The Cement Business Is Extremely Energy-Intensive

Cement mixer

Cement is the most energy-intensive of all U.S. manufacturing industries, according to the Energy Information Administration.

It would follow, then, that lower fuel costs should be a boon for the industry.

But even with the benefit of falling oil prices, cement makers will still struggle to stay profitable in 2015, according to Credit Suisse. The reason: widespread weakness in global economic growth means less appetite for new construction, which will put pressure on cement prices.

“As such, we are doubtful of how much of the benefit of lower energy prices will actually be witnessed in incremental gross profit,” says Credit Suisse analyst Harry Goad.

Some companies will do better than others, and what’s marking that difference is simple: it’s geography. In Europe, where the economic recovery is virtually stalled, demand for cement should remain sluggish. Yet in the U.S., where the recovery is growing stronger by the month, cement consumption is up 7 per cent year-to-date and housing starts are forecast to rise. Cement companies in developing countries have mixed outlooks: margins and capacity utilization are likely to fall in Brazil and Russia because of slower economic growth. China doesn’t look so great either: after dramatic growth in cement consumption from 2010 to 2013, it slowed in the first three quarters of this year and volumes should be more or less flat in 2015, according to Credit Suisse.

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