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https://thewest.com.au/business/con...raine-linked-spike-in-energy-prices-c-5838833

Cement producer Adbri worries about Ukraine-linked spike in energy prices

Sean SmithThe West Australian
Fri, 25 February 2022 4:05PM
Sean Smith


Adbri is consolidating its Cockburn Cement operations at a revamped plant at Kwinana. Credit: methode/methode


One of Australia’s biggest cement producers fears the Ukraine conflict will trigger higher energy prices, exacerbating already worrying inflation sending up costs across business.

Adbri chief executive Nick Miller said the company, a major supplier of cement, concrete, lime and aggregates to the building industry, fears the crisis will increase global energy prices, forcing it to pay more for the gas, oil and diesel powering its operations.
“We are very cognisant of the inflationary environment we are operating in and some of the challenges that I’m sure are going to emerge from the heightened geopolitical pressures,” Mr Miller said.
“The two biggies for us are oil and gas.”

Mr Miller said WA’s gas reservation policy ensured sufficient supplies, though at a higher cost, for the State’s industry, including Adbri’s $200m upgraded cement plant at Kwinana.

However, he fears a shortage of gas in Europe will be filled by more Australian LNG from the east coast, creating a squeeze that would push regional gas prices substantially higher.

With Adbri’s shipping its products to remote parts of Australia, higher diesel prices will also weigh on the company.

Those increased costs cannot be recovered from every customer.

Adbri’s annual profit rose 25 per cent to $116.7 million, driven by strong demand for its products for the mining and construction sectors, including a buoyant residential market.
Revenue was up 8 per cent at $1.56 billion.

Its shares closed nearly 8 per cent higher at $3.24.

Mr Miller said that the group was already passing on price rises of up to 3 per cent to four per cent following cost increases for inputs such as labour, pallets, shipping and gas.
But if inflation continued at its current rate, “out-of-cycle price increases are almost certain”.

The industry typically resets prices on April, but the Adbri chief believes “we are going to see increased frequency of price increases in the next 12 to 18 months”.
He also disclosed that the group had already replaced most of the lime sales lost with Alcoa’s decision to source product from overseas for its three WA refineries.
The long-standing contract with Adbri’s Cockburn Cement covered about 500,000 tonnes of lime a year, worth $70m.

But Mr Miller said Adbri had now placed 300,000 tonnes of the lost contract with new Australian customers, who had jumped at the chance during the pandemic to source a reliable, domestic supply of lime.
“It’s a good indication of how the disruption associated with COVID has actually assisted us. It’s brought customers to the table that wanted reliability of supply and certainty of delivery.”

Mr Miller also joined other firms in expressing interest in parts of the BGC building products empire, which is expected to be offered for sale again this year.
He said while competition issues could prevent a purchase of BGC’s cement business, he did not see any such obstacles linked to its concrete, aggregates or quarry assets.