Show BUSINESS end and the STOCK MARKET by BABSON'S REPORTS INC Copyright 1973 A LOOK AT THE CEMENT INDUSTRY As a result of the World post War II building boom cement shipments increased in creased at a rapid rate between 1947 and the mid Cement manufacturers manufacturers manufacturers operated at or near capacity level level le Ie le- le vel with confidence bolstered by what appeared to be a favorable industry outlook outlook out out- look a long delayed expansion of facilities facilities fac fae was undertaken This led to the addition of about 22 million tons of capa- capa between 1955 and 1960 Unfortunately Unfortunately Unfortunately projections of demand for cement were overoptimistic As new capacity was added construction activity began to slacken Capacity utilization in the industry fell feU to 70 percent causing a fiercely competitive battle among the cement producers to maintain their mar market ket share Prices were reduced rising costs were absorbed by producers and severe shrinkage of profit margins ensued These chaotic conditions prevailed throughout throughout throughout most of the The industry's industry's indus try's return on investment which had averaged close to 14 percent for several years in the dropped to 47 percent percent percent per per- cent in 1969 As a consequence of this exceedingly low return capital for new production facilities became scarce and the gap between capacity and output began to narrow Sharply rising construction construction con con- costs also served to put a crimp in new building plans With the coming of the a new further factor aggravated the supply situation More stringent 1 control tion-control regulations made it uneconomic uneconomic uneconomic to modernize dust-control dust equipment equipment equip equip- ment and many many marginal plants were closed It has been estimated that the cost of adding sufficient pollution con trot equipment for the average cement company could amount to per ton tonof tonof tonof of capacity Faced with this prospect cement producers have found it impractical impractical to put additional funds into a marginal marginal marginal mar mar- ginal or substantially unprofitable plant For this reason Lehigh Portland Cement Cement Ce Ce- ment meat has shut down four of its ten cement plants and Alpha Portland Industries Industries In In- has closed two of its eight plants An industry study indicates that 23 more plants representing 9 million tons of capacity would be potential candidates for closing before 1976 It seems likely therefore that total industry industry in in- capacity may decline somewhat at a time when the demand for cement is expected to show significant growth |