Cement is one of the most commonly used industrial products that the widespread of its producing is a development index for a country. Cement is assumed as a local product, because of the high cost of its transportation. Therefore, cement export to long distances doesn’t have an economic justification unless the cost of its producing is low.
According to the IA-Cement’s report, the global demand for cement has been decreased 7% during 2015. This situation can be a result of the economic slowdown in China which is the second largest economy in the world. China consumes more than 60% of global cement production. Although China has several cement manufacturers, it has to import cement because its domestic supply doesn’t meet the demand. But these days, because of the sub-trend economic growth, China’s demand for cement has decreased 6.3% which has caused global cement price to plunge.
Iran used to be the 4th cement producer in the world until last year (2015), but recently its ranking has fallen to the 5th place among cement producers in the world. The economic downturn which had an impressive effect on construction sector, has hit the cement industry particularly hard during these two years. Also Iran has been experiencing a long term recession in housing sector during these years.
Iran’s total cement production with the total capacity of 90 million Tons in 1394 (20th March 2014- 20th March 2015), has been 58 million Tons. 48 million Tons has been used locally and 10 million Tons has been exported mostly to Iraq, Azerbaijan, Qatar, Russia and etc. These figures for 1393 (20th March 2013- 20th March 2014) had been 66 million Tons for total cement production, 53 million Tons for local usage and 13 million Tons for export. The top four Iranian cement companies including Tehran, Sepahan, Shargh and Hegmatan, by total capacity of 11,335,000 Tons cement, collectively produced 7,870,000 Tons cement last year.
It shows that a significant recession has occurred in cement industry. Among the domestic reasons caused recession in this sector, we can point out the halt of construction projects and depressed housing market. From the export point of view, as a result of Middle East region crisis, Iran has lost a big sector of its export market during these years.
Altogether, according to the sub-trend economic growth, while the construction sector is still depressed, it is estimated that the average capacity utilization of cement plants achieves to maximum 70% for the coming years. On the other hand, the cheap energy and labor costs in Iran can create some advantages for its cement industry. Furthermore, when the political situation in Middle East region stabilizes, it is expected that the amount of this region’s cement consumption will increase and as a result, it can lead to a boom in Iran’s cement industry.
FAR law firm