CalPortland completed its acquisition of the Redding cement plant from Martin Marietta this week. As previously announced the transaction involved the integrated cement plant in northern California, related cement terminals and 14 ready mixed concrete (RMC) plants also in the state. However, CalPortland’s parent company Japan-based Taiheiyo Cement revealed this time round that it is considering buying the Tehachapi cement plant from Martin Marietta too. It says it has some sort of preferential purchase agreement in place, although a final decision is yet to be made.
If CalPortland and Taiheiyo Cement do end up buying the Tehachapi plant as well as Redding then it will mark a fairly quick turnaround of owners. HeidelbergCement subsidiary Lehigh Hanson announced that it was selling up assets in its US West region to Martin Marietta for US$2.3bn in May 2021. The deal was completed by October 2021. Then, CalPortland said it was buying the Redding plant in March 2022. From an outside perspective it was not clear what Martin Marietta might have had planned for its new assets. Over three quarters of Martin Marietta’s revenue in 2021 came from its Aggregates and RMC products. However, it is also a prominent regional US cement producer with two plants in Texas and two plants in California, along with associated terminals. So, building up its cement business in California didn’t seem unfeasible. Now, as can be seen, it is likely to be sticking to its primary focus of aggregates and RMC. It is also worth noting that California has some of the stricter CO2 reduction policies in the US with a 40% reduction target for 2030 (compared to 1990 levels) and a local emissions trading scheme that started in 2013.
Looking at the local cement production base in California, the latest development with the former Lehigh Hanson plants shows the changing situation since the subsidiary of HeidelbergCement left the region. Beforehand, Cemex, Lehigh Hanson and CalPortland each had a similar clinker production capacity. Then, Martin Marietta took the lead and now CalPortland looks set to become the frontrunner if it buys Tehachapi. With the Redding deal completed it now operates three integrated cement plants in California and one in Arizona. Alongside this it runs 15 terminals in Alaska, Arizona, California, Nevada, Oregon and Washington – and – two terminals in Alberta and British Colombia in Canada. The Redding plant is also a distinctive addition to its portfolio as it is further north than the other clinker units.
United States Geological Survey (USGS) data shows that cement shipments to California grew by 5% from 10.05Mt in 2019 to 10.57Mt in 2021. So far in 2022, shipments to the state rose by 3.4% year-on-year to 3.56Mt for January to April 2022 compared to 3.44Mt in the same period in 2021. However, clinker production fell by 5% to 8.94Mt in 2021 from 9.45Mt in 2019. This trend seems to have continued into 2022 with a 9% fall to 2.54Mt for January to April 2022 compared to 2.81Mt in the same period in 2021. Despite this, California remained the second largest OPC and blended cement producer in the US in April 2022. In its Western US Regional Outlook in May 2022, the Portland Cement Association (PCA) forecast that the Pacific region of the US (including California) will experience flat growth in cement consumption in 2023 due to a slowdown in residential consumption. However, consumption is then expected to bounce back sharply in 2024 as the effects of the infrastructure bill take effect.
This suggests that CalPortland has picked an uncertain time to start buying cement plants in California. Yet only last year, in 2021, Cemex began restarting production at a previously mothballed cement plant in Mexico to supply the south-west US. Alongside all of this, environmental regulations are tightening. However, the key difference between Martin Marietta and CalPortland is that the latter is owned by Japan-based Taiheiyo Cement, which is more cement-focused than the aggregate and concrete oriented Martin Marietta. No doubt Taiheiyo Cement’s intention to become more international also played a part in its decision making. If CalPortland does decide to buy Tehachapi then this may give observers an idea of how much further its ambitions go.