The market
By 2013, the global cement market will reach $246 billion gross annually, representing a total volume of 3.5 billion tons of construction materials. Cement is the most widely used construction material in the world. China produces about 50% of global output, while India is the second-largest producer, characterized by higher growth rates—even compared to China. The European and American markets are slowly recovering from a sharp decline in 2008–2009, with US sales falling by some 17% in a single year. The cement industry is highly concentrated in the hands of a few. The world's five largest producers control more than half of global production capacity. Lafarge (France) is the world leader with revenues of $16.1 billion, just ahead of Holcim (Switzerland) in 2009. Last year, Lafarge acquired 17 cement plants in China, an unprecedented number. CEMEX (Mexico), the world's third-largest cement producer but the leading building materials company, offers a rare leadership position in this global industry in Latin America. Employment in this sector has fallen considerably in the United States, dropping by 23% over the past 20 years. This is primarily due to the pursuit of economies of scale through the ever-increasing size of rotary kilns. FL Smith, the Danish world leader with over 1,000 units installed, built the largest kiln in Tongling, China, with a spectacular capacity of 12,000 tons of cement per day. One of the major challenges facing the cement industry is greenhouse gas (GHG) emissions. Each ton of Portland cement requires 1.3 tons of limestone, which is heated to 1450 degrees Celsius, releasing CO2 while using 0.2 tons of coal and 100 kWh of electricity. The industry emitted approximately 2.9 billion tonnes of CO2 in 2010, making it one of the main contributors to climate change and accounting for 5% of global human-caused greenhouse gas emissions. Even the most climate-neutral cement kilns produce 0.66 kilograms of CO2 per kilogram of cement, of which 90% is released at the point of production, with only 5% emitted during transport and 5% during on-site electricity generation.
Innovation
The European Union has subsidized companies that buy outdated cement plants and equip them with clean technologies. However, even the greenest technologies can only reduce CO2 emissions by 20%. The chemical reaction that creates this building material simply releases carbon dioxide. As the amount of cement produced globally increases, so does the total amount of cement produced globally, leading to increased pollution. This is known as the rebound effect: overall pollution increases even as per-unit production decreases. The industry has turned to incorporating waste that would otherwise create greater environmental challenges, such as the creation of methane (21 times more harmful to the climate than CO2) or eliminating the risk of black carbon in the atmosphere by burning waste and tires during its production process. On the other hand, one of the major costs of the cement industry is its closure. With high-profile cases of asbestos nearly bankrupting companies, it's instructive to note that during the 1950s and 60s, asbestos was a standard material used by the cement industry. When Anders Byström observed the mechanical marvels of a rotary kiln that had processed cement for decades at high temperatures, he couldn't help but be impressed. He admired the heavy equipment rusting away at Stora Vika, in a former cement plant just south of Stockholm. How could such an engineering masterpiece be valued solely for its scrap value? Cement plants face high closure costs, but for Anders, the facilities could be converted into municipal solid waste (MSW) plants. Instead of burning coal and processing limestone, he envisioned how the entire facility could receive solid waste, first removing all metals, then retaining up to 900 tons at a rate of 300 tons per day, subjecting the mixture of organic and inorganic matter to combined aerobic and anaerobic digestion. All waste could be sorted and recycled, with the remainder becoming clean compost.
The first cash flow
The innovative process, from converting the plant to sorting waste, has grown from a pilot unit processing one ton per day to full-scale operation. However, it caught the attention of Masatsugu Taniguchi, a senior executive at Taiheiyo Cement, Japan's largest cement company. He realized it could represent a breakthrough for an infrastructure facing declining cement demand while simultaneously experiencing increasing demand for waste management. Based on pilot studies conducted in Sweden using Japanese waste, Taiheiyo Cement engineers concluded that the total calorific value of SMW water could reach a surprising 50% of that of coal, the traditional fuel in kilns, if it were processed in these old rotary kilns. A $40 million investment led to the establishment of the first industrial-scale facility in Hidaka City, Saitama Prefecture, Japan. A disused incinerator receives all the household residual waste (HRW) from the local waste management company. This allowed the city to scrap a pending investment in an incineration plant and avoid expanding its landfill. This reduced the tax burden for local residents while improving air quality. Swedish technology transformed low-calorific-value waste into high-calorific-value waste, eliminating the risk of methane production from landfills, a harmful greenhouse gas. This process saved 20 tons of coal per day, helping to reduce the negative impact of a traditional waste management system at a lower cost by utilizing readily available materials. This approach views industry as an interconnected system, a key characteristic of the Blue Economy. After two years of testing, the Japanese Ministry of Economy, Trade and Industry (METI) offered an operating license.
The opportunity
One of the most underutilized capital structures globally is the depreciation of manufacturing facilities. Because these facilities are often valued at almost nothing on the balance sheet, having been fully depreciated, they still face the risk of high closure and decommissioning costs. This is because companies are prohibited from selling these older facilities for a pittance, as was previously the case. If cement manufacturers stick to their core cement business, this will remain a risk. However, if cement manufacturers are willing to think outside the box and form a consortium with complementary partners, they could reduce their own liabilities, lessen their negative impact on the climate, create jobs, improve return on investment, and even alleviate the tax burden associated with costly waste management. By utilizing existing resources, reducing public deficits while meeting basic energy needs provides a foundation for business growth. Entrepreneurs like Anders Byström have demonstrated that this type of business can take off with very limited private financial resources. As cement industry investments continue to amortize smaller kilns in favor of those with three to four times the capacity, more rotary kilns will become available. Selling them for the value of their waste does not represent an opportunity to offer a fundamental new, lower-cost option for managing municipal solid waste, without being caught between landfill and incineration. It is up to contractors to make the difference.
