Cement makers across the globe are eyeing reducing their petroleum coke and coal consumption in the second half, as a weakening global economy puts pressure on construction activity.
For roughly the past year, cement producers have been mitigating steep increases in petroleum coke and coal costs by raising sales prices for their products, with customers mostly receptive to the increases. But that trend may fade in the second half of this year, as the strong underlying cement demand that had supported the aggressive pricing strategy has begun to ebb under the threat of global recession.
"I think we are beginning to brace for impact in a way," one cement producer said.
While multinational cement manufacturers are still mulling over the possibility of cutting back cement production and, in turn, fuel consumption in the second half, the construction industry has already begun to feel the effects of higher inflation in a number of countries.
New construction project start-ups in China fell by more than 34pc in January-June compared with the same period a year earlier, according to China's National Bureau of Statistics. Chinese cement production decreased by 15pc in May on the year. In Brazil, the average cost of materials per square meter of construction increased by 18pc on the year in June to 974 reals ($179.67), according to data from the Brazilian Institute of Geography and Statistics.
Lower fuel demand from the cement industry would weigh heavily on high-sulphur fuel-grade petroleum coke prices, which are already on the downswing on a lack of demand from major coke-buying countries, particularly China. The Argus fob US Gulf 6.5pc sulphur coke assessment fell by 23pc from 30 March, just before the start of the second quarter, to $164/t on 29 June. So far in the third quarter, the fob US Gulf 6.5pc coke price slipped by another 4pc to $157/t on 13 July.
The world's largest cement maker, multinational Holcim, will release second-quarter earnings results on 27 July, while other large cement companies Heidelberg Cement and Cemex will each report second-quarter earnings on 28 July.
