Turning up the heat on old US plants
The opening, at the end of last month, of Holcim's new 4.0mt per annum cement works at Ste. Genevieve, Missouri, on the Mississippi river is further increasing the pressure on the remaining wet process plants that are becoming increasingly less competitive. While two wet process Holcim plants in Missouri and Michigan have been permanently closed, these account for only just over half of the capacity now being brought on stream at Ste. Genevieve. With Ste. Genevieve, by far the largest US cement plant, being ideally served by cost-efficient water-borne transport, Holcim can lay claim to being a low delivered cost producer from the Great Lakes to the Gulf of Mexico.
The current recession has slowed down the commissioning of, or extension of, clinker production lines and has led to the postponement, until further notice, of new works such as the Cemex project in Arizona. This can, however, only provide a very temporary lease of life to high energy cost plants. The US cement industry has been very slow to espouse energy efficient production methods. In Mexico, by example, with 33 operational plants, every single grey cement kiln uses the dry process, and has been doing so for years. In fact, because of the earlier reluctance of American domestic companies to invest in modern production methods, undoubtedly led to the North American cement industry now being dominated by European-based companies (accompanied by the odd Mexican and Brazilian group!).
When the US economy recovers, energy costs are clearly set to rise more sharply than that of the overall economy and the remaining wet process cement producers will be put at a further additional competitive disadvantage. In the age of NAFTA, there is no way out, and the Mexicans and the Canadians generally have more fuel-efficient cement plants than the United States has. The alternative to energy efficient production is closure. Can any of the less energy efficient producers afford to invest in new kilns? In the medium term they cannot afford not to, if they wish to stay in the business. It is a question of investing a lot of money, or looking to the right opportunity to sell out but the opportunities are becoming increasingly limited.
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