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Cement Output Target: 120m Tons by 2025

Cement Output Target: 120m Tons by 2025Cement Output Target: 120m Tons by 2025

Latest data show about a 30% drop in the value of white cement exports during the first five months of the current Iranian year (ended August 22).

The figures, released by Iran Customs Administration, come one week after the Ministry of Industries, Mining and Trade announced that Iran has set a cement production target of 120 million tons by 2025.

The cement industry is one of the pillars of Iran’s non-oil economy. Iran’s cement exports ranked first worldwide with 19 million tons last year. In terms of production, Iran ranks first in the Middle East and fourth in the world.

Last year’s output stood at 75 million tons, which is slightly below the nominal capacity of 79.4 million tons.

The Strategic Plan, Iran’s most comprehensive industry-development plan in at least 15 years, was announced late August by the ministry. According to the plan, cement output should grow 60% between now and 2025 (see graph).

Output figures stipulated in the Strategic Plan are based on the operation of 54 cement plants currently under construction. The total production capacity of these plants amounts to 48.3 million tons. About 17% of this output will hit markets soon, with 10 plants in an advanced (over 60% progress) construction phase. If these plants reach their expected production targets, the cement industry’s nominal capacity should cross the 127-million-ton mark (see graph).

The Strategic Plan defines exports as the main engine behind higher production, aiming to increase overseas sales by 68% over the coming decade to 32 million tons per annum. The Strategic Plan believes Iran is able to export 21 million tons a year two years from now.

However, the new customs data have thrown doubt on these ambitious export targets. Exports of white cement fell to 3.7 million tons in the first five months of the current Iranian year, down 21.3% from 4.7 million tons in the same period of last year. In terms of value, exports fell from $262 million to $185 million, or 29.4%.

The removal of western sanctions is expected to help the government find new international partners for the 20 plus million tons of cement the country produces annually.

An end to the sanctions regime will also allow Tehran to attract foreign investment for quick and efficient construction of cement plants. Most plants under construction are still in their early phase of development (see graph), making the acquisition of major investments a matter of urgency.

Over the past few years, the cement industry has had to rely primarily on rising demand from Iraq. Indeed, strong demand from Iraq has allowed the value of exported colored cement, which constitutes a tiny proportion of total cement exports, to multiply six times in the first five months of the current Iranian year, ISNA reported.

However, lower oil revenues and contractionary policies to combat inflation have caused a slump in the infrastructure and construction sector, the backbone of domestic cement demand.

Regional demand for Iranian cement has also been depressed as oil prices have collapsed, causing budget and infrastructure cutbacks in some of Iran’s closest cement trade partners, including Iraq, the UAE, Azerbaijan and Saudi Arabia.  

Iran also increasingly competes with the Turkish cement industry which, unlike Iran’s, is not suffering from oppressive sanctions and hence has access to lower transaction costs and foreign investment. This has allowed Turkey to catch up with and the two were for the first time jointly ranked fourth in global production, according to the USGS Mineral Program Cement Report.

 

Financialtribune.com