The resilience of sustainable infrastructure investment has gained attention, as the world witnessed significant disruptions in economic growth and supply chain disruption resulting initially from the Covid pandemic, war, geopolitical tensions, natural catastrophes such as floods and storms, and inflation over the last few years. The definition of infrastructure broadens beyond airports, seaports, and roads to intermodal transport, and railways, energy extraction and distribution, real estate, and manufacturing sectors, urbanization and irrigation, social and healthcare centres etc, which is expected to grow significantly over the coming decade.
Likewise, growth in infrastructure is a key driver for cement. The market research entity Fortune Business Insights, projects that the global cement market size to grow to $423.2 bln in 2024 from $406 bln in 2023, up 4.2% y-o-y.
Production
According to the World Population Review data, the Middle East region is the highest cement producing region with Iran (10%), India (8%), Turkey (7%), and Saudi Arabia (2%) – among the top ten cement-producing countries saw positive growth in their cement output in 2023. Despite being the world's largest producer of cement (2.1 mln mt), China's output has been decreasing over the last few years. No surprise, cement prices have been impacted by the persistent decline in the Chinese real estate industry, which has slashed the profit margins of cement makers. Moreover, the substantial capacity surplus remains a key issue in China, which is now scaling down its industry.
Meanwhile, India and Vietnam continued to rank second and third by producing 410,000 tonnes and 110,000 tonnes, respectively. The production threshold for all other producing countries remained below 100,000 tonnes. To speak briefly, the production growth in India is primarily driven by real estate and infrastructure projects. Enhanced production in Turkey can be ascribed to the growth of non-oil sectors as low inflation is drawing in more foreign investment, while a rebound in output in Saudi Arabia is supported by mega projects such as Neom getting underway. Conversely, rising interest rates, a collapsing property market, and a decline in clinker shipments to China caused Vietnam's output volume to decline.
Exports
According to the AXSMarine data, since 2019 Turkey has surpassed Vietnam and China and displaced Japan to become the largest seaborne cement exporter. As a matter of fact, the country, in 2023, exported 10.9 mln mt followed by Vietnam (9.6 mln mt) and Japan (5 mln mt) and has maintained its ranking by exporting 9.2 mln mt in ten months of 2024.
Despite rising output, exports from Turkey remained lower in 2023 as the country diverted supplies to the domestic market. On the contrary, exports from Vietnam shot up 40% to 7.7 mln mt in 2023 despite registering a negative production growth of 8% to 110,000 mt in the same year and is expected to follow suit in 2024. This year, Turkey remained the swing factor due to the reversal of the 2023 export diversion and rising seaborne shipments. Production and exports from Japan have been on a steady decline as many cement plants have slashed operations due to rising fuel costs, a slowdown in construction activity, and decarbonization policies. Elsewhere in the EU, the Carbon Neutrality Roadmap, and inflation are the main hindrance to cement exports.
Freight
According to AXSMarine data, cement and clinker accounted for about 2.5% of the total dry bulk seaborne shipment. The trade is concentrated between the Minibulk to Handymax (3,000 to 49,999 Dwt) tonnage segment, mainly in bulk, with only a tiny percentage transported in bags. With the potential rise in global demand for cement, Supermaxes (50-60,999 Dwt) could be best positioned to benefit.
Meanwhile, the US continued to be the largest cement importer. The increased spending on infrastructure and commercial (non-housing) projects, the rise in prices of domestically produced cement on account of inflation, and the rise in investment in the construction sector and new manufacturing facilities have paved the way for comparatively inexpensive imports. Obviously, with the homecoming of the Trump administration, how it impacts domestic construction, will be widely watched by the cement sector. Even though this is an attempt to protect domestic companies who are suffering from cheaper imports, a possible increase in import duties will be a significant hinderance to import volume.
On a relevant note, long-term demand for cement will likely boost the seaborne trade for limestone. Limestone is a key ingredient in the production of cement, which typically constitutes about 70-80% of limestone to produce cement. India and the US are the major importers of limestone for feeding their cement plants. India’s limestone imports are rising from 19.8 mln mt in 2020 to 28.5 mln mt in the ten months of the current year due to rising demand from pharmaceuticals, packaging industry, and food and beverage sectors as well. On the contrary, limestone imports to the US are heading to the south from 10.9 mln mt in 2020 to 4 mln mt in the ten months of the current year due to ample domestic supplies. India’s limestone imports are mainly sourced from the UAE and Oman boosting seaborne Arabian Gulf-India trade on geared vessels and gearless Panamax tonnages constituting about 15 days voyage. The US mainly sources its limestone requirement from the US Gulf, ECCA, or the Great Lakes regions employing geared tonnages engaging about 7-8 days voyage. China and Taiwan source their limestone requirement from Japan making it the Far East round trip.
Post-Covid, the cement industry faced a substantial surge in production expenses including fuel, electricity, and international freight rates all experiencing double-digit hikes. This was exaggerated by the geopolitical war between Ukraine-Russia and Israel-Palestine. For example, Ukraine was a key exporter of clinker to neighboring European countries. With the war, these exports naturally plummeted. Consequently, EU nations are dealing with shortages and higher prices. Moreover, the Israel-Palestine Conflict is centred around a highly volatile region that has disrupted vital shipping routes like the Suez Canal and the Red Sea. The destruction of 38 concrete factories during the conflict has paralyzed local output, while damaging roads and key infrastructure. On the flip side, the widespread destruction, however, could induce a long-term boost in potential demand for cement following post-war rebuilding efforts.
To conclude, recently, the global cement industry stands at a pivotal juncture, navigating through diverse trends and forecasts that shape its trajectory in the coming years. The demand is expected to be firm due to the increasing infrastructure development worldwide. The Asia-Pacific region is expected to continue its dominance in the market supported by additional infrastructure spending in the US, the Middle East, and India in the short to medium term. On the other hand, cement makers elsewhere in Europe are focusing on reducing carbon emissions and improving their sustainability practices to stay competitive in the market.