Market recovery but new obstacles to competitiveness
The outbreak of the Covid-19 pandemic in early 2020 and the resulting restrictions on activity (confinements, cessation, or stoppage of construction projects) meant that the year ended with a significant decline in the cement market. Although the health emergency continued during 2021, social and labour conditions improved resulting in a recovery in cement consumption which has not yet reached pre-pandemic levels.
The return to a certain degree of normality is undoubtedly the best news of the year. The general economic improvement in the country, although weighed down by inflation levels such as we have not seen in 30 years, has also contributed to generating a sense of relief in our companies.
But, in 2021, this good news was accompanied by other situations that have had a very negative impact on the Catalan cement industry, especially on the economic front. All of these have led to a significant increase in costs which hinders our competitiveness.
Firstly, the exorbitant increase in the price of electricity. July prices were 3 times higher than January. Spain has the most expensive electricity in Europe (46% higher than Germany, and 150% more expensive than France). The cement manufacturing process is intensive in electricity consumption, already representing 54% of our variable costs. It is therefore urgent that the competent public administrations adopt measures to control electricity prices, at the very least to prevent industrial sectors from being placed at a disadvantage compared to neighbouring countries.
Another factor that has penalised us has been the constant increase in the cost of CO2 emission rights, which rose from just over 30 euros to 80 euros per tonne in 2021. The cement industry, through the chemical process of decarbonising limestone (its main raw material), emits large amounts of carbon dioxide, so the impact of CO2 allowance costs is critical. This has a direct effect on our competitiveness; there are countries outside the market for greenhouse gas emission allowances that do not have to bear this cost. This allows them to trade cement more cheaply on international markets. The solution is to maintain the allocation of free rights and to apply a border carbon adjustment mechanism for clinker from countries outside the emissions market.
We also have the threat of the tax on GHG emissions that the Catalan government wants to impose on the industrial sector. For us, who are already within the scope of the ETS at European level, this would mean double taxation. In a globalised world, this will put the Catalan cement industry in a situation which is scarcely viable.
We are a sector committed to the fight against climate change and we are implementing our Roadmap to achieve carbon neutrality by 2050. However, we need support from the public authorities: more availability of alternative fuels, a halt to tax escalation, control of electricity prices, more investment in maintenance and renovation of infrastructures. Without this support, there is a serious risk of relocation of our activity to other Spanish regions or to third countries where the regulations make the production of clinker and cement more viable and more economical.
