The Iberian Peninsula is located in the south west corner of mainland Europe. Around 85% of its land is occupied by Spain, with smaller Portugal occupying around 15% in the far south west. Andorra, France and Gibraltar (UK) also occupy very small areas. Spain has the largest population, economy and cement sector in the region, with Portugal operating a far smaller cement sector. Here, we discuss the main players, trends and prospects of these two national industries ahead of the Global CemFuels Conference, which takes place in Barcelona, Spain on 1 - 4 February 2017.
Spain is a large and populous southern European country. It has been a Member of the EU (and its predecessor the EEC) since 1986. Spain has a developed economy, which has undergone significant transformation after the dictatorship of General Francisco Franco between 1936 and 1975.
Despite making massive gains in the 1980s, 1990s and early 2000s, the economic crisis of 2008 hit Spain very hard. The economy had developed a large housing bubble, which allowed unsustainable GDP growth. When the global economy faltered, Spain was forced to apply for a US$100bn bailout loan from the Eurogroup group of EU finance ministers.
Its GDP fell by 25% between 2008 (US$1.64tn) and 2015 (US$1.19bn). The country’s unemployment rate rocketed from 8.2% in 2007 to 26.3% in 2013, although it has since fallen slightly.
Cement consumption trends
The Spanish cement sector grew rapidly in the second half of the 20th Century. In the 1950s the country saw significant development as people migrated from the countryside to the cities. Increasing levels of prosperity in the 1960s and 1970s, led to an acceleration in development, including Spain’s massive tourism infrastructure, to the extent that domestic supply could not keep pace with demand and the country had to import cement. Production hit a (then) all-time record of 27.6Mt in 1991 due to construction for the 1992 Summer Olympic Games in Barcelona. It was not until the late 1990s that this level was once again exceeded.
Data from the Spanish Cement Association Oficemen shows that apparent cement consumption more than doubled in the 10 years between 1997 and 2007 from 26.8Mt to 56.0Mt, alongside Spain’s rapidly growing economy (See Figure 1). Then, as the economy turned downwards, cement consumption followed suit. However, whereas GDP fell by 25%, cement consumption crashed by an incredible 81% between 2007 and 2013, falling back to levels not seen since the late 1960s. Production has skimmed along at this new low level and was not significantly greater in 2015, the last year for which Oficemen has published data.
The effects of these changes on Spanish per-capita cement consumption are similarly stark. Figure 2 shows how it increased from an already high 682kg/capita in 1997 to over 1200kg/capita in 2006 and 2007. Per-capita comsumption then plummeted to 231kg/capita in 2013. It has since remained close to this low value.
To provide comparison, Cembureau data for 2014 shows that the EU28 average per-capita cement consumption rate was 363kg/capita, around 1.5 times that of Spain. Even Italy, which has been similarly affected by the Eurozone crisis, had a rate of 335kg/capita, around 1.4 times that of Spain.
Cement production trends
Trading Economics.com has published monthly cement production data for Spain up to November 2016. Its data broadly agrees with that of Oficemen for 2015 and shows that the Spanish market has limited seasonal variation in terms of output. Production for December and January are typically lower than other months, likely due to Christmas and New Year holidays. However, generally warm weather means that construction is less seasonal than in Spain’s colder northern neighbours.
Figure 3 shows how cement production in Spain actually fell year-on-year in 2016 compared to 2015. A comparison of the first 11 months of each year shows a 5.4% decrease from 2015 to 2016. By assuming the same percentage decrease for December 2016, we arrive at likely cement production of 13.8Mt in Spain in 2016, down from 14.6Mt in 2015.
The decline in its domestic market, coupled to Spain’s location next to North and West African markets, has caused exports of cement and clinker from Spain to increase significantly since 2007, as shown in Table 1. No clinker at all was exported between 2005 and 2007. Total cement and clinker exports increased nearly 10-fold from just 1.1Mt in 2007 to 9.65Mt in 2014. Both cement and clinker export volumes declined in 2015.
Above - Table 1: Cement and clinker exports from Spain (Mt), 1997 - 2015. Source: Oficemen.
However, Spain remained the sixth-largest cement and clinker exporting country by value in 2015, selling US$489.2m worth of material, according to World’s Top Exports. This represented 5% of all cement exported worldwide in that year. In 2014 Algeria was Spain’s largest cement export destination, according to MIT’s Observatory of Economic Complexity. The country received around 18% of the total value (US$111m of US$613m) of Spanish cement exports, followed by France (16%, US$100m) and the UK (10%, US$61m). Africa was the largest continental consumer (US$286m), followed by Europe (US$243m) and South America (US$49m), (mainly Brazil (5.7%, US$35m)).
The Global Cement Directory 2017 lists 32 active integrated cement plants in Spain that share a total integrated cement capacity of 42.0Mt/yr. Indeed, solely by this measure, the country has the largest cement industry in the whole of the EU, larger even than that of Germany.
However, having made an estimated 13.8Mt in 2016, Spain has an effective capacity utilisation rate of just 33% and that is before one adds Spain’s 19 grinding plants, both on the mainland and in the Balearic and Canary Islands. Several plants are mothballed, closed or are operating on a campaign basis.
Like many countries in the EU, Spain’s cement production base is predominantly owned and operated by major multinational cement producers. Between them Cemex, LafargeHolcim, HeidelbergCement, CRH and Votorantim share 24.4Mt/yr of integrated capacity, around 58%. The remaining 17.6Mt/yr (42%) of integrated capacity is taken up by locally-owned producers, most notably Grupo Cementos Portland Valderrivas (CPV), which is the largest producer in Spain (11.1Mt/yr). Other local producers are Cementos Molins, Cementos Balboa and SA Tudela Veguín.
|SA Tudela Veguín||3.5|
Above - Table 2: Integrated cement producers in Spain. Source: Global Cement Directory 2017.
Oficemen data shows that the Spanish cement industry’s main fuel in 2015 by mass was petcoke, which accounted for nearly two thirds of all fuel used (See Table 3). It was by far the major fossil fuel used.
A wide range of alternative fuels were also used by the industry, to the tune of 33% by mass (Note that, due to different fuels having different calorific values, these percentages do not correspond directly to thermal contribution). The most prevalent was refuse-derived fuel (RDF), which accounted for around 38% of the alternative fuels used and around 13% of all fuels. Other prominent alternative fuels include tyres, waste wood and animal meal.
|FUEL TYPE||Mass (t)||% (by mass)|
|Other fossil fuels||52446||2.4|
Above - Table 3: Types of fuels used by Spanish cement industry in 2015. Source: Oficemen.
In its Autumn 2016 forecast the European Commission (EC) forecast that Spanish GDP would increase by 3.2% in 2016, by 2.3% in 2017 and by 2.1% in 2018. This represents steady, if unspectacular growth following economic contractions in 2009 - 2013. Faster GDP growth of 3.1% was seen in 2015, albeit from a very low base.
Whether or not this forecast growth can be translated into improved prospects for the country’s cement sector remains to be seen. In the short term, exports are likely to remain important to the ongoing viability of many plants. However, increasing cement capacities in some of the regions that currently receive Spanish cement, such as north and west
Africa, may adversely affect the ability of Spanish plants to export economically. Consolidation and further contraction are therefore potential future trends for the Spanish cement sector in the event that significantly higher domestic sales cannot be obtained in the short to medium term.
Like its larger neighbour Spain, Portugal is a member of the EU and Eurozone. It too was run by a dictator, António de Oliveira Salazar, between the 1930s and 1970s. Salazar’s rule ended in the Carnation Revolution of 1974, which brought political and economic liberalisation.
In the 43 years since, Portugal has undergone a similar transformation to that of Spain, although it has been reliant on IMF funding on occasion. Most recently, Portugal received a US$116bn bailout from the IMF and EU in 2011 following the collapse of a major bank and runaway costs relating to various Public Private Partnerships. GDP fell by 13.3% from US$262bn in 2008 to US$227bn in 2012. The economy has since improved marginally, although unemployment remains at around 13%.
Portugal’s eight cement plants have a combined integrated capacity of 12.4Mt/yr, with a further 0.9Mt/yr of grinding capacity.
The largest by installed capacity is Cimpor - Indústria de Cimentos. The company was originally established in Lisbon in 1976 but became part of Brazil’s InterCement in 2012. Cimpor operates 8.2Mt/yr of integrated cement capacity across three plants. Cimentos de Sines, another InterCement subsidiary, operates a 0.9Mt/yr grinding plant at Setúbal, close to Lisbon. Cimpor also operates the Cimentaçor terminal in the Azores.
The other player with integrated capacity in the Portuguese market is SECIL, which has 4.2Mt/yr across three plants. This includes 0.8Mt/yr of white cement capacity. It has made cement since 1930 when it formed from a collaboration between SECIL - Companhia Geral de Cal e Cimento, FLSmidth and Hojgaard & Schultz.
Production, demand and export trends
Figure 6 shows Portuguese cement production between 1997 and 2013, according to the USGS. It shows a significant spike in production in 2007 and 2008, although levels have been lower since 2009, when they fell to 7.2Mt/yr.
In the years since, the country’s adverse economic environment has had a depressive effect on its construction and cement sectors and demand plummeted. In 2015 Cimpor produced 4.4Mt of cement in Portugal, with 70% of this (3.1Mt) exported, according to its 2015 Annual Report. This leaves around 1.3Mt of cement in Portugal itself. In its 2015 Annual Report SECIL reported domestic sales of 1.05Mt in the same year, with 1.57Mt exported, a domestic/export split of 40/60.
Given that these two companies produce all of the cement in Portugal and the fact that imports are highly likely to be zero or very low, the above data suggests that Portugal consumed around 2.8Mt of cement in 2015.
SECIL points to overcapacity in Spain as presenting a challenge to exports. However, Portugal was the 13th-largest cement exporting nation in 2015, according to World’s Top Exports, despite being the 42nd-largest cement industry by capacity, according to the Global Cement Directory 2017. The country exported US$222m worth of cement in 2015.
According to MIT’s Observatory of Economic Complexity, the major importers of Portuguese cement in 2014 were Algeria (US$140m, 41% of all exports), Colombia (US$23.8m, 6.9%) and Cape Verde (US$20.3m, 5.9%).
In its Autumn 2016 forecast the European Commission (EC) forecast that Portuguese GDP would increase by 0.9% in 2016, by 1.2% in 2017 and by 1.4% in 2018. Previously the economy grew by 1.6% in 2015. In their 2015 Annual Reports, both SECIL and Cimpor were bullish about the Portuguese market in the long term, pointing to increased private consumption. However, the heady days of 7Mt/yr are not likely to be repeated in the foreseeable future. Slow-but-steady is the name of the game.