Cement industry and the COVID-19 crisis

This week has seen growing action and concern from the construction and cement sectors on how best to fight off the coronavirus (COVID-19), which was declared a pandemic on 11 March, to keep businesses running and employees safe. Many countries have already announced emergency financial packages and stimulus measures to support businesses and protect livelihoods, as countries impose social distancing measures and quarantine measures to slow the virus.

The latest reports reveal that building material companies are likely to come under increasing pressure to stop work as the pandemic reaches new proportions. In China, cement production over the first two months of the year fell by 29.5 per cent, in the first signs of how the virus and strict quarantine measures have affected construction activity. Furthermore, the financial implications of the outbreak are now surfacing on the shares of cement producers that have seen a sudden crash in the last month.

Share prices crash
The leading global cement producers are experiencing severe conditions on the stock markets, where share prices have fallen by between 30 and 50 per cent in just 30 days. HeidelbergCement, Cemex and CRH are down by 51, 50 and 45 per cent, respectively. Companies with high levels of debt will be particularly impacted if the financial markets seize up in the way that they did in the global financial crisis, which is already being described as ‘child’s play’ by industry analysts.

Asia and Australasia
The lastest statistics from China show a massive and unprecedented 29.5 per cent fall in cement production in the first two months of the year. This matches the picture of reduced trade activity in the region. Vietnamese cement producers have reported declines in cement exports due to the coronavirus with Nguyen Quang Cung, chairman of the Vietnam Cement Association, announcing that cement and clinker exports are down in January and February by 30 per cent.

In Indonesia there has been a 7.5 per cent YoY decline in national cement consumption in February. Export volumes also dropped by 27.9 per cent in the second month of the year. Cement producers are having to shift sales to the domestic market as exports to Bangladesh, Australia and the Philippines have been impacted by the coronavirus.

In Australia CemNet reported that the country's construction sector was already on the brink despite there being a boom in demand for infrastructure projects. The real concern is that raw materials will not get through to construction sites from southeast Asia and that work will soon be stopped on all but vital publicly-funded construction work.

Europe
Italy is the most affected European country with COVID-19 cases, and HeidelbergCement and Italcementi have stepped in this week with an unprecedented EUR100,000 donation each to the Ospedale Pap Giovanni XXIII in Bergamo, which is at the epicentre of the Italian outbreak in Lombardy, northern Italy. Bergamo is where Italcementi‘s headquarters are located and more than 400 people have already died from COVID-19 in this area.

France is the fourth-highest European country suffering from active coronavirus cases. President Macron has imposed a ban on citizens leaving their home unless they have a valid reason and have a written paper stating their reason for being out and about. Meanwhile, work on the Lyon-Turin tunnel construction project has come to a standstill.

USA
The United States has seen a quick rise on COVID-19 cases and the first cement industry cases could be shortly announced. State health officials are currently investigating a potential exposure to the virus in Dorchester County, where people have may have come into contact with the coronavirus at the Giant Cement plant in South Carolina, USA. A contractor showed signs of the illness and may have contaminated other staff at the cement plant.

An example of actions being taken in response to COVID-19 include Monarch Cement in Humboldt, Kansas, which has put a contingency plan in place to isolate any employees who fall ill. The company also owns the Chanute plant and if necessary, could split up its administrative, accounting, sales and IT staff between the two plants. The Monarch plant has three weeks’ worth of finished product on hand and could withstand a shutdown of up to three weeks with no interruption of service to its customers.

 Further measures have been put in place at Monarch Cement. Staff feeling ill and suspecting COVID-19 must call ahead to the on-site health clinic to avoid contaminating other staff. Temperatures of all employees are taken as they report to work, said a company spokesperson. Additional sanitisation of commonly-used areas has also been implemented, while employees who may come down with the coronavirus will have to wait and see if they are recompensed while off work as the matter is still pending.