Global Trading Patterns in Cement

Introduction

Cement trading represents a small but vital part of our industry. According to our estimates, total cement trading accounts for around 3% of total cement volumes. It performs the vital role of allowing surpluses and shortages to be ironed out across countries. After declining 20% from peak, pre-credit crunch levels, trading volumes began to improve in 2012 and we anticipate a further increase in 2013. In 2011 we estimate that 130 – 135 million t of cement was moved across borders with the following breakdown:

• Around one-third was moved by truck or barge across countries sharing a border. 
• Circa two-thirds was seaborne cement.
• The seaborne trade was split approximately between clinker (25%), bulk cement (60%) and bags (15%).

Cement trading peaked in 2007, when we estimate that total volumes surpassed 160 million t. Trading flows have dropped in recent years, and become more local/regional. There have been two major changes worldwide. First, there has been a sharp reduction in US imports after the bursting of its housing bubble. Second, the Chinese have cut exports considerably as the government phased out small, inefficient plants and removed subsidies on exported cement. Other large import markets have seen sharply lower flows due to falling demand (Spain) or new capacity (several countries in the Middle East).

Cement is typically a difficult product to transport, being a low-value bulky item. It accounts for only 3% of the overall shipping market. Trade is heavily concentrated in the smaller Handysize and Handymax vessels. Its dusty nature also means that shipowners typically prefer to carry other products. The low-value nature of the product also gives other commodities an edge in competing with cement as a cargo. Steel and its inputs account for around half of global trade.

USA and China – two sides of the same coin?

In 2006, cement trading in the US and Chinese markets surged to 36 million t each. The US imported this amount on the back of the housing bubble, while China exported the same figure as its capacity spiked dramatically.

US cement and clinker imports have averaged 20 million t in the 2000 – 2012 period. After the 2006 peak of 36 million t, imports dropped to a trough of 6.4 million t in 2011 with a small pickup to 7 million t in 2012. During this same time period, US cement consumption declined by over 50 million t. Chinese exporters have borne the brunt of this decline, with Chinese exports to the US dropping from over 10 million t in 2006 to less than 0.5 million t last year. Canadian exports have held up as the multinationals have integrated operations in North America and have always used Canadian production to supply the US market. All other major exporters have seen a sharp drop in US sales.

In time, we expect the US import market to come back strongly. We expect demand to recover and surpass previous peaks on the back of demographic growth and the continued normalisation of housing and commercial construction markets.

While US cement imports have dropped from 36 million t to 7 million t, Chinese exports have dropped by almost the same amount, reaching a trough of 10 million t. We expect a flat development in 2013.  Longer-term we expect Chinese exports to remain in a range of 5 – 20 million tpa. These numbers are, of course, miniscule in the context of Chinese domestic demand, which stands at well over 2 billion t. There has been talk in the past decade of China emerging one day as an importer of cement. We believe this is unlikely to happen in the short-term.

Likely changes to trading flows in 2013

We expect that 2011 marked the trough of the market in cement trading. After an increase of 3 – 4 million t in 2012, we are anticipating a further small increase of 2 – 3 million t in 2013. Our commentary below relies heavily on our growth assumptions and worldwide discussions with industry players, and must be viewed in this context.

On the export side, several countries were under severe pressure to export more in 2012 and we generally expect this trend to continue into 2013:

• An extra 2 – 3 million t exports from the UAE: new capacity from Arkan is likely to come onstream as this article is going to print. This will push surplus clinker capacity in the country to well over 15 million t. Even with a booming domestic market, it would take a decade to absorb this surplus. However the UAE continues to stagnate under the weight of the huge real estate crash, and we expect demand to increase by a modest 2 – 4% in 2013.
• An extra 2 million t exports from Vietnam: producers in Vietnam are struggling to pay down debts after building capacity rapidly in recent years. The bursting of the property bubble led to a sharp drop in demand last year. While some commentators believe the market has now bottomed and that domestic demand will increase in 2013, we remain cautious and expect a rather flat market.
• An extra 3 – 4 million t exports from Southern Europe: the Eurozone crisis has led to a glut of spare capacity in Spain, Italy, Greece and Portugal. This region has now become an important hub for cement trading. All four countries have been rather slow to rationalise capacity in our view (partly due to the carbon credit system), and export pressures have naturally escalated dramatically. Healthy demand growth in Libya and Algeria provide a ready market for exports from Southern Europe.
• A 2 million t drop in exports from Turkey: we expect a slight drop in Turkish exports this year as demand declines from its traditional markets like Syria and Iraq, while Southern European countries such as Spain take some share for exports to Africa.
• A 2 – 3 million t drop in exports from Far Eastern countries: we expect a further decline in exports from Thailand and Japan this year, largely due to the stronger domestic demand in both countries. Reconstruction is a key factor here, with Thailand undergoing flood repair programmes and Japan still rebuilding after the Fukushima earthquake.
• A 1 – 2 million t increase in exports from Iran: producers in Iran are currently struggling with a major surplus after capacity extensions from recent years. Exports have risen sharply in recent years into Iraq, Afghanistan and the Caspian Sea. We anticipate a further increase in 2013 as domestic demand drops further.
• We expect to see little change in volumes in 2013 from other large exporters such as China and Pakistan.

In the case of importing countries, we are expecting to see changes that are smaller in scale compared to the export side. We anticipate a 1 – 2 million t increase in imports in the following markets: Algeria; Libya; Indonesia; Myanmar.

Africa is more difficult to read this year. Growth in cement demand remains very strong in a 6 – 8% range across both importing segments of West and East Africa. Capacity expansions are also gathering pace, although plants are very often delayed. In addition, much of the new capacity is grinding only, which means that over time clinker imports will take the place of bagged cement imports. In West Africa we expect higher imports into Ghana in 2013 where demand remains buoyant, while Nigeria may see a decline as the producers are campaigning for a ban on imports, having spent huge sums on increasing domestic capacity. In the East we expect higher imports into Madagascar, Mozambique and Djibouti. New capacity is under construction in several countries, such as Angola, Tanzania and Ethiopia, which will bring down imports over time.

Written by Imran Akram, IA Cement Ltd, UK. This is an abridged version of the full article, which appeared in the May 2013 issue of World Cement. Subscribers can view the full article by logging in.

Read the article online at: https://www.worldcement.com/africa-middle-east/29042013/cement_global_trading_patterns_961/