I. Trend of cement production in Canada
From 2000 to 2007, Canada's cement production increased from 12.6 million tons to 15.1 million tons, but the US sub-prime crisis followed and the global economy began to decline. Canadian cement production fell by 9.3% to 13.7 million tons in 2008 and again by 19.7% to only 11 million tons in 2009. Since then, Canada's annual cement production has been fluctuating around the line of 12 million tons. By 2016, Canada's national cement production was 11.9 million tons, down 2.4% from 12.2 million tons in 2015.
Figure 1: Statistics of annual cement production in Canada from 2007 to 2016 (million tons/year)
Source: Statistics Canada
Figure 2 shows the full 12 month cement production for a few selected years between 2007 and 2016. From the chart, we can see the gap between the peak of cement production in 2007 and the trough in 2009. In addition, we can also put the latest data of 2016 and a virtual annual production line, which is the median of cement production in each month from 2007 to 2016. We can find that the cement production in 2016 is very close to this median virtual line. In the 12 months of 2016, cement production in each month was either above or below the median, always moving around it. At the same time, we can also see from Figure 2 that the cement production in Canada has a significant change with the season. The cement production begins to decline in October every year and then rises again in February next year.
Figure 2: Comparison of cement production in Canada by year (million tons/month)
Source: Statistics Canada
II. Canadian cement export
Canada is a net exporter of cement. Historically, most of Canada's cement was exported to the United States. However, with the occurrence of the subprime mortgage crisis in the United States, the economy of the United States has experienced a sharp recession, and the demand for cement has also decreased. Canada's cement exports to the United States have decreased from 5 million tons in 2004 to less than 3 million tons in 2010. Over the next five years, cement exports stabilized at around 3 million tons, rising slightly to 3.6 million tons in 2016.
III. Cement Production in Canadian Provinces
Ontario, the most populous province in Canada, accounts for about 38% of the total population and is the largest cement consuming region in Canada. In 2016, Ontario's cement shipments were about 3.2 million tons, accounting for 38% of the national cement shipments of 8.3 million tons, which is just the same as the proportion of the population in the country. Quebec is Canada's second largest cement consumer province, with shipments of 2 million tons, accounting for about 24% of the country's shipments, and coincidentally, its population accounts for 24% of the country's total population.
Although Statistics Canada also collects data on cement shipments in various provinces and regions, it does not publish the data, because if it publishes the data, it will directly expose the shipments of producers in areas with only one or two cement plants. It reported only 3.1 million tons, or 38% of the country's total shipments, from the remaining 11 provinces and regions, which account for 38% of the total population.
IV. Canadian cement producers
The Canadian cement industry currently has 15 integrated cement plants in operation, one project under construction and one planned project. At present, the annual production capacity is 16.4 million tons. In 2016, the utilization rate of cement production capacity in Canada is about 73%. At present, there is no separate cement grinding station in Canada. Multinational companies are major players in Canada's cement industry, with a total capacity of 15.6 million tons, accounting for 95% of Canada's total cement production capacity. Its production capacity is LafargeHolcim (6 million tons/year), Heidelberg Cement (4.5 million tons/year),
Figure 3: Comparison chart of production of cement manufacturers in Canada (million tons)
Source: Statistics Canada, China Cement Research Institute
LafargeHolcim, the world's largest multinational cement company, operates five cement plants in Canada through Lafarge Canada, covering all five cement manufacturing provinces in Canada. These subsidiaries are mainly Lafarge's former Canadian subsidiaries, which were sold to CRH Group when Lafarge-Holcim merged for divestiture.
Heidelberg Cement: Canada's second largest cement producer, Heidelberg (Germany), through its Canadian subsidiary Lehigh Hanson, has long controlled two cement plants in Alberta and British Columbia. After its acquisition of Italia Cement in 2016, it also took over Italia Cement's Essroc Canada and Quebec Cement in Canada, two cement plants in Ontario and Quebec, respectively. This makes Heidelberg Cement's operation in the east and west of Canada more balanced.
CRH: has been in the Canadian market since 2015. Ireland's CRH Group entered the Canadian market mainly by purchasing the assets of Essroc, a subsidiary of Lafarge Holcim. CRH currently operates two cement plants in Canada with a capacity of 3.1 million tons per year.
Votorantin: In 2001, Votorantin entered the Canadian market through the acquisition of St. Mary's Cement Canada, an old homegrown cement company founded in 1912. Currently, Votorantin continues to operate two cement plants in St. Mary's, an old plant with a capacity of 800,000 tons per year and a newer plant with a capacity of 1.3 million tons per year, both in Ontario. In addition, Votorantin operates four cement plants in the United States.
McInnis Cement: McInnis Cement will be a major player in the Canadian and even North American markets when its cement plant under construction goes into production operation in 2017. The plant, with a capacity of 2.2 million tons per year, was first proposed for construction in the 1990s, funded by a number of independent investors, and is expected to be put into operation in the first half of 2017. The cement plant is mainly constructed by Oracle Industries (USA). The operation of McInnis' cement plant will increase Canada's total production capacity to 18.9 million tons per year. The plant is located near the St. Lawrence Strait and its main purpose is to export to the U.S. market.
Although McInnis Cement has not yet started production and operation, it has not even entered the cement market before. But given that its main goal is to export to the U.S. market, McInnis has faced lawsuits from U.S. manufacturers in the United States, as well as protests from Lafarge and environmental groups for attempting to bypass Canadian environmental clean-up procedures in 2013. McInnis has made a considerable effort to assure all stakeholders that its plant will be built and operated in compliance with all environmental regulations, which in Canada are among the most stringent in the world. It also sought to reassure Canadian producers that the operation of the new plant would not adversely affect the supply situation in the Northeast.
The project is also under intense public scrutiny, with the Quebec government putting in $350m for a minority stake (a major reason for opposition from the American industry) and the province's pension fund putting in $100m. In January 2016, its former CEO was forced to step down because of a $350 million overspend on the project budget. The good news is that McInnis recently appointed a new CEO to reassure investors, and the project has finally made significant progress. McInnis also announced an agreement with the Gasp Gaspé Railway Company to transport 140,000 tons of cement.
Federal White Cement: a small independent cement manufacturer, Federal White Cement has been in production operations since 1979. The plant was upgraded in 1999 and 2007 and currently has a capacity of 500,000 tons per year.
Colacem Canada: Colacem Canada is the Canadian subsidiary of Colacem Italy and is currently the smallest cement producer in Canada. Its cement plant in Grenville-sur-la-Rouge has a capacity of only 300,000 tons per year. Colacem Canada has recently proposed a 3,000 t/d (1.2 million tons/year) integrated cement plant near a limestone mining area operated by its L 'Original in Ontario. But one of the two local councils voted against the project in January 2017, and it is not clear whether it will resubmit the plan.
5. Development Prospect of Canadian Cement Industry
Canada's strong economic momentum has been hampered by the recent decline in oil prices. However, the International Monetary Fund (IMF) still gave Canada 1.9% economic growth forecast in its 2017 forecast, a slight increase from the 1.3% forecast for 2016. The IMF also predicts that Canada's economy will grow by 2.0% in 2018, and the strong economic growth prospects are good for the development of the cement industry. For comparison, the IMF's forecast for the United States is 2.3% growth in 2017 and 2.5% growth in 2018.
Despite the strong economic growth, the outlook for the Canadian cement industry will continue to depend on the recovery of oil prices and how Canada's relationship with the new U.S. government develops. The demand for cement in the United States will have a direct impact on McInnis's cement exports and on the availability of cement in Canada. If cement consumption in the United States is lower than expected, there will be an additional million tons of surplus cement capacity in Quebec and even Canada.
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