Money in stone?
Europe’s demand for aggregate

	The ultimate aggregate carrier, “Stones” of 28,000 DWT, loading at Eikebet in the Oster fjord. PHOTO: ARNE SOGNNES

On the average each of us requires four tons of aggregate a year – for road construction, site development and construction purposes. In Great Britain alone some 230 million tons are quarried, mostly for local use, while Continental contractors are also looking to Scandinavia for supplies. The transportation of aggregate – crushed stone – is an important trade for the shortsea fleet, bringing cargoes from deposits in Scotland, Norway and elsewhere to the market.

For a low-cost commodity like stone, high volumes and low transportation costs are essential factors. The stone trade was traditionally thought of as a positioning cargo for shipowners, but this has changed long ago. To some extent tugs and barges are being used, but on longer distances small bulk carriers with discharging gear have proved successful.
The customers for aggregate are generally the large construction companies or suppliers of building materials. These are often quite large companies, like the Tarmac plc, a British subsidiary of the Anglo-American group with activities in several corners of the world, or Heidelberger Zement AG which is Europe’s leading cement producer, including Cementa and Norcem in Scandinavia. And for such industrial combines aggregate is just a small sector.
The largest single export quarry in our region is Glensanda in Northwestern Scotland, owned by Foster Yeoman, a family-owned company which also runs quarries in Bantry Bay and has an interest in Espevik, Norway. With an annual production of six million tons, Glensanda was laid out for vessels up to Panamax size with self-discharging systems.
Last year almost ten million tons of rock aggregate were exported from Norway to other North European countries, in addition to 1.9 million tons used by the North Sea offshore industry. The export volume has picked up from two million tons in 1988 but has shown stagnation the last few years at 10 million tons and a value in excess of EUR 54 million.
As the largest source of hardrock aggregates in Northern Europe, the Norwegian market reveals clear signs of consolidation and ambitions to reach the optimal scale economies.
Although there is a great number of quarries, many are owned by the six main producers: Norsk Stein, Oster Pukk & Grus, NorStone, Kolo-Veidekke, NCC Råstoffer, Halsvik Aggregates and Frantzefoss Pukk, each turning out 1 to 2.5 million tons a year.
Transportation is organised by producer or buyer, depending on terms. Some quarries prefer to deal on CIF terms, whereas some of the larger customers insist on FOB terms to control the distribution lines. The policies vary, from chartering market vessels to cargo contracts. Oster is partly owned by the shipping company Sandfrakt, whereas Kolo-Veidekke and NCC are contractors in their own right and cover their logistics by cargo contracts, the latter through their subsidiary Holst Shipping in Randers.

	Norway's export of aggregate in million tons, 2001. Source: NGU.

The dominant player
The trend for consolidation in the market for construction materials is apparent from Heidelberg Zement. From local roots, Heidelberg has grown by take-overs, particularly in the cement and concrete business to an 80 per cent market share in Northern Europe. In the gravel and aggregate sector the company owns Jehander Sand & Grus in Sweden as well as NorStone AS in Norway, the largest single producer.
Today Heidelberg controls roughly half the export of aggregate from Norway through NorStone with its eleven quarries and also the Norsk Stein quarry at Jelsa through the affiliated Mibau Baustoffhandel in Cadenberge. NorStone was acquired from the Aker group and has its own shipping division with nine excavator-fitted bulk vessels of 800 to 3,500 DWT, mainly used for transports to Norway and Sweden. Heidelberg has reportedly been keen to secure a stake of 49 per cent in Oster.
The quantities exported to the UK and Continent are taken on FOB terms by Heidelberg or Mibau and shipped by Stema Shipping AS based in Aabenraa, Denmark. These volumes are taken to depots or delivered directly on site.
For effective transportation Heidelberg has joined forces with Jebsens, the bulk shipping company in Bergen, in the jointly owned Beltships operation with a fleet of eleven self-unloading bulk carriers.
These are all fitted with a discharging system which includes a conveyor boom with an out-reach of 36 to 81 meter. The fleet consists of five 8,000–12,000 DWT vessels from the Jebsens fleet and the 16,000 DWT Splittnes in addition to two 28,000 DWT vessels delivered last year, Stones and Kvitnes. Jebsens also has a number of similar vessels employed in offshore and in Australian waters.

Cost-efficient carriers
The newbuildings Stones and Kvitnes represent the most cost-efficient aggregate carriers in the North Sea, each designed to carry two million tons a year, fitted with conveyor booms of 81 meters and discharging 3,000 tons an hour. Financed by German Kommanditgesellschaft-equity and management with Reederei Frank Dahl in Cuxhaven, these are employed within the Mibau Stema operation.
For a cheap raw material the freight rates are generally low, and the key to economy may be good productivity – quick passages, discharging rapidly by the ship’s gear at any time of the day and a hasty return.
For sophisticated self-unloading vessels like the Beltships fleet, with higher finance costs, the results will also depend on available quanitities of cargo.
Requiring two million tons per year for the 28,000-ton vessels tends to underline this point. One thing is certain – there will still be demands for large volumes of aggregate in Europe and the aggregate trade will largely be controlled by the large suppliers of building materials. So far the basic material – crushed rock – has been a cheap commodity; a British export duty of one pound per ton was recently inposed and increasing environmental focus on quarrying may well contribute to higher costs. Effective transportation, too, should have its value.

//Dag Bakka Jr

Back to SSG 10, November 15

Latest update 18-10-2006 8:49

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