The Iberian Peninsula is located in the southwestern corner of the European continent, 85% of which belongs to Spain, while Portugal occupies about 15% of the western half. In addition, Andorra, France and Gibraltar (UK) also occupy a very small part of the peninsula, but Spain is the largest and most populous country on the peninsula, as well as the largest economy and cement industry in the region. This article will focus on the players, trends and prospects of the cement industry in Spain.
First, the financial crisis hit the Spanish economy .
Spain is a southern European country with a large population. It has been a member of the European Union since 1986. After nearly 40 years of dictatorship under General Francisco from 1936 to 1975, Spain's economy has undergone a major transformation and is now a developed economy.
Although Spain's economic development made great progress in the 1980s, 1990s and early 2000s, the 2008 economic crisis hit Spain hard. Spain's GDP is growing unsustainably because of the real estate bubble caused by economic development. When the global recession hit, Spain was forced to ask the European Union for nearly $100 billion in bailout loans. In just one year in 2008, Spain's GDP plunged by 25% to $1.64 trillion, and by 2015, Spain's total GDP was only $1.19 trillion. The unemployment rate in Spain also increased from 8.2% in 2007 to 26.3% in 2013, although this figure has eased from the years after the 2008 economic crisis.
Two, the demand for cement is falling off a cliff.
The Spanish cement industry grew rapidly in the second half of the 20th century. In the 1950s, with the large-scale transfer of population from rural areas to cities in Spain, the domestic economy of Spain experienced significant growth. The prosperity of the 1960s and 1970s made Spain's economy enter a fast development channel, Spain began to build large-scale tourism infrastructure, and even once the domestic cement supply could not meet the demand, so it had to import cement to meet the economic development. The 1992 Barcelona Olympics brought Spanish cement demand to a record 27.6 million tons, a record that was not surpassed until the late 1990s.
Figure 1: Cement consumption in Spain, 1997-2015 (million tons)
Source: Spanish Cement Association (Oficeman)
According to the Spanish Cement Association, between 1997 and 2007, with the rapid development of Spain's economy, its domestic cement consumption doubled, from 26.8 million tons to 56 million tons. But then Spain's economy took a turn for the worse, and demand for cement fell. With GDP falling by 25% in 2008, Spanish cement demand fell by an eye-popping 81% between 2007 and 2013, falling straight back to the level of demand in the 1960s. According to the data released by the Spanish Cement Association in 2015, the domestic cement production in Spain has also declined to a corresponding level.
Figure 2: Cement consumption per capita in Spain, 1997-2015 (kg/person)
Source: Spanish Cement Association
Spain has seen a similar shift in per capita cement consumption. Per capita cement consumption increased from 682 kg in 1997 to nearly 1200 kg in 2006-2007. However, in 2013, Spain's per capita cement consumption was only 231 kilograms, and the data has been hovering around this level since then. To give a comparison, Cembureau data shows that the per capita consumption of cement in the 28 EU countries is 363 kilograms, which is about 1.5 times the per capita level in Spain. Even Italy, a country hit hard by the economic crisis, currently consumes 335 kilograms of cement per capita, 1.4 times that of Spain.
Three, the seasonal change of cement production is small, and the output has risen slightly.
According to the monthly data of Spanish cement production published on the website of Trading Economics, the data is basically consistent with the data published by the Spanish Cement Association. Monthly production data show that the Spanish cement market is less affected by seasonal changes. In addition to the low production in December and January, most likely due to the impact of holidays such as Christmas and New Year, the Spanish cement market in other months has lower seasonal changes than its northern neighbors, such as France and Germany, due to the long-term warm climate.
Figure 3: Monthly cement production in Spain from 2015 to 2017 (10,000 tons)
Source: Trading Economics
Cement production in Spain declined in 2016 compared with the same period in 2016. Spain produced 13.8 million tons of cement in 2016, down 5.48% from 14.6 million tons in 2015. In the first five months of 2017, Spain produced 6.3 million tons of cement, a significant increase from 5.35 million tons in the same period of 2016 and 6 million tons in the same period of 2015.
Four, domestic sales to export, cement export scale is large .
Spain is adjacent to North Africa, and its cement exports have increased since 2007 due to the continuous decline in domestic cement market demand. Between 2005 and 2007, Spain did not export any cement clinker , and between 2007 and 2014, Spain's total cement and clinker exports increased from 1.1 million tons to 9.65 million tons, an increase of nearly nine times. But in 2015, Spanish clinker and cement exports fell again.
In any case, as of 2015, Spain remained the sixth largest exporter of cement and clinker in the world, with total exports of $489.2 million, accounting for 5% of the world's total cement exports in 2015. According to the MIT Economic Complexity Observatory, Spain exported $613 million of cement and clinker in 2014. Algeria was the largest importer of cement and clinker in Spain ( $111 million, 18%), followed by France ( $100 million, 16%). It was followed by the United Kingdom ( $61 million, or 10%). In terms of continents, Africa accounts for the largest proportion of Spain's total cement and clinker exports, reaching 286 million US dollars, Europe imports 243 million US dollars of cement and clinker from Spain, and South America about 49 million US dollars, mainly Brazil, accounting for about 5.7%, with a total value of 35 million US dollars.
Five, local big factories beat international giants .
According to the data of Global Cement Encyclopedia 2017, there are 32 active and operating integrated cement plants in Spain, with a total cement capacity of 42 million tons. In fact, with the capacity of these active cement plants alone, Spain has firmly occupied the first place in European cement production capacity, and even Germany is far below Spain's cement production capacity.
Figure 4: Distribution of Integrated Cement Plants in Spain
Data source: World Cement Encyclopedia 2017
However, Spain produced only 13.8 million tons of cement in 2016, and Spain's effective capacity utilization rate was only 33%. This does not add the capacity of Spain's 19 cement grinding stations, and if it is added, the capacity utilization rate is even lower. These grinding stations are mainly located near Barcelona and on the Canary Islands. At present, some cement plants in Spain have been mothballed or closed, and some of them are maintained at a very low level of utilization even in operation.
Figure 5: Designed capacity of domestic cement enterprises in Spain (10,000 tons)
Data source: Global Cement Encyclopedia 2017
As in other European countries, cement plants in Spain are mainly controlled and operated by large multinational companies, such as Cemex, LafargeHolcim, HeidelbergCement, Vautelantin, and CRH, which have a total capacity of about 24.4 million tons in Spain, accounting for 58% of the total capacity. The remaining 17.6 million tons are controlled by Spanish companies, the largest of which is Grupo Cementos Portland Valderrivas (CPV), which currently has 11.1 million tons of cement production capacity in Spain and is the largest cement producer in Spain. The other remaining indigenous cement companies are Cementos Molins, Cementos Balboa and SA Tudela Vegu Veguín.
Figure 6: Distribution of grinding stations in Spain
Data source: World Cement Encyclopedia 2017
Six, fossil fuels are the mainstream, and alternative fuels are abundant .
According to the Spanish Cement Association, as of 2015, petroleum coke was the main fuel used by the Spanish cement industry, accounting for nearly two-thirds of the fuel used by the Spanish cement industry. This is by far the main fossil fuel used in Spain.
In addition, the Spanish cement industry uses a variety of alternative fuels, which account for the remaining third (note that since different fuels have different calorific values, the proportion here is only an intuitive amount, not a proportion calculated by calorific value). The most common alternative fuel is garbage, which accounts for about 38% of alternative fuels and 13% of total fuels. The rest of alternative fuels are waste tires, waste wood and animal fuels.
Figure 7: Proportion of fuel used in cement production in Spain (%)
Source: Spanish Cement Association
Seven, economic growth is stabilizing, and domestic demand is still the key to the development of the industry.
In the autumn of 2016, the European Commission predicted that Spain's GDP would grow by 3.2% in 2016, 2.3% in 2017 and 2.1% in 2018. After extremely poor economic growth from 2009 to 2013, Spain's economic growth has entered a stable period. Because of the previous low base, we also saw Spain's economic growth level of 3.1% in 2015.
But it remains to be seen whether this forecast will translate into domestic cement demand in Spain. In the short term, exports are still an important way for most cement plants in Spain to maintain their operations. However, we also see the growth of domestic cement production capacity in many countries receiving Spanish cement, such as parts of Africa, which may have a negative impact on Spanish cement exports. Therefore, if the domestic cement demand in Spain can not be really improved in the short term, the Spanish cement industry will face further contraction.
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