Iran is the second leading cement producer in the Middle East and North Africa, and is the world’s seventh largest producer of the industrial material.
The country competes with Turkey and Pakistan for the export markets of neighboring countries such as Iraq and Afghanistan, according to a report recently published by the US Geological Survey on Iran’s nonfuel minerals.
In 2015, Iran’s cement production decreased by 12% to 58.6 million tons, after decreasing 33% in 2014, owing largely to a continuing decline in domestic consumption and the resulting contraction of the construction sector since 2012.
The industry’s capacity expansion trend came to a halt in 2015 for the first time in more than 15 years, as it stayed put at nearly 80 million tons per year.
Iran’s cement consumption amounted to 54 million tons in 2014 compared with 55.6 million tons in 2013 and 57.6 million tons in 2012.
Last year, the Ministry of Industries, Mining and Trade set the target for domestic cement output to grow 60% to reach 120 million tons per year by the end of 2025, and exports to rise 68% over the next decade to 32 million tons per annum.
The ministry is looking to increase exports to 21 million tons a year by 2017 and to 32 million/year by 2025.
To reach the output target, an average annual growth rate of 11.5% would be required starting in 2016 compared with 8% in the previous decade.
Challenges on the Way
The cement sector has faced various challenges, such as reduced construction activity and an inadequate provision of natural gas to industrial users, which has prompted the idling of a portion of its capacity.
Cement producers experienced a seven-year boom because of the controversial Mehr Housing Scheme–a large-scale construction program initiated in 2007 by the previous administration to provide two million low-income people with housing units through free land and cheap credit.
The plan, however, slowed down due to lack of funding and dragged down domestic demand for construction materials with it.
Gas shortages in the last Iranian year (March 2015-16) also caused many cement plants to either turn to using mazut as fuel or shut down production for the last three months of the year.
A surplus stock of nearly 20 million tons of clinker–the raw material used in the first stage of cement manufacturing–during the final months of last year, a result of the industry’s sprinting capacity expansion for the past nine years, prompted producers to call for cutting down on production for the December 2015-February 2016 period. As of early 2016, 35% of total cement capacity remained inactive.
Cement producers have increasingly focused on exports in recent years to compensate for falling demand.
Iran was the leading global exporter of cement, shipping 15.9 million tons (including clinker) in 2015, mainly to countries in the Middle East and Central Asia.
However, regional demand for Iranian cement reduced as oil prices collapsed, causing budget and infrastructure cutbacks in some of Iran’s main export destinations, including Iraq, Afghanistan, Azerbaijan, Kuwait, Qatar, Turkmenistan and Pakistan.
The unfavorable condition reached its crescendo as Iraq, which accounted for nearly 65% of Iranian cement sales overseas, banned the imports of foreign cement back in April to support its domestic producers.
Ever since early 2015, Baghdad has become a difficult partner for Iranian cement exporters. On top of the challenges posed by the assault of IS militants on Iraq and the consequent difficulties in goods transportation, the Iraqi government slapped an import tariff of $20 per ton on Iranian cement in September.
To bolster its local industry, Iraq turned to the import of clinker at cheap prices from Iran. This led to an unprecedented rise in clinker production capacity last year, in turn leading to overcapacity as Iraq’s demand waned gradually.
In reaction, cement exporters are turning away from the restricted Iraqi market toward North African countries like Kenya and Ethiopia as alternative destinations.
Future Plants, Projects
There were 71 cement plants in Iran in 2015 with a combined capacity of 80.6 million tons/year, including 64 grey cement plants and 7 white cement plants.
As of early 2016, utilized capacity of Iran’s cement sector amounted to 66 million tons/year. The construction of 54 new plants with an additional capacity of million tons/year was planned. Of these, 10 plants were near completion as of September 2015, with 8.3 million tons/year of capacity expected to come on stream in 2016.
Government-backed companies, including Fars & Khuzestan Cement Company, Tehran Cement Company and Ghadir Investment Company, controlled 63% of the cement market by sales.
FKCC, the leading cement producer, operated 17 plants with a total capacity of 24.8 million tons/year, including the 3.9-million ton/year Abyek plant, the largest in Iran.
Tehran Cement, the second leading cement producer, operated seven plants with a total capacity of 10.6 million tons/year, whereas Cement Investment and Development Company operated five plants with a total capacity of 8.1 million tons/year.
The market share of privately owned companies continued to increase, reaching 37% in 2015.
