Spain's road back to high cement volumes seems a rather tortuous journey with Fomento de Constructions & Contratas (FCC) announcing a net loss of EUR1625.2m this week for its close of business in 2016. While the financial impact being felt on Spanish producers is extenuated with exchange rate fluctuations, the report also highlighted that construction business for the company was down 17 per cent in its domestic market, while the Spanish building market had fallen by 35.4 per cent for the company.

Spanish GDP growth is forecast to pick up to 2.3 per cent this year but is likely to slip back to 2.1 per cent in 2018, according to the IMF. Unemployment remains high, running at 19 per cent.
As public sector debt mounts, public funding hand-outs to the construction sector have been under pressure and have left the building industry powerless. A lack of leadership from the government has contributed to public works spending being cut by more than three-quarters in the past six years, according to Reuters. Construction now makes up five per cent of Spanish GDP, compared to 10 per cent in 2008.

Last month, ICR recorded that domestic cement consumption had fallen 3.1 per cent in 2016 to 11.1Mt, far below the dizzy heights of 2007, when consumption was running at 56Mt.

Looking for new markets
Spanish cement producers have had to adapt to the changing times by mothballing redundant capacity. LafargeHolcim decided to cut production by 10 per cent at its Sagunto plant, near Valencia, last year, although this has been attributed to the cut-of of the company's Algerian export market.

Cement and clinker exports have in fact provided a lifeline for some cement producers. The port of Barcelona recorded cement and clinker handling up nine per cent in 2016 and the Port of Seville upped its throughput by 481 per cent to 74,200t in 2016. In 2016, exports of cement and clinker from Spain reached 9.78Mt.

FCC is one company that has headed out into overseas markets to pick up lucrative construction and cement markets, as local funding into large-scale construction projects, like FCC’s recently-completed 384m-high railroad bridge project at the Alacantara reservoir in Spain, have slowed. Instead it is looking at the UK's Mersey Gateway, which will design a second Mersey river crossing over the next 30 years.

Is there hope for a pick-up in the domestic market?
The forecast for a return to pre-2008 cement consumption levels in Spain is certainly not on the cards, but there was a hint last year that investment in Spanish cement production has at least stabilised. The industry has launched a new initiative to support the cement sector entitled 'Crecimenta 2030'. Through this initiative, Oficemen – the Spanish cement association – hopes to persuade the government to raise the infrastructure levels to lift cement consumption to 30Mta in the long term.

A sign of cement manufacturers trying to reinvigorate the Spanish production base were also given a boost when Cementos Cosmos’ 0.5Mta Oural plant in Galicia (Votorantim Group) opened its gates last year, after a four-year closure, generating some 300 new jobs. The plant has also applied to increase its alternative fuel usage, which currently stands at 15 per cent.