Cement majors pivoting to margin defense, tightening output discipline: industry sources

Cement producers, particularly Western multinationals, are increasingly prioritizing margin protection over maximizing volumes, accepting production restraint rather than triggering price competition, industry participants told Platts at the World Cement Association's annual conference in Bangkok April 20.

The change is most visible among "the Western majors and their activities," reflecting a growing recognition that "pushing volume and going into price tension doesn't serve any purpose," Tony Hadley, founder of cement consultancy Tony Hadley African Advisory, said.

Hadley added that companies are instead focusing on "good, sustainable investments to reinvest" and to "reward shareholders through dividends and buybacks increasingly."

Hadley said that Europe's market structure within the decarbonization backdrop is "a bit of a ring-fenced market," adding that "there's an acceptance of discipline and focus."

Regional business models

An industry source at the conference told Platts that cement producers are adapting their strategies as the industry moves away from the globalization-driven expansion model that characterized multinationals in prior years.

"We moved from a globalization and a global view from majors and multinationals, they wanted to expand all over the place," the source said. "They realize that the world is changing and that the returns are at risk."

In Europe, to move from volume to value, producers are no longer viewing cement as a commodity and are moving up the value chain to extract more value, including positioning for "a premium" in the future, the source said.

The source added that some are also moving "to adjacent industries outside cement where they see superior growth driven by green regulation."

In the US, strategies are more domestically focused, with shareholder expectations shaping capital allocation and operating priorities, the source said. "It looks like it's America first."

Producers are seeking to "drive margins by improving efficiency and focusing on the US market," the source said, adding that there are efforts to increase sales of blended cement -- "because obviously they capture much more of the margin by selling that" -- and to reduce reliance on imports, which have low margins.

The source added that expanded alternative fuel use is another lever, noting US producers were "relatively late" compared with Europe.

In China, the business model is evolving through a combination of domestic restructuring and outward expansion, the source said.

China is "moving more global and trying to capture growth outside of China," alongside efforts to capture much more of the value that volume through moves beyond traditional cement, they added.

Oversupply remains a key test of the industry's ability to protect profitability, market participants said.

Platts, part of S&P Global Energy, assessed cement clinker FOB Turkey at $46.5/metric tons April 16, unchanged week over week.