships (Gautrain) not fully captured

Biggest issue in infrastructure investment is delivery, not funding

BudgetR billion FY06 FY07 FY08 FY09 FY10 3yr tot

Electricity 12 16 17 23 31 71Roads 13 16 19 21 23 62Rail 5 13 16 16 14 46Water & sanitation 8 11 11 12 13 37Housing 5 7 8 10 12 30Ports 3 4 7 6 4 17Health 3 4 5 5 6 16Education 2 3 3 3 4 11Criminal/justice system 1 1 1 2 2 5

Budget

R billion FY06 FY07 FY08 FY09 FY10 3yr tot

Provincial governments 23 27 35 42 42 119

Municipalities 21 23 28 32 34 94

Other government 9 13 15 18 18 51

Parastatals 26 38 45 50 57 152

Total 79 101 123 142 151 416

Source: Michael Mc Clintock, SASOL, Presentation at Deloitte & Touche Forum, Feb. 2007


Major Public Infrastructure Projects Major Public Infrastructure Projects

ESKOM: R 150 b capital pipeline TRANSNET: R 80 b

• Saldanha Iron Ore Terminal• Durban Terminal Expansion and Harbor Mouth Widening• PE: Completion of COEGA Harbor and Industrial Zone• Cape Town Terminal Expansion, Berth Deepening• Richards Bay Bulk Terminal Expansion

GAUTRAIN: R 25 bn for rapid rail network Soccer Stadiums for FIFA World Cup and annex infrastructure: R 15 bn SANRAL: R 30 b for Road Infrastructure Housing (low cost): R 30 b ACSA R 18 b

• Enlargement OR Tambo and Capetown Airport• New King Shaka International Airport (Durban)

DWAF (Water): R 20 bn (4 dams, water transfer schemes), financed on the capital market


Significant Industrial Investments mainly in Significant Industrial Investments mainly in Metals, Mining and BeneficiationMetals, Mining and Beneficiation

ALCAN Aluminum Smelter at COEGA, PE (construction to start 2008) New refinery (COEGA) SASOL Coal to Liquid Project (likely Free State) Expansion of ISCOR/Mittal Steel: R 7 b investment at 4 different sites to

boost steel capacity by 2,5 M t Cement Industry Expansion Program (PPC, Lafarge, ORASCOM):

approx. R 5 b in projects confirmed or underway, additional R 3-4 b under feasibility study

DUBE Trade Port (King Shaka Airport Durban), KZN Investment in the Coal Industry (Mpumalanga, Limpopo) to cater for

demand from ESKOM and increased coal exports Platinum industry (Mines and Smelters), mainly North West Province Ferro Alloy Industry (Mining and Smelters)

Industrial Investments in Mining and Beneficiation in remote areas (i.e. Ellisras): will require establishment of housing and related infrastructure to cater for the workforce. Tourism will remain a growth driver.


Construction Output to Double in Constant Construction Output to Double in Constant Currency by 2014 Compared to 2006Currency by 2014 Compared to 2006

25% Capital formation-to-GDP ratio

Doubling of industry output over 2006Average real growth in

industry of 8% p.a.

Civil construction larger than building industry by

2009/10

0

20

40

120

160

200

240

280

320

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014

Val

ue

Building Civil Construction Total



Demand and Supply in the Cement Demand and Supply in the Cement MarketMarket


Cement Market Growth Driven by Cement Market Growth Driven by Civil/Construction OutputCivil/Construction Output

Sector Cement Demand (kTon and % Contribution) % Change

over Period2007 2008 2009 2010 2014

Residential7 191 7 479 7 965 8 403 9 410

4,4%48,3% 46,5% 45,8% 45,0% 42,3%

Non-Residential4 343 4 691 5 019 5 346 6 373

6,4%29,1% 29,2% 28,9% 28,7% 28,7%

Construction3 362 3 900 4 388 4 913 6 438

11,2%22,6% 24,3% 25,3% 26,3% 29,0%

TOTAL14 896 16 070 17 372 18 662 22 221

6,7%100% 100% 100% 100% 100%

% Change p.a. 12,2% 7,9% 8,1% 7,4% 4,5% -

SA per capita cement consumption is around 270 kg/capita and will grow to approx. 350 kg (world average) by 2010



Main Growth Driver for Cement: Public Main Growth Driver for Cement: Public Sector. Private Investment also Contributes Sector. Private Investment also Contributes

to Growth but less than in the Pastto Growth but less than in the Past

Sector

Cement Demand (kTon and % Contribution) % Change over Period

2007 2008 2009 2010 2014

Public1)5 656 6 448 7 222 7 944 9 931

10,1%38,0% 40,1% 41,6% 42,6% 44,7%

Private9 240 9 622 10 150 10 718 12 290

4,5%62,0% 59,9% 58,4% 57,4% 55,3%

TOTAL14 896 16 070 17 372 18 662 22 221

6,7%100% 100% 100% 100% 100%

% Change p.a. 12,2% 7,9% 8,1% 7,4% 4,5% -

1) Public sector accounts for 35% of cement demand in 2006: the public-sector investment program adds 800 000 tons to annual demand in 2010



Growth of the Cement Supply in South AfricaGrowth of the Cement Supply in South Africa

M tIndustry Capacity end 2006 14Out of which Lafarge 2.7 Lichtenburg Cement Plant+Richards Bay Grinding PlantProjects underway, completed between 2007 and 2010Lafarge 1.0 Brownfield kiln Lichtenburg + milling plant GautengPPC 1.8 Batsweledi and Milling Capacity Upgrades GautengNPC CIMPOR 0.6 Simuma Plant Expansion, KZNAFRISAM 0.4 Milling and Blending Capacity IncreaseORASCOM 2.0 New Greenfiled Plant in Northwest Commissioned 2010Total Expansion underway 6Industry Capacity end 2010 20Projects under study, commissioned after 2010AFRISAM 2.0 North West brownfield LichtenburgPPC 1.9 Riebeek Project, Western Cape, other expansionsNPC or New Operator 0.6 Other greenfiled investment North West ??, SimumaTotal Projects 5Capacity Long Term 24

Source: Proceedings INTERCEM South Africa Congress Sept. 2007

There is another 0,7-1,0 Mt supply capacity from extenders Fly ash usage not at potential (cement and RMX) Granulated blast furnace slag supply will increase with steel output

(milling capacity in place to process additional tonnage


Growth of the Cement Supply in South AfricaGrowth of the Cement Supply in South Africa

In 2006 and 2007 capacity was insufficient to fully cater for the demand, yet the market was fully served: balance supplied through cement imports (PPC, NPC, HOLCIM and Lafarge).

NPC Simuma expansion came on stream early 2007

Other projects underway come on stream on time to supply the mid term (2010) demand (imports will phase out in 2008)

Project pipeline sufficient for satisfying demand forecast

Regional Supply/demand imbalances possible: most capacity will be created in the Northwest, Eastern Cape will remain “net importer” of cement (transport impact on cement prices)

Source: Proceedings INTERCEM South Africa Congress Sept. 2007


Growth of Supply by Lafarge CementGrowth of Supply by Lafarge Cement

Brownfield expansion (kiln) at the Lichtenburg Cement Plant Northwest Province

Grinding Facility close to the market in Randfontein, West Rand (Gauteng)

Rail Logistics for clinker Transport Chinese Technology (CBMI) R 1,2 b investment for 1 Mt additional capacity Lowest investment per t additional capacity created of all projects

currently underway in South Africa

Lafarge supply position to the industry reinforced by its subsidiary “Ash Ressources” supplying a range of classified and non-classified cementitious materials to the cement, ready mix concrete and pre-cast industry


Lafarge Aggregates and RMX at a Lafarge Aggregates and RMX at a glanceglance


66 Ready Mix Plants

• 58 Commercial Fixed Plants

• 8 Mobile Plants• 480 Ready Mix

Concrete Trucks

Pump Services• 17 Truck

mounted Boom Pumps, truck mounted Conveyors

Workforce: > 1100

The largest, most innovative and leading supplier of Aggregates and Ready Mix Concrete on the African Continent

Extensive coverage of the National Territory

24 Aggregate Quarries• 450 Tipper Trucks

Mobile Crushing• 3 Crushing Units

Lafarge Aggregates & Readymix


WitfonteinGeorge

Port Elizabeth

Nelspruit

Polokwane

East London

NORTHERN CAPENORTHERN CAPE

WESTERN CAPEWESTERN CAPE

EASTERN CAPEEASTERN CAPE

FREE STATEFREE STATE

LESOTHOLESOTHO

NORTH WESTNORTH WEST

LIMPOPOLIMPOPO

MPUMULANGAMPUMULANGA

KWA-ZULU KWA-ZULU NATALNATAL

GAUTENGGAUTENG

Durban

Richards Bay

Cape Town

Saldanha

Mossel Bay

King Williams Town

BloemfonteinBloemfonteinPietermaritzburg

White River

Evander

Olive Hill

Empangeni

Ninians

Stanger

Inanda

Tongaat

Ridgeview

Blue Rock

Moregrove

Coega

Perseverance

KnysnaTygerberg

Dorsberg

Peak

SWAZILANDSWAZILAND

Lichtenburg

3

173

11

1

12

3

11

31111

1

14

2

11

Aggregate Quarry

Ready Mix Concrete Plant (Circle Center Number of plants)

Lafarge Plant NetworkLafarge Plant NetworkCement Plant

Gypsum Wallboard Plant

Gypsum Project

Limestone Quarry Machadodorp Komatipoort


Lafarge Readymix & AggregatesLafarge Readymix & AggregatesWhat we are proud of – Soccer World CupWhat we are proud of – Soccer World Cup

Lafarge Aggregates & Readymix is proud of having been the only operator contributing with the supply of heavy construction materials to all 5 new stadium constructions

In partnership with all major South African construction companies on these jobsites we are fully committed to success

Venue

Consorti

um

Tender

Ran

d M

Concret

e

m3

Aggregat

es

Cemen

t

Cape Town Murray&Roberts - WBHO 2490 Lafarge 136000 Lafarge PPCDurban Group 5 - WBHO - Pandev 2430 Lafarge 92000 Lafarge NPC-CimporPort Elisabeth Grinaker LTA - Interbeton 1150 Site batch 40000 Lafarge PPCPolokwane WBHO - Pauls 800 Site batch 70000 Lafarge LafargeNelspruit Basil Read - Bouygues Civils 860 Lafarge 75000 Lafarge PPC


Demand and Supply in the Ready Mix Demand and Supply in the Ready Mix Concrete MarketConcrete Market


Increasing Importance of Readymix Concrete Increasing Importance of Readymix Concrete

• Quality, guarantees, consistency

• Accessibility to sites• Storage of material on site• Theft and loss of product• Placing techniques

(pumping)• Special concretes (self-

compacting, readymix mortars and plasters) gain market acceptance

• Speed of construction paramount, lack of skilled labor, new technology formwork, turnaround times

• Improved service levels• Increased average strength,

particularly in civil

Total

2006 34,1

2003 24,4

Readymix concrete in % of all concrete produced

Readymix concrete in % of all concrete produced

Total

2006 67,9

2003 56,5

Ready Mix Concrete within Large Construction (%)

Ready Mix Concrete within Large Construction (%)



Growth of the Ready Mix IndustryGrowth of the Ready Mix Industry

The Ready Mix Concrete market will grow significantly faster than cement: trend to larger jobsites and the intrinsic superiority of Ready Mix Concrete versus site batched concrete

Ready Mix Volumes and No. of plants will double by 2014 compared to 2006.

The industry will grow in line with demand: standard, “off the shelf” engineering = lead times to put capacity are short (4-6 months)

Clients may still be exposed to local shortages as a result of poor planning (allow for sufficient lead time when tendering !)

2006 2007 2008 2009 2010 2014Volume M m3 7.5 8.6 9.5 10.5 11.4 14.7Growth % p.a. 15% 10% 10% 9% 6%Number of Plants 188 216 237 261 286 368

South Africa RMX industry forecast


Lafarge’s Capacity Plan for ReadymixLafarge’s Capacity Plan for Readymix

So far Network: 2003 to 2007: number of plants from 42 to 66 Mobility: 8 mobile plants to go where the demand is Trucking Capacity: 60 8 m3 trucks since 2005 Upgrading of existing plants (to load 8 m3 trucks = 70% done) Increase and major refurbishments of pump fleet Innovation: ARTEVIATM and ULTRASCC product ranges

Future Grow by 6-8 plants per annum

• Add capacity• Increase geographic footprint

High output wet batch plants in large markets as from 08 Increase truck fleet with full conversion to 8 m3 trucks More innovation to come: ExtensiaTM (industrial flooring)


Demand and Supply in the Aggregate Demand and Supply in the Aggregate MarketMarket


Growth of the Aggregate IndustryGrowth of the Aggregate Industry

Aggregate Volumes will more than double until 2014, grow at double digit rates until 2010 (road and infrastructure)

Quarried Products will increase their share in output (Poor quality of natural sands, environmental concerns)

Share of industrial clients (RMX, Concrete Products, Asphalt) in total demand will increase: stringent quality requirements

Aggregates from alternative sources (mine dumps, slag, recycling) will remain a factor of local/regional importance

2006 2007 2008 2009 2010 2014Total Volume 000 ton 59 69 78 88 97 116Growth % p.a. 19% 12% 13% 11% 4%Volume "High End"* 41 50 57 66 74 88Growth % p.a. 22% 15% 15% 12% 4%* clear sizes and base course products from quarrying, excludes roadbase,natural sand

South Africa AGGREGATES Industry forecast

Source: 2006 Base DME Statistics, recalculated


Aggregate Industry challenges affecting Aggregate Industry challenges affecting supply/demand balancesupply/demand balance

Changes in Product Mix from the demand pattern prevalent when most of the plants were built

• Substitution (Crusher Dust – Natural Sand): Capetown, PE, Bloemfontein, Mpumalanga, Limpopo

• Other products with demanding specifications (UTFC)• Washed materials, in particular manufactured sand

Local spikes in demand in rural areas related to large projects

MPDRA (Mining Law): uncertainty about mining right conversions in 2009

Illegal Mining Reserves at existing, legal, quarries is not an issue

(Lafarge: > 50 years permitted reserves at current sales, no quarry with less than 10 years)

Source: 2006 Base DME Statistics, recalculated


Lafarge’s Capacity Plan for Aggregates: so farLafarge’s Capacity Plan for Aggregates: so far

Mobility

3 mobile units, capacity 250 – 300 t/h producing the entire range of clear sizes and road products (from G7 to G1) with primary, secondary and tertiary section (Total investment, including mobile equipment: > R 80 M)

• 1st plant: June 2006, Peak Quarry, Capetown, moved to Saldanha• 2nd plant: Feb 2007, Ridgeview Quarry, Durban• 3rd plant: Nov. 2007, White River Quarry, Mpumalanga

Capacity Expansion• Tygerberg automation and capacity expansion from 0,8 Mt to 1,2

Mt p.a. commissioned end 2006 (R 25 M)• Moregrove screening capacity from 250 t/h to 450 t/h (R 7 M)

Feb. 2007• Tongaat new plant: 60-70 Kt/month, investment R 60 M

Product Mix Adjustments and Quality Improvements• Peak Quarry Cape Town: Replacement tertiary section with new

generation crushers bringing capacity to 750 Kt/h (> 2 Mt p.a.) with up to 55% manufactured sand (R 44 M)


Lafarge’s Capacity Plan for Aggregates: FutureLafarge’s Capacity Plan for Aggregates: Future Lafarge COEGA Quarry re-commissioned Nov. 2007, R 4 M Upgrade of screening capacity at Inanda Quarry (Durban,

operated in JV, reopened in 2007): 1st half 2008, R 2 M De-bottlenecking of Machadodorp Quarry, replacement of

secondary crusher and upgrading of screening capacity to double output of rail ballast, R 5 M

New plant at Perseverance (PE) to double production and improve quality of natural sand, R 15 M

Mobile Barmac plant to crush single sizes to crusher dust, R 3 M De-bottlenecking and upgrade of Ridgeview Quarry in Durban

end 2008 or 1st half 2009, investment > R 30 M

Investments of approx. R 255 M, commissioned in 2007 and 2008 boost Lafarge Aggregate’s capacity by over 4 Mt

Additional investments are directed to acquisitions and mobile equipment

2014: 30 quarries, enlarged geographic footprint, average output/quarry up 50% from 2007


Price Trends for Aggregates, Cement Price Trends for Aggregates, Cement and Ready Mix Concreteand Ready Mix Concrete


Construction Material Industry TrendsConstruction Material Industry Trends

Industry growth triggered listings in 2006 and 2007 (JSE Main Board and AltX)

• WG Wearne (RMX, Aggregates)• AFRIMAT (RMX, Aggregates, Concrete Products)• RAUBEX (Aggregates, Asphalt, Road Construction)• INFRASORS (Aggregates, Concrete Products)• AFRICAN BRICKS (Clay Bricks)

Raise capital to fund organic growth and consolidation• AFRIMAT -> Malans Quarries, Denver Quarries• WG Wearne -> De Bruyn Sand, Tzaneen Quarries, Willows• RAUBEX -> Queenstown Quarries

Vertical Integration moves by listed construction companies• Group 5: AFRIMIX, Quarry Cats, Sky Sand, GoCrete• Protech Kuthele: Rockcrete, Instant Concrete

Lafarge participated in consolidation (White River Quarries, Stonetech): reasonably priced acquisitions become scarce

Black economic empowerment transactions, the largest of which the investment of AFRISAM into 85% of HOLCIM South Africa


Volume Growth and Price Trend for Volume Growth and Price Trend for Construction Materials 2003-2006 Construction Materials 2003-2006

41%46%

32%58%

44%65%

51%38%

22%83%

57%55%

53%44%

59%15%

0% 10% 20% 30% 40% 50% 60% 70% 80% 90%

Cement

Structural Steel

Reinforcing Steel

Building Timber

Concrete Roof Tiles

Bricks

Crushed Stone

Bitumen

PPI Volume



Pricing Trend for construction materialsPricing Trend for construction materials

Prices have increased at rates above consumer price inflation between 2003 and 2006 and will continue to do so

Aggregate and Cement Industry run at capacity: additional volume will come from capacity expansion (Capital Cost, Depreciation)

Industry inflation rates significantly above consumer price inflation• Electricity with ESKOM Plans to adjust prices for industrial users• Costs for compensation 2,5-3,0% above CPIX every year• Energy (Fuel, Explosives) significant Industry Cost Factors• Maintenance component strongly impacted by steel, rubber• High reliance on imported capital equipment (fixed and mobile).• Additional charges ahead ? (Minerals Levy, Rates + Taxes)

Listed operators strive to ensure adequate return for investors

Concrete Prices will reflect the prices for Materials and Transport (> 85% of the operating Cost of the Industry)


ConclusionConclusion


Construction Material Demand DriversConstruction Material Demand Drivers

The South African Economy entered into its longest expansion period on record in 2000/2001

Increased disposable income, consumer spending, emergence of a black middle class

Construction industry output to double between 2007 and 2014• Residential construction main driver until 2006• Industrial and infrastructure developments over the next 3-8 years

Sufficient funding by federal and provincial budgets (budgets extended by “build + operate” schemes, i.e. toll roads)

Investments will address bottlenecks enabling SA to redress the negative current account balance = main economic risk factor

• Absorb backlog out of the long period of underinvestment• Capacity for further growth of the backbones of South Africa’s

economy: Mining, Metals and Tourism


Construction Materials SupplyConstruction Materials Supply The industry has progressively saturated existing production

capacities until 05/06, further growth = investment into plants and mobile equipment

• Cement capacities will grow by > 70% and in line with demand• Ready Mix Concrete will double until 2014 (plants and trucks)• Aggregate Supply will more than double until 2014

Local, temporary, shortages may occur, in particular for aggregates but will be related to poor planning, bidding behavior and improper accounting for logistics constraints

Lafarge drives a growth strategy focusing on organic growth and innovation in all of its product lines

• 1 Mt additional cement by 2009• Local manufacturing base for gypsum wallboard• Doubling of ready mix concrete and aggregate production

Main challenge = investment inhibitor for Cement and Aggregates: uncertainty around the conversion of Mining Licenses


THANK YOUTHANK YOU

Date post:	15-Jan-2016
Category:	Documents
Upload:	gwenda-shields
View:	222 times
Download:	1 times

Supply Capacity of Construction Materials (Cement, Ready Mix Concrete, Aggregates) Ulrich Aumuller,...

Documents