On Tuesday, June 30, 2015, Giant Cement reported that it was unable to pay interest to shareholders due to the direct impact of the Greek debt crisis on the local cement industry. Greece's main cement producer blamed the government for the proposed capital controls.
On June 30, 2015, Greece was unable to repay the latest IMF loan due, and the government authorities and the eurozone governing bodies were still playing games with each other. Two countries, Sudan and Zimbabwe, were also unable to repay IMF loans. Under such circumstances, it is necessary to assess the development of the cement industry in Greece.
A good reference is the Argentine debt crisis of 2001. Its construction industry fell 12% year-on-year in that year and 30% year-on-year in 2002. Cement consumption and production also fell by 23% in 2002. One major difference is that the Greek debt crisis has lasted far longer than Argentina's. Argentina fell into a financial depression in 1998 and went into debt default in 2001, while Greece's financial difficulties began with the global financial crisis in 2008 and suffered its first default in 2010.
Because of capital controls, even ordinary commercial enterprises will be initially affected by the financial situation. In May 2015, the Financial Times studied the potential impact of a Greek default and an exit from the euro zone. Simply put, businesses will have some measures to deal with any situation they face. For example, olive oil producers can increase their profits by exporting. However, in an interview with a construction contractor, respondents worried that the crisis might reduce infrastructure projects led by the government or the European Union.
Giant Cement said in its first quarter report of 2015 that the Greek market is dependent on road construction. In February 2014, Giant Cement said that its operating efficiency had increased for the first time in nearly seven years, and that it had achieved profit growth throughout 2014. Other major cement producers, Lafarge's Hercules Cement and Italcementi's Halyps Cement, have also reported that the Greek construction market boosted cement consumption in 2014. However, Lafarge said in the report that it needed to improve "capacity utilization" by developing exports. Giant Cement also mentioned that it benefited from exports in the first quarter of 2015, and that the stronger dollar earned through exports helped to combat the depreciation of the euro.
It seems that the construction market in Greece will be depressed, but exports will provide a new lifeline. Because the main cement manufacturers in Greece are international enterprises, they can show a lot of strategic flexibility in the process of coping with the crisis. Of course, according to the European standard, compared with Greece's population of 11 million, the total annual cement production capacity of 14 million tons is suspected to be excessive. If the export channel is not reliable enough, the situation faced by the Greek cement industry will be more severe.
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