The next five years in cement

How do we see the cement sector in the next five years?

CemBR just published their five-year forecasts in the CemBR Forecasts report. We would like to give my LinkedIn followers a taste of how we see the cement sector developing in the next five years, based on our significant research, and forecasting work.?

Recent performance?

Since the onset of the financial crisis in 2007/2008 where we saw a decline in cement consumption, the global cement sector began a continuous upwards recovery path. This however was halted around 2015. Since then, the sector has experienced significant volatility. Clearly, the 2020 pandemic and the recent geopolitical events have increased this volatility. Although, 2021 was a strong recovery year, 2022 is estimated to be a weaker year with a small decline in global (Ex-China) demand.

At the same time, global (Ex-China) cement milling capacity has not shown signs of abating. Between 2010 and 2022E global supply increased by a CAGR of 3.0% whereas demand increased by 2.3%. As a result, cement utilisation rates have declined from over 63% at the high of 2014-2015 to close to 57% in 2022E.?

Consumption and supply projections?

Looking ahead in the next five years, the recent volatile trends in demand are expected to continue.

?The small decline in demand in global (Ex-China) cement in 2022 is expected to be followed by a more significant drop in 2023. The growth in the forecasting period from current levels (2022E) is expected to be well below the 2010-2022 growth pattern.?

At the same time, it is projected that around 5.2% of additional capacity will enter the industry between 2022E and 2026F. This is capacity that is known to have a high level of probability (this mainly reflects new cement projects that have already started construction).

Supply – Demand balance?

As a result of the above, the next five years supply – demand balance in the global cement sector is projected to be challenging, particularly when compared to its recent past.?

NB: Above graphs based on CemBR's global universe (90 countries representing 95% of global consumption).

So, what are the issues we shall face in the next five years?

There are several issues that we have identified during our work on CemBR Forecasts. These include:

• The recent geopolitical events are having a significant impact on the sector – globally.
• There have been significant capacity additions, outstripping demand in the last 12 years, and this is expected to continue into the forecasting period. This has led to a significant overcapacity in the sector.
• Recent (2021) cement scarcity may therefore be short lived.
• Most of the largest cement markets in the world are fragmented leading to increased competition.
• The notion that emerging/developing markets can also experience cyclicality in demand has been now confirmed.

In addition, our several years of work on strategic aspects of the cement sector has led us to add some more major issues facing the sector in the next five years. These include:

• Increasing energy costs, and other cost inflation (labour, shipping etc.) have introduced a significant pressure on cement producers.
• Climate change legislation and associated increasing carbon costs will add to the cost burden of the industry. At the same time, carbon reduction attempts may require significant investment for those cement producers embarking on such initiatives.
• China is an unknown factor in all this. It is not expected to grow any further and indeed, a significant decline in demand may be on the cards.

You may explore CemBR Forecasts on our website. Also, in the Knowledge Hub of our website we have posted several regional forecast presentations.?