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Lobby against the levy

Like others in the cement industry, Rugby Cement chief executive Philip Bruce has strong views on the proposed Climate Change Levy. 'If we don't get most of the levy rebated, the major UK producers could be forced to import cement instead from countries where there is no levy.

'The net effect would not be to reduce global CO2 emissions - simply move them from one country to another.'

Cement prices would have to rise by about £3.33/t, or 8%, to cover the full cost of the CCL, Bruce says. This is enough, when taken in conjunction with the strong pound, to increase the attraction of imported alternatives. Bruce, however, is reasonably confident that current discussions with the Government will result in a much reduced levy.

'We're looking for a reduction of more than 90%,' he says. 'Our argument is that we are major energy users who have already invested heavily in improving fuel efficiency and are under constant threat of imports. We look for a similar deal to that achieved by other high energy users like the aluminium industry.'

By analogy, this would involve zero rating the 425kcal of energy needed on average to drive the chemical calcination process of producing a tonne of cement. The balance - the electricity consumed by the fans, blowers, dryers, ballmills and so on - should be eligible for a more than 90% reduction, Bruce believes.

He adds: 'In return, the cement industry is offering the Government a significant reduction in CO2 emissions over the next five to 10 years, mainly through the decommissioning of the less efficient wet kilns and the investment in new works like New Rugby and Blue Circle's Medway works.'

Without a deal on the levy, Bruce insists, investment in more fuel-efficient works will stop. 'The current price of cement makes it very hard to make an adequate return on the capital invested in new works. Although cement prices have risen slightly more than inflation over the last couple of years, over the last decade they've lagged well behind.'

Like other cement companies caught in this bind, Rugby has turned to alternative fuels, and its Barrington works is currently replacing 40% of its kiln fuel with processed liquid wastes. 'We believe alternative fuels are the way to go,' says Bruce. 'But the new protocol is bound to slow down the growth in the use of alternatives - unless it's applied with more common-sense than we've seen so far.'

Bruce is supported in this view by Rugby Group executive director for cement and lime Peter Crowley. 'Cement producers in other countries find it much easier to exploit unique local sources of alternative fuels,' Crowley says. 'There's one works in Switzerland that sits between the factory that produces Lego and one making food wrappers, and it burns offcuts from both.

'But in this country every trial of an alternative is treated as a unique event - and every trial costs at least £200,000.'

Allowing the knowledge and experience a company has acquired with alternative fuels at one works to be transferred to another would be the common-sense solution, Bruce says. 'Having to start from scratch every time is a real disincentive.'

Zero, or even negative fuel cost is Rugby's long term goal, like most cement companies worldwide. Even then, profit margins will still be significantly lower than with most other industrial chemicals. Crowley believes the only real route to acceptable profitability is increased production, triggered by a significant long term government investment in the country's crumbling infrastructure.

'We need to invest in the infrastructure, cut planning delays and take measures to end the shortage of building land. Yes, there are potential new growth areas for cement and concrete - such as contaminated land remediation - but greater public investment is the key.'

Failing an immediate Government spending spree, neither Bruce nor Crowley are particularly optimistic about the immediate future of the industry. 'Essentially flat' is their prediction for short term growth.

Margins can only be improved by reducing fixed costs, improving energy efficiency, and by fighting off the worst effects of the CCL. With the £120M New Rugby Works project now complete (NCE Concrete Engineering November 1998), Bruce and his team will be paying close attention to the remaining options for greater efficiency.

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