Displaying items by tag: Shortage

UK: Hanson, part of Germany-based HeidelbergCement, has reduced its bagged cement allocations to customers. The Construction Index has reported that the decision is due to a national shortage of cement in the UK. The building materials producer introduced a packed cement allocation in May 2021. It calculated these by the proportion of orders that it believed could fulfil. Packed products director Andrew Simpson said, “Regrettably, we have been unable to maintain those levels.” He added that the company had had to perform unforeseen work on its cement operations following its 2021 shutdown.

Supply issues for packaging materials have also been reported. Bag suppliers informed Hanson to expect longer-term packaging shortages due to global demand for polymer and kraft paper, according to Simpson. He added that low pallet availability was also a concern.

The UK construction market is in a funny situation right now. As the economy has started to grow in 2021, shortages of building materials have been reported following the relaxation of coronavirus-related restrictions. In April 2021, for example, the Construction Leadership Council (CLC) added cement, aggregates and certain plastics to its existing lists of products in short supply. These commodities joined a slew of other materials, including timber, steel, roof tiles, bricks and imported products such as screws, fixings, plumbing items, sanitaryware, shower enclosures, electrical products and appliances. The CLC advised all users to, “plan for increased demand and longer delays, keep open lines of communication with their suppliers and order early for future projects.”

Skip forward a month to May 2021 and these shortages are on more people’s minds with the announcement by the Office for National Statistics that UK monthly construction output grew by 5.8% month-on-month to around Euro16.5bn in March 2021 due to both new work and to repair and maintenance projects. Quarter-on-quarter output also rose by 2.6%, adding to the impression of a building sector emerging from the fog of lockdown. In the face of this good news Nigel Jackson, the chief executive of the UK mineral Products Association (MPA), was asked about reported shortages of cement. He told local press this week that “it would not be surprising if there were short-term issues of supply as the economy gathers momentum.” He added that the biggest issues had been observed in levels of bagged cement typically used in domestic projects.

The MPA followed this up with the results of a survey of building materials manufacturers that reported a slow but steady start to 2021 with mounting construction demand month-on-month. Sales volumes of aggregates and concrete were both up quarter-on-quarter but volumes of asphalt and mortar fell. Unfortunately that survey didn’t cover cement volumes but it did have more to say about concrete. In its view ready-mixed concrete sales had been subdued since 2017 due to the UK’s departure from the European Union (Brexit) and a general slowdown in residential building. The market recovery seen so far in 2021 was likely to be merely a return to growth from a subdued level of activity that pre-dates Covid-19.

At the time of writing the UK government faces a decision about whether to continue opening up the economy or exercise caution in the face of the as-yet unknown consequences of the Indian variant of coronavirus. This may delay talk of building materials shortages but it can’t avoid it forever. In the UK, cement shortages appear to be due to the self-build segment and will hopefully soon be resolved.

A shortage of cement in the UK may not mean much to people outside the country, with the exception of exporters. Yet the wider picture here is that the coronavirus pandemic has affected the production of building materials, changed end-user behaviour and distorted markets around the world. Other examples include the row over the price of cement in Nigeria, the boom in cement sales in Brazil in the second half of 2020 or reported shortages in Jamaica this week. A significant number of people, when forced to spend more time at home, appeared to save money and then decided to either move to a different house or make their current one better. Yet at the same time differing government restrictions and market fluctuations have seen building material output levels vary widely. Other reasons are at play both local and international. Brexit in the UK is one example of the former, as importers and exporters have been forced to grapple with new rules and costs. The temporary blockage of the Suez Canal in March 2021 is one example of the latter. No wonder supply chains are struggling. That last point goes wider than building materials though, for example, as anyone trying to buy semiconductors has discovered. One fear behind all of this though is whether these are temporary shortages or whether inflation is on the way for the global economy generally. In this is the case, then it signals the end of the low consumer inflation rate era since the financial crash in 2008 and may herald changes in behaviour from both producers and consumers.

Jamaica: Builders have complained about a shortage of cement with mounting delays between ordering the product and receiving it. However, Caribbean Cement has denied that there is any disruption to supply, according to the Jamaica Observer newspaper. However, the producer did note that there is currently an ‘extraordinary’ demand for cement due to a boom in the construction sector. It is currently increasing production to meet the surge.
Caribbean Cement says it produced over 0.1Mt of cement in March 2021, a record in recent monthly production. In 2020 it produced over 0.94Mt.

Nigeria: Dangote Cement says that work is underway to increase its total cement production capacity in Nigeria by 4.5Mt/yr before September 2021. The Guardian newspaper has reported that plans consist of new lines at the company’s cement plants in Obajana, Kogi state, and Okpella, Edo state, and the restart of production at its plant at Gboko, Benue state. Sales and marketing director Rabiu Umar said that the reason behind the decision was a surge in demand leading to a ‘sold-out’ situation in the country. He added that the firm has also ceased its export programmes in order to better serve the needs of domestic consumption.

UK: The Mineral Products Association (MPA) has warned of the likelihood of a short-term shortage of cement. It identified the cause of a probable shortage as the rise in construction leading to record cement demand. Bagged cement, of which the industry delivers 12.0Mt/yr, is most at risk of running out. The Daily Telegraph newspaper has reported that domestic projects are rising most sharply due to the deployment of the Euro232bn of costs saved during coronavirus lockdowns, and the recommencement of suspended projects from the same periods.

MPA chief executive officer Nigel Jackson said “We appear to be coming out of this period of Covid-19 lockdowns; the roadmap is on course; people's confidence and optimism is growing. A lot of people have been confined to their homes and taken the decision to invest in improving because they're not moving.”

Cuba: Cuba’s full-year cement exports totalled 21,200t in 2020, down by 40% year-on-year from 35,200t in 2019. ADN Cuba has reported that the value of exports fell by 45% to US$1.04m from US$1.89m. The vast majority of exported cement went to Colombia. Cuba is currently experiencing domestic shortages of cement.

Cuba: Citizens have begun buying stolen cement from government construction sites due to a shortage that has caused a price rise on the cement market. The Havana Times has reported that many people are unable to repair their housing due to the high prices. Government and military projects reportedly continue unaffected.

Mexico: Nearly 500 cement and concrete plants in the northern Mexican states of Chihuahua, Coahuila, Nuevo León and Sonora have partly or fully suspended production due to an on-going regional shortage of natural gas. The El Financiero newspaper reports that plants run by Grupo Cementos Chihuahua (GCC), Cemex, Holcim and Cruz Azul operate in this region.

GCC said that a lack of electricity and natural gas had affected production at three of its plants in Chihuahua, Samalayuca and Juárez. Mexican Association of the Ready-mix Concrete Industry (AMIC) president Ana Laura Burciaga said that the situation has caused a 50% drop in the cement supply to concrete plants.

The cause of the shortage is reported to be the suspension of natural gas exports from Texas, US. Mexican steel and automotive manufacturers have also been affected.

One news story to note recently has been Cemex’s decision to recommission a kiln in Mexico to address cement shortages in the southwest US. In early February 2021 the Mexico-based producer said it was spending US$15m to restart a 1Mt/yr kiln at its CPN cement plant in Hermosillo, Sonora. The unit is over 250km from the US border but Cemex said it was making the investment to cope with cement shortages and project delays in California, Arizona and Nevada. At present it supplies over 3Mt/yr to California, Arizona, and Nevada from its integrated plant in Victorville, California and via sea-borne imports. Efficiency improvements at Victorville and other unspecified supply chain changes are also planned.

Cemex isn’t the only company with an eye on the south-west US. Around the same time Japan-based Taiheiyo Cement concluded its deal with Semen Indonesia to buy a 15% stake in its subsidiary Solusi Bangun Indonesia (SBI) for around US$220m. It’s a long way from Arizona but the related statement mentioned plans to make SBI’s integrated Tuban plant in East Java more export focused, with the construction of a new jetty and silos. It intends to export 0.5Mt/yr of cement to Taiheiyo Cement’s business in the US. Its local subsidiary, CalPortland, runs two integrated plants in California and one in Arizona.

Chart 1: Annual change in US cement consumption by state, December 2019 – November 2020. Source: PCA & USGS.

In its recent winter forecasts the Portland Cement Association (PCA) reported that the Mountain region of the US recorded the highest growth in cement consumption in 2020, at 10%, due to underlying economic fundamentals and favourable demographic trends. Data from the United States Geological Survey (USGS) supports Cemex’s view too. Ordinary Portland Cement and blended cement shipments rose by 21% year-on-year to 2.74Mt in Arizona and New Mexico in the first 11 months of 2020 from 2.28Mt in the same period in 2019. This doesn’t quite tally in California where shipments fell slightly, by 0.8%, to 9.42Mt. However, it reported 12% growth to 2.38Mt in the first quarter of 2020, suggesting that the market could return sharply once the coronavirus epidemic is better under control. Overall, shipments in the US grew by 1.03% to 82.3Mt in the first 11 months of 2020, driven by growth in central regions. The PCA expects national cement consumption to grow by about 1% in 2021 with a ‘robust’ recovery driven by residential housing but slowed by uncertain coronavirus vaccination supplies and general market volatility.

In a world with too much clinker production capacity, it stands out to see two established producers so visibly chasing market share in a mature market. Rather than building new plants, both Cemex and Taiheiyo Cement are using or reviving existing production lines in other countries, and building import strategies as well as optimising their existing facilities in the regions. With the western building material multinationals now often looking to focus on ‘safe’ markets in Europe or North America the fight to grow market share in these regions is likely to become more intense. It also complicates decisions about when or if an existing plant should be mothballed or shut. After all, Cemex’s old production line in Hermosillo is about to become very useful indeed.

Mexico/US: Cemex has invested US$15m in recommissioning a 1Mt/yr cement kiln at its CPN cement plant in Hermosilla, Sonora. The decision is intended to reduce cement shortages in the western US and bolster its supply chain in Arizona, California and Nevada. The project at the CPN plant is scheduled for completion in the second quarter of 2021 and will create 130 jobs.

Cemex USA cement commercial executive vice president Joel Galassini said, “Many cement customers in California, Arizona and Nevada have been impacted by supply constraints this past year. The decision to recommission this kiln was made with our customers top-of-mind, to give them reliable access through a local supply chain to help meet their growing needs. Our unique network of production facilities in this region allows us to make these types of investments that will have a meaningful impact on meeting our customers’ needs.”

California regional president Francisco Rivera said, “We are excited to build greater synergies with our Mexican operations to strengthen our US cement supply chain and help our customers avoid or mitigate any potential delays to their projects in 2021.”