Contents
CEMENT SECTOR ANALYSIS
>Questions we are going to answer
1)What is Cement?
2)Swot Analysis of Cement Sector
3)General Condition of a Cement Sector in the World
4)General Condition of a Cement Sector in Turkey
5)Related Sectors
6)Cost Components and Problems of Sector
7)Porter’s Five Forces Model
8)Future Prospects of Cement Sector
What is Cement?
A cement is a binder, a substance that sets and hardens independently, and can bind other materials together
A cement includes calcium, silicon, aluminium, iron-oxide, calcareous, clay, marn, iron gem.
Clinker is ground to become Portland cement. It may also be combined with other active ingredients or chemical admixtures to produce:
– ground granulated blast furnace slag cement
– pozzolana cement
– silica fume cement
Types of Cement
Portland cement:The most common use for Portland cement is in the production of concrete
Non–Portland hydraulic cements
-Pozzolan-lime cements
-Slag-lime cements
-Supersulfated cements
-Calcium aluminate cements
-Calcium sulfoaluminate cements
SWOT Analysis of Cement Sector
Strengths
Cement is, literally, the building block of the conAlmost every building constructed relies on cement for its foundation
struction sector
The cement business is a $10 billion sector, measured by annual cement shipments
There is also a strong reputation behind the cement sector
Cement is a solid material and consumers rarely have complaints about the product
Regional distribution plants have also made cement widely available to any type of buyer.
Weaknesses
The cement sector is not without its drawbacks
The cement sector relies on construction jobs to create a profit
The cement sector heavily relies on weather
About two-thirds of cement production takes place between May and October
Cement producers often use the winter months to produce and stockpile cement, to meet demand
The cost of transporting cement is high and this keeps cement from being profitable over long distances
In other words, shipping cement costs more than the profit from selling it
Opportunities
One opportunity is the cement sector’s efficiency
The cement sector has recently streamlined its production efforts, using dry manufacturing instead of wet, which is heavier and more time-consuming
The cement sector has also invested about $6 billion in expansion efforts to meet unmet cement needs
Projections show that by 2012, the cement sector will have 25 percent more production capabilities
Threats
The nature of the economy have uncovered a number of threats to the cement sector
The cement sector greatly relies on construction
The current economy has lessened the number of construction jobs, which in turn hurts the cement sector
Kyoto Protocol and EU Environmental Legislation has introduced regulations for the cement sector to cut down emissions
In 2008, world cement production reached 2,87 billion tons
European Cement Union countries produces 11 % of total world cement production
In 2008 and 2009, because of the economic crisis, production of cement is decreased
In 2008, exporting value of China was 26 million tons but in 2009, it dropped to 14 million tons and its capacity increased to 1,3 billion tons
It indicates overcapacity problem of a sector
Global economic crisis in 2009, affected mortgage market in USA, after that construction sector and so cement sector are affected
Consumption of cement is decreased mostly in America and Europe continents
Consumption is decreased most in Russia (25%)
Although these decreases, cement consumption increased in Mediterranean Countries such as Libya, Algeria, Syria and Iraq
Turkish cement sector is in the first ten countries in the world
In Europe, Turkey is third in production and fourth in selling cement
In 2009 production reached 54 million tons and capacity reached 90 million tons.
Cement sector is only sector which is not unregistered in construction sector
Demand in cement sector changes according to economic conditions and investment environment in related country and it stagnates the period that there is no expenditures
Especially, the last global economic crisis affected construction and real estate sectors, so demand of cement is decreased
In cement production raw material, auxiliaries, energy and fuel are important cost components
Also transportation is other important component
Especially cost of energy, fuel and transportation demage competitiveness of the cement sector in the market
Turkish cement producers have disadvantages in cost according to the international competitors in the market
Capacity Problem
Because of overcapacity and intensive competition, prices are decreased and sector is in trouble
In 2008 Feb, average cement price was 120 TL, but it decreased 27 percent to 88 TL in 2009 Feb, also in 2010 average price is 85 TL
It is expected that the capacity problem will continue for a while because of stagnation in the market
To solve this problem investments must be planned and controlled
For using all of the current capacity, investment of civil infrastructure and urban regeneration projects must be increased
Transportation
In fact increasing in domestic and international markets, increased production cost affect export in bad manner
The most important factors in the exporting cement is inadequate railways and export ports
Because of the inadequate ports, exports are made by highways
High transportation cost is important barrier in exportation
To solve his problem there must be policies to increase exportation
Ports and logistic projects must be improved
Energy
Especially high petroleum prices affect cement sector badly
Because of low sale prices which is caused by overcapacity, sector is in trouble because of incerasing production cost
There must be fiscal policies in energy costs
Also companies are sensitive about energy efficiency and increase environmental awareness
Also companies are sensitive about energy efficiency and increase environmental awareness
There must be trainings about energy efficiency and cost advantages must be determined
Environmental Regularization
Kyoto Protocol and accordance to EU Environmental Legislation are important problems about environment
In this process sector will have to make high technological investments and establish new treatment plant
For this expenditures and investments finance and timing are main problems
Research&Development
Projects must be developed to decrease gas emissions and energy consumption
It must be provided that sector has to give importance to R&D activities
Porter’s 5Forces-Barriers to Entry
There are no barriers to entry
But if you want to build a cement factory capital cost is high (approximately 130 million dollars to build 3500 tons/days capacity)
The main consumer is housing markets
Housing is now booming as a part of the remittances is being used for construction of houses
Commercial banks with liquidity are finding housing sector potential area for lending
Infrastructure is the another segment of cement sector
Cement demand in emerging economies is much higher than developed countries where the demand has reached a plateau
Licensing of main reserves is controlled by government
The shortage of a raw material remain a concern
Transportation and packaging suppliers can affect bargaining power so backward integration can be used
Gypsum plaster is a good substitue for construction purposes
Gypsum plaster is also useful in construction in regions of extreme cold and hot climate for isolation
Existing firms are trying to expand their capacity
Government enforce the improvement quality of the cement and rivalry by the anti-trust laws
Competition Board is analyse the sector, for mergering, acqusition, and price statement activities
Future Prospects of Cement Sector
As it is mentioned before global economic crisis affected construction sector so cement sector is also affected
The world have experienced a recession in demand in 2009
Turkey also affected by the recession and declines in domestic consumption was observed
170 million tons in the entire world experienced an increase in capacity, and this has created excess demand
Experienced decline is foreseen in the coming years, increases in capacity, capacity increases are expected to be provided by the majority of developing countries
Losses in the demand recovery is expected in the coming years, in Europe such a recovery is not expected in the short term
The investment in the sector is thought to increase in the United States and Russia
Cement consumption in the two countries share most of the India and China have shown differences in the predictions for 2010, India’s growth potential is expected to be higher than China’s