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1、 2024 Boston Consulting Group1This article is part of a series examining the competitive outlook for key global process industries and howthey can prosper in an uncertain future.Cements Carbon FootprintDoesnt Have to Be Set inStoneThe Future of Process IndustriesSEPTEMBER 10,2024 By Guillaume Ricome

2、,Marta Guzzafame,Jason Degnan-Rojeski,and IshangJawaREADING TIME:8 MIN 2024 Boston Consulting Group2As everyone in the industry knows,the immense amount of cement produced globally releases 3gigatons of greenhouse gases(GHGs)annually into the atmosphere,and that amount is expected toincrease signifi

3、cantly as demand for this critical material grows.The only realistic way to fully abatethose emissions and meet the industrys 2050 net zero goals involves scaling carbon capture andstorage(CCS)to an industrial level.Industry experts expect this effort to require more than$1 trillionof capital deploy

4、ment over the next 25 years.For the industry to reach net zero in 2050,sufficient CCS capacity must beavailable to abate more than 35%of its GHG emissions.For the industry to reach net zero in 2050,sufficient CCS capacity must be available to abate morethan 35%of its GHG emissionsand its implementat

5、ion will transform the industrys cost structureand traditional sources of competitive advantage.Today,most cement is consumed within 200 km of where it was produced,since the most cost-effective way to supply it is by serving local demand,thus minimizing transport costs.Only around 5%of the worlds t

6、otal cement production is traded across country borders.The cost of CCS technologywill change all that.Cement production costs will vary considerably depending on local access to CO2storage capacity,proximity to industrial CCS hubs,and the cost and availability of the green energyneeded to produce c

7、ement.This in turn will transform the industrys global geographical footprintfrom an almost entirely local industry to one where the advantage goes to low-cost producers,wherever they are.This article explores various factors that will determine the winners and losers in the cement industryof the fu

8、ture.(See the sidebar,“The Future of Process Industries.”)Following several decades of strong growth driven by high demand,cheap capital,technological change,and the rise of China and India,the metals,paper,cement,chemicals,and other basic industries are entering a far more challenging businessenvir

9、onment.Geopolitical tensions are rising along with trade barriers,demand isshiing,aging workers are becoming harder to replace,and regulators,customers,and other stakeholders are raising the sustainability bar.How each of theseTHE FUTURE OF PROCESS INDUSTRIES 2024 Boston Consulting Group3industries

10、navigate the challenges they face will also affect the fortunes of the manydownstream industries that the process industries supply.Each article in the series will examine the nature of the new business reality faced bya particular process industry,and how the coming changes will drive technological

11、progress,redefine the industrys cost structure,and reshape its competitivelandscape.The goal:to provide industry leaders with the data and guidance neededto ensure their companies can thrive in the coming years.The Net Zero TimelineThe numbers are daunting.In the absence of any abatement action at a

12、ll,global growth in demandfor concrete is forecast to result in 3.8 gigatons of annual CO2 emissions by 2050.In the near term,to2030,the industry will focus primarily on a variety of well-known decarbonization levers,including thegradual substitution of clinker materials(and their attendant process

13、emissions),the use ofalternative fuels,and a relative decline in demand for concrete as a result of greater design andconstruction efficiency.In the absence of any abatement action at all,global growth in demand forconcrete is forecast to result in 3.8 gigatons of annual CO2 emissions by 2050.By 205

14、0,however,more than a third of the industrys emissions will have to be abated with CCS,according to the Global Cement and Concrete Association(GCCA),which will require an estimated1.4 gigatons of CO2 in CCS capacity.(See Exhibit 1.)As of July 2023,however,the announced CCScapacity of GCCA members is

15、 just 19 million tons of CO2 a year.Making up the difference will not beeasy,and the effects on the cement industrys cost structure will be profound.2024 Boston Consulting Group4Today,the delivered cost of cement is determined largely by a plants proximity to limestone quarriesand demand centers,its

16、 cost of energy(including the availability of alternative fuels),and theefficiency of its kilns.But the need for CCS,and the cost of implementing it,will change thatdramatically.Winners and LosersThe cost of CCS will drive a significant increase in the price per ton of delivered cement from acurrent

17、$90 to$130 to at least$160 to$240 by 2050.The cost of the raw materials needed will beunaffected.But the cost of energy needed to make cement could rise by$20 to$30 per ton,aertaking into account the energy cost required to capture CO2 emissions.And transport costs,includingthe cost of transporting

18、CO2 to storage facilities,could triple and rise by another$20 to$40 per ton.(See Exhibit 2.)On the plus side,CCS costs will likely decrease as this technology matures and isdeployed at scale.2024 Boston Consulting Group5As the role of CCS in abating carbon emissions grows,benefiting from optimal CCS

19、 cost will becomean increasingly important competitive factor.This is turn will realign who is advantaged and who isnt,determining the extent to which cement plants are future proof.A key competitive factor will be how close a plant is to CO2 storage locations.Proximity will affect thecost of transp

20、orting captured CO2,as well as a plants connection to large-scale industrial CCS hubsto support shared infrastructure costs.Our analysis shows that CCS abatement costs at plants within200 kilometers of storage locations will be half that of plants located more than 750 kilometers away.As the role of

21、 CCS in abating carbon emissions grows,benefiting fromoptimal CCS cost will become an increasingly important competitive factor.Further advantage will come from a plants access to cheap renewable energy for capturing CO2.Likewise,plants with large kiln capacities will drive significant economies of

22、scale in using CCS tocapture CO2.(See Exhibit 3.)2024 Boston Consulting Group6Moreover,what was once a strategic advantage for a plant,such as an inland location far from portsand thus protected from import competitioncould become a disadvantage in the future if it islocated far from a CO2 storage s

23、ite,as the high cost of transporting CO2 will impact the plantscompetitiveness within its historic market.On the other hand,plants near ports that once couldexport their marginal clinker production may no longer have a cost advantage over countries thatonce imported cement,aer factoring in the cost

24、of CCS.Footprint of the FutureAs all of these factors gain importance,five very different plant archetypes will emerge(see Exhibit4):Export Hub.Internationally cost competitive for CCS and located near a port for efficientexport.2024 Boston Consulting Group7Plants that can keep CCS abatement costs l

25、ow and maintain outlets for theirproduct will thrive.These archetypes will determine the cement industrys future local and global market structure andtrade flows.(See Exhibit 5.)Plants that can keep CCS abatement costs low and maintain outlets fortheir product will thrive;those without competitive C

26、CS abatement costs will likely become too costlyand unattractive to investors,leading to plant closures.Inland Fortress.Locally or regionally cost competitive due to onshore storage access and closeto local demand centers.Former Exporter.Traditional exporter losing cost advantage due to high CCS aba

27、tement costs.Import Grinding Hub.No cost advantage for CCS but close to a port,allowing it to importcost-advantaged net-zero clinker and grind it locally to serve local markets.Stranded Asset.Limited structural cost advantage,at risk depending on cost of clinkertransport.2024 Boston Consulting Group

28、8The competitive advantage for the Middle East,for example,lies in its structurally lower energycosts,which could lead to a$20 per ton advantage in CCS cost versus the global median.SaudiArabia,in particular,could become an Export Hub.Similarly,in the US and Canada,the distance to suitable CO2 stora

29、ge such as saline aquifers anddepleted oil and gas reservoirs is around 50 kilometers on averageeight times less than thedistance in Europe,giving the two countries an advantage in the cost of clinker of$20 per ton.Thisshould enable them to thrive as Inland Fortresses focused on their own internal s

30、upply-and-demanddynamics,and potentially leading to the reshoring of much of the 15%to 20%of clinker productionthat is currently imported.In contrast,many parts of Europe face considerable competitive challenges because they have muchhigher energy costs and are located much further from suitable CO2

31、 storage sites.In many Europeanlocations,producing clinker could become economically unattractive.However,this is highly variablelocally:we anticipate a$70 to$100 per ton difference between first-and fourth-quartile EU plantabatement costs.In the future,it might become more economical to serve these

32、 markets withneighboring plants,both within Europe and elsewhere,that benefit from more competitive CO2abatement costs and that are located in places that can export their excess capacity.In many European locations,producing clinker could become economicallyunattractive.The realignment of the dispar

33、ities among cost and strategic factors at the country level will lead tofurther rationalization of production capacity,a rewiring and increase of regional and global tradeflows,and a more globalized clinker market.Three Potential FuturesExactly how much realignment takes place among cement producers

34、 will depend on two factors:theavailability and degree of regulatory and policy support,and the extent of innovation in the industry.Those factors in turn will determine the industrys overall structure and competitive landscape.The more local support that plants receive for CCSincluding policies all

35、owing for onshore storage,CCS investment,and the development of competitive green energythe less the industry will rely onreducing the global clinker production footprint.(See the sidebar,“Regulating the Future.”)2024 Boston Consulting Group9Given the high cost of CO2 abatement relative to the price

36、 of cement,newregulations and policies are required to drive the industrys net zero transition.Already,some regulatory efforts that attach a financial incentive to decarbonizationare in place,such as the EUs Emissions Trading System and the tax incentivesoffered for decarbonization in the US,which a

37、lso maintains one-time capital fundingprograms for companies looking to decarbonize.Regulatory decisions regarding onshore storage of CO2 must also be made,as theycan profoundly affect the cost of CCS.At present,CO2 storage in Europe is allowedonly offshore.While Northern Europe benefits from proxim

38、ity to the North Seas oiland gas reservoirs,areas such as southwestern France and Spain could be lesignificantly more isolated and face unviable CO2 transport costs.Should onshore storage be allowed,however,the fate of many plants could bereversed.Onshore storage would enable Spain to increase its c

39、linker exports furtherdue to its favorable energy-cost position and excess capacity,for example.In Italy,local support of affordable green energy for industries would also reduce relativecapture costs and change the competitive dynamic considerably.The industrys success in pursuing the innovations n

40、eeded to develop cost-effective newsupplementary cementitious materials(SCMs)to replace clinker,or even cement,will also impact itsfuture footprintbut its ability to do so remains highly uncertain.The more that plants can usegreen alternatives,the less the industry will require abated clinker capaci

41、ty in the future.This woulddrive further capacity rationalization and support cost-effective clinker capacity with CCS at the localrather than global level.(See the sidebar,“Innovation in the Mix.”)The cement industry has traditionally used products such as fly ash and groundgranulated blast-furnace

42、 slag as supplementary cementitious materials(SCMs)toreplace CO2-intensive clinker,thus producing cement with lower emissions that alsooffer specific product qualities.Yet the availability of these productscreated fromREGULATING THE FUTUREINNOVATION IN THE MIX 2024 Boston Consulting Group10the bypro

43、ducts of coal-fired power plants and basic oxygen steel making,respectivelywill decline significantly by 2050 as the two industries go through theirown sustainability transitions.The cement industry,therefore,faces a double innovation challenge:it mustcompensate for the drop in traditional SCMs by s

44、couting new cementitious materialsto reduce the use of clinker;and it needs to develop substitutes of cement itself.The ability to develop credible alternatives,at scale,will depend on the evolution ofcement and concrete product standards,the availability of alternative raw materials,and the capital

45、 needed to develop them.Recent recognition of low-emissions cementblends by the EU and investment in alternatives such as calcined clay,suggest thepath forward in developing new lower-cost,sustainable cementitious materials.Depending on the relative levels of the two factors,different plant location

46、s will experience one ofthree potential futures(see Exhibit 6):Globalized Trade Flows;Commoditized World.A lack of policy support and innovation wouldlead to both an increase and a rewiring of trade flows at a global level,due to significant regionaldifferences in the cost of CCS.In the short term,l

47、ocal producers will continue to be favored ascountrywide or regional markets maintain their own internal incentives to decarbonize.In the longerterm,the industrys production footprint will become more global,as more and more cement isexported from naturally advantaged CCS locations.Regional Clinker

48、Megafactories.Strong regulatory support across regions would lead to a futurein which the equalized cost of CCS reduces global disparities.This would effectively drive a 2024 Boston Consulting Group11consolidation of clinker production at the regional level(rather than global)into fewer,largerregion

49、al factories.Clinker capacity would consolidate around locations with favorable CCSeconomics,notably Inland Fortresses and Export Hubs.Such industry rationalization will decoupleclinker production from cement grinding,which will remain local and drive uneconomical assets outof the market.Rise of Cli

50、nker Alternatives.Stepping up product innovation in the industry would drive thedevelopment of cost-effective alternatives to clinker,reducing its ratio in cement production to lessthan 50%and driving reduced clinker requirements.Innovative alternatives to cement would give riseto a range of new pro

51、ducers while benefiting admixture players.Reduced demand for clinker wouldforce further rationalization of clinker capacity into fewer,more economical production hubs.Call to ActionCement producers looking to maintain or gain a competitive advantage in a changing industry mustmake critical decisions

52、 today regarding how they will allocate capital,innovate,and determine theirstrategies for success in a net zero future.Players should take the following key steps to navigate thetransition.Players must adopt a holistic approach in defining,delineating,andprioritizing decarbonization initiatives and

53、 a road map for implementation.1.Develop a decarbonization road map.Pulling all currently available decarbonization levers willlay a crucial foundation for the CCS future.Players must adopt a holistic approach in defining,delineating,and prioritizing decarbonization initiatives and a road map for im

54、plementation.2.Assess your footprint of the future.The most competitively advantaged plants of the CCSfutureExport Hubs and Inland Fortresseswill claim an increased share of local and exportmarkets.Assessing plant footprint in light of future industry evolution,determining your businessmodel for com

55、petitive advantage,and conducting war games to test resilience are critical strategicimperatives for every cement maker.3.Cra an innovation strategy.Cement makers should determine how innovation can best alignwith future strategy;assess their own R&D capabilities and potential ecosystem of partners;

56、andallocate resources to support their innovation portfolio.Careful selection of which innovation areasto focus on and access to the enabling resources is critical.2024 Boston Consulting Group124.Identify key policy needs and prepare for regulatory engagement.Local regulatory supportfor CCS will mak

57、e or break the economics of many at-risk plants.Players should identify the mostcritical policy interventions,assess the viability of proposed policies,and prepare for how to engagewith governments and other stakeholders,including industry associations such as the GCCA andregional and national assoc

58、iations.5.Define how you will manage large capital projects.The scale of most capital expenditureprojectsas much as$300 million or moremeans that delivering them on time and within budgetis critical.Players should identify and engage with the ecosystems needed to develop major CCScapital projects wi

59、th industrial partners and develop large capital project management capabilities.The scale of most capital expenditure projectsas much as$300 million ormoremeans that delivering them on time and within budget is critical.6.Create a green go-to-market strategy.In the future,demand for sustainable con

60、structionmaterials will increase.To thrive,cement makers must be able to measure and report their productcarbon footprint in order to guarantee the reliability of their green products.Moreover,playersshould rethink their go-to-market strategies to target new segments for their low-carbon products,an

61、d scout opportunities for capturing green premiums.The competitive dynamics of the global cement industry are changing rapidly as the need todecarbonize becomes increasingly pressing.Cement makers should begin now to determine howCCS will affect their production and pricing,and how that will change

62、their competitive positionlocally and globallyand to develop the winning strategies that will enable them to thrive.2024 Boston Consulting Group13AuthorsGuillaume RicomeMANAGING DIRECTOR&PARTNERLondonMarta GuzzafameMANAGING DIRECTOR&PARTNERMadridJason Degnan-RojeskiMANAGING DIRECTOR&PARTNERBostonIsh

63、ang JawaMANAGING DIRECTOR AND PARTNERNew DelhiABOUT BOSTON CONSULTING GROUPBoston Consulting Group partners with leaders in business and society to tackle their mostimportant challenges and capture their greatest opportunities.BCG was the pioneer in businessstrategy when it was founded in 1963.Today

64、,we work closely with clients to embrace atransformational approach aimed at benefiting all stakeholdersempowering organizations togrow,build sustainable competitive advantage,and drive positive societal impact.Our diverse,global teams bring deep industry and functional expertise and a range of pers

65、pectivesthat question the status quo and spark change.BCG delivers solutions through leading-edgemanagement consulting,technology and design,and corporate and digital ventures.We work in auniquely collaborative model across the firm and throughout all levels of the client organization,fueled by the

66、goal of helping our clients thrive and enabling them to make the world a better place.Boston Consulting Group 2024.All rights reserved.2024 Boston Consulting Group14For information or permission to reprint,please contact BCG at .To find thelatest BCG content and register to receive e-alerts on this topic or others,please visit .FollowBoston Consulting Group on Facebook and X(formerly Twitter).