2009 was year where cement industry news was really dominated by three factors: the economy, the Chinese, and the environment. Here are some of the stories we at BGE believe were the most important of the year:
It’s the economy, stupid – The economic collapse and its effect on the cement industry may have started in ernest in 2008, but it really hit high gear in 2009. Cement producers in North America and around the developed world responded with cut backs in capital projects, plant closures (some temporary, some less so), layoffs and other cost saving measures. Producers in North America and Europe continue to postpone investments, preserve cash, and fend off price erosion of their product. The poster child for the pain of a vanishing credit market had to be Cemex. As the fastest growing member of the global cement producers, funded mostly on gigantic lines of credit, they found themselves on the verge of insolvency, sold off a number of strategic assets, and to admirably survive as they managed to renegotiate billions in credit.
Sinoma International becomes the world’s largest OEM – OEM’s responded with traditional “retrenching” moves, cost cutting and layoffs. Shoveling expertise into the street with abandon, a trend that is expected to continue. Those with a small piece of a large pie now found themselves with a small piece of a much smaller pie. Expect at least one of the traditional Euro-American suppliers to fail in 2010. Of course, not all the suppliers played defense. The Chinese OEM’s, Sinoma in particular, took advantage of the increased price sensitivity to become, for the first time in history, the largest supplier of cement equipment in terms of new production capacity OUTSIDE China. In fact, Sinoma sold just under 50% of the capacity sold outside China in 2009, pushing FLSmidth out of the #1 spot it had held for decades and forever changing the competitive landscape of cement equipment supply.
Big Brother is watching – The environment and the increasingly large specter of regulation has to be one of the biggest stories of 2009. Environmental sessions were sharply in focus at the IEEE/PCA conference. The EPA made noise about Mercury and they made noise about CO2. Eventually they classified CO2 as a hazardous substance, thereby giving themselves the power to regulate it. New regulations have also been proposed for Mercury and will be a reality sooner rather than later. We have frequently reported on the various environmental issues in this blog as we see it as a major force in the market for years to come.
Modernization of capacity – 2009 certainly wasn’t all bad news for the cement industry. Developing markets continued to show growth and reinforce the long term trends in demand. Additionally, many of the modern, high capacity plants ordered in the last boom came on line in 2009, thus “modernizing the fleet” and providing the ability to produce more cement at a lower cost with less energy and environmental impact. Holcim’s shining star, the 12,000 mtpd Ste. Genevieve plant designed by FLSmidth, came on line in July and quickly met and exceeded production and environmental targets. This facility will help to assure the future of cement manufacturing in the difficult labor and regulatory North American market environment and provide a model for cement plant design going forward.