UK cement downsizes

UK cement downsizes
18 June 2010

Following speculation over the fate of Lafarge’s Westbury plant in the UK, the company recently announced plans to decommission and demolish the clinker line, which had been mothballed since February 2009 due to the economic downturn.

The company said it would end its manufacturing operations at the site but continue to use it to run bulk and bagged cement distribution. In addition, the cement mills for grinding and blending cement products will also continue to operate, using clinker transported in from Lafarge’s other UK works. 

Erdogan Pekenc, the company’s managing director, said: "It is clearly with much regret that clinker manufacturing at the site is drawn to a close…However, as a year has now passed in the site’s new role as a depot, it is continuing to play an important role in our national supply network.”

The deterioration in the UK cement market has also forced other cement producers to rationalise operations, with Cemex mothballing its 0.25Mta Barrington works in 2008 and Castle Cement (HeidelbergCement) proposing to reduce manufacturing at its Padeswood works to a minimum last year.

UK market turning point?

After peaking at 15.8Mt in 2007, UK cement sales have been in decline for two years. Last year construction activity in the UK fell 12% – the industry’s worst fall in more than 35 years. First quarter 2010 analysis from the Minerals Products Association (MPA) indicated that cement, sand and gravel, and ready-mixed concrete sales all declined by 3%, 6% and 7% respectively compared with the first quarter of 2009. Meanwhile, domestic cement sales in the January-April period amounted to 2.45Mt.
There are signs, however, that the decrease is slowing and the market has bottomed out. Recent figures suggest that the UK construction market is gathering momentum with house building growth in May 2010 driving the fastest expansion in activity since September 2007.

Nevertheless, future demand recovery is likely to be a slow process. "There appears to be little prospect of a quick return to the pre-recession 2007 levels of demand and output," explains industry observer Edwin Trout. "There is a tentative hope of a modest rise during this year and next. On the positive side, housebuilding has improved conspicuously over the last two quarters, but this growth is fragile and balanced by the corresponding threat of decline in public sector work." Indeed, some industry analysts even talk of the recovery taking place over several years.

Government economic policy remains fluid, with school building and social housing protected only temporarily. The prevailing fear is that the construction sector will be badly hit by the spending cuts to be imposed by the country’s new coalition government in its attempts to sharply reduce Britain’s unprecedented budget deficit. Public sector spending on infrastructure and buildings is expected to be cut over a number of years as part of this process. The Housing and Communities Agency is also planning for a greatly reduced budget. 

“The biggest threat to demand recovery is the prospect of a ‘double-dip’ recession,” Trout explains. “The Olympic Park has provided a measure of stability in difficult times, but construction will conclude in 2011. Crossrail – a new high frequency railway for London and the Southeast – is the next major national construction project, but even its future remains uncertain.”

In its spring forecast, the Construction Products Association (CPA) said it expects the industry to contract 2% in 2010 compared to its winter forecast of 3.1%. It also predicted a modest growth of 1.2 % in 2011. With the UK days away from the government’s emergency budget on 22 June 2010, the CPA has written to the Chancellor ahead of his statement, urging him to look “beyond a short-term fix” and focus on public spending where it will deliver the most cost-effective solutions and support sustained economic growth in the longer-term.
Meanwhile, cement prices have been falling since the early 2009 price increase and are likely to stagnate this year, though structural steel has risen sharply in the past month reflecting the wider inflation of building material prices.
Published under Cement News