The past 12 months have seen continued growth in the US cement sector, with demand continuing to rise rapidly following the economic crisis of 2008. Here Global Cement looks at the US cement market at the start of 2015, including production and consumption trends, the main players and possible future scenarios.
The United States of America has been one of the world's most dominant political forces through much of the past 150 years. In the 21st Century it has the largest economy (GDP of US$16.8tn in 2013) and the highest military spending (US1.7tn in 2013) in the world, as well as great sway in global political and cultural affairs. The country is also the third largest nation by land area after Russia and Canada and the world's third largest producer of cement.
The US economy is a highly-developed market-based economy that is based on a broad variety of industries. Of its 155.4 million-strong workforce, 79.4% work in the service sector, 19.5% in manufacturing and 1.1% work in agriculture.
US cement history
The US cement industry began in the Lehigh Valley, Pennsylvania in the mid-19th Century, when a variety of intermittent and continuous shaft kilns were used. A large number of cement producers have come and gone since the early days, with relatively few US-owned operations surviving today.
Figure 1 shows the development of US cement production since 1900 according to the United States Geological Survey (USGS). The general trend has been one of steady growth, but some significant events have also caused production to fall. These events are highlighted below.
Production and consumption in the 2000s
Despite US cement production rising over the course of the 20th Century, the amount of cement produced in the US so far in the 21st Century has fallen. In 2000 around 86Mt of cement was produced but in 2013 just 77.2Mt was made. This is a drop of over 10%.
The peak year for US cement production was 2006, when around 94Mt was produced. The most recent cement production minimum was 61Mt in 2010, giving a peak-to-trough production drop of 35%.
Apparent cement consumption, according to the USGS, along with cement production, cement imports and GDP/capita, can be seen in Figure 2. This shows that 2006, in addition to being the year in which cement production was at its height, was also the year in which imports of cement into the US were at their maximum. Imports were as high as 32.1Mt in 2006 giving total apparent cement consumption of 131Mt in that year. Since then, imports have fallen to around 6Mt/yr, stabilising since 2009.
From 2000 to 2008 the average price of cement (ex-works) rose from US$78.50/t to over US$107/t. Since then it has fallen back to US$91/t in 2013. Figure 3 shows this trend, as well as the mean cement price divided by domestic cement production (normalised to 2000s values). Figure 3 shows that, between 2000 and 2008, cement prices rose relative to the amount of cement produced. This makes sense in a market that is being driven by rising demand.
Between 2008 and 2010, however, cement prices continued to rise in a market where demand was rapidly falling making the link between price and production less clear. Prices appear to have stayed high as producers attempted to claw back shrinking margins. Since 2010 the price has remained static but the ratio of price to production has fallen as production rates have increased once more.
US cement in 2013 and 2014
Above - Figure 4: The integrated cement plants present in the USA in 2015. Click on the map to see a larger map with cement plant listings. Source: Global Cement Directory 2015, research performed for the Global Cement Directory 2016 and company websites.
In 2013 the US produced 75.1Mt of OPC and 2.1Mt of masonry cement from 98 plants in 34 states, according to the USGS. The value of sales was US$7.6bn, with ~70% of cement used to produce concrete. As in recent years, the top five cement producing states were Texas,
California, Missouri, Florida, and Michigan - in that order. Between them these five states contributed 47% of national production in 2013.
In December 2014 Ed Sullivan, the Chief Economist at the Portland Cement Association (PCA) announced that cement production was expected to grow by 8.2% in 2014. This is slightly ahead of the 8.1% forecast that the PCA issued at the start of the year. In April 2014 Sullivan said that he was confident that the target would be met. "I think that there is an upside to our 8.1% forecast," he said. "Texas, California and Florida will lead this growth but I also think that there are some other areas, which were so depressed by the recession, that will come back." This forecast has now been realised.
The Global Cement Directory 2015 lists 97 integrated cement plants in the United States that share a total capacity of ~118Mt/yr. Figure 4 shows the integrated cement facilities in the United States, along with their capacities where known. They are operated by a range of players, including six major multinationals.
Cemex has the largest capacity, with 12 plants that share 15.7Mt/yr of capacity. In second is Holcim, with eight plants and 13.6Mt/yr. Third is HeidelbergCement, which operates 12 plants with 12.2Mt/yr of capacity via its subsidiary Lehigh Cement. The fourth-placed multinational is Italy's Buzzi Unicem, which operates 11Mt/yr of capacity across nine facilities. Lafarge is the fifth multinational, with eight plants and around 8Mt/yr of integrated cement production capacity. The final multinational is Essroc, part of Italcementi, which has a capacity of 5.4Mt/yr over four sites. Together, these six firms hold over 50% of US cement capacity.
The US is also host to smaller-scale regional players. These include Brazil's Votorantim, which controls St Marys Cement. It operates two plants and has 1.9Mt/yr of cement production capacity. Another, relatively recent entrant into the market is Cementos Argos from Colombia. Following acquisitions in 2012 and 2014 it now operates three plants with a shared capacity of 4.3Mt/yr. A smaller foreign player is GCC, from Mexico, which runs 2.6Mt/yr of capacity at three sites.
Once home to many illustrious domestic players, the capacity owned and operated by US-based cement manufacturers has fallen in recent decades as cement multinationals have bought up assets. The most notable domestic player in 2015 is Ash Grove Cement, which operates nine integrated plants that share 9.7Mt/yr of cement capacity. Another local operator is Texas Industries (TXI), which operates five plants in Texas and California (8.42Mt/yr). Eagle Materials also operates through several subsidiaries, with 5.6Mt/yr of capacity across six plants.
Acquisitions and future sales
In the past 12 months there have been two major asset sales in the US cement market. Firstly, Cementos Argos purchased Vulcan Materials' cement, aggregate and port assets in Florida, bringing its total cement capacity (integrated and grinding) up to 6.7Mt/yr. The deal, worth US$270m, took the firm from the position of minor player to major force in the south east US cement market. It also obtained 69 ready-mix concrete plants in the same transaction.
At the time Jorge Mario Velasquez, CEO of Cementos Argos, said, "We are doubling our cement production capacity in the United States in a market like Florida, where growth for the coming years is expected to be double the already-encouraging growth estimates."
The second major deal of the year was also in the southern states. In June 2014, Martin Marietta purchased TXI for US$2.7bn. In order for the deal to go through, the new entity had to divest two rail yards and a quarry in Oklahoma to satisfy concerns over competition in the crushed stone and aggregates markets.
In the first half of 2015 there may be further changes to ownership of US cement facilities in order to allow Holcim and Lafarge's planned global merger to take effect in the US. If no assets were to be sold, the combined LafargeHolcim would have 21.6Mt/yr of integrated cement capacity across 16 plants. This represents approximately 19% of installed US cement capacity. It is likely that this will attract the attention of the US Bureau of Competition, although no list of assets to be sold has yet been announced.
Current plant expansion projects
At present there are five expansion projects in progress. These are highlighted in green in Figure 4 and are all being carried out by multinational producers. Combined they will bring an additional 5.3Mt/yr of cement capacity to the market when completed. This is the same capacity addition as a mid-size player suddenly entering the market. It will take the capacity of the US cement industry to around 123Mt/yr.
Three of the projects, at Ravena (New York), Joppa (Illinois) and Ada (Oklahoma), are of particular interest because they are being carried out by Lafarge and Holcim, the two multinationals that are set to merge. Work on the Lafarge Ravena plant, to replace a wet kiln with a larger dry line, began in April 2014, shortly after the announcement of the planned merger. Meanwhile Holcim is spending US$100m on its Ada facility, also to take it from wet process to dry process. The contractor is Denmark's FLSmidth. The capacity will not greatly increase as a result of the work, but efficiency gains will be achieved. The third project, at the Lafarge Joppa plant has been ongoing, albeit gradually, since 2008. One of the plant's two long dry kilns was closed in 2012 after demand in the Mid West failed to recover after 2008. It is not clear when this project will be completed.
Another ongoing project, albeit not related to capacity expansion, is Holcim's environmental upgrade to its Hagerstown facility in Maryland. The plant will see its NOx and SO2 emissions fall by 60% and 48% respectively, due to the kiln being converted from a long dry line to a short line with a new pre-heater and improved controls.
Future
The IMF estimates that US GDP will grow by 3.1% in 2015 as it continues its escape from the economic downturn. PCA Chief Economist Ed Sullivan forecasts ~8% cement consumption growth for 2015 and 2016. If realised, this will mean that the US will consume 96Mt in 2015 and 105Mt in 2016.
Some of the resurgence in demand will be met by domestic plants, which are not all operating at high capacity utilisation rates. The three mothballed plants could come back online. Indeed, in late November 2014 Jim Burke, the mayor of Dixon, Illinois stated that he was optimistic that the city's St. Marys Cement plant, mothballed in 2008, could be re-started. It is possible that St. Marys would have to invest in the plant in order to restart it, since it violated the Clean Air Act prior to being closed.
The 5.3Mt/yr of new capacity from the five expansion projects will also be available. It is possible that some of the slack could be met by imports. This appears to be the opinion of Mitsubishi Cement, which applied to expand its import terminal at Long Beach, California in October 2014.
In the short to medium term all indicators seem to point to continued strong growth for the US cement industry. Despite this, lingering concerns over the budget of the Federal Government, which approved a US$1tn spending bill on 10 December 2014, and continued indecision over how to handle the US's >US$18tn of debt, may negatively impact on cement consumption in future years.
In the longer term, however, the PCA anticipates cement growth to be strong after 2015 and 2016, assuming business as usual. It anticipates around 155 -160Mt of cement consumption in 2035 based on GDP growth of 2.2%/yr, an extra 60 million inhabitants and higher infrastructure spending.
Figure 5 shows the growth trend that would have to be met between 2000 and 2035 for this forecast to be realised. The values for 2000 - 2010 are actual, the 2015 value is extrapolated from the PCA's forecast, the values for 2020 to 2030 are extrapolated from the PCA's long term estimate and the value for 2035 is in the middle of the PCA's estimate. Of course, much can change between now and 2035, but fundamental US trends, especially its rising population, should mean that the future is strong for cement producers.