Mediterranean trading trends

Cement producers bordering the Mediterranean have seen a shift in trading trends over recent years due to a number of influencing factors. In this report, DGS Consultants explains how cement and clinker trade for the region has evolved over the last two years and, with an expected post-COVID recovery, presents key findings for tomorrow. By Sylvie Doutres, DSG Consultants, France

Over the last 10 years, the countries bordering the Mediterranean Sea have suffered particularly from different types of turmoil. These include economic crises in southern European countries, increasing south-north migration flows, wars or political instability in MEDA countries, energy price fluctuations and, to top it all, the COVID-19 pandemic since early 2020.

However, since COP21 in Paris, the fight against global warming and its consequences has been, as with its peers, the main concern for the Mediterranean cement industry, with the necessity to quickly adopt ways of producing cement to achieve CO₂ reduction goals by 2050. Alternative fuels and supplementary cementitious materials (SCMs) are now compulsory for all plants. Moreover, regional demand surpasses the regional supply for both these inputs.

The different phases of the European Trading Emissions Scheme (EU ETS) and increased CO₂ costs have put an added pressure on southern European producers. Green and efficient supply chains are also required. Therefore, Mediterranean rim-based cement producers are not playing on international markets with the same cards.

For the last 10 years, Mediterranean countries have been experiencing a surplus situation that spread from southern European countries via Turkey to northern African countries. All the aforementioned economic and political negative factors have contributed to a global decline in cement consumption and created an established imbalance between regional cement supply and demand. Several factories have been closed, mothballed or converted into grinding stations, especially in southern European countries.
Until 2019, exporting surplus was the solution to maintain a national industrial network. In 2020 important changes in European carbon quota allocations, combined with the impacts of the COVID-19 pandemic, halted production and modified supply availability for most importing nations.

2020: a year of transition

Global cement and clinker exports from Euro-Med1 countries have been rising since 2012 (29Mt) to reach a record high of over 50Mt in 2020 (see Figure 1).

As shown in Figure 2, EU-based exporters have reduced their shares in this volume since 2016. Spain and Greece began to curb exports in the last two years while Portuguese exports have progressively declined until 2020. On the other hand, non-EU countries (ie, Algeria, Tunisia, Morocco, Albania and Turkey) have significantly increased cement and clinker exports since 2016, especially until 2019.

Cement and clinker export trends

Cement exports still represent the majority of volumes, but the share of clinker exports has gradually increased from 34 per cent in 2012 to 43 per cent in 2020. Mediterranean countries exported approximately 28Mt and 23Mt of cement and clinker, respectively, in 2020. While cement volumes have risen by 46 per cent since 2012, clinker volumes have grown by 133 per cent (see Figure 3).

Some Euro-Med countries (eg, Greece, Italy, Croatia or Albania) have always been more cement export-oriented with it representing more than 60 per cent of their global exports, thanks to efficient cement export logistics or proximity to importing markets. Other countries (eg, Morocco or Algeria), with poor cement export logistics at ports, have focussed on clinker exports, which can account for up to 90 per cent of their global exports.

Spain, Portugal and Turkey have demonstrated that they can favour cement or clinker exports according to the economic context or international market needs. Spain developed its clinker exports during the 2012-19 period mainly to supply west Africa. Since 2020 Spanish cement exports have overtaken clinker exports supported by intragroup sales within western Europe.

Portuguese products are mainly now exported to Portuguese-speaking territories or western Europe.
Turkish exporters are developing increasing amounts of clinker deliveries (+430 per cent over the last five years). However, cement represented ~60 per cent of global Turkish exports in the 2012-20 period. A large proportion of cement is delivered by truck to neighbouring countries (ie, Syria and Iraq).

Achieving record volumes

One would have thought that trading activity in 2020 would have been affected by pandemic-related restrictions, but this was not the case around the Mediterranean. In 2020 regional cement and clinker exports reached record volumes. Of course, the 2Q20 was weaker than other quarters of the year. Nevertheless, 2020 global trade from this region rose by 18 per cent YoY (see Figure 1). This positive result is explained by the remarkable increase in Turkish exports (+46 per cent), which represented 62 per cent of Euro-Med exports.

On the contrary, European countries with longer lockdown periods, such as Italy, Spain and Greece, saw exports decline by eight, nine and 27 per cent, respectively. The decrease was also significant in Algeria (seven per cent) and Tunisia (39 per cent), where COVID-19 restrictions were high. Portugal, Morocco and Albania saw exports increase by three, four and five per cent, respectively, and Croatia saw an advance of up to 15 per cent.

The winner of this very special year was definitely Turkey. Turkish cement exports totalled 16Mt (+63 per cent YoY) and clinker exports were 15.6Mt (+32 per cent YoY), according to customs data. Türkçimento,  the Turkish cement producers association, declared 13.5Mt of clinker exports by its member factories.

Turkey consolidates its regional leading export supremacy

As can be seen below in 2020, cement and clinker exports from Turkey were largely much higher than exports from all other Euro-Med exporting countries: Spain (4.8Mt), Greece (4Mt), Portugal (2.1Mt), Croatia (1.67Mt) and Italy (1.65Mt). The volumes of other non-European exporting countries were far lower than those of Turkey: Algeria (~2.5Mt), Morocco (1.2Mt), Albania (1Mt) and Tunisia (1Mt). However, all these countries succeeded in maintaining high export volumes despite the COVID-19 context.

Turkey’s domestic cement consumption declined in 2018 (11 per cent) and 2019 (29 per cent). The cement market is still very fragmented and shows significant excess cement capacity. According to türkçimento, Turkey had 145Mta of installed cement capacity for ~56Mt of domestic consumption and an average utilisation rate of 53 per cent in 2020. Therefore, most factories rely on cement or clinker exports. In 2020, despite the pandemic, Turkish exporters performed quite well and sold products globally. Success continued in 2021, but producers suffered from high energy costs during the latter half of the year. 

Turkish seaborne cement exports are driven by demand from the US and Israel (see Figure 4). These countries attracted 48 per cent of Turkish cement exports in 2020. Syria, Libya and Ukraine are also large importers of Turkish cement. Altogether, these five countries accounted for 68 per cent of all Turkish cement exports in 2020. These countries, in particular Libya and Ukraine, significantly increased cement imports from Turkey, especially in 2020 to compensate for the slowdown in inland deliveries from neighbouring countries (eg, Tunisia and Egypt). In 2021 Turkish cement exporters not only gained market share in Haiti and Ghana but also in Italy.

Greek products are particularly appreciated in the US and Israel. Since 2020 Greece has lost a lot of ground to Turkey in these countries, mainly for alkali-cement.

On the other hand, European exporters such as Spain or Portugal, have conserved their leadership in cement exports to other European countries like the UK and France.

More than 70 per cent of Turkish clinker exports in 2020 were sold to 10 countries. Among them, seven were in Africa (Ghana, Côte d’Ivoire, Cameroon, Guinea, Togo, Mauritania and Senegal). The US, Dominican Republic and Belgium were also in this top 10. Most of these countries increased their purchases of Turkish clinker during 2020. In 2021 Turkish clinker lost ground in Togo, Mauritania and Senegal but developed in Israel, Colombia and Haiti. Since 2019 Morocco and Algeria have entered the same clinker markets as Turkey in west Africa – at a time when European exporters have become less competitive on these markets due to higher production costs. Intragroup trade (from Cimat, Holcim or HeidelbergCement) was key for the development of Moroccan clinker exports.

Algeria improves clinker export logistics

Algeria has previously suffered with poor port logistics. The competitiveness of exporters has been marred by logistic constraints across the entire export chain: from inland transportation from plant to port, to handling efficiency, port congestion, high port costs, etc.

However, the Algerian government considers cement and clinker to be a promising source of external revenue to diversify the economy away from gas. It is aware that public-private partnerships must be found for financing logistics investments.

For example, Lafarge Algeria, one of the leading producers in the country with an installed cement capacity of 11.5Mta, commissioned a logistics platform in June 2020. It is situated 1km from the Djen-Djen port and was developed in partnership with Rail Logistics, a subsidiary of the state-owned SNTF Group. This platform allows the temporary storage of 10,000t of clinker (they usually charter handy or supramax loaded with 30,000-40,000t) and limits a vessel’s long and expensive call at port. Lafarge Algeria exported 1.2Mt of cement and clinker in 2020 and volumes are expected to reach 2.6Mt in 2021.

To support its export ambitions, another logistic improvement was announced in November 2021 in partnership with state-owned port operator Serport. It will be the first clinker shiploader in the country at Djen-Djen port, with a nominal loading rate of 18,000tpd. Other improvements are to follow at the ports of Oran, Mostaganem, Skikda and Annaba.

Algerian state-controlled cement group GICA is looking for government support to reduce its logistics constraints and expects the construction of a new deepsea port between Alger and Oran to develop exports from its Chlef plant. GICA exports less volumes than Lafarge Algeria (around 1Mt of clinker in 2020 for US$600m) but GICA has forecast that it will double this volume in 2021 to a US$1bn revenue from exports.

Algeria’s global cement and clinker exports were close to 2.5Mt in 2020 and reached 5Mt at the end of 2021. Since 2021, destinations have evolved. In addition to the traditional western African countries, Algeria has sent clinker to Latin America (French Antilles, Dominican Republic and Brazil), the US and, increasingly, to Europe (France, Spain, Belgium, Italy and the UK). France and overseas French departments could import up to 0.5Mt of clinker from Algeria by the end of 2021.

More exports from Mediterranean countries to EU28

The European cement sector is experiencing structural changes to meet zero carbon emissions targets by 2050. Quotas given in the ETS for clinker production are not free any more. There is no longer a financial interest to produce clinker whose substitution with other less-polluting raw materials, like limestone, pozzolan, granulated blast furnace slag (GGBS) or fly ash, is key. Inflation on carbon and energy costs are putting pressure on prices. The Mediterranean trading landscape has evolved with the development of intra-EU flows and the increase of clinker and granulated slag imports from non-European countries.

Southern European countries (Greece, Italy, Portugal, Spain and Croatia) decreased clinker exports in 2020 (14 per cent YoY). The pandemic played an important part in this decline, with mothballed lines and paralysed construction activity during the 1H20. After this period, the post-lockdown recovery in most European countries triggered a cement shortage and obliged cement players to massively import clinker, cement or SCMs. As a result, cement and clinker imports by EU28 countries from Mediterranean exporters was about 10.5Mt in 2020, rising 11 per cent YoY. Non-EU exporters (Turkey, north Africa, Ukraine or Albania) represented 38 per cent of these imports. This share was 15 per cent in 2018 and climbed to nearly 50 per cent by the end of 2021.

Spain and Italy were the leading Mediterranean cement exporters to EU28 countries in 2020 with 2.1Mt and 1.2Mt, respectively. The main destinations were the UK and France. Both importing countries attracted important volumes of cement from Mediterranean rim exporters, which delivered 1.3Mt to the UK and 1.1Mt to France. Exports to these countries has increased even more since January 2021. The UK is expected to surpass 2.2Mt from the Mediterranean rim by the end of 2021 and France approximately 1.8Mt.

The development of clinker movements to EU28 is particularly remarkable in Belgium, The Netherlands, France, Spain and Italy. Mediterranean exporters are well placed to supply these markets.

Clinker imports from Mediterranean countries have tripled to France and Belgium. During the first half of 2021, France received ~1.3Mt of clinker mainly from Spain (48 per cent), Algeria (23 per cent), Turkey (15 per cent) and Morocco (12 per cent). For the first time, non-European sources represented the majority of French clinker imports. The same situation occurred in Belgium, Spain and Italy, where Turkey accounted for more than 50 per cent of clinker imports.

These flows have been amplified by the opening of new grinding stations (like Cem’In’Eu in France or Cemminerals in Belgium) and the relaunch of import activity by independent units previously supplied by domestic producers (such as Elite Cements, Spain, or Superbeton, Italy). Intragroup exchanges to optimise industrial networks have also contributed to the boom in imports in Europe. Cementos Portland Valderrivas, CRH and Cemex shipped large quantities of cement and clinker from Spain to their terminals and/or grinding stations in the UK, France and Benelux. Since January 2021 Holcim has also considerably increased clinker deliveries from its subsidiary in Algeria to its grinding station in Le Havre, France.

Storm warning forecast

The carbon cost is expected to climb up to EUR80/t in the coming years. In this context, southern European exporters will completely lose competitivity in foreign markets (except for intragroup exchanges), and their cement and clinker exports will decline sharply. In addition, fossil fuel prices will continue to rise in 2022. The Turkish cement sector, which relies on imported coal and petcoke, will be affected (its energy costs more than doubled in 2021) and FOB prices will rise. The last quarter of 2021 is expected to see a rise in FOB prices of US$7-9/t, which could climb to US$44/t in 2022 for clinker. All the other Mediterranean exporters should align their FOB prices with those of Turkey.

This situation could favour Algerian exporters that are less affected by the impact of energy and carbon costs and are looking for new outlets. Nonetheless, the European Commission is preparing for the adoption of a Carbon Border Adjustment Mechanism (CBAM) in 2022 to equalise the price of carbon between domestic products and imports. Algerian exports to the EU could become less competitive and be diverted to Africa or the US-Caribbean area. 

On top of this disruption to Mediterranean trading conditions, a new threat has arisen during the 2H21 that has a potential mid-term effect on all Mediterranean exporters: a congested and stressed freight market, causing important increases in freight rates for all sizes of bulk carriers. As a result, inflation of all cement prices around the Mediterranean rim is expected.

SCM prices will also rise. GGBS and fly ash exports from key Mediterranean countries (Turkey, Algeria, Spain and Italy) are expected to reach 4.5Mt in 2021 (about +20 per cent versus 2020). Turkey leads these movements and will continue to be the leading source of SCM in the coming years. However, other sources have appeared in the last two years from Japan, India and Vietnam. In the context of high freight costs, improving shipping and port logistics will be key to conveying a larger quantity of products. At reception, importers must rely on efficient port facilities to be able to handle, store and distribute larger quantities of cementitious products. Some professionals are studying the possibility to freight Panamax and even Capesize bulkers to supply Europe from the Far East. In northern Europe, places such as Amsterdam, The Netherlands, and Ghent, Belgium, have become specialised hubs for clinker and cementitious materials. In the future, DGS Consultants expects that such hubs could emerge in the Mediterranean, especially in southern European countries where demand for SCMs is booming. European resource scarcity and high prices will oblige cement players to change and go further in managing their raw material supply chain, keeping in mind 2050 CO₂ emissions targets.

Notes

¹ In this article and related illustrations, Euro-Med exporting countries include: Turkey, Spain, Greece, Portugal, Italy, Morocco, Croatia, Tunisia (data since 2015), Albania (data since 2016), Algeria (estimates) and Cyprus (no data since 2018)
² Sources: customs data, IHS-GTA, DSG estimates and data – Algerian data are estimated and non-exhaustive

This article was first published in the January 2022 issue of International Cement Review.