Polish producers warn over cement shortages

Polish producers warn over cement shortages
Published: 16 May 2007

A potential lack of construction materials in Poland has been highlighted in the local Polish press, following recent announcements that Poland has been awarded the prize of hosting the European Cup in 2012.
 
Preparing for this major football event will require new stadiums, many more hotels and almost a thousand kilometers of highways, and twice as many high-speed roads, and there is doubt that sufficient basic building materials are available for this major investment spend.
 
Expressing concern, representatives of the Polish cement industry have now written a letter to the President and the Prime Minister in which they stress that realisation of the proposed investments may be endangered. “If the government will not act we can forget about stadiums, road and bridges we are to build before Euro 2012” – says Leonard Palka, manager of Cementownia Kujawy, part of the Lafarge consortium. Furthermore, as Marek Cijka, a distribution manager for Skanska, notes: “The limits imposed by the EU [on carbon emissions]  may cause a lack of cement in the market and raise prices.
 
In fact, it was the decision of European Commission in March on allocations of CO2 emission limits for individual countries for 2008-2012 that has angered Polish producers. According to new rules, Polish companies will have to reduce annual emissions of CO2 from 239Mt to 208.5Mt annually, despite The Polish Ministry of the Environment having applied for an increase of up to 284.6Mt.
 
To get round the problem, cement producers will have to buy additional CO2 emission permits or reduce their production – Vice-Minister of the Environment Agnieszka Bolesta said recently in Parliament. She also added that her department considers contesting the decision of European Commission to the European Union’s Court of First Instance.
 
If the limits remain the same, starting from next year, Polish plants will be allowed to produce about 12Mt of cement annually. The producers would now argue that this is too little for domestic market.
 
“We are having a true boom in Polish construction industry. This year’s production will be almost 17Mt – Leonard Palka says. The first quarter’s results are optimistic. 2.9Mt of cement have left the Polish plants during this period, which is almost three times as much as it was in the first quarter of 2006. According to forecasts in a few years the demand for cement will amount to 25Mt. It means that each year Poland will lack almost 12Mt of cement – adds the principal of Cementownia Kujawy.
 
“Some of our clients have panicked, being afraid that there will be a shortage of cement and they are already buying additional tonnage. This is a reason for queues in front of the plants – Andrzej Ptak, the chairman of Cementownia Ożarów (CRH Group) says.
 
However, cement is not the only problem for construction industry. Road construction companies lack aggregates. We need 1.5Mt of this raw material annually and this year suppliers informed us that they can realize only 70 per cent of our order – says Henryk Wiśniewski, the manager of the supplies department in Budimex Dromex. He adds that they will import the additional supplies of aggregates from Germany.
 
 
The solution to the growing cement problem might also be an increase in cement imports. However, producers don’t believe this will happen. Imports of several millions of tonnes of cement is impossible for logistic reasons, they claim. About twenty trains with twenty-four wagons each filled up with cement would have to enter Poland every day – Andrzej Balcerzak, the chairman of Cementownia Górażdże (HeidelbergCement) and the head of the Polish Cement Producers Association calculates. According to him production capacities in other European countries are now close to the maximum, so it would not be easy to find cement abroad.
 
To increase production, cement plants can buy additional permits for CO2 emissions. Ożarów will do it this year, for example. The present price of CO2 on the market is currently Euro 19 per tonne, but prices are set to rise say the producers as a general shortage now starts to kick-in.
 
According to Andrzej Balcerek, the price of a tonne of cement may rise by a further Euro 20-40 (at the moment it costs over Euro 50 in Poland). Such a raise would be noticeable for customers. The industry’s representatives calculate that the purchase of cement is equivalent to 2-5 per cent of the value in most new construction.
 
Worryingly, rises in the prices of construction materials will influence the prices of local housing – developers warn. This is the worst scenario: we will be building only for those who will pay several thousand Zlotys for a square meter – Jacek Bielecki of Polish Developers Association notes. Just last year, the cost of building one square meter of housing in Warsaw had risen by 50 per cent.