Taking the most votes, ‘cost of energy’ ranked as the main concern of 31% of respondents – perhaps no surprise given that power and fuel account for 25% of the costs of a cement operation.¹ With much cement production still reliant on coal, the industry also remains sensitive to changes in the commodity market. At the time of the survey in mid-February, coal prices had risen 80% in the previous six months with the industry facing prices similar to those of 2018 (115 USD/T) or 2011 (130 USD/T)². 
Figure 1. What is your main concern when planning your cement business?

‘Increased overcapacity’ was ranked second by 27% of respondents as their main concern, reflecting an industry that continues to struggle with the hangover from decades of plant expansion and greenfield projects in the 1990s and 2000s.

 

‘Environmental regulations’ were the third biggest concern, as a result of a growing scrutiny of the industry’s environmental footprint. With global efforts to mitigate the effects of climate change only likely to intensify in coming years – and pressure to ensure a green recovery after COVID-19 – this is a challenge that is not going away.

 

“The cement industry is a fierce commodity market and the survival tactics has always been to minimise cost per ton by maximising capacity,” says Jens Peter Koch, FLSmidth VP for Cement in Europe, North Africa & Russia/CIS. “But, if economy-of-scale is no longer a solution to drive down cost, optimisation, efficiency and smarter decisions are some the main ingredients in driving a profitable business, in a market with over-capacity, rising energy prices and external pressure to make sustainable investments.”

 

The good news is that reducing energy costs and CO₂ emissions often go hand in hand. The combustion of fossil fuels accounts for 32% of the CO₂ emissions coming from the cement manufacturing process. Every time we reduce energy usage through greater process efficiency or replace fossil fuels with less CO₂-intensive alternatives, we meet both objectives.

 

As the leading supplier of equipment and a service partner to the cement industry, FLSmidth is represented in all corners of the world and the trend remains the same, according to Jens Peter: “Despite COVID-19, we have seen a series of projects in the past 12-18 months – focusing on optimisation and with the aim to reduce the environmental footprint of the operation; HOTDISC Combustion Devices, Calciner upgrades, ProcessExpert solutions etc.”

 

What didn’t make the Top 3?

Looking further down the list, ‘lack of capital’ was the main concern of 13% of respondents. It is however a factor that could have important implications for the industry’s ability to transition to a low-carbon future – a transition that will require investment in both new, innovative facilities and to retrofit existing facilities to tightening environmental standards.  

 

How did different stakeholders respond?

‘Cost of energy’ and ‘increased overcapacity’ appears of more concern to cement producers, whereas ‘environmental regulations’ rank more highly with equipment suppliers – perhaps reflecting the differing concerns faced by those that run a cement plant on a day-to-day basis compared to those looking to develop the solutions that will be needed by the industry going forward.  

Figure 2. Respondents by industry segment (right) and geography (left).

Geography also played a part in determining responses. For those operating at a global level, ‘environmental regulations’ were the biggest concern. ‘Lack of capital’ ranked top of concerns for North American respondents, whereas ‘overcapacity’ was the main concern of those operating in Africa.

 

This article was first published in World Cement, June 2021.

 

Note

The survey was distributed in February 2021 via LinkedIn and Twitter and to subscribers to the FLSmidth Discover Cement newsletters, and posted in various online cement forums. Nearly 150 professionals responded to six key questions on the state of the industry. This included the question: which of the following topics concerns you the most? Respondents were asked to select from eight options: political instability; world economy uncertainty; increased overcapacity; lack of capital; environmental regulations; new disruptive technologies; cost of energy; threat of alternative building materials.  


[1 ] https://tradingeconomics.com/commodity/coal
[2] India as case story: https://blog.pawealthadvisors.com/2019/11/17/cement-industry-cost-structure/

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