Forgive the poor image quality but our magazine editor Peter Edwards spotted this provocative graphic (above) at the Federación Interamericana del Cemento (FICEM) technical congress that is taking place in the Dominican Republic this week. It came from a presentation given by Yassine Touahri from On Field Investment Research. The reason this slide raises eyebrows is because it seems to inversely link CO2 emission regulations with cement grinding capacity growth.
One would expect integrated or clinker production capacity addition to decline in the face of various carbon taxes because the majority of emissions in cement production are process emissions. Yet this graphic suggests that it goes further by affecting the supply of clinker in these regions. If correct then it supports the argument that introducing carbon taxes forces related capacity investment to go elsewhere. In other words, if governments try to control industrial CO2 emissions, then the market will follow the path of least resistance. The world has a clinker production capacity surplus and the countries with no CO2 regulations are scooping it up.
The counter argument is that capacity growth and CO2 legislation is unrelated. The regions with flat or falling grinding capacity additions are the places were this trend is occurring anyway for other reasons. These areas have built their houses and infrastructure and so one would expect no or low capacity growth. In this environment it is easier to introduce CO2 laws because, rightly or wrongly, it is perceived to be less important to the overall economy. Meanwhile, outside of these zones national economies are growing: they want to build things and new grinding plants to take advantage of a global glut of clinker are helping them to do this.
Other issues with this graphic are the widely different reasons for low cement grinding capacity growth in the areas with CO2 legislation. Europe, for example, has endured the European Union (EU) Emissions Trading Scheme (ETS) for over a decade and it has seen growth in the slag-cement grinding model in some countries in recent years. General trends have also seen a considerable drop in production capacity in Southern Mediterranean countries as their export markets decline. China is actively trying to manage a reduction in production capacity following a period of unparalleled growth. CO2 legislation is one potential means to do this.
The next step here would be to model the effect of a carbon tax on a developing market, which is genuinely growing its cement consumption, compared to a more mature one. This might help to answer whether economic development can be untangled from carbon emissions. CO2 regulations are undoubtedly distorting cement markets though. Touahri is right when he says that, “CO2 management will be the key challenge for the cement industry in the 21st century.” Once it is given a value then it changes the nature of the business.
There will be a full review of the FICEM technical congress 2019 in a future issue of Global Cement Magazine