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An analysis of worldwide cement and clinker trade

World Cement,

A trade imbalance has been created that has led to plant closures and temporary shutdowns. Cement and clinker trade is facing a downward trend. In 2006, it was already foreseeable that in the years leading up to 2010, worldwide capacity expansion would be growing faster than cement demand. Instead of downsizing trade prospects, up to the first half of 2008 there was still a strong belief in the cement industry and in a 5% annual global demand increase. Accordingly, from 2006 to 2008 alone, about 375 million tpa of new clinker capacity was contracted worldwide, excluding China. Around two-thirds of that will become operational by 2010. The new capacity coincides with the downturn in cement deliveries due to the economic crisis and the fear that 2009 might become a year of negative growth in global cement demand.

Surplus situation
The global cement demand forecast for 2009 is not as bad as stated in some pessimistic reports. China is responsible for 48% of the global production of 2835 million tpa (year 2008) and Chinese cement demand is forecast to grow by 10 - 12% this year. Also, India and the Middle East, with growth countries Saudi Arabia, UAE and Iran, and cement markets in Africa are all forecast to have significant growth this year. Cement markets that suffered the most from the economic crisis are in North America, Western and Eastern Europe (where the severe and prolonged winter weather had an extra effect), as well as some countries in the Far East and Latin America. The latest market figures for the US indicate a drop of 28% in cement shipments for the first three months of this year; in Spain in the first four months, cement demand dropped by about 45%; in Germany by May the decline was 14.6% compared to last year. In the first three months of 2009, cement consumption in Ukraine, Russia, Poland, Czech Republic and Croatia eroded by as much 30 - 60%.

Cement and clinker trade
Worldwide sea trading of cement and clinker decreased by around 14.7% in 2008, while the total trade (including land transport) only contracted by 11.9%. The total trade volume decreased from 159 million tpa in 2007 to 140 million tpa in 2008, of which cement made up 65% or 91 million tpa and clinker made up 35%. Some 110 million tpa, which is 81% of the total quantity, is transported by sea. At present, 70 million tpa of cement or 77% of the world cement trade is transported by ship, while for clinker the share is 82%. Nevertheless, the drop in the seaborne clinker trade last year was about 17%, while the drop in the seaborne cement trade was just 13.6%.

Market protection
National regulations are playing an increasing role in international cement trade. Import duties or import licenses and embargos are mainly imposed to hinder dumping of cement by foreign suppliers and to protect the domestic cement industry, while import duties are lifted to allow the import of foreign, cheaper cement to oppose excessive domestic prices. The latest examples of these schemes have been in Nigeria, Russia, Syria, Jordan and the Philippines.

Now, a serious problem arises with the unilateral initiative of the EU to launch its 2013 - 2020 Emission Trading Scheme (ETS). This will intensify problems of competitiveness for the EU cement industry and may be an incentive to import cement or clinker from countries with no carbon constraints as long as imports are not included in the EU directive.

To read the full and comprehensive report from Joe Harder, OneStone Consulting, please see the September 2009 issue of World Cement.

Author: Joe Harder, OneStone Consulting, Germany.

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