The Rise and Potential Peak of Cement Demand in the Urbanized World

By Peter Edwards
Editor, Global Cement Magazine

Cement is the binder that holds together urban centers around the world. To make it, limestone, sand, and other additives are combined in rotating kilns at temperatures of up to 1450°C. This process yields a granular intermediate known as clinker, which is then ground in mills to produce cement powder. The final cement mix will include around 5% gypsum and may also include other non-clinker mineral by-products like limestone, slag, and ash from coal-fired power plants. The process of making clinker, and hence cement, demands around 100–350 kg of coal per tonne of clinker.A Thus, the cement industry has historically been a major user of fossil fuels, especially coal.

Since 1950 the cement industry has seen massive growth as our world has urbanized.1 From 133 million tonnes (Mt) in 1950, production has increased more than sevenfold to one billion tonnes (bnt) in the 33 years to 1983 (see Figure 1), before hitting 2 bnt in 2004, 3 bnt in 2010, and 4 bnt in 2013. In 2014 around 4.2 bnt of cement were produced.2

FIGURE 1. Global cement production and percentage of global population in urban areas since 19503–6

FIGURE 1. Global cement production and percentage of global population in urban areas since 19503–6

China topped the list of cement-producing nations in 2014 at about 2.5 bnt, which was an incredible ~60% of global production. The second-largest producer, albeit an order of magnitude smaller, was India at 280 Mt. A number of other countries produce substantially less, but are similar to each other in production scale. Although each country in this cluster is far smaller than China and India in terms of cement production, they actually represent very large cement industries. The top producers in 2014 are shown in Table 1.2

Edwards_Table1

Another important group of countries includes those with cement industries that are seeing the most rapid growth. In this category, China and India are joined by relative minnows such as Sudan, Peru, Nigeria, Turkey, Colombia, and Brazil. The “fastest risers” between 2003 and 2013, most of which are developing countries, are shown in Table 2.2,7 The speed at which their cement industries are growing has more than made up for the recent contraction in mature markets, such as the EU and the U.S. Additionally, several countries listed toward the bottom of the table have cement industries that are both large and rapidly growing.

Edwards_Table2

CEMENT SELF-SUFFICIENCY MEANS BUSINESS FOR DEVELOPING NATIONS

It is pertinent that many of the largest and fastest-growing cement industries are now in the developing world, but this should not come as a surprise. As the economy of a given country develops, cities become more prosperous than surrounding rural areas, leading to inward migration and urbanization. This inexorably leads to increased demand for building materials, including cement. Indeed, for many developing countries, self-reliance in cement production is a major industrial target as it reduces the reliance on imports, reduces the cost of construction, and facilitates further development of the economy through improved infrastructure. In the case of some countries it is even possible to show strong positive correlation between GDP and cement consumption over time.8

With the majority of the 2.5 billion new urban inhabitants projected to be in Africa and Asia in the period to 2050,5 it is the countries in these continents, their regulations, and populations that will most strongly influence future cement demand, the efficiency of the production process, and the types of fuels used. It is not, therefore, a great leap to conclude that the global cement production curve will continue to rise in the coming years. So the real questions are how fast will the industry develop in the future and how will its appetite for coal and other fuels change?

IMPACT OF SOFTER CHINESE DEMAND

When attempting to forecast future cement demand it is important to realize that the past decade was anomalous. Chinese growth, which has recently been typified by wild over-construction, is by far the largest single factor behind rising global cement consumption over this period. However, slowing Chinese economic growth9 and the fact that China is now actively removing older and less efficient cement plants10 mean that Chinese production is unlikely to increase at the same rate as has been observed in the recent past. It may even fall in the next few years if the central government pulls the appropriate levers.

Without such rampant capacity addition in China, other countries would have to see an incredible step-change in their demand and urbanization rates to maintain the gradient seen from 2003 to 2014 (see “Fast” line in Figure 2 for a projection to 2050). Such an extrapolation is unadvisable as it predicts a more than tripling in cement production levels by 2050 to around 13.5 bnt/yr. This scenario is highly unlikely.

FIGURE 2. Possible global cement production scenarios to 2050

FIGURE 2. Possible global cement production scenarios to 2050

A more likely outcome is a gradual reduction in the rate at which new production is added in the coming years. A better growth rate “baseline” to take, might be that seen in the period between 1983 and 2003. Over this 20-year period, Chinese growth was much more in line with trends observed in other countries today—global production increased at an average of 42 Mt per year. If this growth rate is extrapolated starting at the present, a projected 5.7 bnt/yr of cement will be produced in 2050.

CHANGING FUELS AND THE ROLE OF COAL

The cement-making process benefits from steady production conditions, which ensure both process efficiency and high-quality cement. Traditionally this has meant that most plants relied on coal as their fuel of choice because it burns consistently, has high calorific value, and is easy to handle compared to some other fuels. The cement industry uses around 5% of the coal produced globally every year.11 While this is much less than the steel or power industries, coal remains the largest single component in the overall fuel mix used by the cement industry, using on the order of 330–350 Mt of coal per year.B Oil and gas have also been used but have traditionally been limited to countries with large natural reserves.

Although consistency is a major requirement for the fuel used to make cement, the fact that thermal energy represents 30–40% of overall costs for the cement industry has increasingly led to a search for lower-cost fuels. In the past 25–30 years this has led to the rise of the use of alternative fuels, a term used to describe any non-fossil fuel that has sufficient calorific value for cement production. The drivers for the use of any alternative fuel will often include legislation that demands reduced CO2 emissions, the impact of landfill taxes and bans, and the price of alternative fuels relative to conventional fuels. In some situations cement producers are even paid a gate-fee to take certain types of hazardous wastes. Thus, in some locations wastes are being increasingly used by the cement industry.

For example, there has been a significant transition away from fossil fuels in places like the EU (from 97.6% fossil fuels in 1990 to 69.2% in 2012) and the U.S. (from 95.9% in 1990 to 83.8% in 2012).12 In these regions, decades of waste management expertise can be used to sort and supply calorific waste from municipal and industrial sources. It is these same markets where the cost of traditional fuels is the greatest and where minimizing environmental impact is a priority. In select developing markets, biomass wastes such as rice husks, olive kernels, and wood waste are also used to supplement traditional supplies.

AN ALTERNATIVE TO ALTERNATIVES

Despite the desire of some to move away from coal, cement facilities using alternative fuels and non-coal fossil fuels remain a minority. While the Cement Sustainability Initiative (CSI) stated that the use of alternative fuels saw a sevenfold increase between 1990 and 2012, the overall rate only rose from 2% to 14% of total fuel use.12 Notably, CSI’s research included far greater coverage of Europe than other regions, meaning that the true extent of alternative fuel use is likely to be much lower than their data suggested. Coal continues to supply the vast majority of thermal energy in major markets like China and India. There was, for instance, strong bidding from cement producers for reallocated coal blocks in India in February and March 2015, highlighting the high strategic importance of the resource over a multi-decade horizon.13

Indeed, in some regions, the trend for fuel choice is currently toward coal. Previously, major oil- and gas-producing countries provided subsidies for those fuels. However, this is increasingly not the case. The curtailment of Egyptian fuel-oil subsidies for the cement industry in 2014 has led to a flurry of investment in coal-feeding systems. Similar moves could be seen in other countries if the oil price (and revenue) continues to be low.

Even with the rise of alternative fuels and low oil and gas prices, coal clearly has a very large role to play in the cement industries that will help build the new cities of the 21st century. Assuming 5.7 bnt per year of cement production in 2050 and 350–400 Mt of coal at current production levels, coal consumption for the cement industry would be 475–540 Mt in 2050.

FACTORS THAT COULD DAMPEN CEMENT’S DEMAND FOR COAL

It is possible that cement industry coal demand may be lower than some projections. A number of factors could act as a damper. First, 35 years is a long horizon over which the use of alternative fuels could grow in developing countries, which have pressing waste management problems in many major cities. As inhabitants of these countries demand the same living conditions as those in developed countries, there could be more waste as well as higher levels of waste processing. This would give rise to the opportunity to use far higher levels of waste as an alternative fuel in many markets that are currently unable to do so.

Cement is a chief building block of urbanization.

Cement is a chief building block of urbanization.

Second, advances in cement kiln technology are driving higher efficiency as older plants are replaced (e.g., transitioning from wet to dry process kilns and also the addition of pre-heaters/pre-calciners). This effect is particularly noticeable in India, which has one of the youngest cement industries in the world. Despite its current low alternative fuel rates, the Indian cement industry has very high thermal efficiency.14 For older plants, efficiency could also be increased via the use of thermal energy recovery systems, which can generate electrical energy from process waste heat. Such installations can improve efficiency by up to one third15 and are already prevalent in China. Low returns on investment are currently preventing this technology from gaining a foothold elsewhere.

Third, the clinker factor: The percentage of clinker in the final cement product has been reduced over the past two decades from 83% in 1990 to around 75% in 2012, according to the CSI.16 This means that 25% of the cement is a non-clinker mineral and thus not as energy-intensive as clinker, which lowers the fuel requirement. Once again, however, the fact that the CSI data include a bias toward Europe may be placing an over emphasis on the extent of this change.

PEAK CEMENT

Cement demand will only increase for an individual country up to a certain level of urbanization. Past this level, frequently quoted as 600 kg per capita per year,8 most countries enter a “repair and maintain” stage. In developed countries this trend is reinforced by low population growth rates. To see this effect, we need look no further than the EU28, the U.S., and Japan. The cement industry of each of these developed regions produced 12–34% less cement in 2012 than it did in 2000.7 As each economy achieves the “repair and maintain” level of development, demand for cement will be reduced in an increasing number of countries, causing growth in global cement demand to fall. After this point, it is conceivable that global cement demand, and by extension the amount of coal it requires, will peak. However, whether or not this could occur by 2050 remains to be seen.

Co-located coal-fired power plant and cement plant

Co-located coal-fired power plant and cement plant

What is certain, however, is that whatever happens to the cement industry over the next 35 years, coal will play a very important role as the primary fuel source. Although other technologies and fuels may each take a small bite out of the demand for coal, the sector will continue to consume vast quantities of this vital fuel.

NOTES
A. Coal calorific content of 30 GJ/t,17 clinker specific energy of 3530 MJ/t,15 and clinker factor of 80% gives coal consumption of 94 kg/t at 100% efficiency. The process is not 100% thermally efficient and an estimate has been made to represent this.

B. 7.7 Bnt × 0.05 = 385 Mt.

REFERENCES

  1. U.S. Geological Survey (USGS). (1950–2015). Bureau of Mines minerals yearbook (1933–1993), minerals.usgs.gov/minerals/pubs/usbmmyb.html; USGS. Cement statistics and information, minerals.usgs.gov/minerals/pubs/commodity/cement/
  2. Van Oss, H. G., USGS, & U.S. Department of the Interior (USDI). (2015). Mineral commodity summaries 2015, minerals.usgs.gov/minerals/pubs/mcs/2015/mcs2015.pdf
  3. United Nations (UN). (2003). World urbanization prospects: The 2003 revision, www.un.org/esa/population/publications/wup2003/WUP2003Report.pdf
  4. UN. (2005). World urbanization prospects: The 2005 revision, www.un.org/esa/population/publications/WUP2005/2005WUPHighlights_Final_Report.pdf
  5. UN. (2014). World urbanization prospects, 2014 revision, esa.un.org/unpd/wup/Highlights/WUP2014-Highlights.pdf
  6. CarbonMajors.org. (2015). carbonmajors.org/PDFs/Sums/Cement%20Sums/IndustryData%206p.pdf
  7. Saunders, A., & Edwards, P. (2014). The top 100 global cement companies & past, present, and future cement trends. Global Cement, www.globalcement.com/magazine/articles/892-the-top-100-global-cement-companies-and-past-present-and-future-global-cement-trends
  8. Davidson, E. (2014). Defining the trend: Cement consumption vs GDP. Global Cement, www.globalcement.com/magazine/articles/858-defining-the-trend-cement-consumption-vs-gdp
  9. International Business Times. (2014, 31 December). Despite slowing China, positive outlook for Asia’s economic growth in 2015, www.ibtimes.com/despite-slowing-china-positive-outlook-asias-economic-growth-2015-1771386
  10. Perilli, D. (2014, 3 December). Smog, politics and cement overcapacity. Global Cement, www.globalcement.com/news/item/3123-smog-politics-and-cement-overcapacity
  11. Bhatty, J.I., MacGregor Miller, F., Kosmatka, S.H., & Bohan, R.P. (Eds.). (2011). Innovations in Portland cement manufacturing SP400, 262. Portland Cement Association.
  12. CSI. (2012). GNR Project—Reporting CO2, Parameter 3211a, www.wbcsdcement.org/GNR-2012/index.html
  13. Global Cement. (2015, 25 February). UltraTech wins coal block in Madhya Pradesh, www.globalcement.com/news/item/3340-ultratech-wins-coal-block-in-madhya-pradesh; Global Cement. (2015, 20 February). UltraTech and Hindalco Industries win coal mines in India’s auction, www.globalcement.com/news/item/3336-ultratech-and-hindalco-industries-win-coal-mines-in-india-s-auction
  14. CSI. (2012). GNR Project—Reporting CO2, Parameter 329, www.wbcsdcement.org/GNR-2012/index.html
  15. Harder, J. (2013). Latest waste heat utilisation trends in cement plants. Presentation at 2nd Global CemPower Conference and Exhibition, 4–5 June, London, UK.
  16. CSI. (2012). GNR Project—Reporting CO2, Parameter 3213, www.wbcsdcement.org/GNR-2012/index.html
  17. Biomass Energy Centre. (n.d.). Typical calorific values of fuels [table], www.biomassenergycentre.org.uk/portal/page?_pageid=75,20041&_dad=portal&_schema=PORTAL
  18. U.S. Energy Information Administration. (2012). Independent statistics & analysis—Coal, www.eia.gov/cfapps/ipdbproject/IEDIndex3.cfm?tid=1&pid=1&aid=2

The author can be reached at peter.edwards@propubs.com

 

The content in Cornerstone does not necessarily reflect the views of the World Coal Association or its members.
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