As the dust settled on the battlefields of Trento, Udine, and Triesto, and Italy signed its armistice with Austria, marking the end of the Great War, a company already 88 years old stood up in the Ardéche region of France and began to establish itself as a world financial power.
Known in 1919 as Lafarge, the cement company produced 800,000 tons of cement a year, added a few monikers to the front and back of its name, and became an international corporation. By 1923, the company was being traded on the Parisian stock exchange (the Paris Bourse). In 1928, the company moved its headquarters from rural France to Paris.
Meanwhile, a cement producer that formed in Holderbank, Switzerland, in 1912 extended its reach of investments in cement companies from Europe to producers in Egypt, Lebanon, and South Africa. This company would eventually be known as Holcim
Cement production had become the stuff of high finance.
In the 80 years since, the cement world has become both bigger and smaller: bigger in the size of these once-small companies that now stand as behemoths, and smaller in the number of companies operating.
Lafarge started as a small lime kiln along the Rhone River. Now, along with producing cement, concrete, and aggregate, Lafarge has interests in products as diverse as biotechnology and home building. And while dozens of companies still exist around the world, no cement market, save for China and Venezuela, is not dominated by some amalgamation of the four major cement producers: Lafarge, Holcim, HeidelbergCement, and Cemex.
These four giants are now just as much financial institutions as they are manufacturers. Being publicly traded means answering to investors who are just as affected by interest rates as they are by housing starts. And since the dawn of the new millennium, these cement companies have been acquiring tremendous amounts of debt.
For instance, Mexico's Cemex has grown enormously since 2000, largely by accruing debt to acquire competitors. Cemex is the harshest example of the toll the economic downturn has taken on the cement industry, as the huge amounts of debt have led the company to propose a plan to refinance $15 billion that was to come due in the next two years. Cemex's struggles forced the company to sell its Australian operations for $1.6 billion to Holcim, half of what it paid in 2007.
Cement is, of course, the primary ingredient in concrete. Just as concrete provides the foundation for our world, so too does cement provide the foundation for the concrete industry. But before it is mixed and poured, and before cement joins with aggregate and water and hardens into the solid material upon which the modern world has grown, it is first a fine, infirm powder, subject to any strong wind that would blow it away.
The strong wind of global economic decline is prevailing on the international cement industry. Companies who, for the past decade and throughout their entire histories, have been acquiring are now selling assets at a breakneck pace.