US cement producers are upbeat about improved economic growth and the Trump administration’s infrastructure pledges, even as seaborne imports have risen to plug the sector’s current capacity gap.
But the specifics of the US$1T infrastructure package (see p7-8)) are far from set, despite earlier signals from the White House that the proposals would be a priority in the first 100 days of the administration. In May, the PCA and representatives of the US concrete industry pitched up on Capitol Hill to lobby Congress and the Trump administration with the message “don’t delay” on the infrastructure revitalisation programme.
The cement and concrete industry have a significant constituency in America, employing 535,000 people, and contributing US$100B a year to the US economy, according to the PCA. America counts more than 25 cement producers with over 140 kilns and around 100 Mtpa of capacity for clinker, the intermediate product in cement manufacturing. Gypsum, slag, fly ash and limestone are mixed with clinker to form Portland cement, of which the US has 108 Mtpa of capacity.
But America’s cement producers and their supply chains are only recently emerging from a difficult period, in which the US has grappled with sluggish demand. US cement consumption has increased only gradually over the last six years, reflecting the subdued rate of post-recession economic growth. In 2005, the US consumed more than 125 Mt of cement, but volumes had contracted by 45% to 69 Mt by 2009 as the construction sector and cement demand slumped.
The recovery in US cement consumption to 94.5 Mt last year reflects this tepid rate of economic recovery, says the PCA. Moreover, cement producers looking to meet rising demand have faced capacity constraints, with some plants idled and others retired over the last decade. Recent environmental regulation and new emission thresholds (see box story) have also posed constraints on US cement manufacturers as they look to limber up for expansion.
Trump’s infrastructure ambitions offer a further opportunity amid improved demand to ramp up the use of US cement making capacity. Although projections are tricky while the administration’s plans are far from concrete, the PCA estimates that US cement consumption will increase to between 113 Mt and 128 Mt by 2021. US cement manufacturers added 1.3 Mt of domestic production capacity in 2016, with 1.6 Mt planned by 2018.
With US cement makers operating at only 79% of production capacity, there is room for the sector to ratchet up output. James Toscas, president and CEO of the PCA is bullish that US producers can meet this demand and overcome these recent capacity constraints. “The industry can readily scale up to meet any currently proposed revitalisation plan, including a border wall,” he says. “We can do this with American cement, and we’re ready to roll.”However, the big initiative to supply extra cement capacity for the US is coming from north of the border. McInnis Cement, which is headquartered in Quebec, with its US operation in Stamford, Connecticut, has its eyes on the shortage of capacity across the Eastern Seaboard. Although the Canadian initiative pre-dates the Trump administration, its ambitions coincide. McInnis is poised to make its splash in the wider North American market.
The company’s project centrepiece is a 2.2 Mtpa cement plant and marine handling terminal on the St Lawrence Seaway in Quebec, which is readying for production after three years of development. The C$1.1B industrial project has not come without controversy in Canada and the US. In 2013, US producers took legal action to block the development on environmental grounds, while multinational subsidiary Lafarge Canada allied itself with green activists.
Backed by the Canadian family behind industrial giant Bombardier, the project has also drawn criticism for its C$350M subsidy from the Quebec government, and cost overruns of C$400-450M. Last year, Caisse de dépôt et placement du Québec, the province’s institutional investor, took control and agreed to a new C$250M round of financing, with an additional C$125M from BlackRock Alternative investors, to complete the Port Daniel network.
In June, the first cement was produced from the new PortDaniel-Gascons plant in Quebec, with construction work starting in 2014. Port Daniel is the first cement production development serving the wider Eastern Canada, US Mid-Atlantic and Great Lakes region in more than 50 years. The area encompasses major population centres including Montreal, Toronto, Boston, New York City, Philadelphia and Cleveland.
The Port-Daniel-Gascons 850-acre complex, which includes a quarry with rich limestone deposits, processing plant and marine terminal, is expected to ramp up to its full 2.2 Mtpa production within two years. Cement will be transferred from four 30,000t silos to the deepwater marine terminal via a fully enclosed conveyor that can load 1,400 t/h. The all-year berth serves a network of Eastern US and Canada hub terminals.
McInnis is investing in a maritime terminal network across Eastern Canada and the US. Work started last year at its terminal at Sainte-Catherine au Québec near Montréal, with two silos built on the existing wharf, which will serve around 25 ships per year. The 36,000t capacity facility is served by rail and truck. Construction at the site has continued this year, with the Sainte-Catherine terminal due to be fully operational now.
In Ontario, construction of the Oshawa terminal is also due for completion. The Lake Ontario facility already has storage domes, two of which are being refurbished, with a cement-unloading system for visiting bulkers. A new truck loading station has also been under construction. The two domes will have a 14,000t capacity, while the terminal will be able to cater for 60 trucks per day. The chartered, 14,600 dwt general cargo ship NACC QUEBEC will serve Oshawa via the St Lawrence Seaway.
In May, the Quebec Government also agreed to restore the Matapédia-Gaspé railroad, which will carry at least 200,000 tpa of cement. McInnis has also acquired 25 specialist rail cars from TrinityRail, the US rail transport group, with the 3,230 ft3 sealed cars delivered to the Eastern Quebec short-line railway Société de chemin de fer de la Gaspésie. The fleet will load cement at the New Richmond transhipment site on the southern coast of the Gaspé Peninsula.
Work has also been carried out on the group’s first US terminal in the Port of Providence, with the US$22M deepwater facility able to cater for vessels with 30,000t of cement from Port-Daniel-Gascons.
The Rhode Island facility will cater for the New England construction market, including the Boston metropolitan area. The terminal includes a new storage facility, and it has thecapacity to load 100 trucks and 10 railcars per day.
McInnis’s hub terminal network includes developments in New York, due to begin operations in 2018. In April, work started on a 74,600 ft2 terminal in the South Bronx of New York, which was chosen for its strategic location for the east coast, access to the Great Lakes and proximity to market. The New York City Harbor facility features a warehouse with 43,000t capacity, three load-out silos, and can load up to 80 trucks per day.
Cement will be delivered to the Bronx from Port-Daniel-Gascons. A barge-mounted ship-unloader will shuttle between New York and the port of Providence, and will be used to pneumatically transfer the cement into the warehouse. The round-theclock facility is located near to local concrete plants, will use rooftop solar units to reduce demand on the local power, and will operate fully enclosed truck- loading to mitigate dust.
Big Apple appetite
The New York metropolitan area alone is expected to see more than US$45B in infrastructure projects, as well as another US$6B for repairs following Hurricane Sandy in 2012 – all of which has created demand for concrete. The redevelopment also gives the Bronx terminal – which was a former coal and bulk rail yard serving Manhattan and Long Island – a new lease of life after being left derelict for a number of decades.
The PCA is bullish that there is enough supply potential to cater even for the most ambitious government-backed infrastructure spree. To supplement domestic production, the US has 125 cement and clinker import terminals with 45 Mtpa of capacity. The PCA estimates that foreign supply, such as the McInnis shipments, can push overall capacity to 150 Mtpa. But, with cement production rarely operating at more than 90% of capacity, the ceiling would be 135 Mtpa.
But the ability, together with the willingness, to import cement is determined by a series of factors alongside the demand conditions and government policy in the US, including the value of the dollar, shipping rates and the availability of ships to carry the product. The strength of the US dollar and low dry bulk shipping rates mean that imports are looking like an attractive alternative for US cement users.
Latest US Geological Survey (USGS) figures indicate that domestic production of cement, which includes masonry alongside Portland, has increased steadily since 2012, up by 11 Mt to 85 Mt in 2016. But production, amid increased demand, remains well below therecord 99 Mt churned out by America’s cement plants in 2005, which reflects the continued full-time idle status of some plants, the underuse of others, and plant closures in recent years.
US cement sales increased by 3% year-on-year in 2016 to 96.3 Mt, but remain only three-quarters of the record volumes seen in 2005. Increased sales have largely been accounted for by imports, the USGS notes, which have doubled over the last five years to 12 Mtpa. Imports in 2016 alone rose by 16% from a year earlier. The top four sources were Canada (46%), South Korea (15%), Greece (11%) and China (10%).
Hendrik van Oss, cement specialist at USGS, notes that imports have increased for “some time” at a rate that is ahead of cement sales. This reflects the collapse of imports during the recession. However, low bunker fuel costs, modest dry bulk chartering rates, increased ship availability and the strong dollar have also been a boost. Imports are also offsetting production constraints related to the operational difficulties of reactivating idle kilns.
Ad Ligthart, owner of Cement Distribution Consultants, expects US seaborne imports to increase by 2 Mt to 11 Mt this year, as the industry faces the short-term difficulties of upping production. With the US importing 31 Mt of cement by sea back in 2006, mothballed import terminals could reopen to handle this increase. However, with US terminals built largely for Handysize vessels, rather than today’s Supramaxes, Ligthart suggests that there is a need for more flexibility and scale in future US cement terminal developments.