Going forward, there are opportunities for market participants not just to minimise the adverse effects of cementitious product disruption, but also to generate differentiation. We believe the following steps are critical to capture these opportunities:
1. Understand the current market equilibrium and plant-by-plant inflexion points. Modelling supply/demand balance at the regional level and proportion at which inclusion in cement makes sense is a critical first step of analysis.
- L.E.K. Consulting has developed a decision-making approach using approximately 10 key cost and market metrics that will point to the optimal cementitious integration option for each cement plant, but also flag the inflexion points in cementitious prices that should lead to a decision change.
2. Anticipate macro trends and their regional impacts, including the major shifts in supply and demand, as well as the economics of production, inland logistics and trade that will underpin potential market disruption.
3. Get ahead of the curve on securing new cementitious sources by leveraging the detailed understanding of regional economics to zero in on the most attractive sources.
4. Revisit alternative cementitious options. Pozzolana and metakaolin have long been used as cementitious products, but increasing cementitious shortages call for renewed analysis of their sources and production costs. As part of investigating these alternatives, cement players should consider the market potential of their applications outside of building and construction.
5. Make the most of ternary mixing options as the pressure to loosen concrete standards in specific countries may open the door to an increased use of finely ground limestone in cement mixes.
6. Consider the potential impact of further vertical integration in regions where cementitious providers are aggressively leveraging their increasingly strong bargaining power.
7. Investigate other ways to offset the environmental footprint and support governments’ environmental objectives — including through construction waste management and recycling.
1China Beige Book
2Inclusive primarily of fly ash (from coal power plants), blast furnace slag (from steel mills), natural pozzolanas, metakaolin and calcinated shale or clay, ground limestone, and silica fume (from silicon or ferrosilicon alloy plants)