Sluggish construction markets have limited demand for cement and caused industry revenue to contract
New York, NY (PRWEB) March 30, 2015
The Cement Manufacturing industry produces a variety of cements, including Portland cement, cement clinkers and aluminous cement. Industry products are primarily used for making concrete, mortar and stucco. Consequently, demand is closely correlated to the level of activity in residential and nonresidential construction. Infrastructure construction, which relies heavily on concrete, also generates demand for cement products. Sluggish constructions markets have limited demand for cement and caused industry revenue to contract slowly over the five years to 2015. However, this includes slight forecast growth over 2015 due to improved export revenue.
http://www.ibisworld.ca/industry/ default.aspx?indid=551 [The Cement Manufacturing industry __title__ The Cement Manufacturing industry] is highly concentrated, with about 20 companies comprising the entire industry and running one or a few large-scale facilities each. The four largest companies alone generate over two thirds of total industry revenue, with the top player, Lafarge, responsible for half of that. All four companies are global and vertically integrated, with headquarters abroad and Canadian facilities involved in cement manufacturing, as well as upstream quarrying activities and downstream concrete mixing activities. These major players also face limited competition from the import of cement produced elsewhere. According to IBISWorld Industry Analyst Amal Ahmad, “Cement, a low value-added good, is also highly perishable, voluminous and costly to transport.” As a result, international trade in cement is mostly limited to cross border trade with the northern regions of the United States. Oligopolistic competition has kept this industry's profit margins high.
Since a wave of consolidations in the 1970s, the Cement Manufacturing industry in Canada has exhibited high and rising market share concentration. IBISWorld estimates that the top four companies currently account for over half of total industry revenue. The largest operator, Lafarge, controls half of that, thereby accounting for over one third of annual industry revenue. All four major operators are multinational and vertically integrated companies, complementing their cement operations with concrete mixing and concrete product manufacturing. They are also frequently involved in upstream quarrying operations.
As a result of vertical integration and economies of scale in production, the major players have been able to sustain very high profit margins. Over the next five years, the industry is expected to exhibit even higher market concentration, precipitated by the potential merger of Lafarge and Holcim. The new giant would control a substantial percentage of total annual revenue and may be able to raise cement selling prices across the industry.
In April 2014, the two largest cement manufacturers in Canada, Lafarge and Holcim, announced plans to merge operations. Pending regulatory approval by mid-2015, this merger would increase concentration in the Canadian cement industry pronouncedly, with the new giant controlling close to half of total market share. The merger is also likely to enable the industry to raise cement-selling prices and boost profit margins across the board. Higher selling prices, combined with some improvement in construction demand, are expected to boost revenue slowly through 2020.
For more information, visit IBISWorld’s Cement Manufacturing in Canada industry report page.
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IBISWorld industry Report Key Topics
This industry manufactures Portland cement, other hydraulic cements, cement clinker and specialty cements. Cement is demanded by construction markets and is used as an ingredient into concrete, mortar and stucco manufacturing. Upstream quarrying operations and downstream concrete mixing operations are excluded from this industry.
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