The EastMed pipeline megaproject – a 1,900km undersea pipeline to carry natural gas from the eastern Mediterranean to Europe, potentially cutting dependency on Russia for energy supplies – will require huge quantities of aggregates, generating highly attractive commercial opportunities for Cyprus’s aggregates-producing businesses.
The highly ambitious works moved a step closer on 2 January 2020 when Cypriot president Nikos Anastasiades, Greek prime minister Kyriakos Mitsotakis, and Israeli prime minister Benjamin Netanyahu attended a ceremony in Athens to seal the accord for the project.
The three governments will now put the EastMed pipeline proposal out for financing bids from private investors. Cyprus, Greece and Israel are looking to reach a final investment decision by 2022 and have pencilled in completion of the pipeline by 2025. European governments and Israel agreed last year to proceed with the eye-catching project, which could cost up to €7bn.
Significant progress on the EastMed pipeline plan is being made at a time when Cyprus aggregates production is already rising, with the government having released long-held funds for various new highways projects and commercial and residential construction works. A variety of rock armour coastal defence projects are also set to be commissioned in the next few years, each requiring high volumes of aggregates.
Cypriot aggregates production in 2019 stood at 8,422,664 tonnes – up just over 5.5% on 7,978,000 tonnes in 2018. However, the 2019 production volume is still only around 60% of peak annual Cypriot aggregates output of 14,174,480 tonnes in 2008. As these figures indicate, Cyprus has not been immune from the impact of the 2007-2008 global financial crisis. As highways and building projects were shelved or abandoned altogether, annual aggregates production fell significantly, reaching a nadir of 3,941,378 tonnes in 2015.
Cypriot aggregates exports are linked to specific projects, such as Greek railway or Israeli natural gas underwater pipeline works. Around 300,000 tonnes of aggregates went to export customers in 2018, with no exports recorded in 2019.
Based in Pyrga, south-east Cyprus, Skyra Lima, a quarry company owned by the Iacovou Group, a Cypriot construction company giant, produced 1.15 million tonnes of diabase aggregates and sand in 2019 for its large highways and commercial and residential building customer portfolio. This makes it the biggest supplier of diabase aggregates on the island.
In recent years, Skyra Lima has provided aggregates sourced from its 380,000m² quarry for key infrastructure projects including Larnaca’s new airport, the new Limassol-Nicosia highway and a major Limassol traffic-congestion-easing project.
“We have invested €2.5 million in upgrading our crushing plant to a Metso solution, and a further €2 million on our earthmoving machine fleet, with new Caterpillar and Hitachi models,” said Iacovos Stefanou, Skyra Lima’s quarry manager, during ABI’s visit to the company’s production site and office. “We crush our aggregates and wash our sand products here, after it’s gained and transported from our quarry a kilometre away. We inherited this set-up when the Iacovou Group bought Skyra Lima Ltd in 2007 and are looking into the viability of having production on just one site.”
Stefanou and ABI’s Cypriot trip host, Antonis Latouros, head of the Latouros Group, a major Cypriot quarrying group, president of the Cyprus Aggregates Producers Association (CAPA) and first vice president of UEPG (European Aggregates Association), who are accompanying me on my quarry firm visits, stress that as unoccupied space in Cyprus is at a premium, it is vitally important for the island’s quarries to be good neighbours to nearby villagers and small businesses.
“Protecting the environment is our number one priority. There is a house only 250 metres away from our quarry,” explains Stefanou. “Dust can be a problem during summer production, so we have invested in a state-of-the-art dust suppression system. We also measure noise levels and don’t operate at night-time. We crush and screen Monday to Fridays and carry out plant maintenance on Saturdays.”
Stefanou and Latouros explain how for each tonne of Cypriot aggregate sold - with current prices (depending on aggregate type) ranging from €4 to €9 per tonne - operators of Cyprus’s 25 quarries, plus two gypsum sites, need to pay a 40-cent environmental royalty. This builds into a significant sum over the course of a year, which is used on community improvement projects focused on schools, local galleries, public parks or other facilities.
For example, the 800 residents of Ayios Theodoros, where Stefanou lives and is president of the village council, have seen environmental royalties from neighbouring Latouros Gypsum, Latouros’s gypsum quarry business, fund a new park, a local industrial history museum and an art gallery.
“We are talking about a village receiving as much as €100,000 a year towards community improvement projects. That’s a substantial amount of money,” highlights Latouros.
Stefanou says that Skyra Lima’s investment in its crushing plant and earthmoving machine fleet leaves it well placed to increase production in order to cater for a forecast further rise in Cypriot aggregates demand.
“Government funds are being released for a new Nicosia ring road, a new parliament building in the city and a new archaeological project based there. There are also many new residential skyscrapers planned in Limassol and Larnaca. We sell our aggregates and sand to customers in a 50-kilometre radius of our quarry – which covers all these works.
“We get a lot of information through Antonis and the UEPG about what’s happening in the wider European aggregates industry. I think there is potential for us to export our aggregates, such as ballast for the Greek railway network. Greece has limestone which isn’t suitable for producing railway ballast. There is also obviously big potential to supply aggregates to cover and protect the underwater pipes on the EastMed pipeline project.”
The nearby Pyrga quarry, operated by Latomio Pyrgon, part of Antonis Latouros’s Latouros Group (LG), produced 360,000 tonnes of diabase rock aggregates of various sizes and sand in 2019, mainly for concrete plant customers. The quarry was opened in 1986, before Latouros Group bought it off J&P Construction in 2011.
“The Cypriot aggregates market is okay,” says Achilleas Tsiopanis, the quarry’s long-standing manager. “It’s definitely better than 2013-2014. The most aggregates we’ve produced here in any one year was 700,000 tonnes in 2008. The economy is improving so let’s see what happens.”
Turning to Latouros, he smiles and adds: “He’s a very hands-on boss and we have a close working relationship.”
The quarry had subcontracted its loading and hauling work up until the end of 2019 and is currently looking to recruit new operators. “Trying to find young skilled operators is not easy,” admits Latouros.
The site has what Latouros describes as a highly productive and efficient Metso Nordberg crushing plant, installed in 2000, and equally as efficient Telsmith screens. Production efficiency has benefited further from last year’s installation of a new conveyor system from Israeli manufacturer Elkayan Metal Industries. The system has reduced the need for wheeled loader transportation of crushed and screened material to stockpiles, thus reducing fuel cost and production time. Latomio Pyrgon was also due to benefit from the scheduled March 2020 delivery of two new Caterpillar 772G off-highway trucks and a Caterpillar 988K wheeled loader.
The amount of bureaucracy in the Cypriot aggregates industry is, says Latouros, a major issue for producers. “You need all kinds of different permits to operate and they can take a long time to process. We need a one-stop shop relating to a permit that covers everything. Our national aggregates association has had some success in making the town planning permit valid for the life of a quarry’s production, instead of needing to be renewed every five years.
“Cyprus also has government-designated quarry zones. If an existing or proposed new quarry is in a quarry zone, it should be far simpler to get working permits.”
We travel half an hour or so to Hellenic Mining’s quarry in Mistero, a town just south of Cyprus’s capital, Nicosia.
Demetris Vattis is Hellenic Mining’s Mistero area manager. “The Mistero area was the centre of Cyprus’s iron pyrite ore and copper sulphate mining business until the mid-1980s. Now it’s known for its limestone, and we have five limestone quarries, including ours, in a one square kilometre area. In the past we were able to produce one million tonnes of aggregate products a year, now we produce around 100,000 tonnes of aggregates and sand each year.
“The limestone in this area has good properties. It’s not too dense with a 2.2-2.3 SG (specific gravity) ratio and 25-30 LA (Los Angeles) abrasion rating, and its water absorption is relatively high, above 3.5% to 4%. It means you can produce very high-quality sand. A new crushing plant is being installed here which will increase our production capability.”
Vattis notes that since Cyprus joined the European Union in 2004, the country’s aggregates producers have needed to comply with EU standards on limestone density, which needs to be higher than 2.3 SG when supplied in large pieces known as armourstone, used for marine projects like marina and sea coast defences.
“Armourstone is the most expensive aggregate in Cyprus because of its scarcity. It’s a very important product for all quarries in the Mistero area. Armourstone pieces come in three sizes: 1-3 tonnes, 3-6 tonnes or 6-10 tonnes. Between 2008 and 2010 alone, Hellenic Mining supplied customers with armourstone pieces totaling a combined weight of 120,000 tonnes.
“The quarries of Mistero supplied armourstone for the marina and coast defences in Zygi, a small village between Limassol and Larnaca on the south coast of Cyprus. Armourstone was also supplied from the Mistero area for the Limassol marina project and will be supplied to the yet-to-be-completed Ayia Napa marina on the south-east coast.”
As well as being able to draw on a further 40 years of limestone reserves, Hellenic Mining’s Mistero quarry also houses a lime kiln, which produces 7,000-10,000 tonnes of hydrated lime each year. Hydrated lime is used to improve the plasticity, cohesiveness and water retention of Portland cement mortars and renders.
While en route to see the next quarry business, located near Limassol, Latouros talks about his part-owned, July 2019-established construction and demolition (C&D) waste recycling business, Recycling Point – Latouros & Xenis Bros, of which LG owns 51%. The company was in the process of installing a C&D recycling plant, from Israeli manufacturer Elkayan Metal Industries, at the time of ABI’s visit. Latouros also discusses the ongoing success of Agrolab RDS Cyprus, a company providing integrated laboratory and consultancy solutions related to geochemistry, environmental issues, food chemistry and microbiology, in which his group owns a 30% stake.
M.S. (Skyra) Vassas’s quarry is Cyprus’s biggest, with a production capacity of 2 million tonnes of diabase aggregates a year.
“The biggest issue for us is price,” says Phidias Savvides, MS (Skyra) Vassas executive director. “Competition is unbelievable in the Limassol area. Nobody really makes any money. We currently produce around 69,000 tonnes a month, mostly for customers in Limassol and Paphos, a city on Cyprus’s south-west coast.
“The pricing issues means we have to look to export more aggregates. We produce ballast and have been exporting it to railway customers in Greece since 1999. Back then demand from those customers was 500,000 tonnes. The customers kept saying they wanted ‘more, more, more’, so I built a bigger factory then Greece went bankrupt. Now Greek ballast demand is half of what it was in 1999, but there is talk of demand rising to 500,000 tonnes a year by the end of 2020. Given that, I’m keeping a close eye on that market.”
Savvides has also exported his aggregates to Lebanon and is interested in new business opportunities in that market. “The political situation there is not easy which makes it harder to do business,” he laments.
“Israel is another interesting market. Over a five-week period in the summer of 2018, we shipped 190,000 tonnes of 40mm-100mm aggregates to an Israeli customer involved in an underwater natural gas pipeline project. It was a very complex and demanding job as each freight ship required 17,000 tonnes to be loaded onto it in just 12 hours. Ships were going and returning in 48 hours, and you needed six to seven excavators and 20 people at Larnaca port, 70 kilometres from here, working 19 hours a day, every day.
“We have proven we can handle this type of contract and we are interested in bidding for an Athens-Crete pipeline project likely to begin this summer. Obviously, we are also monitoring what’s happening with the EastMed pipeline project.”
After our conversation, Savvides takes ABI on a tour of M.S. (Skyra) Vassas’s vast quarry site, which includes a giant €45mn, 1,200 tonnes-an-hour FL Smidth-manufactured aggregates processing plant. The set-up includes a €7mn automation system which allows for total remote production plant control by a single system user. This ensures complete flexibility in how much of the plant is operating at any one time, ensuring optimum production efficiency.
K. Kythreotis Holdings quarry in Parekklisia, a village near Limassol, operates next to two other quarries. This creates similar aggregates-pricing issues to those articulated by Phidias Savvides at M.S. (Skyra) Vassas. All four quarries serve the same market.
“As we are one of three quarries in the same area, we also get some complaints from local villagers about dust and when blasting takes place,” explains mining engineer George Piperides. “We produce around 700,000 tonnes of diabase aggregates a year but have the capacity to handle 1.2 million tonnes annually. “It’s very difficult to justify investing in new equipment given how we have to price to secure business. The Cypriot authorities have also set an even higher durability threshold for diabase aggregates than EU guidelines. This means we will struggle to meet any rising Cypriot aggregates demand.”
The K. Kythreotis Holidings quarry also contains concrete and asphalt plants, creating a more diversified product offer. “While we have this, the asphalt and concrete supply market is also very competitive in this part of Cyprus,” says Piperides.
The following day, ABI is in the boardroom at Latomia Latouros’s calcareous limestone sand quarry in Dali, LG’s flagship quarry site situated just under 20kms south-east of Nicosia. Less than two kilometres away, Latomia Latouros operates Elmeni (Latomia), another calcareous limestone sand quarry under LG’s group. The Cyprus Aggregates Producers Association board is discussing the health of the Cypriot aggregates industry, echoing many of the views expressed during the previous day’s tour around some of the island’s quarry businesses.
Additionally, the board discusses the situation in Paphos, where the aggregates deposits within the existing footprint of the city district’s three limestone quarries are running out. The operators of the quarries would like to extend their sites to access new mineral reserves, but as their area has been designated an EU Natura 2000 nature protection area, new quarrying licences are not being issued.
“It means that quarries often some distance from Paphos will need to cater for the city’s aggregates demand, which will generate much higher supply costs,” explains Latouros. “We would prefer the government authorities to identify a new quarrying zone in that area.
“Regarding the rest of the island, we would prefer the government authorities to deeply investigate the possibility of expanding the existing quarries, wherever this is possible, in order to secure long-term deposits, rather than continuing as they are to look for a new quarry zone for the Larnaca area. These expansions together with the creation of buffer zones of between 300 and 500 metres around the existing quarries will give much more long-term deposits. It is also a much more environmentally friendly approach compared to opening a new quarry zone.”
Given the progress on the EastMed pipeline project and the overall increase in Cypriot aggregates demand due to increased government funding on highways and commercial and residential building infrastructure, ‘expansion’ is a good word to describe what appears to be in store for the island’s aggregates sector over the next few years.
