Dec '11/Jan '12

Cement, stone and aggregates

Hard times

By P. Diekmeyer

You would think that aging infrastructure in Canada and the United States, and resulting initiatives to build new roads, bridges and hospitals would signal new hopes for producers of cement, stone, sand and gravel. However, the sectors continue to navigate a variety of challenges and opportunities on the business, economic, domestic and export fronts, and companies are struggling to adapt.

“The strengthening dollar and the U.S. recession have considerably dampened demand in the industry’s largest export market,” notes Michael McSweeney, president and CEO of the Cement Association of Canada. “This has been exacerbated by challenges from importers, who are now grabbing an increased share of the domestic market.” Earlier this year, cement production in the United States hit a 28-year low and, with production facilities there idle, it is hard for Canadian companies to get a hearing from clients.

Here in Canada the picture is not much better. Production has fallen from 14.4 million tonnes in 2007 to 11.6 million tonnes in 2010, and for 2011 is expected to slip further, to an estimated 11.0 million tonnes. The strong loonie not only makes local goods more expensive in export markets, but also gives Canadian cement consumers more purchasing power on international markets, making imports relatively cheaper. Nowhere is this more apparent than in British Columbia where, according to McSweeney, imported cement now accounts for 24 per cent of consumption, up from just three per cent in 2007 – an increase due in no small part to the carbon tax applied by the province to its domestic, but not imported, cement.

Making a better case on the environmental front

The industry took another big blow with British Columbia enacting a wood-first policy for construction, and Quebec has been sending signals it may follow BC’s lead.

McSweeney challenges these provincial moves, which he characterizes as poorly designed policies. “These types of initiatives serve to push production overseas, into jurisdictions where environmental oversight is less of a priority,” he says. “Furthermore, they are often based on inadequate or incomplete competitiveness assessments.”

McSweeney cites government purchase decisions regarding road construction, which tend to specify asphalt in bid documents, despite the fact that concrete roads have a significantly longer service life – which more than compensates for possible initial cost differentials. (Asphalt prices are heavily tied to oil prices, and when these rise above $70 per barrel, concrete roads are cheaper even on a straight-comparison basis).

A part of the neighbourhood

“There are many pit and quarry license applications in the works right now, and approvals in process,” says Moreen Miller, president of the Ontario Stone, Sand & Gravel Association. “However, the province continues to grow at a rapid rate, which means demand for aggregates near expanding urban areas continues to be strong.”

The challenge, says Miller, is that transportation expenses form a huge percentage of overall aggregate prices. “Half of the product costs consist of moving it from where it is extracted to where it is used,” she says. “That means the pressure to develop resources that are close to where they are used is high.”

This presents the industry with two challenges in getting mine approvals. The first is that Ontario’s rapid expansion means that potential resource sites often have multiple alternate uses, ranging from agriculture to residential housing developments. The second is educating environmental activists, who are often unaware of how responsive the mining industry can be to local concerns when developing new resources.

A focus on innovations

In October, the industry announced a new, environmentally friendlier cement named Contempra, which requires less clinker – cement’s energy-intensive main ingredient. The cement is comprised of 15 per cent ground limestone compared to only five per cent in regular Portland cement, yet it produces concrete comparable to traditional mixtures.

Contempra, which promoters say reduces CO2 emissions by 10 per cent, is recognized under the name Portland Limestone Cement by the Canadian Standards Association, the 2010 National Building Code of Canada and the building regulations of British Columbia, Manitoba, Ontario, Quebec and Nova Scotia.

However, according to McSweeney, industry can only do so much, and to reach its full potential it will need help on the public policy front. “If governments can coordinate their efforts on the environment to create a more simplified and level playing field, and bring in fairer tax policies,” he says, “this sector could recover much faster.”

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