Across the globe, multiple internationally renowned commentators are speculating on the impacts of the global pandemic COVID-19 on the future of globalisation, as governments and companies strengthen their capacity to cope with extended periods of economic self-isolation. This is a huge subject, with massive socio-political, geopolitical and economic connotations and it will likely be that it is up to historians in fifty or a hundred years to make the final assessments, however, that fact that this conversation is happening now tells us something, as do the wild conspiracy theories that circulate across the internet which suggest an increasingly vocal mistrust in foreign powers and the existing international order.
In TIME magazine, Ian Bremmer wrote that "In coming years, the coronavirus outbreak may be remembered as a milestone moment on the road toward the end of the first phase of globalization. Over the past few decades, markets have opened, supply chains have gone global, middle classes have emerged, and new connections have been made. More recently, a backlash against the increasingly free flow of information, ideas, money, jobs and people has created extraordinary political pressures. The result has been tightened immigration rules, new barriers to trade and investment, a shortening of supply chains, a technological decoupling and a new emphasis on country-first politics.”
Cement, as we all know, is by its nature a local product but over the last 25 years or so the industry globalised with a flow of capital from the multinationals into emerging markets and with an increasingly international supply chain for fuels and supplementary cementitious materials and machinery/parts. While not at the same level of integration as in some other sectors, such as technology, the trend has certainly been towards far greater global integration. Following the 2008 Global Economic Crisis, the multinationals both benefited by the profits from recently acquired regional markets and were challenged by the high level of debt accrued through their global expansions. Through the recovery from the crash, there have been some rolling back of the expansionist policies of the past, with the mergers or Lafarge and Holcim and Heidelberg and Italcementi etc and the sale of assets – particularly by European majors in South East Asia.
At recent INTERCEM conferences, speakers have debated the theory that the cement world is changing and two spheres of influence are emerging; one from China – across the countries included in their One Belt, One Road (OBOR) policy and the other encompassing the traditional multi-national bases of Europe and North America. With the depth of the economic impact of this pandemic yet to be fully realised – and with the words 'recession' and even ‘depression’ being used by commentators – could one impact of COVID-19 be that this process is accelerated?
The broad consensus among foreign policy analysts is that our globalised world isn’t going anywhere, it is too ingrained into our everyday lives, however, this period may accelerate current trends away from hyper-globalisation towards shorter supply chains, politically blunting some of the international institutions designed to further multilateralism and further de-coupling between Chinese and US spheres of influence.
As always for important strategic industries, such as cement, politics and economics will be influential drivers in the decisions that industry executives make. By the time the results of the US Presidential election are announced at end of the year, we may have clearer ideas on how both will influence the global direction of the cement sector through the coming years, or perhaps it will take several years to fully assess the potentially wide-ranging impacts of this outbreak on the global order.
The potential for instability is clear, both in demand and supply. You could easily argue that a sharp upturn in demand will follow the end of the global pandemic as projects return to work and construction restarts. However, you could equally argue that a lack of liquidity could severely hamper any return to normality. The structure of the industry could also change radically over the next decade, as it did following the 2008 financial crash. In fact, the economic impact could be considerably worse, and the restructuring might be more fundamental. Even before the onset of the Covid-19 pandemic it was apparent that the industry was beginning to form into two distinct spheres of influence, the next few months might tell us how much further this process is likely to go.