Displaying items by tag: China Cement Association

It won’t be a surprise to most readers that the Chinese cement industry continued to struggle in the first half of 2024. The China Cement Association (CCA) summarised the situation as a "continuous decline in demand, low price fluctuations and continuous losses in the industry." Cement output fell year-on-year and four of the six large cement companies featured in this article reported falls in revenue. The CCA estimated that the sector as a whole lost about US$140m in the first half of the year.

Graph 1: Cement output in China, 2019 to first half of 2024. Source: National Bureau of Statistics of China.

Data from the National Bureau of Statistics of China shows that cement output fell by 13% to 855Mt in the first half of 2024 from 980Mt in the same period in 2023. That’s a fall of more than 100Mt and around the annual cement production capacity of the US! Analysis by the CCA reckons that the first half of 2024 saw the lowest cement production since 2011. It blamed the situation on the failure of the real estate market to stabilise and a slowdown in infrastructure investment. Geographically the areas with the biggest declines were the Northeast, Northwest and Central and South regions. Those provinces with the smallest declines were Tibet, Jiangsu, Yunnan and Hebei. However, the CCA was keen to point out that staggered production, through initiatives such as peak shifting, took place in the second quarter of 2024, the producers’ cement inventory fell and cement prices rallied somewhat in June 2024.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports. Note: For CNBM Basic building materials segment revenue shown only.

CNBM says that it is the largest cement producer in the world. However, Anhui Conch appears to have sold more cement and clinker than CNBM did… in the first half of 2024 at least. Anhui Conch sold 126Mt of cement and clinker, a drop of 3% year-on-year, compared to 114Mt by CNBM, a drop of 20%. Anhui Conch’s sales revenue and net profit fell by 30% to US$6.4bn and 48% to US$490m respectively. The sales revenue from CNBM’s Basic Building Materials segment, its division that manufactures cement, deceased by 31% to US$5.73bn. Tangshan Jidong and CRC reported similar situations to their larger peers with declines in revenue and profit.

Huaxin Cement and Taiwan Cement both managed to raise revenue, but this was mostly due to their businesses outside of China. Huaxin Cement increased its operating income by 3% to US$2.3bn, with sales volumes of cement falling at home but growing abroad. Indeed, its domestic operating income fell by 32% to US$716m, a similar rate of decline to the other companies featured here. By comparison, the operating income from its overseas cement business rose by 55% to US$502m. Combined with a boost in aggregate sales volumes, this helped to stabilise the company’s financial performance. Taiwan Cement, meanwhile, completed its acquisition of Cimpor Portugal in March 2024 giving it a majority stake in OYAK’s cement business in Türkiye. Subsequently, its revenue in the second quarter of 2024 shot up year-on-year.

CNBM hit the nail on the head in its half-year report when it said: “The overcapacity has not been fundamentally resolved.” China is a big country with lots of regional variation but when cement plants stopped manufacturing cement in the second quarter of 2024 the price improved. Funny that should happen! The government is slowly making adjustments to the real estate market and other mechanisms, including the China national emissions trading system, are due to be applied to cement plants soon. Yet, until that overcapacity is addressed or unless some market fundamentals change then expect to see more of the same in China in the near future.

The National Development and Reform Commission and other government bodies in China released plans this week to cap clinker production capacity at 1.8Bnt/yr by the end of 2025. Energy efficiency of existing capacity will be used as the driver to determine which production lines can remain open. 30% of capacity will be required to be above the benchmark energy efficiency level. Plants below this line will be obliged to upgrade or face elimination.

Points of interest from the longer release include detail on how the authorities intend to promote energy efficiency. Installing improved production line equipment is as might be expected. However, there is also a drive towards low-carbon fuel substitution such as an increased thermal substitution rate (TSR) through the use of alternative fuels (AF), promotion of renewable energy sources and, interestingly, no new cement plants will be able to add captive coal power plants. The government is targeting a TSR of 10% by the end of 2025 with 30% of lines using AF in some form or another. A plan to reduce the clinker factor in cement is also being pushed through for the increased use of blast furnace slag, fly ash, carbide slag, manganese slag and other supplementary cementitious materials. This last point might have big implications for the ferrous slag export market but that’s a story for another day.

Working out how much these new measures will affect the cement sector in China in the short term is not straightforward since it’s unclear what the country’s actual production capacity is and how much of it is actually active. Data from the National Bureau of Statistics of China showed that cement output was 2.02Bnt in 2023. The China Cement Association (CCA) estimated that the capacity utilisation rate was 59% in 2023. So, if the sector were using all of its integrated cement plants flat out, then one might crudely suppose that the national production capacity might be around 3.5Bnt/yr. This guess does not take into account the prevalence of blended cements and a whole host of other factors so should be treated with caution. Given that cement output fell by 5% year-on-year in 2023, output could be just over 1.8Bnt in 2025 if the rate of decline holds. Research by Reuters in April 2024, suggested that the capacity utilisation rate hit 50% in that month, suggesting that the sector could meet the target in 2024 if it’s a particularly bad year. So, provided the production cap is enacted along the same lines of peak-shifting, where plants are temporarily shut for periods, then the target looks well within reach.

As reported in April 2024, the Chinese cement sector has faced rationalisation in recent years as the real estate market collapsed. Output peaked in 2020 and then fell subsequently. Most of the big producers endured falling sales volumes, revenue and profit in 2022, although some managed to resist the continuing decline in 2023. One coping mechanism has been to focus on overseas markets as proposed by the government’s Belt and Road initiative. Huaxin Cement has been a particular proponent of this strategy. The CCA says that China-based companies have invested in and built 43 clinker production lines in 21 countries with a cement production capacity of 81Mt/yr. Another 43Mt/yr of capacity is currently being built outside of China with yet another 25Mt/yr of capacity proposed for construction.

It is interesting, then, to note that the CCA issued an official warning this week to its members to invest ‘cautiously’ in Uzbekistan. The association said in a statement that at the end of April 2024 the country had 46 integrated production lines with a cement production capacity of 38Mt/yr. This is double the country’s demand for cement. Half of this production capacity is managed by China-based companies. It added that the utilisation rate was currently 50%, that the price had dropped by about 40% since 2020 and that competition was ‘fierce.’ Incredibly, another 7Mt/yr of capacity is expected to be added in 2024. The CCA has advised Chinese companies to consider the state of the Uzbek cement market before making any more investments.

The two news stories we have explored this week cover two sides of the same issue: Chinese cement overcapacity. The local market is finally slowing down after a period of phenomenal growth and the big question is what is the actual market demand now that all the big stuff has already been built. The government gives every impression it is using the decline to meet its sustainability goals. Like institutions in many other places it has set itself targets that it seems likely to meet. The flipside of overcapacity at home is investment overseas. China-based plant equipment manufacturers have certainly done well out of this situation. Yet in Uzbekistan, at least, it looks like the cement sector in China has also managed to export its overcapacity. This has created the absurd situation where the CCA has implored its members and others to exercise the same self-discipline abroad that the government extols at home. Another way to put this might be that Chinese cement companies are increasingly unable to make money at home… or in Uzbekistan. This then leaves a query over where else enthusiastic Chinese cement investors may be causing market imbalances. One solution might be for the Chinese government to impose a cap on clinker production by its companies outside the mainland. Whatever happens next though, the introduction of a capacity cap in mainland China marks a decisive change to the local cement sector.

The stock market price of Tianrui Cement crashed by a staggering 99% last week. On 9 April 2024, during the last 15 minutes of trading at the Hong Kong Stock Exchange, the price of shares in the company dropped from around US$0.64 to below US$0.01. Its market capitalisation swung from US$1.8bn to US$18m in a quarter of an hour. The cement producer then suspended trading shares the following morning. It said trading would remain halted until it made a formal announcement about the situation. At the time of writing that announcement is still forthcoming. The question on everyone’s minds is, “What happened?!”

On its website Tianrui Cement describes itself as “one of the 12 national cement enterprises supported by the Chinese government.” It is part of Tianrui Group and it listed itself on the Hong Kong Exchange in late 2011. By the end of 2020 it had 22 clinker production lines and 59 cement grinding units with a total cement production capacity of just under 58Mt/yr. It describes itself as the “leading clinker producer in Henan and Liaoning Provinces” and the ninth biggest clinker producer by capacity in the country.

Unfortunately, as reported by Global Cement Weekly earlier in April 2024, the cement market in China was tough in 2023. This has continued into the first quarter of 2024 with cement output falling by 12% year-on-year to 337Mt. Tianrui Cement, like many other China-based cement producers, reported falling sales and profits in 2023. Its revenue decreased by 29% year-on-year to US$1.09bn from US$1.58bn and it made a loss of US$87.6m compared to a profit of US$62m. Its cement sales volumes fell by 9% to 25.2Mt and it noted that the average price also fell by 22%. It blamed the fall in revenue on the lower volumes and prices. Profits and earnings suffered in turn as it couldn’t cut its costs fast enough.

Aside from the general poor state of the property market in China there has been little information about what actually happened to Tianrui Cement on 9 April 2024. Reuters reported speculation amongst financial sources that the company may have become subject to a margin call. In this situation an investor that has borrowed money to invest in shares has to provide additional funds if the value of the shares fall below a certain point. Bloomberg said that the controlling shareholder Li Liufa and his spouse jointly own approximately 70% of the company. It noted the risks of companies with a high concentration of shareholders and those that use shares as debt collateral. In this situation a large sale of shares could potentially trigger a panic as there might not be enough buyers.

Within China the Financial Associated Press (CLS) reported that three other companies listed on the Hong Kong Exchange had also experienced severe stock market volatility at the same time as Tianrui Cement. None of these other companies are in the building materials sector. Following the drop in its share price, Tianrui Cement told local media that the company was operating normally. Its spokesperson wondered whether the plunge in share value was due to small shareholders selling up. Coverage of local media by the China Cement Association explored the theory that the market was jittery about the poor state of the cement industry in China. Suspicions about the company’s debt structure were also raised.

From a western point of view the meteoric rise of the cement industry in China over the last 20 years has always carried the fear of a hard landing once the period of growth ended. The trick for the government and cement manufacturing is how to transition to lower levels of cement production without causing a recession. So, extreme stock volatility for a major cement producer in China is exactly what a cynical external observer might expect. China has a couple of exit routes up its sleeve though from the state-controlled nature of its economy, to how it approaches its net zero commitments, to the unreliability of its data, to exporting production capacity overseas and so on. This leaves us waiting to see what Tianrui Cement has to say to the market about what happened and what happens next. One share price crash for a cement producer might be forgivable. Two, however, might be seen as a sign of something else.

We turn to look at the Chinese cement sector now that the larger China-based cement producers have released their financial results for 2023. In summary, national output of cement has continued to fall and many of the bigger companies are reporting weakening sales and profits. Yet this trend appears to be slowing, with a few of the producers managing to grow revenue, profits and sales volumes.

Graph 1: Cement output in China, 2018 to 2023. Source: National Bureau of Statistics of China.

Data from the National Bureau of Statistics of China shows that cement output fell by 4.5% year-on-year from 2.11Bnt in 2022 to 2.02Bnt in 2023. This is a slower rate of decline than the 10.4% drop reported between 2021 and 2022. However, it is worth noting that the rate of decrease in output on a half-year basis fell strongly in the first half of 2023 but remained similar in the second half of the year. In its commentary, the China Cement Association (CCA) said that the country’s real estate development investment fell by 10% year-on-year to US$1.53tn.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports.

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.

Unlike in 2022 the two graphs above show that not every cement producer has lost revenue or sales volumes of cement in 2023. CNBM chair Zhou Yuxian used the phrase ‘storms and challenges’ to describe the situation faced by the world’s largest cement company. He left president Wei Rushan to deliver the bad news that the cement industry as a whole faced “insufficient demand, weakening expectations and weakening off-peak season characteristics” along with surpluses and high costs. He said that the cement sector in China saw its profit fall by 50% to US$4.42bn in 2023, its lowest figure since the mid-2000s.

In comparison CNBM Group’s revenue fell by 10% year-on-year to US$29bn and profit by 52% to US$534m. This was principally due to losses from the group’s basic building materials division, the section that makes heavy building materials, including cement. Alongside this, it pushed on with its supply-side structural reforms, implemented staggered peak production and worked on sustainability initiatives. These included preparations for the national carbon emissions trading scheme. Anhui Conch’s results showed that it managed to increase its revenue but its sales volumes of cement dropped and its profits fell by 33% to US$1.48bn. It achieved the boost in revenue by growing its trading business.

Of the smaller companies covered here, only Huaxin Cement managed to grow its revenue in 2023. It appeared to pull this off by growing its concrete and aggregate business domestically whilst growing the business overseas at the same time. The share of its international business grew to 16% in 2023 from 13% in 2022. Major overseas acquisitions in 2023 included Oman Cement and InterCement’s subsidiaries in Mozambique and South Africa. More recently Huaxin Cement has also been reported by local media as the preferential bidder for InterCement’s business in Brazil, although no formal announcement has been made. Of the rest, Tangshan Jidong Cement, CRBMT and China Tianrui all reported declines in sales revenue and profits. Tangshan Jidong Cement did manage to grow its cement sales volumes, but reported heightened competition in the north and north-east of China where most of its plants are located.

With the first quarter results for 2024 on the way soon, the CCA has been bracing itself and the sector for more bad news. It noted that national cement prices during the last week of March 2024 were about 1% lower than during the same week in 2023. Prices were lower in East, Central and South China, although they had increased in Chengdu and Sichuan. The CCA is worried that a price war, either nationally or regionally, will make a bad situation worse. It has called on cement producers to accept that the slowdown of infrastructure development in the country has led to a decline in cement demand and that this is the new normal. Apart from the usual watchwords of ‘self-discipline,’ ‘overcapacity reduction’ and ‘supply-side reforms’ the association has suggested that cement companies look for growth internationally and look to the leadership of associations to help everyone adapt to the new market situation. China’s sales output of cement may be starting to stabilise, but the market has a way to go yet to adapt to the new reality.

World: The Global Cement and Concrete Association (GCCA) has signed a new agreement with the China Cement Association (CCA). The agreement constitutes an historic ‘partnership pledge’ to accelerate cement decarbonisation globally in 2024 – 2026. The partners says that their collaboration will contribute to the development and launch of the upcoming China Cement Carbon Neutrality Roadmap. Equipment supplier Sinoma International Engineering and the European Cement Research Academy (ECRA) will also help to develop the roadmap. The GCCA previously launched its own global net zero roadmap in 2021. Together, GCCA and CCA members account for 90% of global cement production in capacity terms.

GCCA CEO Thomas Guillot, said “The world needs leadership and collaboration like never before, especially on addressing the key issue of our time, climate change. This agreement between the China industry and the global industry is a signal to the world that we stand ready to deliver the essential decarbonised building materials that our planet needs. Cement and concrete enable the key infrastructure, thriving and resilient communities, clean water, safe homes and the shift to clean energy that are essential to a future sustainable world.”

CCA Executive president Kong Xiangzhong said “This important agreement marks a win-win cooperation, and shows where we can collaborate effectively to bring insights, technical know-how and greater focus to our shared decarbonisation mission. I am sure this will create a mutually-beneficial and long-term partnership that will be crucial in building a more sustainable world.”

The Chinese cement sector had a tough time in 2022. This was confirmed this week as the large domestic cement producers released their financial results. Revenue was down, profits fell and cement sales volumes tumbled. The key causes included the continuation of the country’s zero-coronavirus policy, the declining real estate market and rising input costs for raw materials such as coal. Demand for cement withered and so did the fortunes of the cement companies.

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China.

Data from the National Bureau of Statistics of China shows that cement output fell by 9.8% year-on-year to 2.13Bnt in 2022 from 2.36Bnt in 2021. The greater decrease was in the first half of the year rather than the second. The China Cement Association (CCA) said that this was nearly the lowest output in the last decade and the largest decline since 1969 ! The National Bureau of Statistics of China also pointed out in a release that, despite investment in fixed assets increasing by around 5% in 2022 and national infrastructure spending growing by 9%, real estate development investment dropped by 10% to US$1.46Tn.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports.

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.

The cement producers warned in their forecasts that the results for 2022 were going to be rough and so it came to pass. China National Building Material (CNBM)’s revenue fell by 16% year-on-year to US$33.4bn in 2022 and Anhui Conch’s sales fell by 21% to US$19.2bn in 2022. Although, Tangshang Jidong Cement and Huaxin Cement reported declines of income or revenue in single digits. Profits halved for all of the companies covered here. Various combinations of the reasons covered above were cited for the situation.

What is more interesting are the responses some of the producers are making and what has gone well. CNBM, for example, is pinning its hopes on better staggered peak production and infrastructure projects. Anhui Conch, meanwhile, appears to have been diversifying its business by increasing both its concrete and solar power production capacity significantly in 2022. It was also announced that it plans to spend US$2.81bn on capital expenditure projects in 2023. China Resources Cement (CRC) said it had optimised its presence in South China through selected acquisition and divestments. Huaxin Cement has continued its focus on overseas markets with its share of operating revenue originating from outside China rising to 13% of the group’s total in 2022 compared to 8% in 2021. It also mentioned a number of unnamed projects around the world steadily drawing nearer to action. Sure enough, the group announced earlier in March 2023 that it was buying a majority stake in Oman Cement.

As for 2023, the CCA forecast in January 2023 that cement demand would be flat or slightly down. However, at the same time, provincial changes to the real estate market are expected to improve market conditions and infrastructure development will further drive demand for cement. The CCA identified that the cement sector’s production overcapacity could become an issue with lower demand. In 2022 the national clinker production utilisation rate was 65%, a fall of 10% from that in 2021. It also pointed out that peak-staggered production had actually helped cement producers generally to cope with smaller declines in profits compared to less well regulated industries.

Problems such as the zero-coronavirus policy, the real estate market and rising raw material costs have made the country’s production overcapacity issue worse. Changes are being made such as the national abandonment of the coronavirus lockdowns in late 2022, and, as mentioned above, the real estate market is being modified. In addition to this, various environmental changes are on the way, as the government works towards its sustainability goals. The country remains the largest cement producer in the world. Yet the message here is that we should expect more of the same for the cement sector in China in 2023.

China: Data from the National Bureau of Statistics of China shows that cement output fell by 12% year-on-year to 1.56Bnt in the first nine months of 2022 from 1.78Bnt in the same period in 2021. However, output started to pick up on a monthly basis in September 2022, with a year-on-year increase of 1% to 207Mt. Despite national increases in infrastructure development, the China Cement Association revealed that real estate development investment decreased by 8% to US$1.44tn in the first nine months of 2022.

The larger cement producers in China have published their half-year financial results and the numbers are looking grim. Starting with data from the National Bureau of Statistics of China, cement output in the country fell by 14.5% year-on-year to 979Mt in the first half of 2022 from 1.14Bnt in the same period in 2021. This is the lowest first half output figure since 2012. The decline on a monthly basis started in May 2021 and has carried on consistently since then. Rolling cumulative annual output hit a low of 2.18Bnt in July 2022, the lowest figure since at least the start of 2019 and well before the coronavirus pandemic started.

Graph 1: Cement output in China, 2018 to 2022. Source: National Bureau of Statistics of China.

The financial figures from the cement producers have mostly followed this trend. Of the companies covered here, Anhui Conch’s drop in sales revenue was the most distinct at 30% year-on-year to US$8.14bn. However, Jidong Cement actually managed to increase its revenue and Huaxin Cement’s decrease was fairly small, possibly due to its growing stable of overseas projects. None of these companies could avoid falling cement and clinkers sales volumes though. Again, Anhui Conch is the outlier here with a larger fall in sales volumes proportionally at nearly 40% compared to around 20% for the rest. Chen Bolin, the deputy secretary-general of China Cement Association (CCA), told the 21st Century Business Herald newspaper that of the 20 or so listed cement companies that have published their half-year reports by the end of August 2022, more than half had reported falling sales revenue and net profit and only one company had managed to increase its net profit.

Graph 2: Sales revenue from selected Chinese cement producers. Source: Company financial reports. Note: Cement revenue shown only for CNBM & Taiwan Cement.

Graph 3: Sales volumes of cement and clinker from selected Chinese cement producers. Source: Company financial reports.

The financial reports from the Chinese cement companies detailed here have been fairly light on the reasons for the current state of the sector. Repeated coronavirus outbreaks, instability in the real estate market, a lack of funding for infrastructure projects, growing energy and raw materials costs, pressure on prices and a generally weak economy have all been blamed for the situation. Media channels outside of China have continued to scan the country’s real estate sector for signs of collapse following Evergrande’s problems in 2021. However Chen Bolin diplomatically held back by describing the real estate market as not yet stabilised and a drag on cement demand. Instead he hoped that large-scale infrastructure projects would offer some form of relief.

One last point to note, that both the CCA has made and could be seen in some of the company reports, is that some of the Chinese cement companies are already starting to diversify their businesses. This is in parallel to what some of the larger western-based multinational cement producers have also been doing in recent years with forays into concrete, light building materials and construction chemicals. CNBM already has large concrete, light building materials and engineering subsidiaries. However, Huaxin Cement and Anhui Conch have also started to branch out recently into aggregates, concrete and new energy generation, in the case of the latter company. Things may get worse before they get better, especially depending when or if the Chinese government decides to act on the real estate market. However, whatever kind of adjustment the cement sector may face, there are some signs present already of what some of the companies may do next.

China Daily ran a story this week entitled “Steel and cement don't reflect China's growth story any more.” The piece reassured English-language readers that the country’s economy is moving on and that recent falling production of cement simply reflected the “profound changes China's economic structure is undergoing.” Profound is the right word here given that China is home to the world’s largest cement sector.

Graph 1: Cement output by quarter in China, 2019 - 2022. Source: National Bureau of Statistics of China.

Data from the Ministry of Industry and Information Technology shows that cement output fell by 12% year-on-year to 387Mt in the first quarter of 2022. This compares to 7% and 15% falls in the third and fourth quarters of 2021 respectively. On an annual cumulative rolling basis, output previously hit a low of 2.22Bnt in March 2020 as the initial coronavirus outbreak was brought under control. Output then surged to a high of 2.53Bnt/yr in April 2021 before it started to fall in the autumn of 2021. On a monthly basis, output volumes fell by 5.6% year-on-year to 187Mt in March 2022.

As covered in last week’s column (GCW 555), the financial results from the larger Chinese cement producers have also suffered in the first quarter of 2022. CNBM’s total operating revenue fell by 1% year-on-year to US$7.29bn in the first quarter of 2022. Anhui Conch’s revenue fell by 26% to US$3.85bn and China Resources Cement’s (CRC) turnover fell by 18% to US$889m. Of these three only CRC has released cement sales volumes. Its sales volumes of cement and clinker decreased by 34% and 12% respectively.

In its own analysis, the China Cement Association (CCA) has summarised the current situation as one of rising costs, falling demand and declining benefits. The latest large-scale coronavirus lockdowns and a poor real estate market have hit demand. Rising energy and freight prices have increased the cost of cement. Together, higher costs and falling demand have hit the profits of the cement producers. CNBM’s net profit, for example, fell by 9% to US$420m. Regionally, the CCA observed that the losses of the northern-based producers had increased and that the profits of the southern producers had started to fall sharply also. Another interesting point it made was that the year-on-year decline in March 2022 was slower than compared to the first quarter as a whole and that high levels of inventory may have made March 2022 look worse than it actually was. The association is now pinning its hopes upon demand and prices picking up again later in the second quarter after the current quarantine controls are eased and the government curbs high coal prices.

The CCA’s take doesn’t seem unreasonable, although the first quarter of 2022 was previously deemed to be a continuation of the trouble the Chinese cement sector experienced in the autumn of 2021. Possibly the first quarter has turned out worse than expected but the monthly output in March 2022 has started to look like it might be a tail-off from the worst. The period to watch remains the second quarter of 2022. Looking more widely, energy shocks from the war in Ukraine couldn’t be easily predicted but coal prices were already becoming a concern in the autumn of 2021. China’s renewed zero-Covid policy meanwhile is starting to look unpalatable both economically and socially. Throw in a continued slowdown of the real estate sector and China Daily’s profound pronouncement about the future of cement may prove accurate.

Many first quarter financial results for cement producers are out already and what can be seen so far deserves discussion. The first observation is that the sales revenues of Chinese companies have suffered compared to their international peers. As can be seen in Graph 1 (below) CNBM increased its sales slightly in the first quarter of 2022 but Anhui Conch and China Resources Cement (CRC) had significant falls. Stronger results from CNBM’s non-cement production subsidiaries released so far suggest that the parent company’s slow performance is likely due to the cement market. The China Cement Association has reported that national cement output dropped by 12% year-on-year to 387Mt in the first quarter of 2022. It blamed this on the latest local coronavirus wave, limited construction project funds and poor weather.

Graph 1: Sales revenues in the first quarter of 2022 from selected cement producers. Source: Company financial reports. Note: SCG data is for its building materials division only.

Outside of China sales revenue growth has been better with Holcim and Dangote Cement leading the companies presented here. Holcim attributed its success to “strong demand, acquisitions and pricing”. Demand and pricing have been familiar refrains in many of the results reports this quarter. The undertone though has been the destabilising effects upon energy prices by the ongoing war in Ukraine. Holcim’s head Jan Jenisch summed it up as navigating “challenging times, from the pandemic to geopolitical uncertainty.” The producers with operations in the Americas and Europe seem to have coped with this so far mostly due to resurgent markets. Quarterly sales revenue growth for Holcim, CRH (not shown in the graphs) and Cemex each exceeded 10% year-on-year in both of these regions.

The regionally focused companies presented here have suffered more. India-based UltraTech Cement said that its energy costs grew by 48%, with prices of petcoke and coal doubling during the period. Nigeria-based Dangote Cement reported that its group sales volumes were down 3.6% mainly due to energy supply challenges in Nigeria. Internationally, its operations relying on cement and clinker imports – in Ghana, Sierra-Leone and Cameroon – were also hit by high freight rates caused by global supply chain issues. Thailand-based SCG said that national demand for cement demand fell by 3% due to negative geopolitical effects causing inflation, a delay to the recovery of tourism and a generally subdued market.

Graph 2: Cement sales volumes in the first quarter of 2022 from selected cement producers. Source: Company financial reports.

It’s too early to read much into it but one final point is worth considering from cement sales volumes in the first quarter of 2022. They have appeared to fall for the companies that have actually released the data. The reasons for CRC in China and Dangote Cement in Sub-Saharan Africa have been covered above. Holcim’s volume decline was 2% on a like-for-like basis and the others were all very small changes.

To summarise, it’s been a good quarter for those cement producers covered here with operations in North American and Europe. Energy instability caused by the war in Ukraine so far seems to have been passed on to consumers through higher prices with no apparent ill effect. The regional producers have suffered more, with the Chinese ones having to cope with falling demand and the others finding it harder to absorb mounting energy costs and supply chain issues. Plenty more first quarter results are due from other cement companies in the next few days and weeks and it will be interesting to see whether these trends hold or if others are taking place.