The use of Supplementary Cementitious Materials (SCMs), such as slags and fly ash, in cement blends is a well-established methodology for reducing clinker factor while imparting beneficial properties to the eventual concrete product. Here Global Cement speaks to Charlie Zeynel of ZAG International Pty. Ltd., a company that sources, markets and sells a full range of minerals and raw materials as well as intermediate and finished products to a wide range of industries. What are the current trends and what can we expect from the SCM markets in the future?
Global Cement (GC): Let’s start with slag. What have been the main trends in the use of granulated blast furnace slag (GBFS) as an SCM recently?
Charlie Zeynel (CZ): There are two major trends at present. Firstly, there has been a noticeable up-tick in the use of GBFS in certain regions. Secondly, there has been a change in emphasis on why producers are adding GBFS to their products. In the past it was viewed very much as a low-cost clinker extender. Now, the environmental benefits and the positive effects on concrete performance of including GBFS are also important considerations.
This understanding first took hold among cement producers in Europe and Japan, where the sector has long understood the environmental and performance benefits. However, efforts to promote the benefits of GBFS were sporadic and never truly sustained. Now we are seeing a pull effect from authorities, regulators, architects and others, added to the push effect. That is the result of education. These groups now understand the benefits and are specifying accordingly.
This effect has been observed prominently of late in the Middle East. The government of the UAE implemented new regulations in May 2015 so now all major infrastructure projects and sub-structures have to use at least 60% slag or ash-containing cements. This is the first time that we have seen government-level instructions to this effect. An increase in SCM use is now taking hold in the wider region.
There is now a great influx of GBFS into the Middle East, mainly from Japan, which is one of the highest quality suppliers. As a result there is now a shortage in the region.
GC: Where is next for a boom in GBFS use?
CZ: We think that the US could be the next ‘big one’ for GBFS use in cement. GBFS cements represent 30% of cement sales in Japan and around 25% in Europe. In the US it is 6%, which represents a great opportunity.
The drivers for this change are two-fold. Firstly the US is, gradually, catching up with Europe in terms of environmental regulations. Greater awareness by all parties will feed into specifications and generate a pull of demand. Secondly, there is going to be a shortage of cement in the US in the future. GBFS will provide another way to ‘find’ some extra cement, rather than importing it all.
I expect the ‘explosion’ in US GBFS use will really start to take hold in the next five years. It could even result in GBFS imports, given the unfortunate distribution of GBFS relative to cement-producing areas in the US itself. The US is strange, because it technically has an excess of GBFS. The problem is that it is too far from many cement production sites, mainly located in the Mid West.
GC: Would you expect the US to achieve Europe-like use of GBFS in that five-year period?
CZ: Well that would certainly be a lot! I am not sure that will happen across the country but coastal regions could well see very high use of GBFS-containing cements.
California, the Gulf Coast and the Eastern Seaboard are the three regions that will import the most cement in the next few years, driven by economic recovery, increases in population and the fact that cement capacity in these regions is reaching full capacity. Those regions could see the ratio of GBFS-containing cement rise much faster than inland regions.
GC: Where else will see increased use of GBFS?
CZ: There are countries in Africa that have been importing small quanitites of GBFS but it could be a significant factor in larger, predominantly coastal markets in the next five years. The extent to which GBFS use will develop in each country is dependent on the local economic and, crucially, political situations, but the underlying potential is very strong.
The level of sophistication of the cement sector is also developing in Africa. Dangote, for example, is now a major player looking to develop all aspects of its business. Indeed in July 2016 it announced the construction of a US$89m slag grinding plant at Port Harcourt, Nigeria, built by China’s Sinoma. On top of this, multinational firms are increasingly buying into the market and bringing their expertise with them.
GC: What about South Africa?
CZ: South Africa is a long-term sophisticated user of GBFS due to its mineral industry. However, South Africa has the same problem as the US in that the distributions of supply and demand don’t overlap well. Cement demand has also been down there due to the prevailing economic and political conditions.
Parts of South East Asia and Australia are major users of SCMs and this will continue to grow. The other major area could be the west coast of South America, in Peru and Chile especially, as all of the GBFS would be imported as all of the blast furnaces are on the other side of the continent.
GC: Where do supply volumes currently restrict the use of GBFS in cement?
CZ: There is more a desire for higher quality in many areas rather than an all-out lack of material. The Middle East and Australia, for instance, would love to get their hands on more Japanese slag for instance.
GC: Will the countries supplying GBFS change as well in the next five to 10 years?
CZ: GBFS can only be made in blast furnaces and there has been a reduced emphasis on these in the past few years, certainly in the developed markets, where there is now a preference for mini-mills and electric arc furnaces. A lot of blast furnaces have been built in China and India, with a few in Brazil and Russia, but very few are being built at present. This situation will not change, certainly in the short-term, as we already have far too much steel capacity.
However, for GBFS there will be a shortage at a global level. This is already being seen in Europe, which is now exporting its former surplus, and Japan, which is on allocation.
GC: What about the effects of Chinese state-backed steel producers?
CZ: They have not become a major factor, yet. The numbers in China are ridiculous, 10 times anywhere else. Interestingly, the steel companies have built a lot of grinding plants, so they have a lot of ground granulated blast furnace slag (GGBFS). They are trying to export this powder, which involves a far more complicated set of logistics than GBFS and that makes it far harder.
There are few quality suppliers and, on top of that, there are differences between the Chinese pricing structures and how international customers are used to buying G/GBFS. The Chinese set quarterly prices but GBFS is not a spot-pricing business. Cement producers in other countries want long-term prices so they know what they are getting and can properly secure shipping.
In the longer term, there will be well-recognised Chinese GBFS suppliers, but probably not that many. This is because the majority of steel producers in China are, as you point out, state-owned and, unfortunately, contracts with state-owned Chinese steel producers should be viewed with caution. Also, ensuring consistent quality over the long term could be a challenge. It will take a lot to undo that perception among international customers.
GC: What are the trends in the use of fly ash and SCMs other than GBFS?
CZ: GBFS and fly ash have always been the big two SCMs. Their use has generally depended on what was available locally and, if both were, it came down to price. However, we are now seeing an increase in ternary blends, with both GBFS and fly ash. From a technical perspective this actually ‘irons out’ some of the disadvantages of using just one additive. Many users will tell you that ternary blends are actually the best in terms of their overall properties.
Another trend is that we are seeing increased shipments of fly ash. Traditionally this has not been the case, as fly ash, being a powder, requires more sophisticated infrastructure than GBFS, specialised silos, pneumatic conveying systems and suchlike.
As for other SCMs, natural pozzolans are well documented and some producers use them, just not to a great extent. In many cases they don’t have the consistency that cement produers need. At the other end of the spectrum, silica fume is also used but its ‘SCM market share’ is limited by its high price.
GC: There have been some major changes in the fly ash situation recently. Can you expand on those?
CZ: The fly ash situation has been turned upside-down over the past three to four years, with a continent-wide move away from coal-fired power across Europe. Germany is leading this, along with UK providers like Drax, with some coal-fired plants due to close or switch to biomass in 2016.
Just six months ago the UK had ample fly ash. Now it’s anticipated that the country will be short by 0.2-0.3Mt/yr to supply current demand, Brexit notwithstanding. The price for fly ash has gone from Euro10/t (delivered) to Euro20-30/t in six months. The excess fly ash that was sitting in Germany and the Netherlands has been completely absorbed. The Danes and Finns have also announced that they are switching to biomass, which will put further upward pressure on fly ash prices in Europe.
Earlier I mentioned the changing specifications in the UAE. This effect is also being felt in Europe. The new Fehmarn Belt bridge/tunnel between Denmark and Germany has specified only fly ash cement. As this project is led by governments, it could signal an increased emphasis on fly ash and GBFS-containing cements in other projects in the region.
Of course, all of this has knock-on effects for other countries too. Just 12 months ago, northern Europe was exporting large quantities to the US. Now it has been reduced to a trickle.
GC: Along with the reduction of steel capacity in Europe (which will reduce GBFS supplies), would you say that European cement producers now face a ‘double-whammy’ of constricted SCM supplies?
CZ: Exactly - Producers are going to have to take the cost increase on the chin in the short- to medium-term and look for other sources of SCMs. This may include Italy, where fly ash disposal costs have now reached Euro100/t. People are also looking at other countries to replace the fly ash being lost from northern Europe but there are logistical, political and economic barriers to overcome.
Europe is not the only place where this is a problem. The US is also closing 300 of its coal-fired power plants, starting in 2015, due to the availability of shale gas. This represents around 20% of the US coal-fired capacity and therefore an impending shortage of fly ash.
Globally the industry is going through an interesting paradigm-shift. The areas that need fly ash we have discussed above. Of course, meanwhile India and China are building coal-fired power plants and making loads of fly ash. However, the logistical and business barriers, some of which we have already talked about, are major barriers that have to be overcome if we are to properly make use of the estimated 250Mt of usable slag and 270Mt of usable fly ash located around the world.
Dealing with this logistical challenge will require comprehensive solutions. Previously we could rely on the larger multinationals, such as LafargeHolcim, HeidelbergCement and Cemex, to invest in ‘door-to-door’ solutions and handle everything in house. They will continue to do this. However, within regional and national producers, that expertise is not there. There is a lot of work to be done to convince, for example, an Indian power plant that its fly ash has value elsewhere in the world, that it should invest in specialised terminal facilities and commit to a 10 year contract to supply a cement producer. Of course, the cement producer also has to be convinced that the power plant will honour its commitments before it will be prepared to invest in import infrastructure.
That is where companies like ZAG International come in. We are working on connecting the dots and it can be done. However, it is not a short-term game, there cannot be brokers and traders jumping in and out.
In the future, obtaining quality SCMs will become increasingly strategic. Ultimately, those producers that embrace the new conditions and invest now will stand to gain the most from the economic, environmental and performance advantages of SCMs in the coming decades.
GC: Charlie Zeynel, thank you for your time.
CZ: You are very welcome indeed.
