Macro optimism
In the U.S., roughly 19 million metric tons of supplementary cementitious materials (SCMs) go into concrete products. About 74% of those SCMs are fly ash, with slag, natural pozzolans, calcined clay and silica fumes making up the rest.
But the U.S. is producing less and less fly ash. Production plunged 63% between 2013 and 2021, from 70 million metric tons to 25 million metric tons. It’s on track to decline another 39% by 2032.
The nation will need to find at least six million metric tons to seven million metric tons of SCMs just to maintain its current 14% inclusion rate — and 22 million metric tons to 23 million metric tons to increase inclusion rates to 24%. Can it be done? The answer is a conditional yes.
Regional solutions but no magic wand
The U.S. has numerous fly ash ponds with more than two million metric tons of reserves. However, most of these are in the Southeast or eastern Midwest and will offer limited new supply to the rest of the country. The quality of fly ash in these ponds is also poorly understood, while the inclusion rate of fly ash in Portland-limestone cement maxes out at 20% or so.
In the West, natural pozzolans are widely available. They’re relatively inexpensive to extract, but pozzolanic reactivity levels and water demand can significantly limit their inclusion potential.
The eastern part of the country has clay. Calcined clay can achieve cement substitution rates higher than those of fly ash or typical natural pozzolans. However, flash calciners remain a significant capital expenditure.
Most issues aren’t about product strength or production
Water demand, freeze/thaw resistance and initial set times can be just as important to customers as strength. There’s also the reality that SCM markets are significantly smaller than cement markets due to factors such as:
- SCM inclusion limits
- End customers with fixed water-to-cement ratios
- Ready-mix concrete plants with only two silos available
- Vertically integrated or affiliated operators
As a result, SCMs can have much more volatile prices than cement. Add the impact of new capacity or a single large project to a smaller-than-expected addressable market and you have a recipe for pricing disappointment.
All these risks can be remediated
Stake out a winning position with a realistic assessment of prospective demand in regional markets. Find out who’s selling what and for how much. Stay abreast of competitive projects and potential competitive threats.
You’ll also want to know the effects that coal generator closures are likely to have, keeping in mind that the shutdown of one of two coal plant generators doesn’t mean a 50% reduction in fly ash production.
From a go-to-market perspective, map out potential customers along with their volumes and ownership. Gauge their interest in a new product, whether blended or straight. Segment by segment, consider the needs of both customers and end users. Don’t forget to count the silos (thank you, Google Maps) and assess the economics of silo leasing options if need be.
For more on the challenges and opportunities in closing the projected shortfall of SCMs, please download our analysis. And if you’d like to continue the conversation, please contact us.
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