Data Based Analysis's report highlights the likely slowdown in the pace of price increases with declining capacity utilisation in many emerging markets and the need to maintain volumes in Europe in order to retain free carbon permits.
The report highlights the industry's accelerating progress on decarbonisation, but also the longer term concern about the feasibility and cost of carbon capture, utilisation and storage (CCUS).
Price increases are likely to become more difficult, particularly as inflation eases and price increases for other building products slow in developed countries and capacity utilisation remains low in many emerging markets. Pricing has been particularly strong in Europe, but may become more difficult in the future if volumes remain low and companies need to keep production up in order to retain their allocation of free carbon permits.
Strong progress on decarbonisation but longer term concerns remain
Further strong progress is expected on decarbonisation as the cement industry continues to increase its utilisation of alternative fuels and reduces the clinker factor. Longer term concerns remain though about the cost for the industry of becoming net zero by 2050, with CCUS being required. This typically boosts electricity demand by between three and ten times. Often this necessitates the construction of new power generating capacity, possibly boosting the total cap ex required to several $100 million depending on the size of the cement plant. There are also sizeable annual running costs of several $10 million. However, costs may fall significantly longer term.
M&A replaced by buy-backs in Europe. Share issuance planned in Brazil
The global cement sector has been quiet for M&A in 2023. Share buy-backs have continued in Europe and other European companies may consider following CRH in moving their prime listing to New York. The three largest Brazilian cement companies have announced plans for IPO's. It remains unclear when they will be doable, in view of the cautious outlook for the Brazilian economy in 2024.
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