Global lime industry facing headwinds on depressed manufacturing sector; outlook remains cautiously optimistic

In 2016, worldwide demand for lime, constituting largely of quicklime, but also of slaked and hydraulic lime, slid by 10 million from the 2014 peak to 350 million tons. However, supported by an anticipated recovery of the steel industry ÔÇô which consumes almost 50 percent of the lime used at the global level ÔÇô worldwide demand for lime is projected to show modest recovery by 2021, according to CW Research's study on ÔÇ£Global Quicklime, Slaked Lime, and Hydraulic Lime Market Report.ÔÇØ

ÔÇ£The lime industry has traditionally been relatively stable due to a diversified range of cyclical and non-cyclical applications. As such, in a glass half-full sort of view, although there has been a contraction in demand following a slowdown in global manufacturing, it has not been as severe as that for other sectors such as cement. Conversely, while there are also glimmers of favorable long-term opportunities, notably the growth in environmental and flue gas desulphurization uses in developing markets, we see tempered growth going forward on a global basis,ÔÇØ says Robert Madeira, CW Group Managing Director and Head of Research.

Overall, CW Research explains in the ÔÇ£Global Quicklime, Slaked Lime, and Hydraulic Lime Market ReportÔÇØ that the weakness in lime consumption is forecast to continue until steel production stabilizes in 2018. Moreover, environmental applications (including flue gas desulfurization (FGD), water, and waste and soil treatment), construction, paper and pulp, mining and minerals, agriculture, petrochemical applications, sugar and others will add to lime demand. CW Research projects worldwide demand to expand by less than two percent per year on average through 2021.

ÔÇ£On the supply-side, the industry structure for lime manufacturing is organized quite differently across nations. , Some markets, including China, Russia, and India are highly vertically integrated with steel and aluminum companies largely operating their own quicklime production plants. On the other hand, metallurgical companies in Europe, Brazil, and the US source virtually all quicklime production from commercial suppliers. In fact, the trend in these markets has long been for lime units to be divested to companies specialized in lime production such as Carmeuse and Lhoist for improved core business focus,ÔÇØ noted Raluca Cercel, lead analyst for the study.

China will continue to be the largest lime market, representing about 60 percent of global production. China's steel sector is working through a challenging period of overcapacity and weak domestic and international demand. While an estimated 90 million tons of steel capacity was rationalized in the 12th five-year plan, an additional 100-150 million tons is expected to be shut down through 2020. Europe, the CIS, and the Americas each account for about ten percent of global production, followed by Africa and the Middle East, both representing five percent of total lime production. Notably, in Brazil's case, in spite of the depressed macro-economic environment and low steel production levels, manufacturers of lime expect demand to be resuscitated by growth in the agriculture and sugar cane sectors.

Globally, road construction, metallurgy and ore extraction are expected expand the fastest of all segments at four percent and three percent, respectively, per year on average for the next five years. In developed markets, FGD has traditionally accounted for a significant share of lime consumption. Yet the outlook for FGD-linked demand is complex as coal power generation is facing dual challenges. On one hand, the retiring of coal-fired power plants in favor of renewable electricity will demand fewer FGD systems. On the other hand, reliance on coal as a main electricity source will in some markets increase (and thus drive FGD system expansion and lime demand) with phasing out of nuclear-based power. Furthermore, some markets, such as Germany, face both challenges, creating some uncertainty around the net effect for lime consumption.

While most of the world's lime demand is met by domestic production, less than three percent of consumption was supplied through imports in 2015. The primary lime exporters were Vietnam, Germany, France, Belgium and Oman, which together exported over forty percent of the total lime traded.

The Netherlands and India are the world's largest lime importers, having together imported around two million tons of lime in 2015. India's lime consumers are dependent on high quality lime coming from neighboring Asian markets such as Malaysia and Vietnam, as well as from the UAE and Oman. Notable is the recent resolution to Australia's Cockburn Cement withdrawing its dumping charges against suppliers from Vietnam and Malaysia.

From a company perspective, Carmeuse and Lhoist are the global leaders. Carmeuse operates fourteen plants in the United States, followed by presence in fifteen European countries, as well as in Asia and the Middle East. Lhoist operates at more than one hundred locations, out of which seventeen plants are located in the United States. Besides these two global champions, the balance of companies are either regional medium sized groups as well as local, typically single unit companies. Some of the notable regionals include Graymont (North America), Grupo Calidra (Mexico and South America), Fels Werke (Germany) and NordKalk (Scandinavia).

ÔÇ£There are several challenges that will impact the global lime industry in the coming years. Some notable challenges are in targeting new business opportunities and faster growing segments, reducing cost structures in developing markets and automating plant operations, improving production costs as well as the ever growing emissions and environmental pressures,ÔÇØ added Robert Madeira.