Cement is an intermediate ingredient for making concrete, which in flip is an ingredient for building of roads and buildings all world wide. The value of cement and the amount produced is thus a marker for the extent of financial growth. A number of years in the past (I haven’t seen more moderen knowledge), China was producing greater than half of the cement on this planet as a part of its ongoing modernization. Furthermore, cement is an fascinating product, as a result of it reveals each economies of scale and excessive transportation prices–in order that there are usually comparatively few producers in a given geographic space. For all of those causes, Fabrizio Leone, Rocco Macchiavello, and Tristan Reed discovered it worthwhile to analyze “The Excessive and Falling Value of Cement in Africa” (American Financial Journal: Utilized Economics 2025, 17(2): 1–40).
For these not absolutely on top of things on their building supplies, cement shouldn’t be the identical as concrete. The authors clarify:
Portland cement (hereafter cement) is probably the most extensively used kind of hydraulic cement, which hardens when mixed with water. The primary inputs to cement manufacturing are limestone, clay, and gypsum, that are heated in a kiln to type clinker. Clinker is floor right into a high quality powder, which is completed cement. In flip, cement is a significant enter to ready-mix concrete, which is cement blended with gravel, sand, and water, and delivered to a building web site.
The authors level out that an environment friendly cement plant has excessive mounted prices: about $150 million for each million tons of capability. That’s, a bigger plant may have a decrease per-unit worth than a smaller plant, and thus will are likely to drive the smaller plant out of enterprise. Cement is heavy, and transporting it by land is dear. Put these two elements collectively, and markets for cement are usually localized and concentrated, with a number of larger-sized crops dominating every native market. (Economists name this a “pure monopoly,” during which the bodily traits of the product itself are likely to create a scarcity of native competitors.) The exception is a port metropolis with entry to water transportation, as a result of transferring cement by water is significantly cheaper than transferring it over land, so it’s attainable for such a metropolis to obtain cement from competing suppliers.
The authors present proof for 3 details:
- Reality 1: The common worth of cement in Africa was the very best of any continent in 2011, and consumption was the bottom.
- Reality 2: African economies have on common fewer cement corporations and fewer manufacturing capability than different continents.
- Reality 3: The common worth of cement in Africa fell by greater than in some other continent between 2011 and 2017, coinciding with entry and capability set up.
The authors search to disentangle the explanations behind growth of cement capability and falling costs throughout nations of Africa. For instance, is it improved expertise pushing down prices of manufacturing? Larger competitors in order that cement corporations are pressured to cost decrease markups above value? Are the decrease costs an indication of anticompetitive or cartel-like conduct among the many comparatively few cement firms? Have regulatory limitations make it tougher to begin a cement firm in lots of international locations of Africa? Maybe authorities guidelines or corruption in some type had been protecting cement costs excessive? They write:
Opposite to widespread perception, our mannequin estimates present that cement was no more costly in Africa on account of anti-competitive conduct or excessive entry limitations (e.g., on account of corruption). As an alternative, the small dimension of many nationwide markets restricted competitors and enabled incumbents to maintain increased markups. Constantly with this view, speedy entry and a decline in marginal value occurred in Africa at a time of speedy financial progress. … Our findings have implications for public coverage, particularly the lengthy standing program to cut back entry limitations and enhance competitors in low- and middle-income international locations. … [O]our outcomes problem the speculation that within the cement trade such insurance policies may have a considerable affect on markups and costs.
In brief, cement in Africa is a narrative of financial fundamentals for a product of specific traits in a rising economic system.
Cement is an intermediate ingredient for making concrete, which in flip is an ingredient for building of roads and buildings all world wide. The value of cement and the amount produced is thus a marker for the extent of financial growth. A number of years in the past (I haven’t seen more moderen knowledge), China was producing greater than half of the cement on this planet as a part of its ongoing modernization. Furthermore, cement is an fascinating product, as a result of it reveals each economies of scale and excessive transportation prices–in order that there are usually comparatively few producers in a given geographic space. For all of those causes, Fabrizio Leone, Rocco Macchiavello, and Tristan Reed discovered it worthwhile to analyze “The Excessive and Falling Value of Cement in Africa” (American Financial Journal: Utilized Economics 2025, 17(2): 1–40).
For these not absolutely on top of things on their building supplies, cement shouldn’t be the identical as concrete. The authors clarify:
Portland cement (hereafter cement) is probably the most extensively used kind of hydraulic cement, which hardens when mixed with water. The primary inputs to cement manufacturing are limestone, clay, and gypsum, that are heated in a kiln to type clinker. Clinker is floor right into a high quality powder, which is completed cement. In flip, cement is a significant enter to ready-mix concrete, which is cement blended with gravel, sand, and water, and delivered to a building web site.
The authors level out that an environment friendly cement plant has excessive mounted prices: about $150 million for each million tons of capability. That’s, a bigger plant may have a decrease per-unit worth than a smaller plant, and thus will are likely to drive the smaller plant out of enterprise. Cement is heavy, and transporting it by land is dear. Put these two elements collectively, and markets for cement are usually localized and concentrated, with a number of larger-sized crops dominating every native market. (Economists name this a “pure monopoly,” during which the bodily traits of the product itself are likely to create a scarcity of native competitors.) The exception is a port metropolis with entry to water transportation, as a result of transferring cement by water is significantly cheaper than transferring it over land, so it’s attainable for such a metropolis to obtain cement from competing suppliers.
The authors present proof for 3 details:
- Reality 1: The common worth of cement in Africa was the very best of any continent in 2011, and consumption was the bottom.
- Reality 2: African economies have on common fewer cement corporations and fewer manufacturing capability than different continents.
- Reality 3: The common worth of cement in Africa fell by greater than in some other continent between 2011 and 2017, coinciding with entry and capability set up.
The authors search to disentangle the explanations behind growth of cement capability and falling costs throughout nations of Africa. For instance, is it improved expertise pushing down prices of manufacturing? Larger competitors in order that cement corporations are pressured to cost decrease markups above value? Are the decrease costs an indication of anticompetitive or cartel-like conduct among the many comparatively few cement firms? Have regulatory limitations make it tougher to begin a cement firm in lots of international locations of Africa? Maybe authorities guidelines or corruption in some type had been protecting cement costs excessive? They write:
Opposite to widespread perception, our mannequin estimates present that cement was no more costly in Africa on account of anti-competitive conduct or excessive entry limitations (e.g., on account of corruption). As an alternative, the small dimension of many nationwide markets restricted competitors and enabled incumbents to maintain increased markups. Constantly with this view, speedy entry and a decline in marginal value occurred in Africa at a time of speedy financial progress. … Our findings have implications for public coverage, particularly the lengthy standing program to cut back entry limitations and enhance competitors in low- and middle-income international locations. … [O]our outcomes problem the speculation that within the cement trade such insurance policies may have a considerable affect on markups and costs.
In brief, cement in Africa is a narrative of financial fundamentals for a product of specific traits in a rising economic system.
