The Mongolian cement market is still fairly young; its development is at a stage about twenty years behind that of the Chinese cement market.  What follows are some of the current challenging trends in the Mongolian cement industry that are limiting production to below full capacity.  Central Asian Cement has strategies in place to reverse these trends over the coming years.

• Raw material supply low

The raw material, especially high-quality clinker, is often expensive or hard to obtain, limiting production ability. For example, this factory has the capacity to produce 100,000 tons of cement annually, but has only produced 20-40,000 in the last two years due to lack of financing of raw materials. If the factory had enough raw materials, it would be able to sell the entire 100,000 tons of cement. Central Asian Cement usually obtains clinker from the factories in Darkhan and Hutuul, as well as importing from China. The clinker market is a producer dictated market, and the price of clinker fluctuates often. Even if clinker is available, it is often low-quality, or unaffordable for smaller, local factories.

• Not operating at full capacity

Factories are extremely inefficient, operating at an average of 30-40 percent capacity. Furthermore, most still use the outdated wet technology. As factories are getting shut down in China and technology is being upgraded, the old equipment will likely come to the Mongolian market. Central Asian Cement operates using the more energy efficient semi-dry technology.

• Transportation bottlenecks

There is only one train line that runs from China to Mongolia, which is backed up for the majority of the summer. With rising oil costs and a low value-to-weight ratio, transporting cement is increasingly expensive. In China, the cement industry is highly regionalized, and the cement factories are located in close proximity to the construction. It is also difficult to rent the trucks necessary to transport cement for small buyers.

• Growth of exports

Russia is getting rich because of oil; there is also a wave of development from western to eastern Russia. With the upcoming Winter Olympics also in Siberia, demand for cement in Russia is growing rapidly. As cement in Mongolia is far cheaper, many are looking to produce cement to export to Russia. The government is attempting to regulate exports—there is currently a ban, albeit unenforced, on exporting cement from Mongolia.

• Production Halts during Winter

With a temperature that averages -40 degrees Centigrade in the winter, Mongolia does not yet have the technology to produce cement in the winter. Thus, factories often only operate five months a year.