Issue 3, 2018. June-July

   

FAKE CEMENT IS A PROBLEM IN GEORGIA: HOW TO SPOT COUNTERFEITS

Paul Rodzianko, the Chairman of the Georgian Cement Association, overviews Georgia's counterfeit cement problem and explains how consumers can be sure they are purchasing the real thing.

Counterfeit cement? Yes, counterfeit cement. A new concept for you? And, yes, it exists here in Georgia.

In this article, we will tell you how and why these counterfeit products are made; what are the tell-tale signs of these bagged forgeries; how these faked products cheat you and expose you, the consumer, to risk; and the impacts of these products on the economic well-being of Georgia as well as about the mission of the Georgian Cement Association.

How faked cement is made

When they can, unscrupulous people worldwide try to make an extra buck by trying to pass off cheap "knock-offs" as genuine products. With cement, cheating is not a harmless exercise: it can lead to injuries and fatalities from collapsed construction. If a proven-quality cement sells for 11-12 lari a bag and similarly marked bags generally sell in the range of 9-10 lari (but sometimes even as low as 6-7 lari), a customer might think that they are making a great buy because both bags describe the cement inside as M400, CEM II, 32.5 or something similar. Even if a customer looked inside the bag that he or she had just purchased to make sure the physical product conformed to the characteristics described on the bag, it would be impossible for the customer to tell visually or by touch. Cements even of vastly different grades look and feel pretty much the same. In fact, even if you added water in a test, you would not know the result for 28 days: the time it takes for cement or concrete to reach its full strength.

Quality cements that are made to specification require the use of a certain blend of materials. The most expensive of these is clinker, which generally accounts for 75-95 percent of the physical cement, depending on the grade. Clinker is milled together with gypsum, slag and other additives following the specific formula needed to yield a specific type of cement. On average, a quality cement must produce a compressive strength of about 110 percent more than a given standard, for instance 35.75 mpa rather than the minimum 32.5 mpa for M400. The reason for this margin of safety is that all manufacturing processes are inevitably subject to some modest fluctuations in quality. If the average compressive strength is higher than the minimum specified, it is extremely unlikely that any cement sample produced by that mill will be below its specified strength. Only this manufacturing approach can produce 100 percent reliable cement for sale to the consumer in bags or in bulk.

In the case of counterfeit cement products, their approach is very simple to understand. If the clinker alone represents 75 percent of the composition-and somewhat more of the cost of the cement- using only half the clinker needed will increase that mill's profitability by about 35-40 percent. Even if their bagged product is sold for 10-20% less than the genuine product, this reduction in the amount of clinker used will still increase the profitability of that product to the owners-at the cost of a dramatic reduction in the quality of the cement. Such manufacturers can even afford to provide extra incentives for their distributors to sell their bags more aggressively than the more expensive quality products by offering them a larger commission.

The Georgian Cement Association has been conducting blind testing in the marketplace for one year now, with the most recent testing having taken place last December. The counterfeit cement results were truly discouraging: 14 out of the 25 of the cement samples tested in December 2017 were substantially below specifications, ranging from minus 39 percent (-39%) to an astounding low of minus ninety percent (-90%). Approximately 300,000 tons (13 percent of the total cement market) of such products were sold to consumers last year.

The Tell-Tale Signs of Counterfeit Bags

Since a consumer cannot distinguish visually or by touch whether the physical product he or she just bought is the product described on the packaging or whether it is an inferior product, what can a consumer do? Here are some clues for a consumer to bear in mind:

Neither the name nor the contact information of the producer of the cement is listed on the bag.

The sub-standard cement in bags labeled as coming either from Iran or Armenia appears to have been produced locally since no cements from these countries were imported legally into Georgia in 2016 or 2017.

Green bags that look like Heidelberg bags but with mis-spellings, other small distinguishing marks or no contact information must be avoided.

Bags that are priced 10-40% lower than bags of the same listed quality sold by known reputable producers are not likely to be legitimate.

Avoid dealers who stock obviously fraudulent bags next to legitimate ones.

Consider contacting reliable, GCA-approved producers for the names of recommended dealers, or buy directly from these companies.

Unfortunately, there are some producers who produce bags containing low-grade cement-like material and nevertheless still list their names and contact information on the bags. They substitute the essential materials needed to make good cement with worthless filler. These companies seem to bank on the fact that customers either will not notice the poor quality of the product or do not care.

How Consumers Are Cheated and Exposed to Risk

Obviously, if a consumer needs to choose which brand of cement bag to buy (of identical quality according to the markings on the bag), he or she will need to ask: How can there be such a large price difference between products of allegedly the same quality? The answer to this excellent question is that, barring some sort of real sale price, such a price difference has to represent a quality difference.

And, as Georgian Cement Association testing has shown, the difference in quality is generally far worse than the difference in price.

Cement is a commodity product. There is no mystery that you have to put the right specific amounts of the right raw materials together to produce a certain grade of cement.

There are no shortcuts. If a customer thinks that he or she will save 20 percent off a certain product and yet the cement inside the bag has one tenth of the quality specified on the bag, the customer has been cheated.

Then there is the issue of safety. Certain projects using cement do not have structural issues. They are more decorative or constitute surface covering. While strength is not a factor in these cases, durability is. If one carries out such a project expecting that it will last 5-10 years but then discovers he or she has used sub-standard cement and have to repeat the work every two years, any "savings" realized on the purchase price of the cement is entirely illusory. In the short-, medium- and long-terms, such "savings" actually cost the consumer money.

Then there are projects that at least to some degree require structural strength. In the countryside in particular, bagged cement is often used for dwelling construction.

If sub-standard counterfeit cement is used because it appears to be cheap and its bag states that the product inside is of, for example, CEM II 32.5 grade, then the customer bears the risk that the structure that is built using this product could collapse. Let's remember that Georgia is an earthquake-prone zone. If a house built with counterfeit cement collapses, physical injury or death could result for its inhabitants or visitors.

Are these the consequences consumers want? About 100,000 families are being cheated every year by as much as 60 million lari. Commodity products simply cannot have such wide variations in price and be in fact what they are labeled supposedly to be.

Counterfeit Cement Affects Georgia's Economic Well-Being

At the present time, all 14 of the substandard cements tested from the December 2017 sampling were made from clinker imported into Georgia from other countries. This fact alone does not demonstrate that imported clinker is of worse quality than clinker produced in Georgia entirely from Georgian raw materials. Private testing of some of those clinkers have, in fact, confirmed that their quality is entirely adequate and that there is no technical reason for the mills who use that clinker to produce bad cement. Quite simply, less good clinker is used in these counterfeit cements in order to reduce the manufacturing cost of the product and to create higher profit for the owners of these companies.

Not so long ago, most of these same companies were utilizing good clinker produced in Georgia to produce similarly counterfeit sub-standard cement products. Clearly, the issue is not the source of the clinker but in the behavior of the mills who use that clinker. In addition to continuing to produce "fake" cement, these companies are also thus exporting Georgian jobs by importing clinker when sufficient quantities of domestic clinker are available to meet Georgian construction needs for infrastructure, roads, buildings, residences, dams, and so forth.

These companies are also competing unfairly with the honest companies. By offering false economies and diluting imported clinker with worthless filler, they are seeking to increase their market share unfairly at the expense of those companies who produce cement whose quality corresponds to what is specified on the bag. Georgian jobs are therefore put at risk.

One final point needs to be made, particularly in the area of road-building. Currently, most paved roads in Georgia are being built out of concrete, for which all raw material ingredients are available in Georgia. Roads-especially with bridges and tunnels-require quality (on- or above-spec) cement and concrete. The remaining roads are currently made of asphalt which requires the importation of bitumen. If all or almost all roads were built of concrete, substantial imports of road-building materials could be avoided, thus helping Georgia's balance of payments, and more local jobs would be created throughout this entire sector.

Conclusion

Eliminating counterfeit cement products in Georgia will provide safe and quality construction materials for Georgia, protect the consumer, and create more jobs.

The Georgian Cement Association urges all concerned parties in government agencies as well as in the construction and the building-materials sectors to demand integrity in the quality and pricing of cement products manufactured in Georgia.


THE GEORGIAN CEMENT ASSOCIATION: WHAT WE DO

Over the last several years, the main producers of quality cement in Georgia noticed an alarming trend. Even with the decrease in price and increase of availability of imported clinker, more and more tested cements were proving to be counterfeit and of sub-standard quality. In addition, the presence of counterfeit bags was also ascertained. With faked cements now opportunistically approaching 20% of the Georgian market, it has become clear that the goal of those producers is to maximize their profits at the expense of the consumer. One year ago, HeidelbergCement and GBG/Kavkaz Cement agreed to establish the Georgian Cement Association (GCA) in order to bring this disturbing development to the attention of consumers, builders, government and politicians and to encourage all producers to shift to quality production. Our approach involves the quarterly purchase in the open market of 25-30 bags of different cement products for testing, as follows:

- Under contract with the GCA, the Georgian Chamber of Commerce randomly purchases 25-30 bags of cement on the open market for testing.

- The Chamber then makes five test samples from each bag and assigns each sample a number.

- These numbered samples-with no identification as to which company's cement it is-are then distributed to four accredited laboratories for blind testing.

- One of these laboratories is that of the fully independent Georgian Technical University (GTU).

- When the 28-day results are obtained, all the results are compared to ensure general consistency.

- The GCA then prepares a confidential table listing the results by company and ranking the test results.

- The GCA then announces GTU's results as to which companies' cements are consistent with the description on the bags.

- The GCA only mentions the number, not the names, of companies whose products are sub-standard and therefore counterfeit.

While fourteen of twenty-five of the December samples failed this testing and three were marginal, it was a pleasure to note that a third company had achieved fully satisfactory results: GCC/Georgian Cement Company. Furthermore, one additional company had some samples that almost passed the testing (marginal), but it unfortunately also had some products that clearly did not. These results represent an improvement over the previous testing.

The mission of the GCA is to encourage all producers of cement in Georgia to produce products that conform to the quality that is stated on the products' bags. If such a level playing field is created, consumers will not have to worry about being cheated.

The GCA at this time has two Full Members: HeidelbergCement and GBG/KavkazCement. GCC/Georgian Cement Company has now become eligible to join the GCA as an Associate Member. Full Members source 70% of their raw materials in Georgia, but local sourcing is not a requirement for quality producers who do not meet that threshold and agree to become Associate Members.

Every company producing cement in Georgia is eligible to join the GCA in one of these two categories provided that their products pass our blind testing program on a continuing basis.