Global Cement News

EU: The European Council and European Commission have published their joint coronavirus exit strategy, entitled ‘European Roadmap Towards Lifting COVID-19 Containment Measures.’ It advises EU member states on a course of action aimed at restoring community life and the economy, while also preserving public health, after the coronavirus outbreak.

The roadmap consists of a progressive lifting of travel restrictions, initially between border regions, then between regions less affected by the outbreak and subsequently across internal and external borders of the EU. The strategy applies a similar approach to restarting the economy, beginning with ‘essential sectors’ such as construction. The Commission will maintain a rapid alert system for supply chain disruptions, with the help of existing networks such as the Enterprise Europe Network (EEN), Clusters, Chambers of Commerce and trade associations.

Hungary: Italy-based Entsorga has completed the installation of an automated alternative fuel (AF) line at a Hungarian cement plant.The upgrade consists of an Entsorga Spider crane and Pelican power system which will be able to maintain a continuous feed to the plant’s calcination system 24 hours a day.

Entsorga CEO Francesco Galanzino said, “Bringing a commission to a successful conclusion in the middle of the maximum intensity period of the coronavirus crisis has been a great satisfaction. The cement plant will make significant savings in CO₂ emissions.”

Ireland: CRH has said that it had a ‘positive start to the year’ in the first three months of 2020. Total sales over the period rose by 3% year-on-year. In the Americas region, cement volumes rose by 4% and prices by 6%. European cement sales were ‘broadly in line with the same period of 2019’ due to general volume and price increases offset by a fall in volumes in Western Europe.

Government-implemented covid-19 restrictions on construction towards the end of the period impacted sales in Canada, the UK and France. The likely effects on 2020 profit ‘cannot be reasonably estimated at this time.’ CRH chief executive officer (CEO) Albert Manifold said, “With the financial strength of CRH and the experience of our leadership teams, we will endure through these unprecedented and uncertain times.”

Spain: Cement demand in the first quarter of 2020 was 3.14Mt, down by 13% year-on-year from 3.60Mt in the corresponding period of 2019. In March 2020 cement consumption in Spain was 924,000t, down by 28% year-on-year from 1.28Mt due to the effects of the coronavirus outbreak. Agencia EFE has reported that this is the lowest level of demand in any month since the immediate aftermath of the 2008 financial crash. Construction activity has been restricted by a government-imposed coronavirus lockdown since 14 March 2020.

On 23 April 2020 Spain’s confirmed coronavirus case count was 213,024, with 22,157 deaths.

Data is starting to emerge about how the Chinese cement industry has coped with the economic effects of government action regarding the coronavirus. National cement industry output fell by 29% year-on-year to 150Mt in the combined months of January and February 2020. Output then picked up to 149Mt in March 2020, a drop of 17% compared to March 2019. These are massive figures, larger than the annual output of most countries, but they give some idea of what shutting down economies does to demand for cement and concrete.

Graph 1: Year-on-year change in cement output in China, April 2018 - March 2020. 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.

Graph 1 above gives the general picture of changes in cement output in China over the last couple of years. Growth fell in early 2018 as the government implemented its supply-side reforms, including measures such as industry consolidation and peak shifting. This improved in the second half of the year and throughout 2019. January and February output has been steady for the last few years, possibly due to peak shifting, but this year the trend was massively more pronounced. In March 2020, meanwhile, output fell by 17% compared to a rise of 17% in 2019. On the demand side, reporting from the Chinese Cement Association reveals that national infrastructure investment (excluding electricity) decreased by 19.7% year-on-year in the first quarter of 2020. National real estate development investment fell by 7.7% to US$310bn.

The figures above are for the whole of China whilst the outbreak was centered in Wuhan in Hubei province. The government implemented its toughest public health measures in this city and the surrounding Hubei province, with other regions using social distancing and tracking methods to various degrees. The Chinese Cement Association explains that, once other cities in Hubei province were released from lockdown, construction projects were allowed to resume but that progress was limited due to a lack of workers. Three weeks after measures were relaxed, the average shipping rate for cement producers was only 60% in these outer regions. In Wuhan the situation was more stark with demand for cement at only 20% of expected levels at the time the lockdown ended on 8 April 2020. Data from the Hubei Cement Association reports that on 30 March 2020 only half of Hubei province’s 57 clinker production lines were producing cement. The rest were suspended. To compound the problems here once logistics networks started to reopen imports of cement from other provinces flooded in taking advantage of price differences.

Few if any of the larger domestic producers have released their first quarter financial results for the first quarter of 2020. Huaxin Cement has said that its sales fell by 36% and that this is expected to cause a profit drop of 46% year-on-year to US$100m. Shanshui Cement has said likewise, although it has not released any forecasts. In its annual report for 2019 released in early April 2020, Anhui Conch said that the coronavirus had exerted a ‘short-term negative impact’ on the group’s business due to the slowdown in supply and demand in the construction materials industry. CNBM also acknowledged the situation in its 2019 report saying that it would, ‘impact on economic activity.’ CNBM’s subsidiary BNBM, a gypsum wallboard manufacturer, has released a forecast for the first quarter predicting a 90% drop in net profit due to poor sale volumes.

How this can inform the cement industries of other countries around the world that have enacted restrictions on their populations is unclear. China, as ever, is an exceptional outlier both economically and as a cement producer. Plus, the severity of how a country enacts a lockdown is crucial here. If the early reports above are indicative then half of Hubei’s clinker lines were forced to suspend production, demand for cement fell by 80% at the time the lockdown ended and imports headed in once transport networks were reopened. Issues were also noticed with labour shortages. Forewarned is forearmed as they say. The next point of focus will be how fast the Hubei and Chinese cement industry recovers from this shock. More on this as we have it.