The growing challenge from rising cement prices

Cement, probably the most fundamental of all building materials has, in common with most construction products and systems, seen significant price increases worldwide in recent years. These increases have had far-reaching implications for our industry, impacting project costs, timelines and even the viability of some developments, writes John Ridgeway.

All these fluctuations are causing the markets to shop around for the best deals. South Korea's recent decision to import Chinese cement at 15% below the cost of domestic prices is not an isolated incident. Many countries worldwide facing similar challenges are doing the same in response to rising cement costs.

China has emerged as the world's largest cement producer, accounting for a significant portion of global output and this dominance has in turn, influenced international cement markets, with Chinese producers often offering competitive prices.

However, other regions have also experienced cement price increases due to factors such as increased demand, rising energy costs and supply chain disruptions. Countries like India, Vietnam and the United States continue to face challenges in managing cement prices. So, how is this affecting the market?

Several countries have already taken steps to address high cement prices. Some have imposed import duties on cement to protect domestic producers and reduce reliance on imports. In other regions, governments have implemented price controls to limit the increase in cement prices.

We are also seeing government incentives to encourage domestic cement production to reduce dependence on imports and to promote the use of alternative materials, such as fly ash and slag, to reduce the demand for cement.

Quality challenges

However, importing cement from other countries can pose challenges. Ensuring that it meets domestic quality standards is a concern. Transporting cement across borders can also be complex and costly, especially if you factor in geopolitical tensions and trade disputes, which can impact the availability and price.

Despite these challenges, South Korea's decision to import Chinese cement is a strategic move to address the high domestic prices and ensure a stable supply of this essential building material. The government's preparations, including certification and infrastructure development, demonstrate a commitment to mitigating potential risks and ensuring a smooth transition. As the global cement market continues to evolve, it is almost certain that other countries will also explore import options or implement measures to address rising prices.

But why is the market in such a state of flux? Several factors have contributed to the global rise in cement prices. Robust economic growth in many regions has led to a surge in construction activity, driving up demand for cement. Rising energy costs are another factor and because the production of cement is energy-intensive, it is inevitable that this will also impact on prices.

The COVID-19 pandemic and geopolitical tensions initially disrupted global supply chains, affecting the availability and cost of cement and these have not fully recovered. Limited availability of key raw materials, such as limestone and clay, has also constrained cement production, together with stricter environmental regulations which have increased the cost of cement production, as manufacturers invest in pollution control measures.

Impact on the construction industry

All this means that the rising cost of cement has had a significant impact on the construction industry. Higher cement prices directly translate to increased project costs, putting pressure on budgets and margins. As project costs rise, developers may face challenges in securing financing, leading to delays or even cancellations.

The increased cost of cement can also reduce the profitability of construction projects, affecting the bottom line of businesses. That said, to mitigate the impact of rising cement prices, construction companies are exploring innovative solutions, such as using alternative materials or optimising construction methods.

Cement prices, as we have demonstrated, have fluctuated across different regions. While some areas have experienced more significant increases than others, the overall trend has been upward in recent years.

The Asia-Pacific region, particularly China and India, has witnessed substantial growth in cement demand, leading to price increases. Cement prices in Europe have also risen, driven by factors such as increased construction activity and rising energy costs. Paradoxically, the U.S. and Canada have seen relatively moderate increases in cement prices, although the impact has varied regionally.

Without doubt, the global cement market is expected to continue evolving, with both challenges and opportunities arising. Construction companies and governments will need to adapt to changing market conditions, explore innovative solutions and ensure a sustainable supply of cement to meet future demand. It is going to be a rocky ride.