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This powerful and diversified sector includes dozens of cement plants throughout Germany, numerous energy and raw material suppliers, as well as engineering companies and equipment suppliers related to cement production.
The German cement industry, which consists predominantly of medium and large businesses, includes two dozen companies and more than 50 cement plants.
German cement manufacturers and foreign companies interested in the development of local production actively use various strategies of attracting funds on a long-term basis.
Despite certain difficulties associated with high energy prices, economic slowdown and changes in traditional logistics chains, Germany remains attractive for further investment in the cement industry.
GCAM Investment Group is ready to offer long-term financing of large cement plants in Germany and other European countries.
We offer a full range of solutions for the cement industry, including financial modeling, lending, project finance, credit guarantees and much more.
Contact us to learn more.
The current state of the German cement industry
The annual consumption of cement per capita in different countries is an extremely heterogeneous parameter.Countries such as Indonesia only need about 20 kilograms per capita annually. In Arab countries, annual consumption can exceed 2,000 kilograms per inhabitant. Cement consumption in Germany is about 350 kilograms per inhabitant per year, which can be considered as an important parameter of the intensity of construction activity in the region.
Cement production is an attractive area for investment, as construction on a global scale increases every year. This area is also developing in Germany, as evidenced by cement production statistics over the past decades.
Table: Cement production by year in some countries of the world (millions of tons).
| 1970 | 1980 | 1990 | 2000 | 2005 | 2010 | 2015 | 2019 | |
| Germany | 46.31 | 46.62 | 37.68 | 36.63 | 31.0 | 29.91 | 33.38 | 33.90 |
| United States | 67.69 | 69.58 | 71.40 | 87.84 | 100.90 | 67.20 | 67.68 | 89.0 |
| India | 13.54 | 17.70 | 45.72 | 102.08 | 145.0 | 220.0 | 170.0 | 338.0 |
| France | 29.01 | 29.10 | 26.38 | 20.19 | 21.27 | 17.99 | 15.07 | 16.70 |
| Saudi Arabia | 0.67 | 2.91 | 11.98 | 18.10 | 26.06 | 42.30 | 36.0 | 42.30 |
Financing of the cement industry in Germany is one of the drivers of economic growth.
In 2018, the German cement industry, which employs over 8,000 people, produced about 33.6 million tons of cement, with sales of about 2.8 billion euros. At the same time, cement consumption in the last pre-pandemic 2018 amounted to 29.0 million tons, which is 0.4% higher than in the previous year. In 2020, despite the negative impact of the pandemic, the production reached 35.5 million tons.
Within the European Union, Germany is currently the largest market for cement.
According to the Federal Statistical Office, German producers exported 6.3 million tons of cement in 2018. The most important trading partners were Germany's neighbors. In particular, the Netherlands imported approximately 2.7 million tons of cement products in 2018.
Investments in Germany's cement industry gradually increased in the post-global financial crisis period until 2018, when total investment in construction land exceeded €40 million and investment in cement production equipment exceeded €270 million. In 2020, investments in land plots showed some growth, while equipment financing decreased significantly to approximately €180 million. At the same time, the turnover of the cement industry in Germany has been growing since 2013, remaining relatively stable in 2020-2021, exceeding the mark of 3 billion euros per year.
The largest customers of the German cement industry are domestic concrete producers.
In 2018, they accounted for 56.5% of domestic cement supplies. Another 21.7% came from manufacturers of concrete products. The rest was supplied as bagged cement (6.5%) and other bulk cement (15.3%). In general, there have been only minor changes in the share of these products in recent years.
Consumption of cement in 2018 was distributed as follows:
• 32.0% for housing construction.
• 33.5% for non-residential construction.
• 34.5% for civil engineering.
Housing, which accounted for only 22.5% of German cement consumption in 2009, has become the most important in recent years.
This situation makes investments in the German cement industry highly dependent on the prospects for the development of housing construction in the country and, accordingly, on the well-being of the population.
Despite the still growing demand for apartments, the number of completed houses is growing very slowly. In previous years, this was facilitated, in particular, by the high workload of production capacities in the main construction industries. In the near future, the growing economic crisis will be the main reason for the decline in demand for cement in Germany and the EU countries, which are traditional importers of German cement products.
Non-residential construction may also lose momentum in the coming years as a result of the slowdown in the European economy.
Civil engineering, as the third most important area of construction, is currently shaped in a positive way by public infrastructure projects, to which the German authorities have paid great attention in recent years.
The federal government has increased investment in federal transportation routes, with a particular focus on the construction and modernization of highways.
Autobahn GmbH des Bundes, which aims to bring together the planning, construction, operation and financing of federal highways at the federal level, has set the goal of reducing these bottlenecks as much as possible and thereby helping to speed up the implementation of large construction projects.
The new federal company will be able to fully start its work only in the coming years.
Despite recent problems, in all areas of construction, the opportunities for the German cement industry outweigh the risks. In particular, construction firms' portfolio of orders and strong demand for housing and debottlenecking activities in the transport infrastructure sector suggest that demand for cement will remain strong.
However, the prospects for investment in the German cement industry in the coming years will largely depend on the economic situation in Europe.
Financing cement plants in Germany
An important pillar of financing the construction of cement plants in Germany is project finance, which plays an increasingly important role in the development of the sector.Project finance is the financing of investments, according to which the source of debt repayment is cash flow, which is formed and accumulated as a result of the implementation of an investment project.
Borrowed funds for project finance (PF) are formed using bank loans, bond issuance, leasing and other sources of financing. Bank loans are currently one of the main sources of attracting funds for financing investment projects. Since the cost of building a modern cement plant in Germany can be counted in hundreds of millions of euros, in many cases sponsors attract syndicated loans.
The nature of the syndicated loan is most favorable for financing large industrial and infrastructure projects, including factories, quarries, railways, electrical substations and other facilities for the cement industry.
With a high degree of credit risk, the bank can involve other banks to create a consortium for the purpose of financing a project for the production of cement and concrete products.
After concluding long-term credit agreement, the bank accumulates funds from other banks and transfers them to the borrower in accordance with the specified terms. Both German banks and large international financial institutions can participate in such consortia.
Table: The largest banks in Germany, which are engaged in the financing of large businesses.
| # | Financial institutions | # | Financial institutions |
| 1 | Deutsche Bank AG | 7 | J.P. Morgan AG |
| 2 | DZ Bank AG | 8 | Bayerische Landesbank |
| 3 | KfW Bankgruppe | 9 | Landesbank Hessen-Thüringen Girozentrale |
| 4 | Commerzbank AG | 10 | ING Holding Deutschland GmbH |
| 5 | Unicredit Bank AG | 11 | NRW Bank |
| 6 | Landesbank Baden-Württemberg | 12 | DKB Deutsche Kreditbank AG |
The main criteria for choosing forms of bank loans and forms of project financing are the following:
• Interest rate for the loan.
• Interest payment terms and financing period.
• Principal repayment terms and conditions.
The level of the interest rate for the loan is a determining condition when assessing the feasibility of choosing a financial partner. Such an assessment is based on several conditions.
The cost of borrowed resources and the structuring of the project are considered together, because they are closely related to market conditions. At the same time, measures are taken to identify and limit credit risks. The bank operates on a commercial basis and provides large loans to the cement industry at market rates, taking into account such risks. When assessing credit risks, the situation of the sector, medium- and long-term development prospects are taken into account.
Second, interest rates are set at a margin above the underlying market rate such as LIBOR. Loans can be provided either at a floating interest rate or at a fixed rate and in combination with a set of risk hedging instruments.
The basis for determining the interest rate on a loan can be the market value of interbank short-term lending, which is formed on the basis of the Deutsche Bundesbank discount rate and the average margin of commercial banks, the projected rate of inflation, the form of the loan and its term, fluctuations in the exchange rate difference of currencies, the level of the risk premium taking into account the financial health of the borrower and the security he provides.
One of the important criteria for choosing a bank loan for a cement plant in Germany is the terms of repayment of the principal amount of debt.
The credit margin reflects both the level of development of the economy and a specific sector, as well as commercial risks and corresponds to the situation regarding syndicated loans.
Note that a bank loan is one of the most expensive types of borrowing capital for financing projects in the cement industry.
Extensions of repayment terms can usually be established by agreement between the lender and the borrower, and the duration of project financing in this sector usually varies from 5 to 10 years depending on the specific requirements of the project. Grace periods for debt repayment can be granted for the first year or for the first two years, taking into account the fact that negative cash flows are usually observed at this time.
Attracting funds for financing cement plants in Germany through bond issuance is an alternative source of project financing to bank lending. The company can issue bonds on the local market in accordance with current legal requirements or issue and place bonds on the international market.
Attracting financial resources through the issue of bonds has a number of significant advantages over attracting funds through the issue of shares.
Table: Some advantages and disadvantages of financing cement plants by issuing bonds.
| Advantages | Disadvantages |
| The issue of bonds does not lead to the loss of control over the management of the enterprise. | Issuance of bonds is associated with significant costs and takes a lot of time, so only large companies can afford it. |
| Bonds can be issued with relatively low financial obligations of the issuer to pay interest to investors, because they are secured by all the assets of the enterprise and have priority in the context of satisfying the claims of bondholders in the event of the borrower's bankruptcy. | The responsibility of the issuing company for the timely payment of interest and the principal amount of the debt is very high, because the collection of these amounts is implemented through the bankruptcy mechanism. |
| Bonds have a high distribution potential among both private and institutional investors. | After the bonds are issued, the average interest rate for the loan may fall below the fixed interest rate on the bond. In this case, the company will bear increased costs for servicing its debt. |
Starting from the second half of the 20th century. financial leasing as a mechanism for attracting project funds has become quite widespread in Germany.
Today, leasing is the most promising form of attracting project funds for the construction and modernization of cement plants and quarries.
This type of financing is considered as one of the types of long-term loan, which is provided in the form of tangible assets (for example, rotary kilns, conveyors, mills, and other equipment) and is repaid during a certain period of operation of the facility.
The deficit of investment resources, on the one hand, and a significant number of production facilities and equipment, which cannot be used at full capacity during the economic downturn, on the other hand, create prerequisites for the widespread use of financial leasing in investment activities.
The largest cement producers and plants in Germany
The production of cement and cement products in Germany is mainly concentrated in the hands of a small number of medium and large businesses, including international companies.This list includes Holcim AG, Heidelberg Materials, Dyckerhoff AG, Cemex Deutschland AG, Opterra GmbH, Märker Zement GmbH, Spenner Zement GmbH & Co KG, Thomas Zement GmbH & Co KG, Sebald Zement GmbH and a number of others.
At the same time, cement production in Germany is geographically distributed extremely unevenly, which can be largely explained by the economic history of the country, the development of its infrastructure and the distribution of natural resources.
The vast majority of cement and clinker plants are concentrated in the western, southern and central parts of Germany.
Heidelberg Materials
Heidelberg Materials, formerly known as HeidelbergCement AG, is the largest construction materials group in Germany.The company is considered #1 in the world for the production of aggregates and ready-mixed concrete and #2 for the production of cement.
The group operates in 60 countries with 53,000 employees and 3,000 offices. As of 2021, Heidelberg Materials operated 143 cement plants with a production capacity of nearly 130 million tons of cement and clinker per year, as well as 1,470 concrete plants and 600 aggregates production facilities. In 2021, the company made a net profit of 1.9 billion euros and sales of 18.7 billion euros.
The company offers common types of cement, special cements, including cements for the construction of hydrotechnical facilities and water treatment facilities, as well as special binding and environmental technologies for the construction of landfills and reclamation of contaminated sites.
Other areas include the production of construction aggregates such as sand, gravel and lime products.
The company is also developing the production of silicate bricks and related products.
Due to its greenhouse gas-intensive cement production, HeidelbergCement AG is one of the main contributors to CO2 emissions worldwide, and is therefore subject to criticism. In particular, in 2021, the company emitted 69 million tons of carbon dioxide, which indicates an urgent need for additional investments to modernize many production facilities.
Holcim Deutschland
Holcim AG, with the brands Holcim and Lafarge, is one of the largest manufacturers of building materials in the world, headquartered in Zug, Switzerland.It is also one of the largest owners and operators of cement plants in Germany, with large production facilities in Duisburg, Dortmund, Beckum, Bremen, Dotternhausen, Lagerdorf and other cities.
The name Holcim is derived from the former name of the company Holderbank and from the French noun for cement.
Holcim Deutschland, a subsidiary of Holcim AG, is one of the leading cement manufacturers in this region, specializing in innovative and environmentally friendly products. The company employs around 1,800 people at approximately 130 locations in Germany and the Netherlands.
In its relatively short history of presence on the local market, the international group has played an extremely important role in financing and investing in the German cement industry.
Dyckerhoff AG
Dyckerhoff is a former listed cement and construction materials producer based in Wiesbaden, now a subsidiary of the Italian company Buzzi Unicem.The group operates cement plants in Wiesbaden, Geseke, Lengerich, Göllheim, Neuwied and a number of other locations throughout Germany. Dyckerhoff owns assets in Poland, the Czech Republic, Luxembourg and other countries.
Although the company is not currently independent, Dyckerhoff is a cement manufacturer with a long and glorious history. The history of the company dates back to 1864, when Wilhelm Gustav Dyckerhoff, together with his sons Gustav and Rudolf, founded the Dyckerhoff & Sons portland cement plant in Ameneburg.
In 1884, Dykerhoff supplied 8,000 barrels of Portland cement for the foundation of New York's Statue of Liberty, equivalent to 1,360 tons.
After the Second World War, it was already a well-known brand throughout Germany.
Since 1956, the company under the new name Dyckerhoff Cement Works AG rapidly expanded, mastered the production of new building materials and paints, opening new plants in France, Luxembourg, the USA, Poland, and later even appearing in Ukraine and Russia. As of 2012, the company had more than 6,800 employees, and its total turnover was about 1.6 billion euros.
Schwenk Zement
Schwenk Zement GmbH & Co KG is a large German cement manufacturer headquartered in Ulm.The company's factories are located in Germany, Latvia and Namibia, although at various times the company was represented in Switzerland, the Czech Republic, Poland and other countries.
The company's origins date back to 1847, when Eduard Schwenk started cement production in Söflingen. Throughout its history, Schwenk Zement has always paid a lot of attention to advanced technologies and innovations that have kept the brand competitive. In 1985, the company acquired Isotex Baustoffwerke, which strengthened the area of insulation technology.
After the unification of Germany, the company acquired the cement plant in Bernburg (Saale) in 1990.
It was completely rebuilt and opened in 1994 as the most modern cement plant in Europe.
As of 2018, Schwenk Zement operated cement plants in Bernburg, Karlstadt, Allmendingen and Heidenheim-Mergelstetten. The total staff of the company exceeded 3.5 thousand employees, and the turnover was about 830 million euros.
CEMEX
Cemex Deutschland AG is part of the world-famous CEMEX group.The German company has its origins in Düsseldorf and emerged in 2005 from Readymix AG, a subsidiary of the British company RMC Group p.l.c.
The British company built its first concrete plant in Germany in 1955 with an initial annual production of 8,000 cubic meters of ready-mixed concrete.
Readymix AG was founded as a management company in 1965. With more than 50 facilities and an annual capacity of 2.1 million cubic meters of concrete and 0.8 million tons of gravel, the company was the market leader in Germany at the time. After the reunification of German, the company acquired Rüdersdorfer Cement GmbH, which was the largest cement producer in the GDR. In the 1990s, new branches were added in Poland and the Baltic States.
As of 2021, CEMEX had dozens of large enterprises around the world, employing more than 45,000 employees.
The company's turnover was 14.5 billion euros. Currently, CEMEX continues to make large investments in the cement industry in Germany, in particular by modernizing its plants according to the latest environmental standards.
Investments in the modernization of cement plants in Germany
In recent years, the German cement industry has consistently invested in the modernization of its plants.When it comes to sustainability, CO2 and NOx emissions, use of alternative fuels and energy efficiency, German cement producers remain among the world leaders in innovation.
The German cement industry has always paid great attention to environmental performance and production efficiency.
These investments are carried out in close cooperation with major European equipment manufacturers, which play a leading role in the cement and concrete sector. The focus is also on clinker-efficient cements and their use in the production of strong and durable concrete.
Over the past decades, German cement manufacturers have invested heavily in new exhaust gas treatment technologies to reduce NOx emissions.
In numerous extensive research projects and two demonstration plants, catalytic exhaust gas treatment has been tested under the specific conditions of the cement production process.
Eventually the so-called SCR (Selective Catalytic Reduction) process was developed to industrial maturity and introduced in many German plants. The total investment in reducing NOx emissions in recent years has been estimated at several billion euros.
However, the biggest environmental challenge for businesses is by far the reduction of carbon dioxide emissions from cement production.
All cement manufacturers in Germany are currently working intensively to create clinker-efficient cements with lower CO2 emissions compared to classic Portland cements.
Great progress has already been made here. By increasing the use of composite and blast-furnace cement, the average clinker content of the cement has been reduced to less than 70%. Ultimately, raw material-related process emissions from cement production significantly limit the reduction of CO2 emissions.
Against this backdrop, the German cement industry is involved in pan-European research projects to minimize carbon emissions.
Through the European Cement Research Academy (ECRA), German cement manufacturers, construction companies, engineering firms, universities and scientific institutions have been looking for more than 10 years for suitable technologies by which CO2 can be captured in the chimneys of rotary kilns in cement plants in order to either store it for a long time (carbon capture and storage), or use CO2 for another purpose (carbon sequestration and utilization).
As a result of many different studies and specialized investment projects, the German cement industry is now able to implement highly efficient CO2 capture technologies on an industrial scale.
Experts believe that even if the German industry makes significant investments in the modernization of cement plants, it is essential to finance the project through government programs and external research funds.
In this context, the industry is pinning its hopes on the latest federal government's industrial decarbonization financing program and on the EU Innovation Fund.
CO2 sequestration is certainly a breakthrough technology that can also lead to significant reductions in CO2 emissions from the production process in a cement plant. On the other hand, the process is still extremely energy intensive and therefore expensive. It also raises the question of how carbon can be transported, stored for a long time, or reused in other carbon-rich products.
In addition to time and huge investments, the further development of this breakthrough technology requires a long-term and stable legal framework.
This applies in particular to various building codes and related standards. The efficiency of these technologies must be prioritized in order to make sustainable construction competitive in the near future despite higher costs.
Finally, an important area for financing the modernization of cement plants in Germany is Industry 4.0 and digitization.
This implies, in particular, the introduction of advanced computerized systems with elements of artificial intelligence to improve security and further increase productivity.
