War in Ukraine and High Material Costs Continue to Challenge Cement Producers

Many global cement producers are reporting bottom-line impacts that have rippled out from the conflict in Ukraine, while some companies like Switzerland-based Holcim, which once had operations in Russia, have been more directly affected.

The company reportedly generated 1% of its sales in Russia before exiting that market in March, shortly after Russia’s invasion of Ukraine. A statement from Holcim at the time said its decision to leave the Russian market was “in line with the company’s values to operate in the most responsible manner.”

However, leaving Russia isn’t as easy as it sounds.

After getting interest from several dozen potential buyers for the company’s Russian assets, which includes three cement plants, Holcim faced attempts at asset raiding, according to published reports in Global Cement.

A Russian court changed the benefactors of Holcim’s Russian business, and Global Cement reported that Russia’s tax service was also reportedly seeking structural changes to Holcim’s legal entities. Holcim has tried to appeal that ruling.

Other news briefs show that global producers with no operations in Russia, like Thatta Cement in Pakistan, have increased sales but are still turning out lower profits. Thatta increased its sales by more than $19 million in fiscal year 2022, but profits were down 68% due to increased costs for materials, the firm said. The war in Ukraine was one of the factors Thatta cited as a continuing uncertainty placing pressure on the Pakistani economy.

Meanwhile, in Brazil, industry sales fell 2.7% year-to-year in the first half of 2022, according to a Global Cement report. The president of the Brazilian National Cement Industry Association, Paulo Camillo Penna, said the Ukraine conflict was partly to blame for the cement industry’s “undesirable frustration.”

“Throughout the year, with the successive worsening of the economic environment, high interest rates, inflation and commodity prices added to geopolitical instability, caused by the conflict between Russia and Ukraine, have impacted the economy and the entire Brazilian industrial sector,” he said.

Many of the pressures being felt globally, including those from the continuing war in Ukraine,are being felt in the U.S. as well. Some experts have predicted the nation is headed for a recession and have advised that making operations more economical is one of the few ways to cope with the economic challenges.

Martin R. Cantor, director of the Long Island Center for Socio-Economic Policy, previously told WOC360 businesses will have to pass on increased operational costs, which include having to pay higher wages to workers, unless they become more efficient.

His analysis was backed up by Peter Scalamandre, the president of New York-based Peter Scalamandre & Sons Inc.

“It is not much you can do to save money right now. You used to be able to put slag and fly ash to reduce the cement requirements,” Scalamandre said. “We have been doing that for years, but these prices have increased as much as or more than cement. So, these advantages have gone away."