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Brazil: Cement sales grew by 19% yearn-year to 15.3Mt in the first quarter of 2021 from 12.8Mt in the same period in 2020. The National Cement Industry Association (SNIC) attributed the growth to poor weather and the beginning of the coronavirus pandemic in early 2020. Residential and home-improvement construction work in 2021 were also seen as contributing factors. However, association president Paulo Camillo Penna called for caution due to a decline in sales per working day so far in 2021 despite the apparent growth in absolute figures. The association also called for the local coronavirus vaccination campaign to be accelerated.

Financial results for 2020 from the major Chinese cement companies are now out, making it time for a recap. Firstly, information from the China Cement Association (CCA) is worth looking at. The country had a cement production capacity of 1.83Bnt/yr in 2020. For an idea of the current pace of industry growth, 26 new integrated production lines were built in 2020 with a clinker production capacity of just under 40Mt/yr.

This is as one might expect from the world’s biggest cement market. However, the CCA also revealed that the country has over 3400 domestic cement companies, of which two thirds are independent cement grinding companies. Most of these were reportedly created during the late 2000s as dry kilns started to predominate. The CCA is concerned with the quality of the cement some of these companies produce and the lack of order in this part of the market such as regional imbalances. This suggests that the government’s attempts to consolidate the cement industry as a whole had led to the independent companies heading down the supply chain. It also raises the possibility that the government-led consolidation drive may move to grinding next. One news story to remember here is that in February 2021 the CCA called for its industry to respect competition laws following a government investigation. Later in the month it emerged that eight cement companies in Shandong Province had been fined US$35m for price fixing in a sophisticated cartel whereby the perpetrators went as far arranging a formal price management committee to regulate the market.

The CCA described 2020 as a year of sudden decline, rapid recovery and stability. Coronavirus hit cement output in the first quarter of 2020 leading to unprecedented monthly year-on-year declines before it bounced right back in a classic ‘V’ shaped recovery pattern. Despite the pandemic and bad weather later in the year, annual output rose by 2% year-on-year to 2.37Bnt in 2020 from 2.32Bnt in 2019. This has carried on into 2021 with a 61% increase in January and February 2021 to 241Mt from 150Mt in the same period in 2020. That’s not surprising given that China was suffering from the pandemic in these months in 2020 but the growth also suggests that the industry may have gone past stability and is growing beyond simply compensating for lost ground.

Graph 1: Year-on-year change in cement output in China, January 2010 - February 2021. Source: National Bureau of Statistics of China. Note that accumulated data is issued for January and February each year so these months show a mean figure.

Chart 2: Annual cement production growth by Province in 2020. Source: China Cement Association.

Chart 2 above shows cement production in 2020 from a provincial perspective. Note the sharp decline, more than 10% year-on-year, in Hubei Province (shown in dark green). Its capital Wuhan is where the first documented outbreak of coronavirus took place followed by a severe lockdown. Zooming further out, China’s clinker imports grew by 47% year-on-year to 33.4Mt in 2020. This is the third consecutive year of import growth, according to the CCA. The leading sources were Vietnam (59%), Indonesia (10%), Thailand (10%) and Japan (8%). China has become the main export destination for South East Asian cement producers and Chinese imports are expected to continue growing in 2021.

Graph 2: Revenue of large Chinese cement producers in 2020 and 2019. Source: Company reports.

Moving to the financial figures from the larger Chinese cement producers, CNBM and Anhui Conch remain the world’s two largest cement producing companies by revenue, beating multinational peers such as CRH, LafargeHolcim and HeidelbergCement. Anhui Conch appeared to be one of the winners in 2020 and Huaxin Cement appeared to be one of the losers. This is misleading from a cement perspective because Anhui Conch’s increased revenue actually arose from its businesses selling materials other than clinker and cement products. Its cement sales and cement trading revenue remained stable. On the other hand, Huaxin Cement was based, as it describes, in the epicentre of the epidemic and it then had to contend with flooding along the Yangtze River later in the year. Under these conditions, it is unsurprising that its revenue fell.

CNBM’s cement sales revenue fell by 3% year-on-year to US$19.5bn in 2020 with sales from its new materials and engineering compensating. Anhui Conch noted falling product prices in 2020 to varying degrees in most of the different regions of China except for the south. CNBM broadly agreed with this assessment in its financial results. Anhui Conch also reported that its export sales volumes and revenue fell by 51% and 45% year-on-year respectively due to the effects of coronavirus in overseas markets. The last point is interesting given that China increasingly appears in lists of major cement and clinker exporters to different countries. This seems to be more through the sheer size of the domestic sector rather than any concerted efforts at targeting exports.

One major story on CNBM over the last 15 months has been its drive to further consolidate its subsidiaries. In early March 2021 it said it was intending to increase its stake in Tianshan Cement to 88% from 46% and other related transactions. This followed the announcement of restructuring plans in mid-2020 whereby subsidiary Tianshan Cement would take control of China United Cement, North Cement, Sinoma Cement, South Cement, Southwest Cement and CNBM Investment. The move was expected to significantly increase operational efficiency of its constituent cement companies as they would be able to start acting in a more coordinated manner and address ‘fundamental’ issues with production overcapacity nationally.

In summary, the Chinese cement market appears to have more than compensated for the shocks it faced in 2020 with growth in January and February 2021 surpassing the depression in early 2020. Market consolidation is continuing, notably with CNBM’s efforts to better control the world’s largest cement producing company. Alongside this the CCA may be starting to suggest that rationalisation efforts previously focused on integrated plants should perhaps be now looking at the more independent grinding sector. The government continues to tighten regulations on new production capacity and is in the process of introducing new rules increasing the ratio of old lines that have to be shut down before new ones can be built. Finally, China introduced its interim national emissions trading scheme in February 2021, which has large implications for the cement sector in the future, even if the current price lags well behind Europe at present.

Vietnam: Members of the Vietnam Cement Association (VICEM) produced 22.5Mt of cement in the first quarter of 2021, up by 2% year-on-year from 22.1Mt in the first quarter of 2020. The Việt Nam News newspaper reported that production in March 2021 was 8.3Mt, down by 4% from 8.0Mt in March 2020. Full-year production totalled 100Mt in 2020.

China: The Chinese construction industry has reversed a downward trend in 2020 to grow value-added output by 46% year-on-year in the first two months of 2021. The Xinhua News Agency has reported that the Ministry of Industry and Information Technology recorded a 61%year-on-year rise in cement production to 240Mt in the period.

Cambodia: China-based Conch International Holding subsidiary Conch KT Cement has announced plans for a new 2.0Mt/yr integrated cement plant in Kampong Speu province. The Phnom Penh Post newspaper has reported the cost of the proposed plant as US$263m. It will generate up to 500 jobs, according to the producer. The company also operates the 2.0Mt/yr Ratanak Mondol cement plant in the province that started operation in mid-2018. It says that the new plant will lower domestic cement prices, reducing the demand for imports.

2700 people are employed across Cambodia’s five cement plants. National installed cement capacity is currently 8.0Mt/yr. The Cement Manufacturers Association of Cambodia reports that production grew by 7% year-on-year to 7.9Mt in 2020.

Many Saudi Arabian cement producers have reported increased annual sales and profits in recent weeks. Southern Province Cement’s sales revenue rose by 27% year-on-year to US$440m in 2020 from US$347m in 2019. Net Profit after zakat and tax increased to US$162m from US$123m. Other producers enjoyed similar boosts. The reason can be seen in the country’s domestic cement sales. They rose by 21% year-on-year to 51Mt in 2020 from 42Mt in 2019. After a promising start to the year the coronavirus pandemic hit local production hard in the second quarter of 2020. However, it nearly doubled year-on-year in June 2020 and kept up the pace thereafter.

Graph 1: Domestic cement sales in Saudi Arabia, 2010 – 2020. Source: Yamama Cement.

Graph 1 above puts the cement sales in 2020 into context over the last decade. Sales hit a high in 2015 but then started to wane as infrastructure spending dried up due to lower oil prices and decreased government spending. A ban on exporting cement was subsequently relaxed but the general market appeared to adapt to the new situation. This changed significantly in 2020 with analysts attributing the turnaround to programs organised by the Ministry of Housing. This growth has carried into 2021 with NCB Capital forecasting an increase of 3.5% in local cement sales in 2021 due to the ongoing housing programs, the country’s so-called ‘Giga’ projects and investment by its sovereign wealth fund, the Public Investment Fund (PIF), as part of its 2021 - 2025 strategy. They reported that demand created by the country’s large-scale projects began to be felt along the supply chain in the fourth quarter of 2020 and associated contracts have started to be issued.

To give an example of the scale of some of these schemes, one of the proposed giga projects is to build a new city called Neom from scratch near the Red Sea coast. The resulting conurbation is intended to showcase new technologies and diversify the Saudi Arabian economy away from hydrocarbons. It has a price tag of US$500bn. An airport was built in 2019 and a next step was announced in January 2021, introducing a 160km linear city without roads called ‘The Line.’ Doubtless it will require lots of cement to realise the dream in whatever forms it happens to end up taking.

The wider picture here is that global oil prices hit a low in April 2020 as coronavirus lockdowns triggered a worldwide drop in demand although they then started to recover. The International Monetary Fund (IMF) estimates that Saudi Arabia’s gross domestic product fell by just under 4% in 2020. In response the PIF has upped its investment in the local economy including in the ‘Giga’ projects like Neom. There has been scepticism internationally about whether these projects will progress any further beyond press releases and actually get built. However, the cement producers’ financial results, cement sales figures and reporting from analysts like NCB Capital show that some investment is happening and it’s having results. The sector still faces a battle against overcapacity. It had a production utilisation rate of just under 70% despite the increase in cement production in 2020. Yet cement producers in Saudi Arabia have done well. While the Saudi Arabian government continues to spend on infrastructure in order to rebalance its economy this looks set to continue.

US: Data from the US Geological Survey (USGS) shows that cement producers achieved volumes of 87Mt of Portland cement in 2020, a slight increase from 2019 levels. Portland and masonry cement volumes rose by 1% year-on-year to 89Mt from 88Mt, while clinker volumes remained level at 79Mt. Total cement shipments remained level at 103Mt. The value of shipments in 2020 was US$12.7bn. Total exports of cement and clinker were 1.0Mt, down from slightly over 1.0Mt in 2019. The USGS said that on-going upgrades, closed and mothballed plants, low capacity utilisation and relatively inexpensive imports constrained the industry’s growth.

Domestic consumption fell by less than 1% to 102Mt from 103Mt. Cement imports totalled 15.0Mt, up slightly from 14.7Mt, while clinker imports rose to 1.4Mt from 1.2Mt. This corresponded to a 15% rise in reliance on imports of cement and clinker. The main exporters of cement and clinker to the country were Canada, accounting for 33% of US imports, Turkey (16%), Greece (15%) and China (12%).

Pakistan: Members of the All Pakistan Cement Manufacturers Association (APCMA) recorded cement sales of 38.0Mt in the eight-month period ending on 28 February 2021 – the first eight months of its 2021 financial year – up by 14% year-on-year from 33.3Mt in the corresponding period of the 2020 financial year. The Dawn newspaper has reported that exports rose by 7% to 6.33Mt from 5.94Mt while local dispatches rose by 16% to 31.6Mt from 27.4Mt.

The association said that producers face problematically high costs due to rises in coal and energy prices.

Kazakhstan: Kazakhstan’s cement production increased to 10.8Mt in 2020. Kazakhstan Newsline has reported that 2020 is the first year in which domestic cement production has exceeded 10Mt. Capacity utilisation across the nation’s 16.5Mt/yr of installed cement capacity was 66%.

HeidelbergCement’s 0.8Mt/yr Caspi Cement plant exceeded its rated capacity by 10%. Kazakhcement’s 1.0Mt/yr Shar cement plant and ACIG’s 0.5Mt/yr Khantau cement plant both produced no cement in 2020. Gezhouba-Shiyeli Cement’s Shiyeli cement plant stood idle for several months in early 2020 when management and engineering staff became stranded in China due to the coronavirus outbreak.

Kazakhstan Association of Cement and Concrete Producers executive director Erbol Akymbaev said, “The production capacities of Kazakhstani factories exceed the needs of the domestic market by 41%: domestic consumption in 2020 amounted to just over 9Mt. Access to neighbouring markets is complicated by the fact that states protect their own producers. For example, in Russia, according to GOST, additional certification of imported products is required." He added that the cement industries of the two main cement exporters to Kazakhstan – Iran and Russia – are unregulated in terms of CO₂ emissions. Kazakhstan’s commitment to a reduction in its emissions of 15% by 2030 gives it a competitiveness disadvantage.

Turkmenistan: Full-year cement production reached 1.9Mt in 2020. The Trend News Agency has reported that industrial production, construction work and services grew by 8% year-on-year during the period. The nation exceeded its reinforced concrete building construction plan for the year by 4%.

In January 2021, cement production increased by 29% year-on-year.