Mature markets recovering There are many differing views concerning both the current and future situation in the European cement industry. The prospects for each region vary tremendously depending on the countries concerned.

Several emerging countries are on the verge of joining the community of European nations, and their financial fortunes are tied closely to their expected performance inside and outside that arena. Investors from many of the larger corporations have highlighted Eastern Europe and parts of the former Soviet Union as the next big markets for growth and already have become involved to varying degrees in production facilities of several countries.

Some commentators have gone on record as stating that the majority of western Europe is stagnant and the possibilities of growth are minimal citing the employment problems in France and Germany. Others are more optimistic and quote a recent Financial Times report that stated that low interest rates, weak currencies, and the virtual completion of fiscal consolidation are providing the favorable wind behind the so-called upswing. Analyst J.P. Morgan argued that the region is set for a prolonged period of growth of 3% or more.

Cementing the future When the final figures are calculated, the 1997 demand for cement throughout the UK and Northern Ireland is expected to be 13.5 million mt, an increase of 3% compared to 1996. Castle Cement, Rugby Cement, and Blue Circle Cement combined in accounting for more than 92% of this output. When coupled with the predicted increase in commercial work and a growth in public-housing investment in 1998, it is no surprise that two of the three companies are planning major investments in both existing and new works.

Rugby Cement is planning to spend US$198 million over the next two years transforming its existing Rugby Works into an efficient 1.3 million-mtpy unit, which will amount to 50% of the company's total UK production. The upgraded works will allow Rugby to substitute alternative materials for some of the high-alkali local clays and produce a low-alkali clinker. The site will continue to be a wet-process works, but instead of driving the water out of its slurries in the first sections of a long kiln, the new plant will have a much shorter kiln fed by a fuel-efficient slurry flash dryer.

Blue Circle is expecting its planned new works in Kent to cost nearly US$300 million. It should be in service by 2002, timed to coincide with the closing of the company's Northfleet plant.

Continued development and improvement of the cement manufacturing process is a central objective of the UK cement and concrete industry, which has generated a number of major initiatives aimed at improving the environmental performance, productivity, and energy of cement manufacture. These include increasing fuel efficiency and examining the potential of alternative kiln fuels, while supporting the government's environmental program for reducing industrial emissions. The recovery of energy from secondary fuels derived from waste products was shown to support the government's waste strategy. Several cement plants are now licensed to burn waste-derived fuel as a partial replacement for coal.

The industry also is examining the potential for burning waste tires of which between 25 million and 30 million are scrapped in the UK each year. So far, only one cement works has been authorized to burn tire chips, but various other trials have taken place.

In addition, new markets are being developed, such as the recycling of "brown" land using cement. A recent tour carried out by the British Cement Association (BCA) to the United States concluded that there are no technical reasons why most cement stabilization processes for recycling cannot be transferred to the UK. The signs are reasonably good for the UK industry, which looks set to prosper through the next few years.

Surviving the worst The Italian industry has been beset by problems in recent years, including general recession, spending cutbacks, and a number of alleged corruption scandals. The major players, such as Italcementi, Unicem, and Cementir, have all had to concentrate on internal restructuring in an attempt to cut costs and increase efficiency.

Italy consumes about 35 million mtpy, but the total capacity of the various plants is thought to be nearer 60 million mt. Recent changes in ownership, such as the family-run Buzzi group gaining a majority stake in Unicem, and increases in foreign investment, such as Holderbank's purchase of Merone and Lafarge acquiring two plants from Adriasebina, lead us to believe that the confidence is returning.

The key to a rise in fortunes is public works investment. According to analysts at Merrill Lynch, since 1990 funds set aside for public works have declined by 50%. Italy is currently spending only 1.9% of GDP per annum on this area of construction, versus an average of around 3% for most other European countries.

East versus west Two very different markets face producers in Germany with expectations of a building boom in the east not being met and the drying up of public sector funds as the nation as a whole battles against rising interest rates and unemployment levels. Despite a general trend, the multi-nationals are finding it hard to get a hold in Germany with only Holderbank making any significant inroads. This is slightly different in the east with stakes in many of the former state-owned companies being bought out by the likes of Lafarge, Holderbank, and Dickerhoff. Germany is the second-largest market in Europe after Italy and is known for advanced technology application. However, the national industry is under pressure since the "fall of the wall" from cheap imports from Poland and Czechoslovakia. This threat is decreasing slightly now as major international groups begin to control more and more plants in places like Poland and the Czech Republic and price differentials are eroded.

One to watch Spain is possibly the most attractive of the sizeable European markets to large-scale investors with prices rising steadily and interest being shown by companies such as Cemex. The country is posting one of the strongest growth rates in Europe, and forecasts are good for the construction sector in the coming year.

According to leading analysts, Spain is one of Europe's least concentrated markets with around 10 major players and many plants and operations still family controlled. The leading multi-nationals are involved in the Spanish cement industry to varying degrees with the latest incursion being Lafarge's buyout of the Ciments Francais' stake in the family-owned Cementos Molins.

In terms of imports, Spain still is being affected by cheap cement from Greece and Turkey fuelled by massive demand during the construction boom brought about by the works for the Seville Expo and the 1992 Barcelona Olympics, although recent boosts to the value of the Peseta have stemmed the tide somewhat.

Shrinking steadily The market for French cement has been on a slow decline for some years now with consumption falling slightly in each successive business cycle. But with just two or three major players involved in the market, price control has been adequate and profits continuous. The country's two biggest manufacturers, Ciments Francais and Lafarge, control around 30% to 35% of the market each with the remainder being divided amongst Vicat, a family-owned concern, and Origny, wholly owned by Holderbank. Consumption in France is expected to remain around 18.5 million mt for the next few years, but the international interests of the major cement manufacturers in the country allow exports to act as a regulator.

Rising stars An increasing amount of investment from the European Union toward its so-called poorer members, particularly when spent on infrastructure, has led Ireland and Portugal to become the fastest-growing areas of Europe in terms of the cement industry. In Ireland, there is just one producer, CRH, with the only competition coming from Blue Circle's Northern Irish plant and the independent Sean Quinn, which has just signed a contract with F.L. Smidth to set up a new plant over the border in the Irish Republic.

The economy is booming in Ireland, and international investments in high-tech companies and plants are fuelling extra demand for housing, schools, and highways. The forecast is good for the domestic cement industry.

In Portugal, imports are tightly controlled, a hangover from the days when the state controlled Cimpor-it still owns more than one-third of the shares. This, combined with the state control of prices, is a disincentive to prospective importers. The two main producers, Cimpor and Semapa/Cecil, are operating at nearly full capacity and have started significant export/import operations to control product flow.

Although the European cement industry, with perhaps the exception of some emerging eastern European nations, will not race away in the coming years, prospects are for continued, steadily paced growth in the short to medium term.