Overview of the Cement Industry

Introduction

The cement industry is the building block of the nation's construction industry. Few construction projects can take place without utilizing cement somewhere in the design. Annual cement industry shipments are currently estimated at $10.0 billion for 2008; down from $15.0 billion in 2006. U.S. cement production is widely dispersed with the operation of 113 cement plants in 36 states. The top five companies collectively operate 54.4% of U.S. clinker capacity with the largest company representing 15.9% of all domestic clinker capacity. An estimated 80.0% of U.S. clinker capacity is owned by companies headquartered outside of the U.S.

Cement Consumption

In 2008, the United States consumed 93.6 million metric tons of portland cement, reflecting a -15.2% decrease over 2007 levels. The industry down turn was first linked to the mortgage foreclosure crisis which decreased residential construction spending activity by -18.5% in 2007 and -29.9% in 2008. The financial troubles in the residential sector and the subsequent collapse of the U.S. banking system have spilled over to the detriment of corporate profits, employment, and government revenues extending construction spending activity declines to nonresidential and public construction spending.

Cement consumption is dependent on the time of year and prevalent weather conditions. Nearly two-thirds of U.S. cement consumption occurs in the six months between May and October. The seasonal nature of the industry can result in large swings in cement and clinker (unfinished raw material) inventories at cement plants over the course of a year. Cement producers will typically build up inventories during the winter and ship them during the summer.

The majority of all cement shipments are sent to ready-mix concrete operators. The rest are shipped to manufacturers of concrete related products, contractors, materials dealers, oil well/mining/drilling companies, as well as government entities.

The domestic cement industry is regional in nature. The cost of shipping cement prohibits profitable distribution over long distances. As a result customers traditionally purchase cement from local sources. Nearly 98% of U.S. cement is shipped to its customers by truck. Barge and rail modes account for the remaining distribution modes.

Imports Fill Production Gap

According to PCA estimates, U.S. cement plants achieved an average capacity utilization rate of 82.0% in 2008. Even at this operating rate, domestic production alone does not satisfy total United States cement consumption. The gap between domestic production and consumption was filled in 2008 by 11.5 million metric tons of imported cement and cement clinker. About 90.2% of cement and clinker imported in 2008 came from five major countries: China, Canada, Columbia, Mexico, and the Republic of Korea.

Heavy reliance on imports to satisfy consumption subjects the United States' market to sometimes volatile global economic conditions regarding the availability of foreign cement and ships used for importing cement (dry bulk carriers). As a result, the cement industry is currently engaged capacity expansion. By 2012 more than 25 million metric tons of new capacity is expected to come on line, representing more than $6 billion in investment.

Exports of cement exceeded 1% of total U.S. production. Nearly all exports service the neighboring Canadian and Caribbean markets.

Efficiency Gains

Employment in the U.S. cement industry has declined dramatically during the past 20 years. In 2005, the cement industry employed 16,877 workers--a 23% reduction compared to 1985 levels. This drop in employment is the result of industry efforts to increase efficiency by automating production and closing small kilns. The average kiln in use today produces nearly 78.6% more cement than an average kiln produced 20 years ago: 584,000 metric tons in 2008 compared with 327,000 metric tons in 1988.

The cement industry has boosted efficiency by concentrating new capital investment in plants that use the dry process of cement manufacture, and by phasing out operations that rely on the more energy-intensive wet process. Since 1974, the number of wet process kilns has dropped from 234 to 46 -- a decline of 80% -- while the number of dry process kilns has only been reduced from 198 to 131. Nearly 73% of existing U.S. clinker production capacity has been built since 1975 -- all utilizing the dry manufacturing process. Currently, about 85% of the cement produced in the United States is manufactured using dry process technology.

For More Information
Information and statistics used in this summary are presented in reports compiled by PCA from various government and private sources. For additional information of the U.S. and Canadian cement industry, refer to the Economic and Market Research pages of our Web site.

Anh Van- by: www.cement.org