Cement & Concrete  

Cement Industry Remains Stuck

The Iranian cement industry’s fall from grace has turned into a continuous freefall.

Demand is at sticky lows, overcapacity is rampant and underperforming plants have trouble clearing their debts. What’s to be done?

The Tehran Chamber of Commerce, Industries, Mines and Agriculture is struggling to find an answer through sessions held by its Industries and Mining Commission. The commission’s members, representing the private sector, are even prepared to give up on the business, if things do not take a turn for the better.

“Considering the industry’s deep troubles and the private sector’s problems, we are willing to hand over our production plants to the government,” said Mohammad Atabak, the head of board of directors of Cement Employers Association.

Production and exports have consistently dropped for the past few years. Latest statistics indicate that clinker and cement production fell 2.8% and 3.04% to 29.5 and 28.2 million tons respectively during the first half of the current fiscal year (March 21-Sept. 22) year-on-year. The downturn in clinker shipments is insignificant, yet cement shipments have dropped more than 22% YOY to 3.05 million tons.

Accordingly, Iran’s rank dropped from the world’s fourth largest cement producer and second exporter in 2014 to the sixth and third in 2016. CEA’s forecasts show that by the end of the next fiscal year (March 2018-19), Iran will slide further to the eighth rank in exports and lose its edge to its archrival Turkey.

Per capita cement usage also remained unchanged compared to last year’s 600 kilograms, hinting at a still-lingering overcapacity.

Amid all this, the producers’ accumulated debt is rubbing salt into their wounds.

According to Atabak, the industry started its capacity expansion in 2005 to meet the demands of the ever-growing construction market. What made expansion possible were state incentives for development paid mostly in US dollars.

But things eventually slowed down. Demand for construction materials, especially cement, plummeted as construction market was saturated and the forex crisis of 2011 made USD spike against rial.

Before the ongoing slump hit the sector, Iranian cement producers experienced a seven-year boom owing to the ill-famed “Mehr Housing Scheme”–a large-scale construction program initiated in 2007 by the former administration to provide two million low-income people with housing units through free land and cheap credit.

The plan buoyed demand for all construction materials and prompted unrestrained capacity-making by the government. The scheme’s progress slowed down, however, due to lack of funding, dragging down domestic demand for construction materials.

The US dollar was relatively stable at 10,000 rials during 2005-10, until it surged in the next three years to over 30,000.

“Cement producers, who were borrowing USD back in the industry’s heydays, now have to repay their debts at the very least based on the 2011 levels,” Atabak said, adding that the industry is holding talks with the government to ease the burden.

 Overcapacity: Main Issue

A solution to the industry’s woes could be what China is following in its steel industry: removing all the excessive, inefficient production capacity, says Bahador Ahramian, a member of board at TCCIM with stakes in the steel and iron ore industries.

“It appears that the current condition of the cement sector is somehow the future of steel industry,” said Ahramian.

The official was seemingly pointing to the Iranian steel industry’s ambitious expansion program to reach 55 million tons of crude steel capacity by the end of 2025, and how lack of robust demand in the market might force it to suffer the same predicament as cement industry.

“Let us assume that the government would allow cement plants to repay their debt at the USD rates of 9,000 rials. Even then, there will eventually be debt-free plants with no market to produce for. It seems that the industry’s main issue is overcapacity, not debt,” he said.

Ahramian suggests that the industry should shut down at least 10% of its excess capacity and consider merger into bigger units to boost efficiency and competitiveness.

News No: 1512
Date: 2017/11/06 - 22:16
News Source: Financial Tribune

Cement  Tehran Chamber of Commerce  Cement Employers Association 


Leave a Comment:


Over €6.5b of non-oil income injected to NIMA since March

Iran’s non-oil exporters injected €6.68 billion of their revenues into the Forex Management Integrated System, locally known as NIMA, since the beginning of the current Iranian calendar year (March 21) up to August 11.

Iran private sector discusses grain exchanges with Russian businessmen

Iran’s private sector representatives and members of Tehran Chamber of Commerce, Industries, Mines and Agriculture held a meeting on Sunday with a visiting Russian delegation from the Chamber of Commerce and Industry (CCI) of the Republic of North Ossetia–Alania to discuss expansion of grain trade between Iran and Russia.

Iran posts quarterly trade surplus of $1.5b despite sanctions

Iran’s non-oil exports excelled the country’s imports in the first quarter of the Iranian calendar year starting March 21, as authorities reported a trade surplus of around $1.5 billion.

Iran, Belarus eye boosting bilateral trade volume to $1bn following US sanctions

Iran and Belarus have reviewed efforts and agreed on steps to gradually increase bilateral trade volume to $1bn, as US reimposed sanctions took a toll on bilateral commercial ties between the two countries.

Tehran Chamber of Commerce proposes govt. budget reforms

Tehran Chamber of Commerce, Industries, Mines and Agriculture (TCCIMA) has put forward three specific proposals for the government to carry out a structural overhaul of its budget.

Iran’s Mineral Exports Passed $9.2 Billion

Iran exported over 57 million tons of mineral products worth over $9.2 billion during the last fiscal year (ended March 20, 2019), registering 5% and 2 % fall in tonnage and value respectively.
Upcoming Events
 Mines & Metals

Mine & Business Today

 Scrap & Recycling


Our partners