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A few news stories from Chile give us the opportunity to take at look at the local cement market this week. Firstly, Freehill Mining was keen to promote a new order it has obtained from Cementos Melón. The Australia-based company operates magnetite mineral concessions at Yerbas Buenas, about 500km north of Santiago. The US$180,000 deal starts in March 2024 but the raw material supplier says it is currently negotiating a longer-term supply contract with Melón for larger volumes in the future.

A large order for raw materials is not unusual, although the public nature of the Freehill Mining one suggests that the mining company is promoting itself. The story also highlights the importance of the mining sector in Chile. However, a wider view of the Chilean cement sector could be glimpsed recently from the latest cement despatch data from La Cámara Chilena de la Construcción (CCHC). Despatches fell by 11% year-on-year to 5.2Mt in 2023 from 5.9Mt in 2022. As can be seen in Graph 1, despatches recovered in 2021 following the first year of the Covid-19 pandemic but they have declined since then.

Graph 1: Cement despatches in Chile, 2018 – 2023. Source: La Cámara Chilena de la Construcción.

Two of the three larger cement producers have reacted to these market conditions in the last couple of years by cutting costs. Cementos Melón started a restructuring process in late 2022 whereupon it closed down a concrete plant at Penalolen near Santiago and embarked on a spending review. Its income fell by 4% year-on-year to US$182m in the first nine months of 2023, from US$189m in the same period in 2022. Cemento Polpaico followed suit in November 2023 by closing two concrete plants in the Santiago Metropolitan Region and temporarily suspending operations at its Quilicura cement grinding plant with work shifted to the integrated Cerro Blanco plant instead. In June 2023 it reported that its income had risen slightly year-on-year for the first half of 2023, but it noted a loss compared to a profit previously. Cbb (formerly Cementos Bío Bío) managed to avoid the fate of its peers mainly through the performance of its lime division. Its cement and concrete shipments fell by 9% and 15% year-on-year to 775,000t and 750,000m3 respectively in the first nine months of 2023. It blamed the falling sales volumes on a decline in economic activity that dragged upon investment in infrastructure and housing. However, lime shipments grew by 2% following tough trading conditions in 2022 due to high fuel costs, amongst other reasons. Altogether this meant that the company’s earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by 54% to US$44.3m from US$28.8m.

Finally, a third news story this week illustrated one reaction to the poor construction market in Chile, when Unacem Chile announced that it was buying two concrete plants, at San Antonio and Talca. Once the US$1m deal completes, the subsidiary of Peru-based Unión Andina de Cementos (UNACEM) will hold 12 concrete plants in the country. This follows its entry into the market in 2018 when it acquired Hormigones Independencia from Cementos Polpaico. In December 2023 Grupo Gloria subsidiary Cal y Cementos Sur (Calcesur) said that it was preparing to strengthen its presence supplying lime to the mining sector both at home in Peru and in neighbouring countries including Chile. While this isn’t a cement story, Grupo Gloria does operate the integrated Yura plant near Arequipa in southern Peru and this resonates with both the mining and lime sectors.

Chile’s cement market is suffering as the general construction market contracts. Yet as the stories from Freehill Mining and Calcesur show, the mining sector remains a key part of the national economy and this links to the cement industry. Another related story, for example, is a US$39m deal that Denmark-based FLSmidth signed in mid-2023 to supply equipment for a copper mine. Chile’s northern neighbour Peru has a cement sector that is nearly twice as large based on production capacity and some of its producers look internationally for expansion opportunities, as in the example of Unacem Chile. The CHHC didn’t hold back in mid-January 2024 when it said that it forecast that 2024 would be the worst year for investment and construction spending since the late 2010s. Yet it also expects the decline in the construction sector to slow as gains from government infrastructure spending continue to almost counteract falls in the private sector. Until the situation improves, it continues to lobby for economic reforms.

For more information on cement markets in South America read the feature in the February 2024 issue of Global Cement Magazine

Vietnam: Financial management company SSI Securities Corporation says that it expects Vietnam’s cement consumption to ‘bottom out’ in the first quarter of 2024, before recovering ‘gradually’ throughout the rest of the year. Việt Nam News has reported that the anticipated recovery is the outcome of intensified investments in infrastructure by the Vietnamese government, beginning in late 2023. The cement sector also anticipates growing demand from export markets, including Australia, the US, Africa and South and Central America, as it lowers its reliance on exporting to China. Challenges persist in the form of protective measures or stricter standards in other markets, including the Philippines and Europe.

US: US cement plants produced 91Mt of cement in 2023, according to data from the United States Geological Survey (USGS). This corresponds to a year-on-year decline of 2.2% from 93Mt in 2022. The figure places the US in fourth globally in cement production volumes, behind China with 2.1Bnt (in line with 2022 levels), India with 410Mt (up by 7.9% year-on-year) and Vietnam with 110Mt (down by 8.3%).

Azerbaijan: Cement production in Azerbaijan increased by 4.6% year-on-year to 3.73Mt in 2023, data from the State Statistics Committee has shown. Clinker production rose even more sharply, by 37%, to 3.87Mt. BNI IntelliNews has reported growth of 32% year-on-year in the overall value of building materials in 2023, to US$694m.

Uzbekistan: Cement production was 11.1Mt nationally from January to November 2023, up by 2.5% year-on-year, according to Statistics Agency of Uzbekistan data. Trend News has reported that Uzbek Building Materials Producers’ Association expects annual production to eventually rise by 3Mt/yr after China Energy International Group Samarkand Cement commissions its upcoming Samarkand cement plant.

Switzerland: Swiss cement shipments dropped by 10% year-on-year to 3.7Mt in 2023, from 4.1Mt in 2022. Shipments declined across all quarters, including by 10% quarter-on-quarter in the third quarter. Cement with a reduced clinker factor grew to account for 96% of shipments from 95%, and rail shipments rose to 38%. Ready-mixed concrete plants received 73% of shipments, and building sites 21%.

The Swiss cement association, Cemsuisse, said that it anticipates continued uncertainties and high import pressures in 2024.

Argentina: Cement shipments across Argentina totalled 12.6Mt nationally in 2023, down by 3.2% year-on-year from 13Mt in 2022. Central de Noticias News has reported that the Portland Cement Manufacturers Association (AFCP) attributed this to the continuing ‘paralysis’ of private and public construction projects. The Construction Index dropped by 7.9% year-on-year in 2023.

Kazakhstan: National cement consumption volumes totalled 11.5Mt in 2023. The figure represents a year-on-year decline of 0.9% from 11.6Mt in 2022.

Brazil: Brazil consumed 62Mt in 2023, down by 1.7% year-on-year, according to data from the National Cement Industry Association (SNIC). This marks the second successive year of decline, after demand dropped by 2.8% to 63.1Mt in 2022. As a result, cement’s value on the National Construction Cost Index dropped by 6%, after having risen by 13% in 2022. The domestic cement industry recorded a capacity utilisation rate of 66% in 2023.

SNIC president Paulo Camillo Penna noted high household debt, high interest rates and poor income growth as impacting the industry’s sales. He said “The My House, My Life housing programme was not fully operational until the middle of the year. Up to September 2023, the construction industry experienced a 16% decline in the number of real-estate launches.” He continued “By 2026, we will experience a period of turnaround for the cement industry.”

Vietnam: State-owned Vicem sold 22.6Mt of cement and clinker in 2023, down by 18% year-on-year from 2022 levels. Việt Nam News has reported that the producer exported 2.85Mt of cement and clinker, 85% of its target volumes for the year. For 2024, Vicem aims to achieve full-year sales of 24.3Mt, up by 7.7%.