Economy, Business And Markets

Weak Construction Pace Hits Cement Output

Weak Construction Pace Hits Cement OutputWeak Construction Pace Hits Cement Output

The secretary of Iran’s Cement Association said that cement production dropped 6% during the first eight months of the current Iranian calendar year (March 21-November 21), reported ISNA.

Abdolreza Sheikhan said 47 million metric tons of cement was produced in the said period while the amount stood at around 50 million metric tons during the same period last year. “Cement production directly depends on the situation of the market, which is experiencing gloomy days now due to the slowdown in construction,” said Sheikhan.

Another key factor affecting cement production, according to Sheikhan, is the inefficiency of the sector in terms of power consumption. High electricity prices force cement factories run only when there is demand in the market. The factories are among most inefficient industrial plants in Iran in terms of energy consumption. They were hit hard in 2010 when the first phase of the subsidy reform plan was implemented nationwide. The plan partially removed energy subsidies, causing energy costs to soar dramatically for the industries.

Despite the 6% decrease in cement production, production of clinker, as the main raw material to produce cement, was up 3% during the eight-month period, reaching 50,770,000 metric tons.

Despite the many challenges the industry faces, Iranian officials expect the cement production to reach a target capacity of 150 million tons per year by 2020.

Neighboring countries like Iraq, Afghanistan, and the CIS nations are among the major buyers of Iran’s cement, since the low transportation costs, as a key factor in the pricing process, make Iranian-made cement highly competitive in those markets. However, Iraq has recently imposed higher tariffs on Iran’s cement, making it harder for producers to export the product to the western neighbor, thus, losing a big part of their overall share in the regional markets.