Credible carbon credits seed SCM capacity

This year closes with strong cement and concrete market indicators, especially considering investor enthusiasm for publicly held clinker capacity. Consider activity among New York Stock Exchange-traded operators since Labor Day: Summit Materials announced a cash and stock deal for Argos North America Corp., its $3.2 billion valuation reflecting cement production and distribution assets in Alabama, Florida, South Carolina and West Virginia. The closest Big Board listing to a pure cement bellwether, Eagle Materials Inc., has seen its stock return to near-record territory, thanks partly to Infrastructure Investment and Jobs Act and Inflation Reduction Act funding tailwinds.

How about CRH Plc? Leading into Q4, the producer moved its primary listing from London to New York. Late last month, CRH Americas Materials announced a $2.1 billion deal for Martin Marietta Materials’ Texas cement and ready mixed concrete production assets (note report, page 14). Although not directly traded on Wall Street, CRH’s European peer Holcim Ltd. announced in early November one its top capital outlays for the decade: A $100 million upgrade of the Holcim US Ste. Genevieve Cement Plant, raising annual capacity by 600,000 metric tons (note report, page 16). The takeaway from Holcim, CRH, Eagle and Summit investors: U.S. cement clinker capacity commands a premium. 

With projected demand outstripping supply, and construction market forces calling for a lower clinker factor in concrete mix designs, producers are addressing to some degree the need for greater supplementary cementitious materials availability. Investor interest in higher SCM processing capacity and distribution, nevertheless, has its limits. Enter carbon financing. Some SCM capacity tied to domestic cement clinker constraints, carbon metrics and regional supply complications could be met with funds raised from the sale of credits promoted as a means of reducing portland cement levels in concrete mix designs—lowering the net carbon dioxide emissions associated with finished slabs or structures. A new benchmark from Pennsylvania sustainability consultant ClimeCo provides a carbon financing proposition for SCM capacity, excepting projects for fly ash captured and collected from live coal-fired power generation, GGBF slag cement, portland-limestone cement, and silica fume. 

ClimeCo and a stakeholder working group secured approval in early November of their 10-month undertaking, U.S. Low-Carbon Cement Protocol v1.0, by global carbon market offset registry Climate Action Reserve, Los Angeles. The document sets terms for generating voluntary carbon credits from production of novel alternative or SCM: Raw or calcined natural pozzolans; ground glass pozzolans; rice husk ash; plus harvested and beneficiated fly ash. The working group includes representatives of Ash Grove Cement, Eco Material Technology, Heidelberg Materials, along with the National Ready Mixed Concrete Association and Portland Cement Association.

Stakeholders paint a carbon credit-based funding stream driving the commercial launch of portland cement alternatives. They designed Protocol v1.0 “to ensure the complete, consistent, transparent, accurate, and conservative quantification and verification of greenhouse gas emission reductions associated with a low-carbon cement project … The protocol creates a tested and valid pathway for companies to generate voluntary carbon credits and direct much-needed funds to the production of additional cementitious materials.” 

While they do not carry comparable force of law, Low-Carbon Cement Protocol guidelines emulate U.S. Securities & Exchange Commission accounting and reporting measures for public companies. The heightened interest we see in SCM processing and distribution underscores the document’s relevance and timeliness for spurring investment untethered to Wall Street.

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