It’s the economy, stupid – The economic collapse and its effect on the cement industry may have started in ernest in [...]]]> 2009 was year where cement industry news was really dominated by three factors:  the economy, the Chinese, and the environment.  Here are some of the stories we at BGE believe were the most important of the year:

It’s the economy, stupid – The economic collapse and its effect on the cement industry may have started in ernest in 2008, but it really hit high gear in 2009.  Cement producers in North America and around the developed world responded with cut backs in capital projects, plant closures (some temporary, some less so), layoffs and other cost saving measures.  Producers in North America and Europe continue to postpone investments, preserve cash, and fend off price erosion of their product.  The poster child for the pain of a vanishing credit market had to be Cemex.  As the fastest growing member of the global cement producers, funded mostly on gigantic lines of credit, they found themselves on the verge of insolvency, sold off a number of strategic assets, and to admirably survive as they managed to renegotiate billions in credit.

Sinoma International becomes the world’s largest OEM – OEM’s responded with traditional “retrenching” moves, cost cutting and layoffs.  Shoveling expertise into the street with abandon, a trend that is expected to continue.  Those with a small piece of a large pie now found themselves with a small piece of a much smaller pie.  Expect at least one of the traditional Euro-American suppliers to fail in 2010.  Of course, not all the suppliers played defense.  The Chinese OEM’s, Sinoma in particular, took advantage of the increased price sensitivity to become, for the first time in history, the largest supplier of cement equipment in terms of new production capacity OUTSIDE China.  In fact, Sinoma sold just under 50% of the capacity sold outside China in 2009, pushing FLSmidth out of the #1 spot it had held for decades and forever changing the competitive landscape of cement equipment supply.

Big Brother is watching – The environment and the increasingly large specter of regulation has to be one of the biggest stories of 2009.  Environmental sessions were sharply in focus at the IEEE/PCA conference.  The EPA made noise about Mercury and they made noise about CO2.  Eventually they classified CO2 as a hazardous substance, thereby giving themselves the power to regulate it.  New regulations have also been proposed for Mercury and will be a reality sooner rather than later.  We have frequently reported on the various environmental issues in this blog as we see it as a major force in the market for years to come.

Modernization of capacity – 2009 certainly wasn’t all bad news for the cement industry.  Developing markets continued to show growth and reinforce the long term trends in demand.  Additionally, many of the modern, high capacity plants ordered in the last boom came on line in 2009, thus “modernizing the fleet” and providing the ability to produce more cement at a lower cost with less energy and environmental impact.  Holcim’s shining star, the 12,000 mtpd Ste. Genevieve plant designed by FLSmidth, came on line in July and quickly met and exceeded production and environmental targets.  This facility will help to assure the future of cement manufacturing in the difficult labor and regulatory North American market environment and provide a model for cement plant design going forward.

The major producers are clearly focused on developing markets [...]]]> The Financial Times reports today that the major cement manufacturers expect cement demand in Europe and The US to be 30% and 44% (respectively) lower than in 2007. A squeeze on infrastructure projects, thanks to exploding government debts and tightening of spending is primarily to blame, they said.

The major producers are clearly focused on developing markets where demand is more organically and necessity driven. They don’t expect the situation to turn in the developed markets until 2012. Even so, given the time to market for a new production line and the spectre of impending CO2 regulations and their potential impact on capacity, we believe that regions in North America can expect to see cement shortages and high prices in the coming years as a result of the major producers business focus being elsewhere.

This is one of the consequences of the industry consolidation that has taken place over the last decade and a half. As the local independent producers have been absorbed by the global producers, the business focus has shifted from one of defining and fulfilling local market needs to one of looking at complete continents as a single market. This is not necessarily good or bad, it just is. The global producers will be investing their available capital in markets they see as having the largest short term potential. The result is that near term opportunities may be created in the Americas and Europe for those who are willing to take a risk and gain first mover advantage. Demand will continue to grow in these markets, and in some cases that demand might be extremely localized.

Through an article on tonic [...]]]> BGE has been hitting the pavement hard in recent weeks serving our customers and exploring opportunities, as a result, the blog has fallen a bit too silent. We won’t let that become a habit (well, serving customers and exploring opportunities are habits we intend to keep). Nevertheless, interesting news has not rested!

Through an article on tonic today, we found a story on The Guardian about “Liquid Granite”, a so called carbon neutral cement substitute developed by Prof Pal Mangat of Sheffield Hallam University. As is normal, details are sketchy. Professor Mangat says only that Liquid Granite is made from an inorganic powder, 30-70% of which is recycled industrial waste materials. Using the same aggregates as normal concrete, it could be used anywhere cement is but with a fraction of the carbon footprint.

The same article points to an earlier story we have mentioned previously about a carbon negative cement developed by Novacem which, in theory, absorbs CO2 from the atmosphere at a greater fraction than is released during manufacture. The tonic article also mentions our favorite press release pixie dust company, Calera, who manages to stay in the news despite no real signs of a marketable product yet (and much scientific skepticism).

Finally (phew) Recycling Product News has a feature not cement specific, but about how much time and effort is being put into research for Carbon Capture and Storage (CCS) without considering what to do with all that stored CO2. Many companies are sprouting up around methods to turn captured CO2 into valuable products such as formic acid, algae biofuel, methanol, etc. All very real processes with very real commercial results.

BGE has the skills and knowledge required to integrate CCS and CO2 conversion technologies into cement production facilities. Contact us to discuss the possibilities. The future is now.

An enterprise that wants to implement a standard reliability strategy across multiple sites must confront the implication of this statement.

Most mining enterprises do not have cookie-cutter plants or facilities. The locations will vary in age of equipment and workers. The quality [...]]]> Have you ever heard the expression “Life’s how it is, not how it ought to be?”

An enterprise that wants to implement a standard reliability strategy across multiple sites must confront the implication of this statement.

Most mining enterprises do not have cookie-cutter plants or facilities. The locations will vary in age of equipment and workers. The quality of regional raw materials may be different. Plants near metropolitan centers may have high turnover while those in small towns may be staffed with “lifers.” Cultures can be different. Some plants are union free and historically have had good relations between hourly and management. Others have histories filled with mistrust and arbitrary rule enforcement.

Non-standard plant circumstances force the enterprise to find the right balance between centralization and decentralization. When do you standardize in the name of the enterprise and when must decision-making be left to local management?

Before some of these balances can be discovered, an enterprise must face the truth of “how it is.” Confronting the brutal facts of reality can be more difficult than it sounds.

If a company has spent millions of dollars on a Computerized Maintenance Management System (CMMS), it may not be pleasant to find out that most of the collected data is jumbled. If hundreds of thousands of dollars has been spent on vibration equipment & training, it may be painful to learn that the well-intentioned but part-time vibration specialist did not develop sophisticated time waveform analysis capabilities. If a loyal, friendly, experienced worker has been functioning as a planner for years, it’s hard to confront the fact his actual contribution is clerical in nature – and clerical contributions do not yield the productivity gains of planners who actually plan.

So – how does an enterprise face these brutal facts?

(1) Differentiate process from people. Remember that workers – especially long-time employees – are usually well intentioned. Organizations must consciously create work processes that focus on productivity & proactivity; these things do not naturally emerge without guidance and direction. A planner who focuses on non-productive behaviors is not necessarily a bad employee. The proper routines, tasks, and rules may not have been properly defined for him. When you view your organization through a process lens rather than a people lens, it is easier communicate without your employees feeling defensive or attacked.

(2) Hire a consulting firm. The reality is – the objective, third party gaze can often see things more clearly. Consultants aren’t smarter. They aren’t more knowledgeable about the operation of the plant. But if they are experienced, they are able to quickly zoom in on things that are indicative of a healthy reliability system. (Can the plant easily print a sorted list of Ready to Schedule work? Are the Preventive Maintenance tasks specifically defined?) As outsiders, consultants also have the luxury of remaining emotionally detached from existing relationship & histories between people & departments. This clinical disposition means they won’t be as easily swayed by charisma, earnestness, anger, or old wounds that won’t heal. Good consultants know they cannot add value to an enterprise if they are simply telling their clients what they may want to hear – or if they are ignoring the white elephant in the room. They know that a reliability initiative has to be built on a foundation of transparency and a clear assessment of current conditions.

(3) Establish norms around honest and respectful communication. Respect is important, as snippy exhortations about “ugly babies” and “garbage-in, garbage-out” data will get old real fast if the feedback has a tattle-tale quality. Stick to observations, not judgments about personalities. Accumulate multiple observations before drawing firm conclusions. Don’t just ask about problems that have occurred – ask about the frequency of those problems. Are parts/materials really never available when jobs are assigned, or did this only happen one time, three years ago? And never, ever retaliate against someone after you have given them permission to speak freely. If you do, you will never hear another honest observation again.

Reliability is a data driven field. It is a science. It has objective metrics. Although it may fail in the short-term (a vibration test may fail to identify a loose bolt) – over time, consistent application of reliability concepts produce huge dollar savings. Sycophantic relationships will destroy reliability. Transparent, data-driven decision making must be the norm; otherwise, reliability is just a meaningless label to smack onto old habits. But before an enterprise can begin its reliability journey, it must have an honest assessment of where it is at.

What are other ways an organization can get a good assessment of its current reliability situation?