Peruvian cement industry gears up for low-carbon times

Peruvian cement industry gears up for low-carbon times
17 December 2021

This week, FLSmidth announced that it would be supplying a new pyroprocessing line to Cementos Pacasmayo in Peru. When completed, the project will turn Cementos Pacasmayo into the country's largest cement producer in terms of capacity. As a low-emissions solution, the project is part of a trend among cement producers to increasingly invest in more efficient capacity additions that support the industry's decarbonisation drive. Despite a 75.5 per cent rise in cement capacity from 11Mta in 2010 to 19.3Mta in 2018, domestic cement producers have lowered their CO2 emissions by six per cent during this period as plants have switched from coal to natural gas.

The leading domestic players
In a domestic market where cement consumption has risen slowly from 8.18Mt in 2010 to 9.66Mt in 2020, Peru's two largest producers are Unión Andina de Cementos SAA (UNACEM) and Grupo Gloria subsidiary Cementos Yura.

Formed from a merger of Cementos Lima SAA and Cementos Andino SA in 2012, UNACEM is now the leading cement manufacturer with 5.5Mta of cement capacity and a market share of 50.8 per cent, which is mainly located in the central zone. While the company has been investing overseas this year with the acquisition of Cementos La Unión in Chile, there has been no media coverage on any progress of its 0.75Mta Cempor greenfield plant project in Lima.

UNACEM is closely followed by Cementos Yura (Grupo Gloria), which has a cement capacity of 4.2Mta. Cementos Yura has a 20.5 per cent market share and operates in southern Peru. It also owns Cementos Sur, which had its licence suspended in April 2020. Grupo Gloria sold US$150m bonds in 2015 to finance the acquisition of SOBOCE in Bolivia.

Capacity expansion drive
Meanwhile, Peru's other cement producers are investing in new capacity. The country's third-largest player, Cementos Pacasmayo, operates production sites at Trujillo (2.9Mta), Piura (1.6Mta) and Rioja (0.3Mta). FLSmidth will be expanding the Trujilla works with a new 2.5Mta kiln line. Completion of the project is scheduled for the end of 2023 and Cementos Pacasmayo is expected to control 7.3Mta of domestic capacity as a result. For now, the company is strongest in the northern region where it has a 27 per cent market share.

At the start of December 2021, Caliza Cemento Inka also announced it has ordered a new Christian Pfeiffer ball mill for its Pisco grinding plant. Civil works for this greenfield plant began in 2019. Caliza Cemento Inka also started to expand its Choisica plant by 0.5Mta in the same year, but no progress on the project has since been reported. Caliza Cemento Inka operates in the central region and has a market share of 3.6 per cent.

Other new capacity projects include Cementos Interocéanicos with a 1Mta integrated plant under construction in Puno and Inversiones en Cemento SA (Invercem) that is building a 0.45Mta grinding plant in Ayacucho, although this latter plant appears to have been delayed.

Anticipating higher sales
Behind the drive to expand production capacity at several of Peru's cement companies is the expectation that the cement industry will largely benefit from government initiatives such as the "Arranca Perú" programme. The programme represents US$186m of public works, covering education, agriculture and transportation. In addition, the "Reconstrucción con cambios" programme will rehabilitate the north of the country, which was devastated by El Niño-related flooding in 2017. Furthermore, state-funded construction of the long-awaited US$3.1bn "Nueva Carretera Central" highway, connecting Lima to the central region also began in March 2021.

It is expected that Peru's cement companies will continue their drive for a low-carbon future. The development of the cement sector will be closely tied with the economy and the government measures to deal with suppressing the pandemic, reports Asocem.

In 2021, domestic sales fully rebounded following after the collapse in 2020 brought about by the pandemic. By October 2021, year-to-date domestic sales had reached 11.18Mt, a 50 per cent YoY increase compared to the same period a year earlier. Demand is likely to set a domestic record in 2021, but now that the low base effect of 2020 has been accounted for, the first two quarters of 2022 are expected to see more moderate rates of expansion.

In the mid- to long-term, Peru is on course for sustained economic growth forecast by the IMF at between three and 4.5 per cent annually. For a developing country, this is a modest outlook, and while cement demand will continue its positive trend, Peru will face a surplus of cement capacity which is likely to maintain a downward pressure on cement prices, which are already amongst the lowest in the region at US$6.22/42.5kg bag.

Published under Cement News