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Can The U.S. Cement Industry Keep Up With The $1 Trillion Infrastructure Bill? - YouTube
Channel: CNBC
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Concrete is the foundation of
just about everything
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Concrete is responsible for
modern civilization. I mean to
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be blunt
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You walk on a concrete sidewalk
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Dean Martin planted his feet on
the specially prepared concrete.
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When you travel your aircraft
lands on a concrete runway.
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Drinking water is provided
through concrete pipes, not to
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mention what we know was
concrete jungles, cities. In
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fact, concrete is so popular
that it's the most widely used
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man-made product on Earth. For
every person in the world, about
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three tons of concrete gets used
every year,
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It's been a very durable,
sustainable resilient material
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for 1000s of years.
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After all, it was essentially
concrete that built Rome those
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1000s of years ago. To make
concrete we need cement. First,
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the two materials are inherently
tied together, but they're
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entirely different products.
But, this essential construction
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material has fell victim to
pockets of shortages across the
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U.S.
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The cement itself is becoming
more and more difficult to get
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We're not unlike many
industries. Covid caused
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disruptions in supply.
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Now, demand is expected to
increase the global cement
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market could be worth over $458
billion in 2028. As more
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millennials buy their first
homes and after the Senate
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passed a major $1 trillion
infrastructure package.
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I believe it's a historic
investment in roads and rail and
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transit and bridges.
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All of which need a ton of
concrete,
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We don't have enough workers,
ingredients, capacity to deal
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with the demand right now just
coming out of the private
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sector.
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At the same time, this kind of
production emits a significant
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amount of carbon dioxide. One
study estimates that global
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cement production accounts for
8% of global co2 emissions. That
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makes it the largest single
industrial emitter of carbon
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dioxide. Here's how the
cement-concrete supply chain
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works and whether it can handle
the demand from the new $1
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trillion infrastructure spending
plan.
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Demand for concrete rises along
with construction activity. In
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2019, 70% to 75% of U.S. cement
sales were to ready-mix concrete
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producers, which was worth at
least $65 billion. First, it's
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important we point out the
difference between cement and
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concrete. Cement is like the egg
of the concrete recipe.
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So, concrete is produced with
cement, makes a paste with water
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and that's joined with rock and
sand to heart. So, concrete is
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more of a value-added product.
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There are many different recipes
for cement, but the most common
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one is for Portland cement.
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There are different types of
cement. One that's cheapest to
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make and is most prevalent is
great Portland cement, called
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Portland because it's named
after the gray stones on the
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Isle of Portland, England.
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The first step to making
Portland cement is getting all
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the ingredients or raw
materials, mainly rocks
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Four primary ingredients:
calcium, silica, alumina, and
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iron. These are the most common
elements in the Earth's crust.
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Calcium is the main ingredient
calcium carbonate, aka
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limestone.
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The process of making cement is
still the same today, you have
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to get raw material. You got to
get raw material or from a
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quarry
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Cement companies own quarry
space where they use explosives
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to break apart the earth to find
the right minerals needed. This
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quarry here is part of Lehigh
Cement's operations in Union
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Bridge, Maryland. It's expected
to have about 80 to 100 years
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worth of limestone. All the raw
materials get crushed together
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into a powder.
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And then after it's ground and
crushed, they put it in a rotary
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kiln
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That can heats up to typically
about 27-2,800 degrees
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Fahrenheit. And by the way,
that's about a quarter of the
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surface temperature of the sun.
So it's really, really hot. And
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because it's so hot, we have
these really complex chemical
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reactions that are taking place.
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After the crushed rock cooks in
the kiln
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It turns into material called
clinker
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Then, the clinker gets ground up
again into a powder. This time
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materials like gypsum are added
into the mixture. And then
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it becomes cement. The process
is still the same.
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Well it's pretty much the same.
The U.S. cement industry has a
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rich history.
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American industry shows the
impossible accomplished. Almost
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overnight, the world's largest
cement plant rises...
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These early U.S. cement
manufacturers helped build the
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Holland Tunnel, the Empire State
Building, Rockefeller Center,
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and
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The dream of the Panama Canal
came true when America...
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A project that changed global
trade as we know it today. Now,
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cement production occurs in 37
states, making the industry
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super local, which is part of
the supply chain problem now.
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When the coronavirus pandemic
struck in 2020, the U.S. economy
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came to an abrupt halt. The
cement industry wanted to
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prepare for the coming
recession. The last recession
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after the 2008 financial crisis
caught the industry off guard.
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Like they expected to have big
shutdowns because of what
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happened 10, 12 years ago 2008
and 2009, all of us expected the
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same thing to happen, demand
fall off a cliff. And that
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didn't occur.
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This affected supply levels,
which is why the industry isn't
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seeing cement volumes it
normally would right now causing
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that supply, tightness and local
markets across the U.S. Sullivan
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says the cement market still
grew by 2% overall in 2020.
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And a lot of that growth came at
the very end of the year
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Like Lehigh cement and union
bridge. They're sold out for at
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least the rest of the year.
Another pandemic issue the
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ongoing labor shortage.
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It's such a process just to lay
a concrete slab. That's human
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beings, and there's not enough
of them that do that kind of
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work. And the hitter the market,
the greater the increase in
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prices.
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It's hard to find truck drivers
who move the product around
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locally.
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We rely upon trucks to deliver
the cement from the plant to our
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terminals. I think 97% of all
our product flows by trucks.
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The red hot housing market in
the US during the pandemic
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increased demand for concrete.
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Instances which supply is unable
to keep up with demand. What
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that leads to is bidding wars
and people competing for
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concrete slabs to lay
foundations and that raises the
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price of those kinds of things.
Not just for foundation
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building, but also for things
like patios, and driveways, and
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so on and so forth. So, lots of
demand out there, supply chain
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disruptions, higher prices, big
inflation numbers, frustrated
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homebuyers.
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Plus, weather events and
cyberattacks can shut down
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production. Another reason the
industry sees delays, these
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current supply chain kinks will
work out in the coming months if
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economies continue to reopen at
the same pace. And as of now,
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it's predicted that the U.S. has
the capacity to manufacture the
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cement it needs, assuming
imports of chemicals and
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ingredients arrive on time
drivers and laborers are hired.
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And that extreme weather events
don't shut down production, and
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that there aren't any Covid
related shutdowns.
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Of course, that demand will
increase even further. Thanks to
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the infrastructure deal
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We have ample capacity to meet
even the most robust
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infrastructure bill. You've got
to identify what projects, you
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got to identify the supplies of
those projects, you got to do
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bids, reviews, and it takes
time.
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But, you also have to look at it
with carbon emissions. What
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happens through the lifecycle of
that product? How's it produced?
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How's it used? What happens when
it ends?
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Cement production also comes at
an environmental cost.
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There is some positive
correlation between economic
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activity and our greenhouse gas
footprint. To the extent that
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demand is higher the industry is
more active, you'll tend to see
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more carbon released in the air.
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But we're looking at carbon
neutrality throughout our entire
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value chain and reaching that by
the year 2050. Our value chain
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isn't just cement or concrete or
for that matter what happens at
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a cement plant. From a material
fun standpoint, that concrete
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absorbs co2. Now, it's not a
game changer. But right now, we
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estimate about 10% of the co2
emitted during the manufacture
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of cement and concrete is
actually reabsorbed through the
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lifespan of a concrete
structure. And when a concrete
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structure is demolished, we can
reuse that aggregate for new
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concrete.
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The prospect of more
climate-friendly cement has
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attracted big name investors.
Breakthrough Energy Ventures,
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which is backed by Bill Gates,
Jeff Bezos, Richard Branson and
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other high profile investors,
recently invested 2.5 million
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euros in Ecocem Materials to
roll out new formulations of
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environmentally friendly cement.
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I think it's going to be two key
issues. One is green and
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everything that surrounds that
on the product side as well as
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on the production side. And the
second one is, is the
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infrastructure bill
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Even without the pandemic-driven
labor shortage, the industry
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needs to train more workers to
make up for retirements and the
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already-shrinking labor pool.
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So, as an economist who wants to
see a larger U.S. economy, a
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more efficient U.S. economy, one
that has more infrastructure
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available to its people. It's
frustrating to see so few young
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Americans in particular, enter
the skilled trades. And that's
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again, one of the reasons that
we have these shortages of
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infrastructure, these very high
prices. So in the long-term, I
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suspect we will have enough
cement, but in the short term we
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can do to have the supply chain
difficulties, particularly in
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certain markets. And so prices
are rising. And so right now
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apparently, supply is not rising
up to meet demand. The capacity
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is not there. I still think that
we're going to be faced with
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shortages and high prices
through the balance of the year
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but you'll start to see more and
better equilibrium form over the
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course of this year and then
into next year.
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