This year, the prices for cement are expected to increase by 3.2%, partially making up for the weak price growth of 2020. Producers have noted increases so far this year in various regions and hope to gain further traction after the COVID-19 pandemic stymied price increases last year.
In 2021, we expect cement supply to increase by around 2%. We do not foresee any shortages for cement and concrete next year. Depending on the demand, suppliers adjust their output in several states and build inventories. While demand was lower in energy-producing regions, it was tight in California and other western states. At the national level, we expect close to a 1.5% quarter-over-quarter increase for Q1, followed by another increase in Q2. Similar increases will show up in concrete, with prices then expected to stay flat for the rest of 2021.
In 2020, cement had the lowest escalation rate since 2012, coming in at 1.1%. Slower spending by the oil and gas industry affected several producers as the demand for their higher priced oil-cement faltered. While cement had its lowest price increase in almost a decade, concrete prices continued to rise, increasing 2.5%. We expect price growth to come in at a similar rate in 2021, at 2.4%. The West region had the highest escalation in 2020, at 4.2%, which was driven by higher pricing in California. For other regions in the United States, price increases ranged between 2.0% and 2.5%. For 2021, the West and Midwest regions will continue to see growth closer to 3%; however, other regions will still be capped at 2.0 – 2.5%.
This year, although demand may take a while to recover, there are several other reasons to expect higher prices. One of them is increasing energy prices. Another is an emphasis on environmentally friendly cement and concrete. Large multi-national companies have introduced net-zero emission ambitions and eco-friendly products, and are passing on some of the investment costs of their low-carbon practices. In addition, demand is proving to be strong for these eco-friendly products, which have both a higher price tag and higher margins. Increased consumption of these premium products also brings the overall average price for cement and concrete higher.