Global Cement Industry Outlook Trends and Forecasts

by A. Emir ADIGUZEL - Director World Cement Association

19/03/2024

A)??? Market Demand Projections and Regional Dynamics

“Global Cement Demand Stagnates”

According to On Field? Research recently made global cement market demand is expected to be flat in the period 2024-2030 except for increases in the Middle East, India, and Africa. Weakest cement markets are anticipated to be Turkey, China, and Europe, whereas the best cement markets in the world will be Sub-Saharan Africa (with a projected growth of +77% by 2030) and India (with a projected growth of +42%) and North America (+20%) in the foreseeable future

B)??? Addressing Regional Dynamics and Cement Prices

“Surging Profit Margins in Europe”

The good news is that the cement industry is poised to sustain its gross margin expansion, primarily driven by higher cement prices and significantly reduced fuel costs, despite anticipated weak global demand.

1.???? Challenges and Cost Pressures: Post-Covid Reality for the Cement Industry

After the post-Covid-19 era, the cement industry faced a substantial surge in production expenses, with fuel, electricity, and international freight rates all experiencing double-digit hikes. Moreover, there was a swift rise in marginal CO2 costs for volumes above the free allocation, inevitably pushing cement prices higher.

2. Resilience and Discipline

In 2023, while the world witnessed a significant drop in energy prices, particularly in steam coal and petroleum coke costs, and the impact of the recent decrease in CO2 prices (from 80 to approximately 55 EUR/t) on cement pricing is not observed especially in Europe.

3.??? Contrasting Developments in Established and Emerging Markets for 2024

In 2024, the trajectory of cement prices diverges across regions, with Europe and the USA poised to sustain their elevated levels. This stability reflects the continued influence of various factors, including supply chain disruptions, increased production costs, and regulatory pressures and industry discipline. In contrast, emerging markets are anticipated to experience a notable decrease in cement prices. Here, the tendency to pursue market share at the expense of margins exerts a stronger influence, fostering greater price volatility.

C)??? Global Cement Industry Trends

1.???? Expansion and Diversification Efforts

Chinese cement producers will continue to expand abroad with the aim of diversifying and balancing their portfolio in view of saturated domestic market in China. Chinese cement producers are taking leadership in several overseas markets.

Capacity addition by local players and new entrants is visible in most emerging markets. India will be adding One billion tons of new capacity by year 2030.

2.???? Embracing Sustainable Practices

“Who controls new SCMs will capture growth and value”?

a)???? Cement producers are increasingly prioritizing Supplementary Cementitious Materials (SCMs) to reduce carbon footprints worldwide. Efforts to secure reliable sources of SCMs, such as slag and fly ash, are underway, albeit amid concerns regarding limited availability and rising prices. SCMs will become increasingly significant for cement producers globally. Substantial efforts will be directed towards securing sources of Supplementary Cementitious Materials (SCMs), which present promising avenues for substantially reducing the carbon footprint associated with traditional cement and concrete. Cement industry players will continue to increase the use of SCM’s like slag, fly ashes in their production.

Considering limited availability, prices of SCM’s are expected to rise significantly worldwide. Regional shortages of traditional SCMs and development of new alternatives such as activated clay should not be a surprise 2024 onwards.

b)? At the same time, calcined clay cement production will increase wherever suitable raw materials are available worldwide.

Unlike in developed markets, alternatives such as the utilization of SCMs, clinker substitutes, and other emission-reducing methods are not yet fully adopted in 90% of the world's emerging markets. Therefore, it is essential to maintain focus on existing green solutions.

3.???? Advancements in Carbon Capture Technology

“Is it the Turning Point in the History of the World Cement Industry?”

Carbon capture Technology is not developing fast enough as most have anticipated in the world moreover CC solutions require serious further development to be scalable.

At the present technology level, the investment requirement is more than the capital cost of a cement plant. (refer to the latest announcement of Heidelberg investing Euro 450Mio to its very old Antoing cement plant to capture carbon emissions)

The decision by major European cement producers like HM and Holcim to invest in mega cement plant with large-scale carbon capture units reflects a strategic commitment to sustainability and environmental responsibility. However, this investment also brings significant cost implications, as carbon capture installations typically entail higher expenses compared to the construction of modern cement plants.

a)???? The adoption of carbon capture (CC) technology, while promising, is still in its early stages and faces challenges in terms of scalability and cost-effectiveness. Despite advancements in CC technology, its global availability remains extremely limited due to the substantial costs involved and the need for further development to prove its efficacy at scale.

b)???? Additionally, the issue of where to store captured CO2 poses a considerable challenge on a global scale, as suitable storage sites must be identified and developed. These factors collectively contribute to the anticipation of higher cement prices, as the costs associated with implementing carbon capture initiatives are likely to be passed on to consumers in the form of elevated product prices.

c)???? The landscape for independent European cement producers presents a significant challenge in the face of the push towards carbon capture (CC) technology by larger multinational competitors. Unlike these industry giants, independent producers often lack the substantial financial resources necessary to establish CC units on a large scale. Consequently, they face a difficult decision: either invest in expensive CC technology to remain competitive or risk closure due to an inability to meet evolving environmental standards. For many independent producers, particularly those operating older cement plants, the financial burden of implementing CC technology may prove insurmountable.

d)???? These plants, which may lack the efficiency and infrastructure necessary for successful integration of CC units, face the prospect of closure. Such closures would not only affect the businesses themselves but also have broader implications for the supply of cement in Europe and the USA. The closure of older cement plants operated by independent producers could exacerbate existing shortages in the market. With the capacity of these plants removed from the equation, the overall supply of cement may decrease. This reduction in supply could lead to heightened competition among remaining producers, potentially driving up prices for consumers. Additionally, the loss of jobs and economic activity associated with plant closures could have ripple effects throughout the communities in which these facilities are located.

e)???? In summary, the challenges faced by independent smaller cement producers in adopting CC technology may have far-reaching consequences beyond their individual operations. The potential closure of older plants could exacerbate cement shortages in Europe and the USA, leading to increased prices and broader economic impacts.

f)?????? Finding solutions to support these producers in transitioning to more sustainable practices while maintaining their viability within the industry is crucial for ensuring the continued stability of the cement market.

g)???? Consequently, in markets like Europe, the new CO2 regulations may practically annihilate local cement clinker production, European consumers may soon face cement prices over 250 Euro per ton unless we see a massive amount of cement imports.

4.???? Global Cement Trade - Imports & Exports? ??A threat or an opportunity?

a)? Unless cement producers can establish protective measures to mitigate the risk of unrestricted imports, such as implementing regulatory barriers; the influx of competitively priced cement into Europe from Algeria, Egypt, Tunisia, and Turkey is poised to significantly escalate.

b)???? We note that there is more than one hundred Million tons of exportable cement surplus in the Mediterranean region most of it coming from modern sustainable cement plants, with access to low emission fuels and green technologies.

c)???? To cement their presence in Europe and the USA, several independent cement exporters have started to acquire strategic locations of cement import terminals in destination ports and will further extend close collaboration with domestic cement consumers and independent cement companies to provide low-cost green cement to the market.

d)???? With China shifting from an importer to exporter, world FOB export prices of clinker and cement will continue their decline.

e)???? Global cement capacity surplus may easily reach 1 billion tons in 2024 meaning almost 1/3 of the world cement capacity will be idle. International cement flows can serve as solution to mitigate the global surplus.

f)? ?Controlling international cement flows should regain its strategic importance in the agenda of multinational cement groups. Unless protectionist trade barriers such as taxes, duties, or quotas are successfully implemented (CO2 taxes, adjustments or similar) international cement trade will expand to record figures to fill in cement supply gaps created in Europe, the USA, the Sub-Saharan Africa supported by substantial construction projects in the Middle East.

5.???? Industry Dynamics and Market Leadership

“Time for a change of leadership in cement business”

Further disposals are expected by European multinationals who are increasingly withdrawing their investments from emerging cement markets such as India, Africa, Turkey, and China. This shift creates opportunities for regional and local players to emerge as industry leaders, expanding their market presence at the same time, capitalizing on innovative technologies and alternative business models.

The fast-emerging leaders like Dangote, Adani, Oyak, Votorantim, Vissai, CNBM, Martin Marietta, TCC will continue to grow and strategically invest in cement industry assets with alternative business models, positioning themselves favorably to lead in the evolving cement industry landscape.

6.???? Commitment to Sustainability

“Building a Sustainable Future: The Cement Industry's Concrete Commitment to Environmental Stewardship”

The global cement industry remains steadfast in its commitment to sustainability, embracing innovation, eco-friendly practices, and collaboration to mitigate environmental impact and secure a greener future.?

Undoubtedly investments in high-cost Carbon Capture projects signal a proactive approach by the industry to address climate change concerns and transition towards more sustainable practices all over the world.

7.???? Divergent Priorities and Strategies

The priorities and strategies of Western cement multinationals diverge significantly from those of regional and local leaders in emerging markets. This contrast is evident through actions such as withdrawing from high potential cement markets, redirecting investments towards non-cement ventures in developed countries, and emphasizing areas like software applications, digitalization, and green products in mature markets.

Recognizing these disparities underscores the critical need for collaboration within the World Cement Association, enabling the exchange of knowledge and alignment on long-term objectives. The distinct differences in priorities between major European cement companies and their counterparts in emerging markets reflect unique regional challenges, regulatory landscapes, and market dynamics.

Consequently, many independent cement groups recognize the value of joining forces within the World Cement Association, the largest network of independent cement producers committed to addressing the real agendas of emerging market producers over the long term.

Conclusion - Warnings for the future of the cement industry

In conclusion, the global cement industry stands at a pivotal juncture, navigating through diverse trends and forecasts that shape its trajectory in the coming years. As market demand projections reveal regional dynamics, with pockets of growth emerging in the Middle East, India, and Africa contrasted by sluggish markets in Turkey, China, and Europe, cement producers must strategically address these shifts. While the European cement industry exhibits resilience through sustained gross margin expansion driven by higher prices and reduced fuel costs, challenges persist, especially in emerging markets where free market dynamics prevail, and sustainable practices and alternatives remain underutilized.

The industry's commitment to sustainability demonstrates its dedication to environmental stewardship and innovation, despite divergent priorities and strategies between Western multinationals and regional emerging market leaders.

Collaboration, facilitated through World Cement Association, emerges as a crucial avenue for knowledge exchange and alignment on long-term objectives, ensuring the industry's resilience and adaptation to evolving market dynamics.

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Ali Emir ADIGUZEL, is the chairman of ACG International, Former Global CEO of HeidelbergCement Group’s HCT division, the founder and Director of the World Cement Association and is a top adviser to C-Level executives in global cement industry. He is a key speaker at international conferences in cement industry.

Ali Emir Adiguzel??????????? https://www.dhirubhai.net/in/ali-emir-adiguzel-6349725/

ONField Research? https://www.dhirubhai.net/company/on-field-investment-research/

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19 March 2024