Appendix C 1

THE EUROPEAN CEMENT INDUSTRY

Background Assessment For the IPTS BAT-Competitiveness Project February 2000*

H. Wagner & Partner Willdenowstr. 14 B 12203 Berlin

Prepared by: Prof. Dr. Karin Wagner in collaboration with Michalis Vassilopoulos of IPTS

Appendix C 1

Executive summary

This report focuses on the structure of the European cement industry. The European Union (EU) Cement industry consists of some 250 plants operated by 64 groups (though a large part involves cement mills only). The industry has been consolidating since the 1970s through merger and acquisitions which includes combined ownership of plants by companies.

Today the largest companies are multinationals with interests in the EU, US, CEEC. Among these are Heidelberger (Germany), Holderbank (Switzerland), Italcementi (Italy) and Lafarge (France), which have considerable international interests.

Although a lot of merger activities has taken place the competitive situation in the European countries varies. Looking at the concentration ratio of the largest three manufacturers they account for around 50% in Germany, Italy, Spain and Poland. Highly concentrated ownership can be found in Ireland, UK and France where the largest three producers control more than 80% of the market.

Market share and number of plants of the three largest producers in 1996 France* Germany** Italy*** Spain**** Market share of largest 3 82% manufacturers No. of their owned plants Total no. of plants 32 20 66 43 86 27 37 20 22 7 20 48% 55% 56% UK***** 94% Poland****** 57%

*Lafarge, Ciments Francais, Vicat **Heidelberger, Dyckerhoff, Schwenk in West Germany; for East Germany: 50% by Lafarge, RMC, Dyckerhoff *** Italcementi, Buzzi/Unicem, Cementir ****Cemex, Cementos Portland, Lafarge *****Blue Circle (over 50%), Castle, Rugby ****** Lafarge, Heidelberg/CBR, CRH ******* source: the Cement Industry, Dec. 1997, Dresdner-Kleinwort-Benson, Aprilj 1998; The Global Cement Report 1998

Appendix C 1

Ownership structure of companies differs among the countries. In the UK the three major companies are owned by institutional shareholders whereas the majority of Holderbank and Italcimenti is family owned (Schmiedheiny resp. Pesenti). In Ireland there is a monopoly situation where the company is owned by Irish and UK institutions.

Whilst consumption in Northern Europe followed a decreasing path, Southern Europe has been experiencing growth until around 1992 when growth began to slow down. The largest cement consumers in Europe were Italy (22%), Germany (19%) and Spain (15%) in 1997.

Cement is very transport cost intensive if roads are used and therefore regional markets are limited to a radius of 200km. Exports over long distances are possible if the water way can be used. On average EU exports amount to almost 15% of production. Of all EU countries Belgium (35%), Denmark (51%), Greece (50%), Luxembourg 58%), Spain (22%) and Sweden (48%) export more (ZDV, 1998) which means that most other West European countries export very small amounts, for example Britain only 4.2%. ExtraEU imports have also been increasing in the latest years, mainly from Poland and the Czech Republic into East Germany and Austria (17% of whole German consumption is supported by imports). Romania, Tunisia and Turkey export heavily to Spain.

The cement industry is among the leading capital intensive manufacturing sectors and therefore characterised by high fixed costs. About 70% of variable costs are incurred by energy, this factor receives greatest attention for cost reduction. An increase of Minimum Optimal Size (MOS) due to a change in technology has contributed to a large overcapacity in many countries. In Westphalia in Germany during the 1967- 1969 an intense price competition - known as price war has led to the closure of many plants.

Labour productivity depends mainly on technology, skills, size of plants, capacity utilisation, type of products etc. With the modernisation of production processes, production per employee in the European cement industry has on average doubled in the last 20 years.

Appendix C 1

Cement commands a fairly low unit-selling price. In the building industry the costs for cement amount to about 1%. A reduction or increase in cement price will hardly effect demand. Thus, demand for cement can be seen as highly inelastic. The matched plant study undertaken in this research project examines a sample of cement factories in five countries. These have been chosen because they show among other things a substantial variation in environmental regulation and enforcement:

Germany: High environmental standards with strong enforcement (Germany - with the special case of East Germany exposed to rapid transition to the much higher West German standards). UK: Long record of environmental compliance supported by experience with IPC licensing. Italy: Relatively lower environmental standards and perhaps weaker enforcement than Northern European counterparts, though differences between North and South of Italy could be expected. Spain: Likely to operate below BAT.

Poland: Likely to have very old industry employing dirty processes, Lower emission limits.

Appendix C 1

1.

The Commodity 1

Cement is one of the most important building materials because of its versatility, ease of working and, last but not least, low production costs. Cement is a binding agent, which can harden in the air or under water; it then becomes water-resistant. It consists mainly of compounds of calcium oxide (CaO) and silicic acid (SiO2), alumina (Al2O3) and iron oxide (Fe2O3). The raw components are ground, homogenized and burnt. The decomposition of the limestone into CaO and CO2 begins at temperatures above 600 C. This reaction ends at 900 C. Sintering begins at 1250 C, i. e. the fusion of CaO with SiO2, Al2O3 and Fe2O3 to give new compounds. This reaction is exothermic so that the burning temperature rises to about 1500 C and the sintering process is accelerated. 2

The specific compounds have specific characteristics: (Ca0)3 Si02 Tricalcium Silicate (Ca0)2 Si02 Dicalcium Silicate leads to early strength leads to long term strength

(Ca0)3 Al203 Tricalcium Aluminate influences early strength, flow and stiffening properties prior to hardening (Ca0)4 Al203 Fe203 Tetracalcium Aluminoferrite significant for cement colour

The material leaves the rotary kiln as a granular compound; this is cement clinker. Cement clinker is the main component of cement. The properties of the cement, such as its setting time and strength, are adjusted by the addition of gypsum and by grinding to specific degrees of fineness. Other properties and potential applications can be influenced by the addition of granulated blast furnace slag, pozzolana, waste, ash and other inorganic mineral substances. Burning of the cement clinker and grinding first of the raw materials and then of the cement itself are continuous processes during which the quantities and composition of the material flows are controlled and regulated with reference to permanently monitored quality characteristics.

1 2

I like to express my thanks to Michalis Vassilopoulos who has been of great help in preparing this report. EIPPCB, Cement BAT Draft Document

Appendix C 1

2.

Manufacturing Processes

Processed cement was discovered by Joseph Aspdin in 1824 and was called Portland cement because it resembled a grey stone mined from the island of Portland off the coast of England.

People often confuse cement with concrete. Concrete is a mixture of cement, aggregates and water that hardens to form a building material used for everything from sidewalks to skyscrapers. Behind water, concrete is the most consumed substance on earth, with almost one ton of it being used for each human every year. Cement is to concrete what flour is to fruit cake. It is a fine powder that is the principle strength-giving and propertycontrolling component of concrete. There four main process routes3 for the manufacture of cement:

Dry process. The raw materials are ground and dried to raw meal in the form of a flowable powder. The dry raw meal is then fed to a pre-heater or pre-calciner kiln (rarely to a long dry kiln). This process is widespread in the EU (78% in 1996) and of high concern to the BAT - Competitiveness project.

Semi-Dry Process. The dry raw meal is pelletized with water and then fed into a great pre-heater before entering the kiln or a long kiln equipped with crosses. This method is also frequently used in the EU.

Semi-Wet Process. The raw material is a slurry that is first de-watered in filter presses. The filter cake, then, is extruded into pellets and fed either to a grate preheater or directly to a filter cake drier for raw meal production. Semi-Dry and Semi-Wet processes might

Copy from EIIPCB BAT BREF draft paper for the Cement Industry, pg. 5

Appendix C 1

be economical necessary4 if the raw material is not extracted on the site, but has to be transported (pipelined) to the cement factory.

Wet process. The raw material, rich in moisture, is ground in water to form a pumpable slurry. The slurry is either fed directly into the kiln or first to a slurry drier. This production method requires higher energy consumption and is thus gradually phased out around Europe. About 6% of European production came from this process in 1996 (Cembureau 1997a).

The graph below analyses the steps of a Dry Process, followed by explanatory text.

Source: copy from http://www.lafargecorp.com/prd_cmth.htm

With respect to the installation of new plants: there has been an installation of a 4500 t/d plant in North Germany (Alsen Breitenburg, Laegerdorf) with newest technology for raw material with a semi-wet process.

Appendix C 1

While different types of cement vary in their ingredients, four common elements are found in all types of cement. They are (from most to least): calcium, silica, aluminum and iron. Following is a brief summary explaining how cement is made using the diagram above:

1.

The first step is to get raw materials from the quarry. The most common material

used for cement is limestone because it is rich in calcium. It is blasted from its rock-bed and then crushed to form pieces that are 2 inches in size or less.

2.

Stone from the crusher is then pre-homogenized by blending it with other

materials (sand, mill scale or bauxite to name a few) to achieve the right quantities of calcium, silica, aluminum and iron.

3.

The 2-inches limestone and other additives are ground further in the raw feed mill

before being cooked in the kiln.

4.

The feed is then homogenized through a separator that strains particles that are

too coarse for the kiln. Fine material passes through the separator while coarse material is returned to the mill for further grinding.

5.

Some cement plants have a preheating tower that preheats or precalcines the

feed before going into the kiln which increases production and reduces heat consumption of the kiln.

6.

The feed then goes into the kiln where it is heated to up to 1450 C degrees in what

is called the calcining zone. At this stage, clinker compounds form, which are later cooled and ground into a fine cement powder in the cement mill.

7.

Some cements receive additives such as fly ash, gypsum or silica fume depending

on the properties desired from the final product. It is then shipped and, eventually, mixed with water and aggregates to form concrete.

Appendix C 1

Approximately 1.6 tones of dry raw materials are required to manufacture 1 ton of cement clinker.

3. Types of Cement Although cement is considered as a commodity product there exists a wide variety of cements. They include various types and classes of cement as well as speciality cements such as white and drilling cement. The two major categories are pure portland cement and composite portland cement. Types of cement are standardised according to agreed norms with regard to strength and ingredients. Cement suppliers adhere to certain international standards for delivering. Clients might also follow their own standards, depending on the type of quality they need for their construction site (i.e. different strengths, additives). Cement quality standards are relatively easy to meet which makes exporting also from lower developed countries relatively easy. There are three major strength categories: class 32.5 (ordinary), class 42.5 (high), and class 52.5 (very high)5 which refer to the minimal strength in N/mm2 after 28 days. The use of the letters (in Germany) refer further to the speed of the strengthening process, namely fast and slow. About 90% of the very high strength class and 60% of the high class consists of portland cement whereas the ordinary class is made of portland composite cement (80%). Pure Portland charges a premium price. In composite cement different amounts of main constituents are added, e.g. slag, silica fume, pozzolana, fly ash, burnt shale, limestone. Composites can achieve the same strength as pure portland. Differences in prices (premiums and discounts) vary according to competition, demand and exchange rates. Apart from the UK and Greece, most countries produce a large portion of their cement as composite. In the UK the market is not vertically integrated. The reason lies in the Common Price and Marketing Agreement (an official cement industry cartel) which has legally permitted a formal price mechanism until 1987. Thus, UK construction companies (i.e. Tarmac) add the slag or composite at site facilities on their own.
5

strengths according to the proposed prEN 197-1 (draft European Standard)

Appendix C 1

Pure Portland or CEM I

CEMENT
Portland-Composite or CEM II to V Pozzolana, Fly Ash, Slag, etc.

Some specialization with regard to product type can be found. Whereas Germany, for example, produces three quarters of Portland cement, the majority of production in Poland was on (the relatively cheaper) PC 35 with additives and only 22% pure Portland cement 35 and only 6% PC 45 (BDZ, Zahlen und Daten, 1998; World Cement May 94). The explanation can be found in the customer base. The high production of prefabricated concrete increases the demand for fast hardening cement so that the throughput-times in the prefabrication process can be reduced. The reduction of the class PZ 35 in Germany points to the increase of special cement types for particular constructions. 6

Table 1: EU deliveries by cement type

Cement type

1994

1996

Portland cement (PC) Portland-Composite cement Blast-furnace Cement Pozzolanic cement

43% 44% 7% 5%

40% 45% 7% 6% 1%

Other cements (colored, very high strength) 1%

Source: Cembureau, 1995 Statistics and unpublished table for 1996
6

An unusual example of good raw materials can be found in a Splijt factory at the coast of Croatia where the plant is supplied with such a good quarry (the perfect cement mix) that it allows an excellent quality at a relatively low price.

Appendix C 1

Regarding the sustainable development the cement industry has increasingly sourced alternative materials as a substitute for natural raw materials. Therefore the industry expanded its use of blast furnace slag, power station fly ash, silica fume, natural pozzolanas and limestone fines, mainly as raw materials in the clinker production process. The use of these materials lowers costs and has positive environmental consequences. It reduces the quarrying of primary materials, of energy consumption, emissions of dust, CO2 and acid gases. In the cement milling process, for example, the use of 30% of fly ash reduces the primary energy consumption to just 77% in comparison to a portland cement with similar strength characteristics (VDZ, 1993). Blast furnace cement is not only cheaper but has also different product characteristics as slower hardening so that for some concrete products it is preferred. In addition, concrete made out of blast furnace slag cement has a lighter surface colour. Because of the slower hardening chemical additives to prolong the hardening process are not required. However, the quality assurance process for this type of cement is more demanding.

Appendix C 1

4.

ENVIRONMENTAL REGULATIONS

4.1. Industry Environmental Achievements

The EU cement industry has made considerable efforts in the field of environment over recent years. Some of the environmental investments were a response to specific aims, such as reducing dust emissions by 90% in a period of 20 years. This coupled with better cleanliness and housekeeping levels produced an improved image of the industry. Other aims involved reducing energy consumption to diminish high-energy costs (see chapter on energy costs).

4.2.

The IPPC Directive

The aim of the IPPC Directive is to:

1. Define BAT, 2. Issue Permits according to BAT criteria, 3. Allow for local considerations. Directive 96/61/EC7 defines best available techniques BAT thus:

best available techniques shall mean the most effective and advanced stage in the development of activities and their methods of operation which indicate the practical suitability of particular techniques for providing in principle the basis for emission limit values designed to prevent and, where that is not practicable, generally to reduce emissions and the impact on the environment as a whole:

Copy from Discussion Paper to be presented to the meeting of the IPPC BAT Information Exchange Forum, 18 19 February 1999, Brussels

Appendix C 1

techniques shall include both the technology used and the way in which the installation is designed, built, maintained, operated and decommissioned,

available techniques shall mean those developed on a scale which allows implementation in the relevant industrial sector, under economically and technically viable conditions, taking into consideration the costs and advantages, whether or not the techniques are used or produced inside the Member State in question, as long as they are reasonably accessible to the operator,

best shall mean most effective in achieving a high general level of protection of the environment as a whole.

4.3. Differences between general BAT in a BREF and appropriate IPPC permit conditions.

There are a number of specific local considerations to be taken into account when determining appropriate conditions for an individual IPPC permit. This involves making trade-off decisions both in terms of costs and benefits to the environment and impact on the environment as a whole. Specific considerations, which could be expected to vary around Europe, include:

the current environmental and economic performance of the installation; the environmental track record of the installation and the operator; the age, design, anticipated life of the installation; the size and layout of the site; the degree of process integration within the installation and between installations; the actual impact on the environment as a result of an actual or foreseen emission; the technical availability of fundamental resources such as power, water, gas; cost of resources, charges, taxes, fees etc;

Appendix C 1

the inherent approach and enforcement of permit conditions; and limitations and constraints on an installation imposed through other legislation such as Health and Safety, land use planning, product registration.

It is also foreseen that there will be an uncertainty over predicting the ultimate performance achievable and the timescale (commissioning, de-bugging etc) of achievement in the case of new investment. These are matters which can only be fully addressed at the local level.

Determining general sector BAT for a BREF inevitably involves some trade-off decisions but necessarily at a more general level and without quantifying exact costs and the potential benefits to the environment because to do so, a complete data set of individual costs and effects at every installation would be required. There is no

presumption that general BAT is something which is achievable by every existing installation by any given date, nor is there a presumption that it is economically feasible for every existing installation. A BREF written for an industry sector in general at European level cannot fully take all local considerations into account. Therefore,

whatever is described as BAT in a general sense for a sector within such a document can only assist the local decisions to be made.

The cement industry is generally in favour of the IPPC Directive aiming at harmonisation of widely varying national and regional measures. Harmonisation shall level the playing field, where once inefficient producers shall be forced to apply elite technologies (BAT) that are already in use by major companies.

4.4. National emission limits (ELVs) for the production of cement within the European Union

Existing environmental standards vary across the EU. The applications of the limits are different from one country to another (averaging time, reference conditions,

Appendix C 1

measurements techniques, compliance criteria, etc.). The data are to a large extent based on information from the Cembureau report in 1997, and transferred from Annex 1 EIPPCB Draft BAT Document, Survey of national emission limits.

Dust mg/Nm3 Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxemburg Netherlands Portugal Spain

Data based new/modified or on existing plant Na (a) P P P Na Na Na/R new/modified existing new/modified existing new/modified existing new/modified existing new/modified existing new/modified existing new/modified existing new/modified existing new/modified existing new/modified existing new/modified existing

kiln stack

clinker cooling 50 50 50 50-400 50 50 (b)

cement grinding 50 50 50 50-150 50 50 (b)

other point sources 50 50 50-300 50 50 (b)

50 50 50 50-150 50 50 (b) 50 50 (c) 50 50 (d) 50 50 100 150

100 100 (d) 50 50 100 150

50 50 (e) 50 50 100 150

30 30 50 50

Na/P

50

50

50

50

P Na Na

10 (f) 10 (f) 10 (f) 100 75 50 100 75 50 170/100 (g) 300/250 (g) 300/250 (g) 100 (h) 75 (h) 50 (h) 400/250 (g) 170/100 (g) 300/250 (g) 300/250 (g) 100 (h) 100 (h) 75 (h) 50 (h)

15 (f) 50 100

new/modified existing 50 (i) 50 50 20 United Kingdom Na (j) new/modified 40 (k) 50 (k) 40 (k) 50 (k) existing (l) (l) (l) (l) Na=National law; R=Regional law; P=Typical permit a) Daily averages and reference condition of 273 K, 101.3 kPa, dry gas and 10% O2. b) Limits under discussion. Reference condition of 273 K, 101.3 kPa and 10% O2. c) Existing plant must meet 50 mg/Nm3 by Januaty 1, 2001. Monthly averages and reference condition of 10% O2 and dry gas. d) Existing plant with emission <150 mg/Nm3 must meet limit for new plant by 2001. e) Existing plant must meet limit for new plant by 2001. f) Daily average values. g) Current limits. h) Limits under discussion. i) Including start/stop, a limit of 90 applies for monthly averages. j) IPC Guidance Note S2 3.01. k) Benchmark releases l) Benchmark releases are, in particular, not applicable to existing plant but are a factor in considering appropriate limits.

Sweden

Appendix C 1

SO2 , NOx mg/Nm3 PCDD/Fs Austria Belgium Denmark

Finland France Germany Greece Ireland Italy Luxemburg Netherlands Portugal Spain

Data new/modified PCDD/Fs SO2 SO2 NOx ng TEQ/Nm3 based or normal S-rich raw on existing plant situation materials Na (a) new/modified 200 400 500 existing 200 400 1000 P new/modified 1000 1800 existing 1000 1800 no limit no limit 1200/2500/850 (d) P new/modified 5/250/450 (b) 1200/2500/850 (d) existing 5/250/450 (b) 500 (c) 300 (c) P (e) new/modified existing 150-400 1200-1800 Na new/modified 500 1200/1800 (g) 1200/1500/1800 (h) existing 500(f) 1200/1800 (f,g) 1200/1500/1800 (h) Na new/modified 400 400 500 existing 400 400 800

Na/P new/modified existing P

600

1800

10000 (i) 10000 (i)

Sweden UK

new/modified existing (j) Na new/modified existing 400 Na new/modified 2400/6000 (l) 600 (m) existing 2400/6000 (l) 600 (m) P new/modified existing Na (n) new/modified 200 (o) existing (p)

1300 (k) 1300 2400/6000 (l) 1800 (m) 2400/6000 (l) 1800 (m) <200 600-2500 (q)

0.1 0.1 0.1

1300-1800 (m) <200 900 (o) 500-1200 (p)(r)

0.1

Na=National law; R=Regional law; P=Typical permit a) Daily averages and reference condition of 273 K, 101.3 kPa, dry gas and 10% O2. b) 5 for semi-dry process, 250 for wet process and 450 for wet process with wet scrubber and heat recovery c) Limits under discussion. d) 1200 for semi-dry process, 2500 for wet process and 850 for wet process with wet scrubber and heat recovery e) Monthly averages, reference condition of 10% O2 and dry gas f) Existing plant must meet limit for new plant by 2001. g) 1200 mg/Nm3 if 200 kg/h; 1800 mg/Nm3 if < 200 kg/h. h) 1200 mg/Nm3 for dry process with heat recuperation, 1500 mg/Nm3 for semi dry and semi wet processes, and 1800 mg/Nm3 for wet and dry processes without heat recuperation. i) General rule for any kind of industrial emission. j) 90 kg/h as daily average, maximum 375 tonne/year. k) Daily average value. l) Current limits. m) Limits under discussion. n) IPC Guidance Note S2 3.01. o) Benchmark releases p) Benchmark releases are, in particular, not applicable to existing plant but are a factor in considering appropriate limits. q) Limit values reflect the actual levels of releases. Daily averages and reference condition of dry gas and actual O2 content. r) Actual releases, daily averages, not all plants currently have limits.

Appendix C 1

Metals, others mg/Nm3 Austria Belgium Denmark Finland France Germany Greece Ireland Italy

Measurin (Cd, Tl, (Se, Te, (Sb, Pb, TOC g Hg) As, Co, Cr, Cu, interval Ni) Mn, V, Sn) 3 years 0.1/0.2 (b) 1.0 (c) (a) 6 months 0.2 1 (d) 5 75 (e)

HCL

HF

NH3

CO

30

1 year 3 year

0.2 0.2

1.0 1.0

5.0 (f) 5.0 (g)

(h)

30 (i)

5 (i)

varies

0.2

1.0 (j) 1.0 (k)

5.0 (l) 5.0 (m)

(n)

30

250

Luxemburg Netherlands 1 year 0.15 1.0 (o) 1.0 (o) 40 10 1 Portugal 6 months 0.2 1.0 5.0 50 250 50 1000 Spain varies 0.2 (p) 1.0 (p) 5.0 (p) Sweden 1 year (q) (q) (q) UK a) Half hourly averages and reference condition of 273 K, 101.3 kPa, dry gas and 10% O2. b) Group comprises Cd, Tl, Be. The limit 0.1 applies individually, 0.2 applies for the sum c) As, Co, Ni, Pb. d) As, Co, Ni. e) CH4 excepted. f) Zn also included. g) Cyanides (soluble) given as CN, fluorides (soluble) given as F, Pt, Pd and Rh are also included. h) Limits are required for organic compounds divided into three classes of danger: (from TA-Luft) CLASS I: 20, CLASS II: 100, CLASS III: 150. i) Emission limit applies for sum of this and other compounds. j) Se, Te only. k) As, Cr(VI), Co, Ni. l) Sb, Cr(III), Mn, Pd, Pb, Pt, Cu, Rh, Sn, V. m) (Cd, Tl, Hg, Se, Te, Sb, Cr(III), Mn, Pd, Pb, Pt, Cu, Rh, Sn, V) n) Limits are required for specific organic compounds (ca. 200) divided into five classes of danger: CLASS I: 5, CLASS II: 20, CLASS III: 150, CLASS IV: 300, CLASS V: 600. o) (Sb, As, Pb, Cr, Co, Cu, Mn, Ni, V, Sn, Se, Te) p) Limits under discussion. q) No limit specified in the permit. Actual levels are reported initially and are taken into account in the issuing of the permit. Selected elements are reported annually.

Appendix C 1

4.5. Available BAT to reduce Air Emissions and Associated Costs8

Air pollution Considering the technological progress made in the field of cement production and the use of comparable processes, technical equipment and operating methods, which were successfully tested on the commercial scale, to reduce air emissions, the following can be said with regard to the individual pollutants:

NOx: Commercially applied technologies for industrial cement production9 The production of NOx can be considerably reduced by the following measures: lowering the amount of waste gas by increasing the energy efficiency of the clinker burning process high degree of precalcination (prior to the rotary kiln) in order to reduce energy input into the primary furnace to a minimum use of low-NOx burners staged combustion in the secondary furnace By implementing these measures, a reduction of NOx emissions to about 500 - 800 mg/ scm, referred to 10% O2 content, corresponding to 1.15 - 1.84 g/t clinker, can be achieved. Staged combustion is now used worldwide in new plants (Rother, 1997). There are three different staged combustion processes in use which have been developed by different equipment manufacturers. All operate with precalciners using separate tertiary air but put different emphasis on the importance on the burner at the kiln inlet and the supply of fuel and air ( Xeller, 1998). Selective non-catalytic reduction (SNCR) may bring about an emission reduction by 50% without having a negative effect on the clinker burning process. The relative operating and fixed costs for implementing SNCR has been estimated to be ECU 0.4 to 0.7 per tonne of clinker ( Xeller, 1998).

UBA-IB-560 Basic Criteria for BAT-Cement

Appendix C 1

Techniques applied under similar conditions and on the test scale with cement production SCR (selective catalytic reduction) plants are proved both as end-of-pipe installation and as process-integrated parts of power plants and waste incineration plants of a similar size and under comparable conditions. There are a couple of companies which, on the basis of experience with similar applications, offer SCR installations to be used for de-dusted exhaust air from cement works10. For process-integrated installations, however, the exact plant configurations still need to be tested. At present there are a number of pilot plants in operation. Using the SCR (selective catalytic reduction) process emissions of less than 200 mg/scm (standard cubic metre) referred to 10% O2, can be achieved. The specific costs of these techniques are almost $2/tonne clinker.

As far as de-dusting of exhaust air is concerned, activated carbon plants yield similar clean gas results. A pilot plant (rotary cement kiln with a four-stage cyclone preheater and a maximum output of 2.000t/d in Siggenthal in Switzerland) using activated carbon for NOx reduction have been operated in combination with using secondary fuels and materials However, the high specific cost of approximately >$3/tonne clinker and costly safety measures to avoid smouldering fires lessen the possibilities of a large-scale application of this technique in the cement industry (Rose and Brentrup, 1995).

Summing up it can be said that the state of the art of available technologies is not the limiting factor to achieve NOx emission levels of less than 200 mg/scm referred to 10% O2, or less than 0.46 g/t clinker.

These are in addition to the optimisation of the operation process (for techniques see also: Billhardt et al. 1996, Xeller 1986) 10 pilot plants are in operation incyclone preheater kilns in Sweden (Slite), Austria (Kirchdorf) and Germany.

Appendix C 1

Survey of NOx abatement techniques achievable emission levels combination of abatement techniques mg/scm g/t clinker additional process costs $/t clinker

modification of firing technology *

500 - 800

1.15 - 1.84

SNCR-process (new or retrofitted)

500 - 800

1.5 - 1.4

0.75

modification of firing technology + SNCR- 300 - 500 process *

0.9 - 1.5

0.75

modification of firing technology + SCR-process *

100 - 200

0.3 - 0.6

1.4 2.4

retrofitted SCR-process

100 - 200

0.3 - 0.6

2.2 2.4

retrofitted activated carbon process

200

0.6

3.2 3.6

Source: UBA-IB-560 Basic Criteria for BAT-Cement * Retrofitting involves costly restructuring and increase in capacity

The above table gives a survey of possible combinations of processes available to reduce NOx emissions. Information is provided on achievable emission levels and on specific

Appendix C 1

additional costs for abatement measures. Data are based on the assumption of a plant for about 300,000 annual tonnes of clinker operated under conditions as described above. With larger plants specific costs will be slightly lower.

In general it can be said that costs associated with retrofitting measures aiming to reduce the limit value to 100 - 200 mg/scm referred to 10% O2, will be two to three times higher than the expenditure associated with a reduction to 500 mg/scm referred to 10% O2. Since the costs of newly installed and of retrofitted calciners vary widely according to a number of factors such as total costs and possible savings with regard to energy costs, increase in capacity and increased use of cost efficient fuels, estimates have to be made from case to case.

As to the time required to implement the above mentioned measures the following rough indications can be given:

Retrofitting a SNCR plant, will approximately take about 2 years for the licensing procedure, call for tenders and award of contracts and 1 year for erection, start up and trial run. That implies a total of about 3 years between the decision to invest and the taking up of full operation11.

Retrofitting a SCR plant with a tail-end installation will take approximately 2 years for the licensing procedure, call for tenders and award of contracts and 1.5 to 2 years for erection, start up and trial run. That implies a total of about 4 years between the decision to invest and the taking up of full operation.

All those processes, which involve considerable technical modifications and an increase in capacity, will inevitable lead to structural shifts. The increased capacity of a plant subjected to retrofitting measures will in turn cause the closing down of other plants. This is why in this case estimates can only be made with regard to the period between the decision to take retrofitting measures and the putting into operation of the improved
11

Spenner Zement 1995, Heidelberger Zement 1995, Dyckerhoff Zement 1996

Appendix C 1

plant. It can be assumed, however, that such a project - from the planning stage until completion of restructuring - will take a little longer than retrofitting a SCR plant, i.e. 4 5 years.

SO2: Commercially applied technologies for industrial cement production SO2 from fuels is totally bound in the clinker. Without any additional measures emission standards of less than 200 mg/scm dry referred to 10% O2 can be observed with plants operating a dry process, in which SO2 is generated only in the rotary kiln. At present in cement production the use of de-sulphurization plants to capture SO2 from raw materials in the low temperature zones is limited to a few cases.

With cement plants with a gas throughput of 100,000 scm/h using an activated carbon filter the costs of reducing SO2 emissions from 600 to 100 mg/scm referred to 10% O2 are estimated at appr. ATS $4/t clinker. In the cement industry there is already one plant using activated coke filters for de-sulphurization in operation.

Techniques applied under similar conditions and on the test scale with cement production Quasi-dry plants and gypsum scrubbers which are used downstream of power stations or waste incineration plants also seem to be suitable tools for SO2 precipitation. By-products from the de-sulphurization process can be completely recycled within the cement manufacturing process. The costs of a gypsum scrubber with a gas throughput of 100,000 scm/h, which corresponds to a plant for 300,000 annual tonnes of clinker and a reduction of SO2 emissions from 600 to 100 mg/scm referred to 10% O2, amount to appr. $2/t clinker. With $0.8/t clinker the costs for a quasi-dry plant are slightly lower.

CO and organic C: Commercially applied technologies for industrial cement production Emissions of CO and of organic C are mainly associated with incomplete combustion in the rotary kiln or the calciner and/or with a too high carbon content of the raw materials.

Appendix C 1

After the firing process the following emission levels can be achieved: less than 100 mg/scm dry clinker referred to 10% O2 for CO; and less than 10 mg/scm dry clinker referred to 10% O2 for organic C.

Emissions caused by impurities in the raw materials in the cyclone heat exchanger can only be abated by means of end-of-pipe techniques like catalytic after-burning. At present several abatement measures are being tested in pilot plants

Dust: Commercially applied technologies for industrial application in the cement production By means of fabric filters residual emissions can be reduced to less than 5 mg/scm dry clinker referred to 10% O2; provided good exhaust air conditioning, sufficiently dimensioned electrostatic filters can bring about a reduction to 5 - 15 mg/scm dry clinker referred to 10% O2, which corresponds to appr. 0.012 - 0.035 g/kg clinker. Separated dust can normally be recycled within the cement production process.

Gaseous heavy metals: Mercury, mercury compounds, arsenic and thallium compounds from the gaseous phase can be adsorbed on dust or activated carbon. However, measurements carried out in Austrian cement works in 1993 did only reveal insignificant concentrations.

CO2: With clinker burning CO2 emission may result from two reactions:

combustion of the carbon content of the fuels limestone calcining

The process-related CO2 emissions resulting from limestone calcining amount to 0.5 kg per kg clinker. CO2 emissions resulting from the combustion of the carbon content of the

Appendix C 1

fuels can be reduced to 0.17 kg per kg clinker by increasing the energy efficiency of the process and by using fuels with a low carbon content.

4.6.

Energy Taxation

Energy taxation will be another charge the EU Cement industry has to face (Bau-Forum 1998). Information on the future taxation of energy products can be found at the Draft Directive on the Taxation of Energy OJ 17 March 1997 - 97/0111 (CNS) COM(97)30 FINAL. This shall add an excise duty of ECU2/kWh used. Comparably, other industries in North America and developing countries, notably CEECs, NIS, Russia either do not impose any taxation or effectively provide subsidies to their industries.

The cement industry is highly energy intensive with energy accounting for approximately 30-40% of total operation costs. Taxation of energy products would have a strong impact on the industrys competitiveness. Cembureau, along with other mineral or commodity manufacturing industries (i.e. lime, glass, ceramic industries, steel), are strongly opposed and seek exemptions.

4.7. Available BAT to reduce energy demand Depending on the different processes the demand of thermal energy ranges between 2.900 and 5.500 kJ per kg clinker, the demand of mechanical and electrical energy amounting to 310 - 480 kJ per kg of cement produced.

Mechanical and electrical energy: Most of the required mechanical and electrical energy is used for coarse crushing and grinding, the exact amount being determined by the raw material, required grinding fineness, moisture content of the product and the chosen grinding process.

Appendix C 1

The wide variation in energy demand for grinding processes is above all due to different degrees of grinding fineness. Most energy is required for the grinding of cements of the highest strength, grinding fineness decisively influencing strength.

Thermal energy: Compared to mechanical and electrical energy the demand of thermal energy is ten times higher and subject to much wider variations according to the different manufacturing processes.

Thermal energy demand is determined by the following factors: raw material drying enthalpy of the clinker burning process externally utilised thermal energy losses The consumption of thermal energy can be reduced by: low moisture content of raw materials keeping losses of rotary kiln exhaust gas as low as possible utilising the energy content of clinker cooler exhaust air low radiation losses from the individual components All these criteria are met by dry processes with extensive calcining prior to the rotary kiln.

With regard to energy consumption dry processes without precalcination (calcining prior to the rotary kiln) but utilising waste gas for external purposes show only slight disadvantages towards processes with precalcination. These disadvantages are mainly due to radiation losses and losses of clinker cooler exhaust air.

Appendix C 1

With semi-wet and semi-dry processes a considerably higher amount of thermal energy is needed for the drying of the raw materials, resulting in a considerably higher overall energy demand.

4.8.

The Draft National Emission Ceilings Directive

National Emission Ceilings are another issue of concern to the Cement industry. These cover emissions of12:

1. Particulates, 2. SO2, 3. NOx and others,

in an attempt to follow a bubble approach vis a vis Member States. Considering the Cement industry is a major contributor of many gases and particulates, the burden of the National Emission Ceilings Directive might fall disproportionately on Cement manufacturers, especially due to their high NOx emissions relative to other sectors.

National levels have not been decided, since the subsidiarity principle requires that Member States decide locally what the level of abatement shall be. Moreover, pollution shall be combated wherever most cost-effective.

4.8.

The Kyoto Agreement

Moreover, the recent advent of the Kyoto Agreement an important cap on CO2 emissions at National and EU levels. The Cement industry is a large energy consumer, both in terms of electricity and solid or other fuels. Since the Kyoto agreement follows also a bubble approach, the EU Cement industry might be further pushed to comply with very stringent
12

prepared by Mr. Peter Gammeltoft of DGXI

Appendix C 1

standards in terms of energy consumption. Industry advocates that burning waste and/or avoiding expensive and energy inefficient BAT (i.e. SCR) might help them to achieve successfully short-term results.

EU environment ministers have agreed an objective of a 15% reduction in greenhouse gases by 2010 in relation to their 1990 level. The EU will defend this position in international negotiations on a binding protocol to the United Nations Framework Convention on Climate Change (COP-3) to be concluded in Kyoto in December. The Council also agreed on a basket of gases (including CO2, CH4 and N2O) to be taken into account in relation to their effect on global warming and reached a preliminary agreement on burden-sharing between the Member States. The Council's agreement is a major breakthrough in the fight against climate change since it is a strong signal to other industrialized nations and to the United Sates and Japan in particular: COM(96) 569 fin. (Commission proposal).

Achieving the reduction of greenhouse gases will require strong energy policy action to reduce carbon intensity. Transport and power generation are the weak points for substantial CO2 reductions since there are only limited options for fuel switching. The electricity sector should be able to use more low or zero carbon fuels: COM(97) 196 fin.

National figures on CO2 reductions (%): Belgium Luxembourg Denmark Netherlands Germany Austria Greece -10 -30 -25 -10 -25 -25 +30

Portugal Spain Finland France Sweden Ireland UK Italy

+40 +17 0 0 +5 +15 -10 -7

Appendix C 1

4.8.

Other Regulations Decommissioning

Other Directives and/or Regulations the EU Cement Industry could find itself constrained from may include: Heavy Metals, VOC emissions, Dioxins. Though Cement plants are not the main sources of emissions, cases of malfunction have shown that emissions can increase several-fold resulting in serious accidents. A type of precautionary behaviour, good housekeeping, risk assessment and electronic equipment associated with these processes might be obligatory as a result of these regulations.

Last but not least, Site Decontamination and Rehabilitation presents an additional cost to industry when quarries are to be abandoned.

4.9.

The Waste Issue13

Because of its high-energy costs, the cement industry has been searching for alternative fuels and waste. The technologies have been introduced more than a decade ago and are now well established. Waste consumption nowadays represents 12% of the industrys fuel mix and is used in 12 of the 15 EU Member States. Novel technologies allow some EU companies to use up to 50% waste as fuel (i.e. Ciment dObourg) and even 100% has been recorded in some US plants.

13

personal communication, Mr. Michael Theben, DGXI

Appendix C 1

Country Belgium Denmark Finland France Germany Italy Luxembourg Portugal Spain Sweden Switzerland Czech Rep. Poland Slovak Rep. Hungary Turkey*

% Alternative Fuels 19% 0% 0% 47.2% Not available ~2.4% Not Available 0.4% 1.2% ~2% 24% 1.5% 0% 2.1% 0.6% 0%

Source Cembureau 1995. *Citosan only.

Clinker production is one of the few processes with no residual materials as the ash becomes mineral contents in the clinker. Therefore the substitution of primary energy by alternative fuels which are utilized material- and energywise seems to be advantageous. Looking at tyres, for example, the rubber provides the energy whereas the wire becomes a mineral component of the clinker. Organically contaminated grindable or liquid wastes are completely harmless when used in the primary furnace, even if they contain a high amount of sulphur. However, the use of wastes contaminated with heavy metals and halogens should be carefully reviewed with regard to their impacts on the cement production process. If wastes are used in the secondary furnace, measures have to be taken to ensure combustion quality and corresponding controls. With cement production the demand for less hazardous materials is raised above all with regard to the use of

Appendix C 1

wastes and of raw materials containing sulphur or carbon. Thus, the general demand for low-waste technologies and the promotion of re-utilisation and recycling techniques with regard to materials and wastes generated or used in the individual processes cannot be applied as criterion for selecting the best available technique for cement production.

Existing legislation 94/67 covers already some of the hazardous waste and coincineration and cement kilns do have to comply with those levels. The current Directive in force does not cover NOx emissions. The forthcoming Waste Directive by DGXIU shall be comprehensive in that all waste shall be covered (including the rest of hazardous from the previous one), except for some biomass fuels. In fact, cement kilns can and do, in some cases, burn biomass after it is dried. The new Directive shall also include limits on NOx emissions (200-500 mg/annum). An kopol study has shown that those NOx limits can be achieved by cement kilns at a cost of ECU2/ton of NOx abated every year.

As alternative fuels can be taken used tyres, rubber, paper waste, waste oils, waste wood, paper sludge, sewage sludge, plastics, spent solvents, sorted household wastes etc. The environmental advantages are numerous: reduction in the use of non-renewable fossil fuels lowering emissions such as greenhouse gases recovering energy from waste elimination of the need for disposal of slag or ash.

As the organic parts are destroyed and the inorganic parts are combined with the product the use of alternative fuel in the cement industry is considered as safe: high temperatures (2000 degrees Celsius in the combustion gas from the main burners, 1100 degrees in the gas from the burners in the precalciner) long resistence time (5-10 seconds in the rotary kiln and more than 3 seconds in the precalciner) oxidising atmosphere high thermal inertia alkaline environment

Appendix C 1

ash retention in clinker (Cembureau 1997a).

As the cement industry uses more wastes as a substitute fuel these are traded between Member States. Differing national definitions of waste, though, can create serious conflicts of interest. In fact, a plant in Southern Belgium, leading user of wastes as alternative fuel, has experienced substantial problems in buying waste for its kiln from Flanders and Germany. Authorities actually imposed restrictions on the sale of wastes to the plant.

Burning alternative fuels leads in most countries to additional maximum emission limits for heavy metals. These differ widely between countries and regions. A step further was undertaken by many authorities by restricting the contents of heavy metals in alternative fuels. The wide variation affects plants in the choice and therefore prices of alternative fuels which they can utilize (Kehl, without year).

Table: Maximum limits imposed by the authorities for the levels of heavy metals in secondary fuels, in mg/kg Phnix Rdersdorf England Castle Cd TI Hg As 5 2 1 20 10 5 1.5 5 20 20 10 50 Belgium Obourg 100 100 10 200 No regulation Sweden

Source: information given by a plant manager

5.

Industrial Characteristics of the Industry and Competitiveness

5.1. Structure of the Industry and Recent Investment Activity

Appendix C 1

The European cement industry (EU-15) had a turnover in 1992 of ECU 11.000mio for a production of 168mio tones (1994 Panorama of EU Industry), employing just under 60.000 persons.

The European Union (EU) Cement industry consists of some 250 plants operated by 64 groups (though a large part involves cement mills only). The industry has been consolidating since the 1970s through merger and acquisitions which includes combined ownership of plants by companies (Wagner, 1979). In later decades expansionary visions have led the industry to invest heavily overseas, notably in N. America, in North Africa and lately in the opening Eastern European market14. The acquisition program was evident first in the US and the 1990s saw EU companies acquire most of the cement industry in the CEECs, starting with Poland, the Czech Republic and Hungary15 and moving progressively eastwards. The largest ones are multinational companies with interests in the EU, US, CEEC. Among these are Heidelberger (Germany), Holderbank (Switzerland), Italcementi (Italy) and Lafarge (France), which have considerable international interests as the table displays. Among them they control most of the French, Belgium and Moroccan market. In the last years they all have invested in cement plants in East Europe as well. The turnover of each of them exceeds ECU 3 billion in 1997.

EU State

No. Companies

of

Clinker Grinding

&

Grinding Only

Clinker Only

Investments* (1994 mio. ECU)

Investments* (1995 mio.ECU)

Austria Belgium Denmark Finland France Germany

9 3 1 1 6 37

11 4 1 2 38 44

1 3 5 22

1 -

35-45 56.38 7.91 4.29 88.51 n.a.

30.17 49.64 7.40 1.74 111.86 n.a.

14

In North Africa, Moroccan plants are owned by Italcementi and Lafarge. In Tunisia two out of four plants are already sold to Cimpor and Uniland. 15 In the US Holderbank and Lafarge hold 20% of the market. Blue Circle and Cimets Francais another 10%. In Canada these four companies account for 75% of the market. In Eastern Europe Heidelberger Zement, for example, has investments in plants in the Czech Republic, Poland, Hungary and Croatia (Heidelberger Zement Geschftsbericht 1997).

Appendix C 1

Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK TOTAL

4 1 38 2 3 4 16 1 6 132

8 2 64 1 6 37 3 23 244

29 1 2 1 5 1 70

1 2

n.a. 2.52 150.18** 16.47 n.a. 45.52 113.85 2.72 n.a.

n.a. 4.40 168.05** 4.06 n.a. 24.73 86.82 5.38 n.a.

Norway Switzerland Turkey Czech Rep. Hungary Poland Slovak Rep.

1 9 51 7 5 20 7

2 10 40 7 5 16 7 3 11 1 4 -

11.37 n.a. 3.29*** 26.13 10.26 30.35 10.83

6.85 n.a. n.a. 58.82 16.39 31.93 11.75

Source: Copy from Cembureau Annual Review 1995. *Investments include buildings and plant machinery/equipment. This may in turn include environmental investments. The exchange rate used is calculated at end of year (31/12) respectively. **Data for Italy are estimates. ***Turkeys data relate to Citosan only.

Table: International engagements of some of the largest cement companies in 1998

France Belgium Spain Italy Turkey Morocco North America Italcimenti Lafarge Holderbank Heidelberger 33% 35% 15% 14% 18% n.a. 35% 38% 8% 13% 7% n.a. 32% 3% 7% n.a. 9% 19% n.a. 15% 17% 41% 22% n.a. 6% 14% 14% 11%

Source: http://www.nettradecenter.se/ntcframe.html (link to Ciment Francais)

Although a lot of merger activities has taken place the competitive situation in the European countries varies. Looking at the concentration ratio of the largest three

Appendix C 1

manufacturers they account for around 50% in Germany, Italy, Spain and Poland. Highly concentrated ownership can be found in Ireland, UK and France where the largest three producers control more than 80% of the market.

Market share and number of plants of the three largest producers in 1996 France* Germany** Italy*** Spain**** Market share of largest 3 82% manufacturers No. of their owned plants Total no. of plants 32 20 66 43 86 27 37 20 22 7 20 48% 55% 56% UK***** 94% Poland****** 57%

*Lafarge, Ciments Francais, Vicat **Heidelberger, Dyckerhoff, Schwenk in West Germany; for East Germany: 50% by Lafarge, RMC, Dyckerhoff *** Italcementi, Buzzi/Unicem, Cementir ****Cemex, Cementos Portland, Lafarge *****Blue Circle (over 50%), Castle, Rugby ****** Lafarge, Heidelberg/CBR, CRH ******* source: the Cement Industry, Dec. 1997, Dresdner-Kleinwort-Benson, Aprilj 1998; The Global Cement Report 1998

Ownership structure of companies differs among the countries. In the UK the three major companies are owned by institutional shareholders whereas the majority of Holderbank and Italcimenti is family owned (Schmiedheiny resp. Pesenti). In Ireland there is a monopoly situation where the company is owned by Irish and UK institutions 16.

5.2.

Trends in Consumption

Cement demand heavily depends on the construction sector and this in turn on the economic cycles. Major demand comes from the housing, non residential, civil engineering and repair and maintenance sector. These differ widely among the different nations in the EU (see table). Portugal's consumption, for example, depends heavily on
16

For more information visit http://www.nettradecenter.se/industrycement.htm ,or the Hargreaves, Intl Cement Report

Appendix C 1

the housing sector, whereas the Slovak consumption relies mainly on civil engineering. It was only in 1989 that EU consumption has reached 98% of its 1973 level and then decreased again in the early 1990s to 86% of 1973 level (168mio tones in 1995). The overall trend in cement demand in the EU is downwards, with yearly variations across EU Member States. The EU cement trend contains 2 sub-trends. Whilst consumption in Northern Europe followed a decreasing path, Southern Europe has been experiencing growth until around 1992 when growth began to slow down. The largest cement consumers in Europe were Italy (22%), Germany (19%) and Spain (15%) in 1997 (The Cement Industry , 8. Dec. 1987). Current EU consumption per capita lies at 452kg (1995). While EU companies face a downward trend in their markets there is an overall upward trend world-wide, especially in Asia and Latin America. The EU industry represented 27% of world demand in 1973 and is down to just 12% in 1997. However, due to higher European prices this represents 20% of value (The Cement Industry, 8. Dec. 1998).

Appendix C 1

Table: Distribution of Cement to Various Sectors in %

Country

Housing

Non Residential Civil Engineering

Repair Maintenance 12

Austria Belgium (1994) Denmark Finland France Ireland Italy (1992) Luxembourg Netherlands Portugal Sweden Switzerland Czech Rep. Poland (1994) Slovak Rep.
consulted.

35 22 18 23 23.5 40 34.5 29 42 61.5 8 35 8 32 3

20 47 36 40 22 46 31 34 28 20 59 16 49 24 25

33 31 33 27 34 7 34.5 32 24 10.5 27 26 35 44 62

14 10 20.5 7

5 6 8 6 23 8

10

Source: Cembureau Annual Review 1995. For a more complete breakdown, the reference may be

Appendix C 1

Table: Production, consumption, capacity utilisation, imports and exports of cement in EU Member States (mio tonnes)

EU State Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK TOTAL

Production 3.777 8.223 2.051 907 20.697 33.302 14.480 1.730 34.019 708 3.180 8.123 28.491 2.539 11.805 174.032

Consumption 4.987 5.735 1.185 1.089 19.822 38.486 6.851 1.860 34.639 511 5.300 7.886 25.460 1.505 12.740 168.056

Capacity utilisation 62% 82% 71% 73% 63% 45.200 Clinker 94% 80% 56% 84% 82% 96% 76% 77% 87%

Norway Switzerland Turkey Czech Rep. Hungary Poland Slovak Rep.

1.820 4.024 34.747 4.912 2.875 14.652 2.902

1.235 4.216 30.085 3.703 2.994 10.642 1.309

91% 5.015 clinker 95.5% 65% 57.5% 77% 66%

Source: Cembureau, 1995. See also Annex 3

European Annual Review no. 18/1995 (appendix p. IX to XI).

Appendix C 1

It is notable that cement consumption does not mirror GDP or population. Differences in the consumption show Portugal, Greece and Spain with 600 to 800 kg cement/capita leading whereas France, UK and Scandinavia are below 300 kg cement/capita. The cement consumption per unit of GDP follows a similar picture. The variation is due to economic activity in countries ("maturer" countries use less cement than developing countries for housing and infrastructure), topography (mountainous regions need more), building practices (UK and Scandinavia prefer steel-framed buildings or bricks and use more asphalt for roads). A converging in per capita consumption can therefore not be expected (The Cement Industry, 8. Dec. 1998).

A reduction in demand over the last decades in Western Europe has led to a decrease in capacity utilisation. Given the high capital costs in the cement industry this has strong effects on unit costs (see chapter on production costs below).

5.3. Exports and Trade Because of the regionality aspects of cement (due to transportation), exports from the Western European countries are rather limited. For normal Portland cement grades, small quantities are traded for short periods to satisfy short-term commercial (construction for Olympic Games in Barcelona) or production reasons. White cement commands a higher price, is produced by few producers and is exported. However, due to its limited applications, the tonnages are small. Export/Imports of cement do not exceed 6-7% of world production. Higher percentages are seen only in exceptional cases, usually in cases of excess capacity or in order to get foreign capital.

Cement is very transport cost intensive if roads are used and therefore regional markets are limited to a radius of 200km (Fiederer 1994). Exports over long distances are possible if the water way can be used. On average EU exports amount to almost 15% of production. Of all EU countries Belgium (35%), Denmark (51%), Greece (50%), Luxembourg 58%), Spain (22%) and Sweden (48%) export more (ZDV, 1998) which

Appendix C 1

means that most other West European countries export very small amounts, for example Britain only 4.2%. High export rates from countries like Belgium and Luxembourg can be explained by their relatively small area size so that deliveries into the neighbouring country fall easily into the 200 km radius.

Table: Imports and exports of cement in EU Member States (mio tonnes)

EU State Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK TOTAL Imports 1.289 630 250 205 1.550 8.698 50 360 1.841 25 3.604 96 3.032 130 1.234 22.994 Exports 40 3.018 1.110 1 1.686 2.309 7.627 230 1.330 695 349 156 5.336 1.101 453 25.441

Norway Switzerland Turkey Czech Rep. Hungary Poland Slovak Rep.

169 252 331 273 211 -

722 26 4.628 1.463 60 3.909 1.468

Source: Cembureau, 1995. See also Annex 3

European Annual Review no. 18/1995 (appendix p. IX to XI).

Appendix C 1

The majority of Spanish exports use the relatively cheap waterway and have Africa and the US as major destination. Greece also uses the waterway and exports about half of its production mainly to Italy, Spain, US, Asia and Africa. (European Annual Review, No. 18/1995, Cement industry and market data, Cembureau, 1997). Sweden is exporting because of its particular national demand situation which restricts construction in the winter time. The Mediterranean coast of Spain has also recorded stresses, especially in the Catalan area during the Olympic Games when extensive construction works required additional supplies which were delivered by cement plants in North Africa and Romania. Today the east coast of Spain is supplied by a Lafarge owned plant in Romanias Black Sea port.

A common obstacle to imports is just in time delivery. Imports via transport on the waterway require usually specialised just in time delivery terminals to compete with established producers. Facilities such as silos and/or special cargo ships are necessary to store cement. Such an installation comprises silos for storage (cement cannot be stored in open air), loading and unloading equipment, terminals serviced by rail, river, or sea, and unloading equipment at the terminal itself. Quality may also be an important parameter, since local users are accustomed to certain types of cement (i.e. with additives pozzolana, slag, etc.). To overcome these differences may involve additional costs and/or delays.17 Local authorities and purchasers tend to favour domestic companies either as part of a national strategy or because of already well established relationships.

Intra-EU imports/exports have been increasing from 1980 to 1992 from 5Mt to 12Mt/year, while prices (expressed in real terms) fell by 20%. The total trade amounted to 700 mio ECU in 1993 with Greece commanding a great share of exports (4Mt and 250 mio ECU).

17

Cement in Europe / Cembureau

Appendix C 1

Exports from Eastern Europe

ExtraEU imports have also been increasing in the latest years, mainly from Poland and the Czech Republic into East Germany and Austria (17% of whole German consumption is supported by imports). Romania, Tunisia and Turkey export heavily to Spain. Germany and Spain have filed anti-dumping complaints against the relevant CEEC, but the cases were closed without the imposition of duties. Exports to the EU from Turkey and CEEC have risen from 2,5Mt in 1985 to 9Mt in 1993.18

Germany and Austria have been recording heavy imports from neighbouring Poland. Indeed, the area in and around Berlin is experiencing unprecedented growth in construction while fierce Polish competition keeps prices very low for West German standards (at $55). Also companies operating on both sides of the borders (i.e. Lafarge, CBR and German companies) have been trading cheap cement originating from Poland. Polands comparative advantage lies in relative low prices for coal, electrical energy and freight transport (by rail and road).

Table: Imports of cement into Germany from Eastern European countries in '000 ECU

1993 Croatia Czech Rep. Estonia Hungary Latvia Lithuania Poland Slovakia Slovenia 2414 80529 678 4 36 1 104068 35162 5

1994 1476 66182 2577 14 1708 1 139095 49079 10

1995 1298 55392 5217 15 1014 93 154626 52984 0

1996 1800 54663 4665 31 1888 1 127383 31189 34

1997 2497 46059 6530 20 1485 0 109850 26416 47

18

Panorama of EU Industry, 1997

Appendix C 1

Exports of cement from East European countries have increased tremendously after 1990. While the exports from Poland and the Czech (together with the Slovak) Republic to Germany were each less than 270.000t in 1990, Poland's German exports increased to 2.870.000t and the combined Czech and Slovak exports 1.870.000tin 1996 (BDZ, Zahlen und Daten). The Czech Republic and Poland which export almost exclusively to Germany while the Slowak Republic exports mainly to Germany. Together they accounted for 75% of the imports to Germany. Although cement is considered as a relatively cheap product the exports have amounted to quite significant sales volumes (table x).

5.4. Capacity utilisation and economies of scale Although the equipment of the cement industry is long lasting (about 20-30 years) and is not known for radical changes in production technology, changes and additions in equipment have taken place as can be seen by the change of kilns and the greatly improved energy efficiency over the last 30 years as is illustrated for the German case. While in 1970 only 29% of industry's capacity came from plants with cyclone preheaters these covered 84% of the capacity in 1996. Rationalization took place at the same time and meant that smaller and/or inefficient kilns were shut down. The total number of kilns halved over this period from 168 to 82 while output dropped by 15%.

Table: Numbers, Types and Capacity of Kilns in the Years 1970 and 1996 in Germany
Type 1970 Numbers With cyclone preheater With grate preheater Drying kiln Shaft kiln 48 53 7 42 168 capacity 29 31 4 25 100 1996 Numbers 51 21 1 8 82 capacity 84 14 1 1 100

Source: Zement, Zahlen und Daten, different years

Appendix C 1

The reduction of kilns by 50% by a similar output shows that economies of scale have been improved. The number of German plants with less than 200.000t of yearly production, for example, have been decreased from 45% of the industry's capacity to just 7% from 1963 to 1996 while the plants with more than 1.000.000t have increased their share to 25%. Indeed, from 1972 to 1990 average kiln sizes have increased by around 60% in Italy, 40% in Germany, 80% in France and the UK, and 200% in Belgium.

Table: Economies of Scale in the German Cement Industry Plants with a 1963 1974 1982 1991 1996

production of no. 0 - 200.000t 201- 500.000t 501- 1.000.000t over 1.000.000t 44 35 16 2 97 % 45 36 17 2 no. 23 35 17 2 83 % 23 35 17 8 no. 25 42 20 10 74 % 34 36 22 8 no. 22 17 24 3 66 % 8 19 59 14 No. 18 25 17 6 66 % 7 27 41 25

Source: Zement, Zahlen und Daten, different years

The increase of Minimum Optimal Size (MOS) due to a change in technology has largely contributed to a large overcapacity and consequently to an intense price competition known as price war - in Westphalia in Germany during the 1967-1969. Westphalia has been one of the European regions with a large number of suppliers. In 1966 24 companies operated 28 plants. During this time the prices fell until they covered only variable costs for some of the companies (Spenner 1996). 13 companies had to give up their independence until 1972 of which 10 were bought up by Dyckerhoff (Spenner 1996). A decrease in the number of plants has also been experienced in other EU countries. The decrease in Italy is less than in other countries and shows a much more diverse structure.

Table: Reduction in plants between 1972 and 1990

Country Italy Plants in 1972 103 Plants in 1990 80

Appendix C 1

Germany France UK Belgium

84 62 43 9

48 40 26 4

The need to install larger kilns is due to their higher efficiency. This can be illustrated by the construction of the new kiln at Castle Cement which came on stream end of 1986. The dry process kiln with a capacity 1 m tonnes clinker per annum has been replacing six wet process kilns, reducing the energy consumption to less than half and productivity per man more than doubled (Publication by Castle Cement). The expenditure has been 45 million. The new Rugby plants which will go on stream in 1999 will provide half of Rugby's UK capacity and reduce fuel usage by one third. Together with higher energy efficiency and labour productivity the emissions are reduced. The investment into this plant has been 120 million.

5.5.

Transportation

Cement is a heavy, low unit price product so that transport costs rapidly become a very important factor in defining any producers customer base. The delivery radius depend son a companys unit costs as well as national transport costs. The majority of cement is delivered by road. In Western Europe transport costs on roads usually limit the supply to a radius of 200km (Fiederer et al, 1994). Often the threshold does not exceed 150km for some companies and 100-130km for the majority. For France Prof. David Encaoua, a French economist, found that 85% of all direct road deliveries did not exceed more than 130km, that the average for France lied at 60km and in the Paris basin it was only 53km. Rail freight cannot transport cement competitively to distances exceeding 200-400km. To use the railway system usually the plant and the customer must have railway track connexions. This is one of the reasons that the transport by rail is hardly used (table). The East European countries are an exception as transport costs are much cheaper than in the EU.

Appendix C 1

The above mentioned radius for road and railway delivery has been for West European areas. In Eastern Europe not only production unit costs but also transport costs are considerable cheaper. For a distance of 200 km the German tariff has been DM/t 33.76 whereas the Polish freight was only DM/t 9.18 and the Czech even DM/t 5.73 in 1993 (Fiederer et al, 1994). This allows to penetrate the Austrian and East German markets at prices far below the price level in West Germany. In 1993 Polish bulk cement of type PZ 35 was DM/t 69,50 at the boarder while cement in West Germany was DM/t 150. With increasing distance from the East German boarder the Polish prices increase (Fiederer et al, 1994). Table: Comparison of transport costs between the German and Polish railway in DM/t Distance in km Germany Poland Czech Republic 20 10.20 4.18 4.71 60 17.08 5.29 4.94 100 21.80 6.41 5.16 160 28.12 8.06 5.50 200 33.76 9.18 5.73

Source: Fiederer, H.-J. et al. (1994), using a load of 25 tons per waggon

Ciments Francais (owned by Italcementi) has bought over CCB of Belgium to support the French market (especially Paris Basin). Cement is transported profitably for almost 300km by rail (the company uses its own terminals). The commercial decision was determined due to lack of permits to build cement plants in the vicinity of Paris. Moreover, Belgian authorities are keen to keeping the last few remaining industries in Southern Belgiums declining industrial areas.

Table: Transport of Cement by means in % (1995)

Country Austria Belgium Denmark Finland France

By Road 81 97 100 69 96.8

By Rail 19

By Water *

0.4

2.8

Appendix C 1

Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK Switzerland Turkey Czech Rep. Hungary Poland Slovak Rep.

N.A. 94.9 96.5 97 100 100 N.A. 95 95.8 N.A. 54 N.A. 60 93 82.8 60

N.A.

N.A. 5.1

3.5 2 1

N.A. 4 4.2 N.A. 46 N.A. 40 7 17.1 40

N.A. 1

N.A.

N.A.

Source: Cembureau Annual Review 1995. N.A.= Not available. Data also include deliveries to depot and transport to customers. *This type of transportation includes both inland waterways and maritime transport.

Transport by water is much cheaper. In fact, cement can travel very long distances by water, since the latter is considerably cheaper. Once handling charges have been paid, maritime fares are minimal and distance matters little. Therefore prices at ports are usually lower than inland, which can be explained by lower transportation costs via water as well as by increased competition. The differences between prices at ports and average prices may amount to as much as 20% (see table). However, once the ship arrives at the port the cement has to be unloaded and then transported to the customer usually by road or railway.

A natural barrier to trade is lack of access to port facilities for outsiders. Just-in-time deliveries are crucial for most contractors and outsiders cannot play a crucial role in the market if they cannot deliver in time. To deliver the cement at the port terminals with fixed silos or floating silos must be provided. Floating Terminals consist of convertible

Appendix C 1

tankers that stock the products until required by the customer. In some cases they employ a bagging plant as well.

To be able to deliver just in time some producers have taken the decision to invest in rail facilities and terminals or to deliver by inland waterway. An investment in own bulk terminal adds to the costs ECU 10.4 per tonne cement (table). These costs increase to ECU 14 per tonne if the capacity of the terminal is just 100.000 tonnes per year (Cement in Europe / Cembureau).

Table: Costs for using an own bulk terminal to penetrate new markets:

250.000 Tonnes/Year Capital cost Operational costs: - energy - fixed costs (labor force, maintenance, sales force, ) Terminal Total Cost Source: Cement in Europe / Cembureau

ECU/Tonne 5,3 Mio ECUs total (amortized in 5 years at 5% financing cost 0,7 4,4 10,4 (assuming 100% utilization rate)

5.6. Packaging of cement An important effect on price has packaging. Cement is mainly sold in bulk (80% of the European market) for ready mixed concrete and/or large contractors. Small customers are usually buying bagged cement. Differences between these two types of packaging can lie between between $4 and $12 per tonne depending on competition and quantity discounts. Bulk cement is mainly demanded by ready mix customers and manufacturers of prefabricated concrete parts as well as delivered directly to large construction sites. Retailers usually sell bagged cement. In Germany with 54% the majority of the cement consumption is by ready mix companies, 26% by manufacturers of prefabricated concrete goods while 6% are delivered in bulk to cement silos at the construction site and only 14% are sold by retailers in bags in 1990. With the growth of ready mix companies from the early 1950s a change from mainly bagged to bulk cement has taken place. In 1964 only 11.5% of the German cement consumption has been by ready mix companies.

Appendix C 1

Table: Packaging of cement in %

Country

Bulk Domestic

Bagged Domestic 24 21 18 10 30.3 12 32.9 22 31.2 22 10 58.9 34 4.8 N.A. 9 66.6 29 51.3 44.8 40

Bulk Export 2 94 90 62 N.A. N.A. 95.2 100 N.A. 87.5 N.A. 31.2 98 100 N.A. 91 82.9 85 93 87.8 76

Bagged Export 98 6 10 38 N.A. N.A. 4.8 0 N.A. 12.5 N.A. 68.8 2 0 N.A. 9 17.1 15 7 12.2 24

Austria Belgium Denmark Finland France Germany Greece Ireland Italy Luxembourg Netherlands Portugal Spain Sweden UK Switzerland Turkey Czech Rep. Hungary Poland Slovak Rep.

76 79 82 90 69.7 88 67.1 78 68.8 78 90 41.1 66 95.2 N.A. 91 33.4 71 48.7 55.2 60

Source: Cembureau Annual Review 1995. N.A.= Not available. Data also include deliveries to depot and latrer transport to customers. *This type of transportation includes both inland waterways and maritime transport.

5.7. Productivity Labour productivity depends mainly on technology, skills, size of plants, capacity utilisation, type of products etc. With the modernisation of production processes, production per employee in the European cement industry has on average doubled in the

Appendix C 1

last 20 years and productivity is 20% higher than in the US. From an initial level of 1770 tones/man year in both areas, productivity has climbed to 3500 tons/man year in Europe and 3100tons/man year in the USA.

Comparisons of international statistical figures give an overview about differences in productivity performance but care has to be taken that factors are measured in similar ways. Employee figures might include in one country employees whose activities are mainly outsourced in another country, for example transport workers or social employees.

Table: Productivity estimates for Germany and Spain

Germany 1990 Output/employee Output/worker Output/working hour 2700 3993 2.37 1994 +5% +8% +10%

Spain 1990 3521 4991 2.65 1994 +16% +21% +30%

Source: BDZ (Zahlen und Daten 1998); Oficemen, anuario de 1994

Productivity calculations from German and Spanish statistics show a more than 25% higher productivity level for employees and workers in Spain in 1990. In the following years until 1994 the productivity in Spain increased further at a much higher rate. While output per employee grew in Spain by 16%, it increased by a mere 5% in Germany. In the years until 1997 German productivity even fell below the 1990 level. One reason has been the decrease in output by 12%. Further reasons for these international differences have to be studied in field work. A comparison of labour productivity between Germany and Poland in 1989 shows that Polish cement output per employee reached just 40% of the German level (Fiederer et al 1994).

Analyzing energy productivity in 1991 the specific energy (fuel, coal etc.) consumption in Poland was much higher than in Germany (Fiederer et al 1994). Of the eighteen Polish

Appendix C 1

companies only six produce cement with dry process technology of which only two are relatively modern (Gorazdze and Ozarow) providing about a quarter of national production capacity (International Cement Review, May 1995). Average specific electricity consumption is similar to that in Germany as the German plants consume a high proportion of electricity for maintaining environmental technology.

For considering competitiveness costs of the various factors have to be taken into account. As an example energy prices can be used. Even though a similar amount of energy is required in Poland for a ton of cement, this leads to a competitive disadvantage as long as energy prices are much in one country. The electricity costs have been DM/t 3.70 in Poland whereas in Germany they amounted to DM/t 15.40 for production in a dry process (Fiederer et al, 1994).19 This calculation can also be for other countries looking for example at labour, energy or transportation costs.

6.

Production costs

6.1 Fixed and variable costs The cement industry is among the leading capital intensive manufacturing sectors and therefore characterised by high fixed costs. Initial investment costs in terms of years of turnover require for cement plants a factor of 3.0, whereas for paper it is 2.7 and for glass 2.3 (Cembureau estimates). For a 1 Mio tons/year plant about $200 Mio for capital equipment is needed 20.

Production costs in an international perspective vary with respect to a large range of factors: for example, labour costs, quality of raw materials, additives, technology used as well as type and specific consumption of energy (see specific chapter). The table can therefore only give a rough estimation of the contribution of different factors to costs. In this sample depreciation and financing charges make up for about 40% of total. Capital
19 20

to remind the reader: for a wet process the energy consumption would be higher. Rugby's new plant which will go into operation in 1999 has estimated costs of UK 120m for the complete project (International Cement Review,1998)

Appendix C 1

costs are depending on the age of equipment and type of technology which therefore have an important impact on a plant's competitiveness. Labour costs add another 8% to unit costs. In total fixed costs amount to about 56% of unit costs. The overwhelming factor of variable costs with 70% is caused by the use of fuel and electrical power. Thus, fuel mix and energy demands play a critical factor in a companys cost structure. The table shows an exemplary calculation.

Table: Rough estimate of factors contributing to unit costs Fixed Costs % of total unit costs % of fixed costs 70%

Depreciation & financing 40% charges Maintenance Personnel, rents, rates Admin. & Overheads Subtotal 8% 8% 1% 56%

13% 15% 2% 100%

Variable Costs Fuel (thermal) Electricity Raw Materials

% of total unit costs 16% 15% 11%

Percent of variable costs 36% 35% 25% 4%

Paper bags, refractories, 2% wear parts, lubricants, royalties Subtotal 44%

100%

Source: Shenoy, Chako, McGovern, 1997, International Cement Review, provided by Mr. Guy Turner

6.2. Energy costs As about 70% of variable costs are incurred by energy this factor receives greatest attention for cost reduction. Energy costs are affected by:

Appendix C 1

a) energy efficiency of preheaters, precalcinators, kiln, cooling and grinding plants b) fuel mix, particularly to what extent alternative fuels are used c) prices paid for each fuel type d) operating environmental investments (Kroboth 1990).

The much better utilisation of energy with modern technology has led to a strong investment into modernisation and/or restructuring. Process engineering optimization for the rotary kiln plants has induced to further significant reductions in the specific fuel energy consumption for cement production. Modernisation and building of new plants brought about a decline of about 35% since 1960 with the rate of decrease diminishing over the last years (Cembureau 1997, p. 8). A decrease close to 3% in the coming years is forecasted with no further major potential of improvement. The immediate by-product of these major capital investments and process optimisations led to reduced CO2 emissions.

How modernisation can decrease specific energy consumption is illustrated by a comparison of the development in the old and new states (Lnder) in Germany. While in 1987 the specific energy consumption reached 3130 kJ/kg cement in the old states, the consumption was about a third higher in the new states with 4250 kJ/kg cement. The rapid modernisation and the implementation of new technologies led to a fast reduction of specific energy consumption in the new states. In 1997 they recorded with 2905 kJ/kg cement an even slightly lower consumption than the old states with 2995kJ/kg. For the year 2005 a consumption of 2800 kJ/kg is aimed for is both parts of Germany (Table 3). In Britain the kiln fuel consumption per ton of cement has been reduced by 40% since 1961.

Appendix C 1

Table: Specific energy consumption in Germany in kJ/kg cement Year Old states New states 1987 3.130 4.250 1990 2.990 3.980 1994 2.950 3.180 1997 2.995 2.905 2005* 2.800 2.800 * aimed for Source: Verein deutscher Zementwerke (VDZ 1998) Differences in the specific energy consumption with respect to technology can be considerably. Depending on raw materials and the type of process the fuel consumption reaches about 3200 to 5500 MJ/t clinker (Cembureau 1997a). In general countries which still operate a number of wet processes show a higher energy consumption. But changes to other processes are under way. Rugby is for example changing a number of kilns in the wet process to a most modern semi-wet process which will account for half of Rugby Cement's total UK capacity 21. Besides taking into account the required environmental standards the new production process and equipment will reduce fuel usage by one-third.

Examples of modernization possibilities are various and effect emissions as well as energy savings (Cembureau BAT document, 1997b; Monitoring Report, VDZ 1997 and 1998). The reduction of energy consumption requires process engineering which differs according to the age and type of plants. In one of the plants modernisation led to cyclones with a low loss of pressure, use of returning exhaust gases and modern grates into the clinker cooler. This action achieved a reduction of energy in the size of 5,800 tons of coal and a reduction of 25,400 tons of CO2 per year. In another plant the loss of pressure has been too high in the upper cyclone stages. A newly constructed pipe construction in the top stages reduced the loss of pressure by about a half without increasing emissions. The result has been an energy saving of 2,000 MWh/year. A plant in Karlstadt (East Germany) has been built in 1969 and undergone a number of optimisation procedures:
21

At the beginning of 1997 work started on a new 1.35 million tonnes per annum cement plant which is due to be commissioned in 1999. This 120 million investment will provide a state of the art cement plant, which is considered as an industry benchmark by Rugby (http://www.nettradecenter.se/ntcframe.html, link Rugby).

Appendix C 1

optimisation of the meal distribution in the cyclones, reduction of meal circulation, optimisation of the air direction and better regulation and control of the kiln. To make use of economies of scale at Teutonia a new kiln was installed which substituted two smaller kilns which produced the same capacity. The energy consumption was reduced by 10% and at the same time NOx emissions almost halved. The utilisation of economies of scale are also apparent in the investment by Dyckerhoff in Lengerich where the capacity of three Lepol kilns are substituted by one new kiln. The installation of new technology will reduce the specific energy consumption from formerly 3520kJ/kg clinker to 2925 kJ/kg clinker and reduce the volume of emissions from 640.000 to 490.000 m3/h.

After East German plants have been reconstructed and attained considerable savings in specific energy consumption the plants in Eastern European countries will follow. In Poland more than 50% of production comes from wet process kilns which show a high specific energy consumption. Although energy prices are relatively low in Poland modernisation of plants is expected. The Noviny cement plants, for example, operated without cyclone heat exchangers had a specific energy consumption from more than 4000 -4400 kJ/kg clinker (World Cement , Dec. 1994). After modernisation the energy requirement was reduced to 3275 kJ/kg clinker. Experience in the new federal states in Germany show that it has become apparent that the lower energy consumption is not automatically achieved immediately after completion of the modernisation measures but that operating experience is required for achieving low levels (VDZ-Report, 1997). To optimise a new installed plant can take as long as two to three years.

Appendix C 1

Table: Energy consumption and prices for cement plants in EU and major competitors for 1996

Country*

Kiln Energy Consumption (in kcal/kg)**

% Alternative Fuels***

Electricity Consumption (KWh/t) for Cement and Clinker****

Approximate Cost of electricity ****** ECU/100KWh Ho: 100 GWh/mio tonnes average

Belgium Denmark Finland France Germany

1016 1055 848 902 Not available

19% 0% 0% 47.2% Not available

101 114.5 118 121 108

5.36 7.55 4.52 (Jan. 1997) 5.50 (Paris) 6.53 (Duesseldorf) - up to 8.74 in Erfurt

Italy Luxembourg Portugal Spain Sweden Switzerland Czech Rep. Poland Slovak Rep. Hungary Turkey*****

Not Available 876

~2.4% Not Available 0.4%

117.7 91.7 93.4 101 120 101 117 117.7 117.2 104 128

5.88 4.77 5.55 (Lisbon) 6.54 3.88 Not Available Not Available Not Available Not Available Not Available Not Available

830 813 824 919 1254 997 896 928

1.2% ~2% 24% 1.5% 0% 2.1% 0.6% 0%

Sources: Cembureau Annual Review 1995, and Eurostat Electricity Prices 1990-1998. Caution: *Not all countries report data due to sensitivity in disclosing strategic information. ** Energy for kiln derives from Coal, Lignite, Petcoke, Fuel Oil, Gas and Alternative Fuels. *** Alternative Fuels includes mainly Waste and other Derivatives. ****Electricity consumption includes energy utilized for cement mills as well. *****Data for Turkey include Citosan only. ******Electricity prices for July 1996 (taxes included). They are only indicative based on the hypothesis that the average plant produces 1mio tonnes/annum and there is no prior agreement between user and provider. Hence the prices reflect the higher end of industrial consumption with maximum discount in most EU countries (70GWh/year Eurostat data).

Appendix C 1

For energy a number of different materials can be used: coal, petcoke, fuel oil, waste etc. Coal and fuel oil follows world prices as well as Petcoke. The latter, though, recently experienced a precipitous fall in its price and competes fairly now with mining waste. In fact, there exist large stocks of Petroleum Coke around the world that do not reach the markets currently. Nevertheless, a sharp increase in the price is not impossible. A minor disadvantage to using Petcoke is its high content in SO2. (See Annex 1& 2)

COAL (the most expensive of all) 42% in EU-15

Energy Palette for Cement kilns EU-15

PETCOKE (oil derivative) and Fuel Oil & Gas 48%

Waste (incl. Household, hazardous, tires, plastics, etc.) This type of energy comes at no cost or even an implicit subsidy, since cement kilns are currently paid to burn waste, 10%

Further improvement in costs can be achieved through burning waste. Materials entering a cement kiln are exposed to very high temperatures, turbulence and long resistance times. The organic material of waste is burnt as a fuel whereas the inorganic contents are almost wholly combined into the crystalline structure of the clinker. As most waste becomes part of the end product there is no residue to be disposed or landfilled later on as opposed to waste incinerators. Therefore cement kilns provide a unique opportunity to provide environmental benefits in terms of reducing waste disposal and to replace primary fuels e.g. coal or petroleum coke by materials which have a calorific value and which would, before recycling, be regarded as waste. The main waste types burnt in kilns are complete or shredded tyres, plastics, paper products, recycled fuels, domestic refuse and landfill gas. When recycled fuels recovered from the paint, chemical, food, and pharmaceutical industry are burnt most emissions either remain unchanged or are reduced. Sulphur dioxide emissions are generally lower due to a reduced sulphur input and more stable kiln operation. NOx emissions are significantly lower as a result of improved flame stability(BAC, without year).

Appendix C 1

On average the efficiency of alternative fuels is just half that of coal so that the double amount of alternative fuels has to be used (Kehl, unpublished).

For the usuage of alternative fuels special limits have to be regarded. For Chlorid the limit in alternative fuels is 0.2% in Germany which reduces the choice in alternative fuels. A general limit for production in normed cement is 0.1% where it helps to reach the required strength. A high chlorid content in the process leads to alkali problems which can block the cyclons and lead to a breakdown of the process. A method to reduce the amount of chlorid dust is a bypass. A bypass of 15% can handle chlorid contents up to 1.5%. The collected dust can then be added to the cement milling process to achieve the required strength (Festigkeit, Kehl, ohne Jahr).

While the energy consumption for the kiln has been reduced continuously in the last 40 years the electricity consumption has been increasing rom 80 kWh/ton cement in 1960 to 110kWh /ton cement in 1990 in the West Germany (Scheuer and Ellerbrock, 1992). Reasons for this are: Higher use for environmental equipment Higher use of coal instead of oil in modern mills Finer grinding of cement particularly of composite cement Higher automatisation of the process. On average the electricity consumption is divided for the different production stages in the following way (Scheuer and Ellerbrock, 1992): Quarry and mixbed Raw meal milling Raw meal homogenisation Kiln and cooler Cement milling Transport, packing 5% 24% 6% 22% 38% 5%.

Appendix C 1

Since cement milling requires the largest part of electricity special efforts are taken to improve the cement mills. Ball mills are simple to operate, relatively easy to maintain but because of their great specific power concumption more efficient grinding processes have been developed. With vertical roller mills (Vertikal-Wlzmhlen), high-pressure grinding rolls (Gutbet-Walzenmhlen) and horizontal roller mills (Horizontal-Wlzmhlen) the energy requirement can be reduced substantially. The optimum process has to consider the processing of the different input materials as there are for example in composite cements: clinker, blast furnace slag, limestone and pozzolans and the required product range. Ballmills also have the greatest noise emission. Therefore they have to be operated inside closed buildings with special ventilation and air-extraction equipment. In high-pressure grinding rolls very high levels of energy utilisation of up to 60cm2/J are currently reached. Trouble free operation is a matter of ensuring that the maximum particle size of the feed material does not exceed 1.5 to 2 times the gap width, that the feed is distributed as evenly as possible and that any foreign bodies are reliably removed from the system. Ver moist feed material has to be pre-dried. High-pressure grinding rolls are integrated into grinding plants to increase the output of ball mills. The fresh material, for example, is fed into high-pressure grinding rolls where it might be preground to a fineness of 2000 to 2500 cm2/g and then is ground in the following ball mill to a fineness of about 3500 cm2/g. In this way the throughput of existing ball mill plants can be more than doubled while the specific power consumption is reduced by up to 30%.

For raw materials with moisture contents of up to 20wt.% vertical roller mlls with integral classifiers have been used. Cement finenessess of up to 5 500 cm2/g can be achieved and the mills run with only slight vibrations and no breakdowns. Energy utilization of up to 45 cm2/J can be achieved.

The horizontal roller mills are only suitable for dry materials. Energy utitisation of this design has reached up to 50 cm2/J. However, the internal fitting show heavy wear. Up to 1998 no operational experience with this design has been known in the cement industry (Scheuer and Ellerbrock, 1998).

Appendix C 1

In a comparison of grinding processes ball mills have the highest energy consumption but considerable energy savings can be achieved if they are run in combination with other types of mills. The costs of servicing and maintenance is generally low with ball mills and highest with with high-pressure griinding rollers. If high-pressure grinding rollers and horizontal rollers mills are used separage dryers might be necessary for moist mill feed.

With regard to the conservation of resources, energy saving and reduction of CO2 emissions composite cements are becoming more popular. The higher the diversity of cement types produced the more complicated the process becomes. For example, moist granulated blast furnace slag can be used in proportions of 10 to 80% and therefore requires different drying capacities, flexibility to grind different particle size distributions to take account of different reactivities and different grindability of different input materials. Therefore a high degree of process engineering optimisation is required. For this a comprehensive factory system for moniroting hte properties both of the starting materials as well as of the intermediate and final products is necessary when several starting materials are used (Scheuer and Ellerbrock, 1998). Combined energy consumption for fuel and electricity indicates that specific consumption has fallen by 37% from around 7.31 GJ/t cement to 4.55GJ/t over the period from 1961 to 1991 in the UK (BCA, without year). Electricity prices in turn vary widely across countries. Effectively, large discounts may exist for large consumers.

The cement manufacturing process allows a substantial proportion of the sulphur in kiln fuel to be absorbed within the final product. Coal with high ash contents can also be used as the ash from the fuel combustion forms part of the ultimate product. These factors can enable relatively high-sulphur, high ash fuel to be utilised with significantly lower sulphur dioxide emissions and ash disposal needs than would arise from combustion in a conventional power station.

Appendix C 1

Any type of waste can be incinerated in cement kilns if properly controlled and sorted before entry into the kiln. Nevertheless, incineration falls under EU Directives and future revisions might render the process unprofitable. Wet as well as dry kilns find it possible and profitable to incinerate wastes including household wastes. If that possibility ceases to exist, plants with wet processes might find it harder to survive, since their process necessitates significantly larger amount of energy to operate than dry processes. A successful example of the above process can be found at Ciments dObourg in Belgium22.

Secondary materials The environmental performance of cement manufacturing has been significantly improved by reducing the cement content for a given design concrete strength by about 15% if measured per cubic metre of concrete. The introduction of slag and fly ash utilisation has reduced the proportion of manufactured Portland cement in concrete to an even greater degree.

Large quantities of secondary waste cementious materials are blended with cement at the concrete mixer or in the cement milling process. In some circumstances up to 50% replacement of cement can be achieved with granulated blast furnace slag and 30% replacement by power station fly ash. These materials would otherwise be regarded as waste and would have requiree disposal. In addition, also artifical gypsum can be utilized which is produced in flue gas desulphurisation plants attached to power stations. Its use reduces the extraction of gypsum from naturally occurring deposits. In Britain the addition of secondary materials as percentage of cement has increased from 1% in 1971 to almost 15% in 1990 (BCA, without year). This represents a substantial reduction in raw material usuage, energy cosumption and waste disposal.

To enlarge the utilisation of alternative materials which fit the mineral composition of clinker a circulating Wirbelschicht (fluidised bed) has been installed in one cement plant.
22

personal communication, Mr. J.P. Jacobs, Director at FEBELCEM

Appendix C 1

In this fluidised bed the energy and mineral parts of the materials are separated. The energy parts are burnt in the kiln while the mineral parts are transported to the raw mill.

7.

PRICES

Cement commands a fairly low unit-selling price. In comparison with other minerals, it is 4 times cheaper than glass or steel and some twelve times cheaper than paper. Cement is used in the building industry, industry and road construction. In the building industry the costs for cement amount to about 1%. A reduction or increase in cement price will hardly effect demand (Fiederer et al. 1994). Thus, demand for cement can be seen as highly inelastic. It depends on the development in the construction sector and the preferences for type of materials of the customers which vary between the countries and lead to different consumption per head which cannot be influenced by the cement producers.. Moreover, cement prices have been decreasing in real terms the past few years. Whilst the overall consumer price index for Europe between 1982 and 1992 rose by 63%, the cement price grew only by 30,6 recording a relative price decrease in ten years of approximately 20%. (Sources: Eurostat and Cembureau 1995) Pricing policy might also be dictated by Member State governments, (i.e. Portugal), that intervene to maintain or contain prices.

Appendix C 1

Table: Approximate average prices in EU markets

Country Austria Benelux Germany East Germany West France Greece Scandinavia Portugal Spain Italy UK Poland Romania Hungary Czech Republic Turkey

Price at Port

Price Inland 92-104

80

90-100 50-55 Due to Polish Competition 90-100

65-75

85-100 / 49-62 75-85 70-75

80 55 70 40

85 55 (North at $65, South at $40) 75 35-50 30-32 65-70 (duopoly of Heidelberger and Holderbank) 40-60

35

40-45

Caution: Prices are denominated in US dollars. The prices are an approximation and subject to large seasonal fluctuations as well as to differentiation in product types. The ranges might differ substantially among different places. Exchange rates are also subject to abrupt fluctuations (sources:, The Global Cement Report, Mr. S. Goodfellow, financial analyst at ING Barings, The Cement Industry 8.Dec. 1998).

Relative to Western level East European price levels appear cheap. Thus, Polish cement is priced half of Belgium or West German cement prices. Because of the transport costs Polish exports have a strong effect on the East but not on the West German market. However, price differences exist even among the Eastern and Western European countries and reflect different costs and competitive situations. In the Czech Republic cement prices are relatively higher than in Poland, but lower than in Hungary where a duopoly exists. In France prices are almost double the price in Italy where consolidation has not happened yet and 20 manufacturers are competing. Regional prices also differ as

Appendix C 1

can be seen in Spain where ex-work prices for bulk cement were about $67 in the Basque Country in the north east and $59 in Andalusia in the south (The Global Cement Report, 1998). Comparing the price changes between 1992 and 1997 (expected average price) in $ a decrease can be found for most West European countries except for the UK where a price increase is recorded (see table).

Table: Average prices in 1992 and 1997 per ton ($/ton) France 1992 1997* 92 82 W. Germany E. Germany 93 86 77 67 Italy 73 54 Spain 70 57

*expected average price

source: The Cement Industry, 8. Dec. 1997, Construction Monitor, Dec. 95

8. Research & Development R&D is conducted at three levels: at company level, by associations and by plant equipment manufacturers. Plant equipment manufacturers deal mainly with new or adapted technology in optimisation of processes, considering that emissions comply with relevant and future legislation. Producers of cement plants are relatively few and wellknown to the industry.23 They provide anything from turnkey plants to spare parts and services. Investments in the cement industry have a cyclical character of about 20-25 years. The construction of a plant takes about two years. In the last decade investments have been concentrated in South-East Asia. The largest plants there have a capacity of 10.000 t per day (Korea, Tailand and Malaysia). In Europe demand for modernisation has picked up in the last few years. In Germany new investments were required after unification in East Germany. That is also where the largest German plants can be found with a capacity of 5.000 t (in Bernburg and Rdersdorf). In Karsdorf, also East Germany, the kilns have been renewed. In the UK new plants are planned as well by Blue Circle,

23

the largest are Polysius (from Germany) and FL Smith (from Denmark)

Appendix C 1

Rugby and Sean Quinn. Average capacity of modern plants in Europe would be 2-3.000 t per day. R&D is done for the different parts of the plant, e.g. kilns, coolers and mills. Radical technological innovation or breakthroughs are rare as the sector is rather mature. The impulses for technological refinements come both from Polysius engineers and from customers and scientific institutes. The companies are specialized in the development of particular technologies and often cooperate with suppliers in developing and designing plants. The production of environmental technology is a relatively new business line. It was started end of the 1980s and was emphasised by the implementation of more stringent limit values within the legal environmental regulations. Raw materials are a decisive factor for the technology and the environmental measures to be taken. In addition, the local environment has to be considered. Therefore there are hardly any standard solutions and equipment has to be customized which requires a close cooperation with the plants. Ongoing endeavours in the development and marketing of new equipment and technologies are focussed on reducing capital cost, power consumption, increasing environmental compatibility, which ranges from emission reduction to the designing of low-impact plants; maximizing the use of substitute raw materials and / or fuels; the employment of artificial intelligence, such as expert systems and neural networks; and substantially increasing machine and plant availability.

Environmental protection is usually not an issue when equipment is sold to South East Asia, Africa and South America. However, dust and energy reduction is required in any country. In some countries, e.g. the US, there are strict limits for many substances which do not play a role in Europe. Technology has to be adapted for sales there. Further, technology which is delivered to less developed countries with a lower skill base has to be kept more simple. To familiarise technical employees with new plant equipment training courses are offered.

R&D at industry association level coordinates longer term research topics among their members. These topics are taken up and research is outsourced to research institutes or universities as it is the case in Britain or it is dealt with directly in the research institute at

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the association as it is done in Germany. Major fields of the research are cement and concrete technology, environmental technology, emission measurement and quality certification. Laboratory work takes place in cooperation with the member plants where new developments and tests are done with the managers, Meister and also the shopfloor workers. Another important task of the associations is the norming and standardizing of cement types. Financing of research differs. In Germany funding comes from membership fees; from the Arbeitsgemeinschaft Industrieller Forschung which finances projects of strategic interest to all members with 50%. The other 50% is matched by the Research Institute. The research results of the institute are made public to all the member companies and also to libraries. Quite often the institute cooperates with plants, universities and the Dutch Institute on International Flame Research. Research at company level differs widely in scale. Large companies run their own research technology centers, where they are also working on new technologies.24 A major part of all company research concentrates on product development and process optimisation. As cement is quite a homogenous product, companies try to differentiate in product qualities. Another important area is development for products for their customers in the concrete industry (cement is in competion with steel in buildings and bitumen for roads, for example) as this will extend the use and application of cement and concrete.

9.

Summary - Principal features of the Cement Industry

With an estimated annual worldwide production of 1,300 million tonnes and a selling price of about $70/tonne cement is a cheap mass product. The average costs for transportation are about 8c./tonne-km.

From the environmental side the following can be said:

1. Cement is produced without generating any waste-water or residues.

24

Heidelberger Zement e.g. has a large research centre in Heidelberg and also in Canada.

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2. Cement is made of non-hazardous, naturally occurring raw materials like limestone, marl and clay. 3. The main environmental impacts associated with cement production are energy consumption and air pollution. 4. It is possible to use wastes from other industrial sectors in the cement production process.

From the economic side the following characteristics can be mentioned:

highly capital intensive, with a long pay-back period on investments;

high fixed costs - can be up to 70% of total costs, depending on type of plant, etc

high costs of energy, up to 40% of total costs depending on type of technology and fuel used

because cement is a bulky, heavy product, transport costs are high: most transport is by road, with some by inland waterway (eg in the Netherlands) or by sea; the market potential of any given plant is said to be limited by technology and transport costs, so markets tend to be regional - most cement is delivered to distances around 200km from the site of production, except in the case of plants situated by the sea, where maritime transport may be viable in larger quantities

international trade is therefore very limited: worldwide, it accounts for only 6/7% of total production (not counting cross-border deliveries and transfers within the EU)

costs are very sensitive to the rate of capacity utilisation, and to the size of production facility - economies of scale

because the production process route is fairly standard, product differentiation is difficult

Appendix C 1

technology is in a mature phase and further evolution is likely to be limited

demand is cyclical (usually 5 - 10 year cycles), and depends very much on developments in the construction sector: price levels have very little effect on demand in the short and medium term. Demand went down substantially after the two oil shocks, and demand went down by 20% overall between 1980 and 1985. It has fallen more strongly in the north of Europe, but overall the trend is still downwards.

the cement industry has faced this with a certain amount of restructuring - without state or Community aids, and is adopting a position of permanent adaptation to changing circumstances. For instance, the number of Community cement producers went down from 182 to 133 between 1974 and 1990, and the number of plants went down from 378 to 304 over the same period. Restructuring can be expected to continue, especially given the search for economies of scale.

the Community is the world's largest cement producer, and many European producers have established a worldwide presence - the three biggest producers in the world are all European - Holderbank (CH), Lafarge (F), and Ciments Franais/Italcementi (F/I), followed closely By CEMEX ( Grupo Cementos Mexicanos - Mexico).

10.

Sampling for Matched Plant Comparison

To develop and test a methodology to assess the impact of Best Available Techniques (BAT) on the competitiveness of the European cement industry between plants, between EU Member States, and between the EU and other countries a matched plant research (a form of benchmarking) will be used to compare the performance of similar industrial plants. This research approach seeks to explain differences in the economic performance

Appendix C 1

of plants of similar size and product by differences in other factors like costs, business practice, job skills, R&D, innovation and environmental pressures (such as, in this case, to invest in BAT). It requires a sample sufficiently large to capture the influence of these explanatory factors, and visits to each sample plant, involving face to face interviews based on a questionnaire, in order to ensure that the data are accurate and robust. It will be used to compare the performance of industrial plants with different levels of investment in techniques that affect environmental performance in order to assess their impact on competitiveness. In particular, the purpose is to quantify those factors that are likely to influence the commercially successful, or otherwise, adoption of BAT.Best Available Techniques means the most effective and advanced stage in the development of activities and their methods of operation and which indicate the practical suitability of particular techniques for providing in principle the basis for emission limit values designed to prevent and, where that is not practicable, generally to reduce emissions and the impact on the environment as a whole.

The research plan proposes visits to four EU-countries and one non-EU country. For the matching the following countries seem to have interesting characteristics to be considered. As only five countries are to be chosen, the Scandinavian countries are not included, as their production cycle is exceptional. Poland has been chosen as the one nonEU-country as it's closeness to the EU makes imports rather easy. Turkey could be considered as an additional country if the participation of those plants can be expected and financial means are sufficient. Germany (and Austria): High environmental standards with strong enforcement (Germany - with the special case of East Germany exposed to rapid transition to the much higher West German standards) (Billhardt et al, 1996). Technologically advanced industry, most probably has a number of plants operating BAT technology. One of the most vertically integrated markets in EU. Much of the demand is tied to in-house customers.

Appendix C 1

Major producer in EU, with significant imports from neighbouring countries, especially Poland.

Diversity of plant sizes from small to very large (in tons cement/kiln). Diversity of financial possibilities and industry ownership (from large Banks to family owners).

Restrictions to the use of alternative fuels (waste). Companies have to find other ways to reduce energy costs (70% of operational costs) and achieve environmental imperatives.

UK: Long record of environmental compliance supported by experience with IPC licensing. Large investments in new technology replacing past inefficient plants (rationalization, economies of scale). Extensive use of alternative fuels. UK plants are owned by institutional stakeholders and are quoted in the stock exchange. The number of companies is very limited.

Italy: Relatively lower environmental standards and perhaps weaker enforcement than Northern European counterparts, though differences between North and South of Italy could be expected. Many small plants scattered around Italy serving local markets, though at rather competitive prices. Diversity of ownership from diversified and vertically integrated multinationals (Italcementi) to small family owned companies.

Spain: One of the largest producers and exporters of EU, with significant ownership of plants by foreign multinationals.

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Trade stresses recorded from Turkey, Romania and North Africa. Likely to operate below BAT

Scandinavian Countries and/or Switzerland: Likely to have the highest standards and strictest enforcement of all, hence widely applied BAT. Unique cooperation between authorities and businesses. small number of plants strongly seasonal production cycles because of long winter period

Turkey: Low environmental record, but likely to have reasonable technologies due to the young age of its industry. Large producer and potential exporter, especially in periods of domestic crises. Large costal plants possess adequate facilities to export to coasts in EU. The phenomenon could be exacerbated, since Turkey is signatory to a customs union with the EU and exports cannot be contained easily. Industry owned by large stakeholders, state or EU multinationals (i.e. Lafarge, Ciments Francais, CBR). BUT, approach and access to data may be difficult. This is also the case with North African plants.

Poland: Likely to have very old industry employing dirty processes. Lower emission limits Highly competitive prices because of lower labour, energy and transport costs Modernization of first plants take place. Poland is easier to approach due to recent accession agreement with EU and the investments by many European companies in Polish plants.

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Rose, D., Bentrup, L.(1995), Effektive Emissionsminderung bei Einstz von Sekundrstoffen im schweizerischen Zementwerk Siggenthal, in: ZKG International, no. 4 Rother, W. (1997), NOx reduction, in: The Cement Environmental Yearbook. Schneider, M. and K. Kuhlmann (1997), Environmental relevanceof the use of secondary constitutents in cement production, in: Cement, Lime and Gypsum, no. 1. Schwalbach, J. (1985), Die Zementindustrie, in: Mller, J. (ed.) Empirische Untersuchung von industriellen Grenvorteilen nach der Methode der Ingenieurschtzungen, DIW. Spenner Zement GmbH & Co. KG (1995), Werk Diamant: Investitionen zur Verminderung von Umweltbelastungen - Programm des Bundesministers fr Umwelt, Naturschutz und Reaktorsicherheit, Abschlubericht. Spenner, D. (1996), Preiskampf und Wettbewerb in der rheinisch-westflischen Zementindustrie, Frankfurt, Europischer Verlag der Wissenschaften. Sprung, S., W. Rechenberg and G. Bachmann (1994), Environmental compatibility of Cement, in: Cement, Lime and Gypsum, no. 8. VDZ (ed.) (1993), Ttigkeitsbericht 1990-93, Dsseldorf VDZ (ed.) (1996), Beton- Hart im Nehmen, stark in der Leistung, fair zur Umwelt, Dsseldorf.

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VDZ (ed.) (1998), Monitoring-Bericht 1997, Verminderung der CO2-Emissionen, Dsseldorf VDZ-Report '97 (1997), News from the Research Institute of the Cement Industry, Verein Deutscher Zementwerke e.V. (ed.), Dsseldorf Wagner, K. (1979), Ein Modell der Preisbildung in der Zementindustrie, Bielefeld. Wischers, G. and K. Kuhlmann (1991), Eco-Balance of Cement and Concrete, in: Cement, Lime and Gypsum, no. 11. Xeller, H. (1987), NOx-Minderung durch Einsatz eines Stufenbrenners mit

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