Cement Market Besieged by Crisis and Energy Imbalance

Overall, the current calm in the cement market is fragile. Continued pressure from production costs could raise project expenses, reduce contractors’ profits, and slow housing construction.

According to Ambassador Arjan, the cement market in Mehr 1405, despite the relative stability of prices, is still under the pressure of energy restrictions, increased production costs, and construction stagnation. On Mehr 20, each packet of Tehran cement was traded at 260 thousand tomans, Sufian at 293 thousand tomans, Saveh at 257 thousand tomans, and Abik at 255 thousand tomans. Comparing these prices with July shows that Tehran cement has increased by seven thousand tomans and Sufian by nine thousand tomans, but the price of Saveh and Abike has remained almost constant.

This price difference shows that the cement market does not have the same trend. Geographical location of factories, transportation cost, access to fuel, production capacity and distribution structure are the most important factors of price difference between brands.

One of the main challenges of the cement industry is the limitation of energy supply. The secretary of the Cement Association had previously warned about the decrease in production due to the 85% electricity restriction. Also, the lack of gas and the forced use of diesel fuel by some factories has increased the cost of production. According to him, the cost of transporting fuel oil has doubled the cost of cement production in some cases.

Although the share of cement in the final cost of housing construction is limited, the increase in its price, along with the increase in the price of steel, concrete, labor and transportation, puts additional pressure on the builders. The index of construction inputs increased by 106.8% in the spring of 1405 compared to the previous year, and the annual inflation of the cement, concrete, sand group reached 42.9%.

In the coming months, the market faces three possibilities: stabilization of prices if supply continues, gradual increase if energy restrictions intensify, and limited reduction if construction stagnation continues.

All in all, the current calm of the cement market is fragile, and continued pressure on production costs could lead to increased project costs, reduced contractor profits, and slower housing construction.