In an exclusive interview with CemWeek, Ian Riley, CEO of the World Cement Association, shares his insights on the global cement market in 2020, from demand levels and sustainability to WCA projects meant to aid cement producers.
The IMF is expecting global growth in 2020 to decline by almost 5 percent due to the COVID-19 pandemic, and construction is one of the most affected segments. How could that translate into global cement demand in 2020-2021?
The impact of COVID has varied a great deal by country. Our members have estimated the impact to be anything from a reduction of 50% (in some parts of the Middle-East) to a small increase (in China). Generally the outlook is much better for 2021, with many countries that have suffered from demand decline in 2020 expecting a bounceback in 2021 to levels at or above 2019.
Could pent-up demand caused by quarantine and lockdown support prices due to the supply imbalance in the long-term, especially as companies' profitability is challenged, or do you expect prices to normalize by 2021?
The impact of the pandemic on prices is clearly one of the main concerns of cement producers around the world. The experience to date has varied but we can see general weakness in prices where demand has dropped; in some cases this has lead to substantial price falls. As companies balance short term cash needs with longer term profitability, we expect a stabilisation of prices, in most cases at levels below the pre-pandemic levels, with producers looking for the opportunity to increase prices as demand tightens. However, there will continue to be plenty of countries with large overcapacity, so the outlook for seabourne trade prices is rather bearish and this will limit price increases elsewhere.
China is definitely ahead of the world in terms of response to the virus. What has been their cement industry's response to the fluctuation of the market? What should those now emerging from lockdown in other countries take away from the Chinese cement industry experience?
The impact of COVID on China's cement industry has been rather small. There was a significant demand reduction in February and to some extent in March, but by April demand has returned to 2019 levels and the outlook for the full year is that demand will exceed 2019 volumes, with prices firming in Q4 as supplies become rather tight, especially in Southern China. The Chinese situation is heavily influenced by the government supply side policy which imposes significant limitations on kiln operation in most provinces and also the increased infrastructure spending announced as a result of the pandemic, which will provide demand support for several years. Unfortunately, these factors are not replicated in other countries.
The Association you are CEO of has provided a liveblog on members' updates from across the globe and even provided commentary from Chinese companies on their response to the virus. Have members provided any commentary on these initiatives or reached out seeking help for ways to remain productive and profitable at this time?
Our members have expressed their appreciation of the Association and the mutual help offered by members during the crisis, such as donating PPE for other members and webinars to share knowledge and technology. This very much reflects the spirit of the association.
Our main activities are directed at using the network to help members improve operations, save costs and reduce their environmental footprint. The crisis has precipitated changes in the use of remote technologies that may be beneficial long term. For example, we arrange member forums on different aspects of bet practice cement operations. In the past these included plant visits and necessitated travelling to that site but we believe this can be done virtually, which makes it much easier for members in countries distant from the event to participate.
Another example of how we are helping to support members' competitiveness during COVID is a benchmarking project, Pegasus 2020, which started in September and gives members an up to date picture of where they stand in comparison to peers and to best available technology. This is useful input to deciding performance improvement priorities and is free of charge to members.
What are some of the effects from this crisis and its impact on the cement market you would say are not being talked about enough?
The immediate impact of the crisis is being discussed but some of the longer term changes are not yet clear. For example, one of our members in India noted a potential that people would work closer to their home towns rather than migrating to the biggest cities to find work. This would have a big impact on increasing demand for rural housing but might also reduce the need for some infrastructure. Another question is how coping with COVID, and future pandemics, will affect the design and planning of cities, both in terms of buildings and public transport infrastructure.
On the topic of sustainability, the focus is sharpening on making the cement production process more energy efficient by reducing the clinker ratio, using more alternative fuels to help reduce CO2 emissions. While carbon capture is a long-term strategy, are there other steps that companies can take in the short-term?
The current levers to reduce CO2 emissions are energy efficiency, alternative fuels and clinker factor. There remains a large gap between actual performance and best practice and plenty of stepts that companies can take right now, many of which will improve profitability as well as reducing their carbon footprint. For example, there are options to upgrade energy efficiency of both pyro and milling systems, which are practical for existing plants and will rapidly pay back the investment required.
There is potential to substantially increase use of alternative fuels. The global average consumption rate is aroung 18% - some countries achieve over 60%, while others hardly use any AF. We have seen new initiatives to increase biomass usage, such as planting bamboo on unused wasteland which is being trialled by Dalmia in India. In China, Conch, Sinoma and Huaxin have pioneered co-processing of 'as-collected' municipal solid waste to avoid the need for landfilling and replace coal usage.
For clinker factor, the global average is 77% although some countries have much lower rates. Partly this is due to the availability of alternative cementitious materials, but there are significant tonnages of fly ash that are not being used. The LC3 project has renewed interest in the use of a metakaolin/limestone blend as a high performance cementitious material.
As more resources are focused on the problem of climate change, we will continue to see new technologies developed and deployed. Given that the scale of cement and concrete usage is so much larger than other materials, it is certainly possible that these materials could have an important role not just in reducing man-made emissions but also in reducing CO2 levels in the atmosphere.