At first glance, the outlook for the global cement industry appears grim. Particularly in Europe, the industry has limited opportunities for growth, with flat or declining volumes and low valuation multiples. Companies are also having trouble attracting talent and facing significant costs to reach net-zero emissions. This is a challenging puzzle to solve—but it could be the start of a new “golden age” for the industry.
One major unlock—the greater adoption of supplementary cementitious materials (SCMs) and fillers—could completely reverse the industry’s negative trajectories. SCMs are often low-carbon, lower-cost alternatives to clinker.1 GCCA policy document on blended cements and supplementary cementitious materials, Global Cement and Concrete Association, October 2024. Existing and innovative SCMs could clear the way for decarbonization ambitions (notably in Europe) or alleviate supply in regions where clinker supply is constrained (for example, in the United States). McKinsey analysis suggests that greater SCM adoption could grow global SCM revenues to $40 billion to $60 billion by 2035 from $15 billion to $30 billion today. crack fillers
Previous McKinsey research has described the range of levers that are likely to be relevant as the cement industry decarbonizes.2 “Cementing your lead: The cement industry in the net-zero transition,” McKinsey, October 6, 2023. This article focuses on the true potential of SCMs, which we expect to play a preeminent role in the coming decade alongside other decarbonization levers—including an uptake in circularity and recycling, which share some structurally similar dynamics. If industry players seize the SCM opportunity, the cement industry could achieve growth, more attractive business structures (albeit with consolidation of some existing assets), and unprecedented returns for the remaining capital invested.
Players in the cement industry today are dealing with substantial challenges. Current projections show the industry is expected to plateau (in terms of volume) through 2050.3 McKinsey Cement Demand Model, consistent with Concrete Future: The GCCA 2050 Cement and Concrete Industry Roadmap for Net Zero, Global Cement and Concrete Association, October 2021. Several factors are responsible for this challenging value creation outlook:
In these challenging economic circumstances, cement and concrete players find it difficult to pursue decarbonization with gusto, especially if they do not yet have a sufficient base of customers willing to pay for low-carbon solutions in the near term.
Of the available decarbonization options, SCMs and fillers stand out because of their technological maturity, their current level of integration with existing standards, and their economic viability. In fact, according to our analysis, SCMs and fillers are expected to be the best solution for the industry in the next five to ten years. We do not suggest that SCMs and other cementitious solutions8 “Cementitious” materials refers to both SCMs and fillers that can or could replace clinker in cement and concrete products. are the only option for manufacturers; rather, SCMs are expected to be the decarbonization solution of choice in the coming years in regions where they are available, until alternative innovative technologies are ready and cost-effective.
SCMs and fillers can replace clinker (the most emissive component of cement) in cement mixes, lowering cement’s emissions profile by 70 to 80 percent in some cases.9 “Frequently asked questions about ACT,” Ecocem, accessed November 14, 2024; Isabelle Dumé, “We can reduce CO2 emissions from cement by a factor of 10,” Polytechnique Insights, January 6, 2022. Traditional SCMs include fly ash, ground granulated blast-furnace slag (GGBFS), and silica fume, while innovative SCMs and fillers include calcined clay, increased limestone use, and recycled concrete. Some researchers and players are working on truly innovative SCMs with zero or even negative carbon footprints that would valorize basic oxygen furnace (BOF) and electric arc furnace (EAF) slag from steelmaking, as well as other waste streams.10 John L. Provis, Laura Stefanini, and Brant Walkley, “Basic oxygen furnace (BOF) slag as an additive in sodium carbonate-activated slag cements,” Materials and Structures, 2024, Volume 57, Number 153; Sofiane Amziane et al., “Utilization of air granulated basic oxygen furnace slag as a binder in belite calcium sulfoaluminate cement: A sustainable alternative,” Journal of Cleaner Production, January 10, 2024, Volume 436.
SCMs may also have a secondary benefit in markets where clinker supply is constrained, such as in some US markets. For example, they could enable the cement and concrete industry to produce more tons of cement (and concrete) per ton of clinker. This would relieve pain points from limited clinker supply and would be an alternative to the usually expensive capital expenditures needed for growth.
To varying degrees, SCMs and fillers are already approved in building standards, and they are widely available (albeit not in all micromarkets).11 “ASTM C618-22: Standard specification for coal fly ash and raw or calcined natural pozzolan for use in concrete,” ASTM, updated March 14, 2023; “ASTM C1157-02: Standard performance specification for hydraulic cement,” ASTM, updated August 16, 2017; “DIN EN 206: Concrete - Specification, performance, production and conformity (includes Amendment :2021),” European Standards, June 2021; “UNE EN 197-6:2023: Cement - Part 6: Cement with recycled building materials,” European Standards, September 20, 2023. Unlike other decarbonization options, SCMs and fillers are also cost-efficient; in fact, they are already profitable today. In Europe, for example, EBIT margins for SCMs and fillers could exceed 50 percent by 2035, according to McKinsey analysis. Both for operational reasons and to optimize carbon emissions and costs, the industry already uses 24 percent SCMs in cement mixes; however, it is not yet employing this technology at its full potential.12 “GNR 2.0 – GCCA in Numbers,” Global Cement and Concrete Association, accessed November 13, 2024.
As a result, over the next few decades, we expect the use and mix of SCMs and fillers to shift. For example, according to McKinsey analysis, now and over the next five to ten years in Europe, players face domestic supply constraints for existing industrial SCMs—chiefly granulated blast-furnace slag (GBFS ) and fly ash—as coal plants ramp down and steel production gradually shifts away from blast furnaces. Global imports into Europe may mitigate some of these constraints. The widening gap is likely to be filled by natural SCMs and fillers (notably pozzolans, calcined clay, and limestone fillers), which show potential to benefit from this shift. Beyond the next decade, innovative SCMs and fillers (and alternative binders) may play a more significant role as research, development, and innovation pay off (Exhibit 1).
As the world decarbonizes, cementitious solutions—SCMs and fillers—are expected to be the most effective path forward for the cement industry. Players with established footprints can adopt a start-up mindset to build new SCM businesses to take advantage of this massive value-creation opportunity. The player landscape is also expected to change, with mining and steel players and new start-ups likely to play a bigger role as today’s localized markets expand to cover larger regions.
A few factors are expected to be at play in the future cementitious industry: healthy regional demand growth, increasing material prices, a consolidating supplier landscape, and a shift toward new solutions and business models.
These factors will shape player considerations moving forward as the cement industry becomes a cementitious industry, built around SCMs, to facilitate more cement per metric ton of clinker. This will support both the global transition to net-zero and cement growth where clinker is constrained.
Although the changes we expect to see are global in scope, the drivers underlying them vary by region. For example, Europe and North America are expected to drive demand for SCMs (particularly to 2035), but for different reasons.
Below, we explore some of the regional projections and implications of the growing market for SCMs and fillers.
In Europe, demand, prices, and margins for cementitious materials are expected to be slightly positive as a result of growing infrastructure demand in Eastern Europe and Türkiye, as well as regional retrofit activity to achieve greater energy efficiency. In one scenario, prices for cement are likely to rise above €200 per metric ton (by 2035) in many European markets, and EBITDA margins for sustainable materials (such as low-carbon clinker and certain SCMs) could range above 30 percent in certain markets.15 This scenario was modeled in McKinsey’s SCM Outlook Model based on rising emissions trading scheme (ETS) prices, retirement of free allowances, and an effective CBAM.
SCMs and fillers in the region represent an emerging value pool that could reach €8 billion to €10 billion in 2035 (Exhibit 2). This is likely to grow further as new SCMs and fillers are developed, particularly if clinker can be substituted beyond the approximately 60 percent clinker share currently foreseen in industry road maps.16 “CEMBUREAU’s Net Zero Roadmap,” CEMBUREAU, May 21, 2024.
European players with large emissions footprints will need to adapt as demand shifts toward sustainable materials, driven by regulation (and, to some extent, customers). Increasing carbon taxes and the resulting decarbonization could lead companies to restructure their current asset footprints, such as shutting down difficult-to-decarbonize assets or converting them into SCM assets where possible given the availability of raw materials. At the same time, by 2035 we expect a few net-zero mega-clinker plants to emerge in locations with limestone access, green energy, and CO2 sink and storage capacity, leveraging scaled CCUS technology.
Demand growth in North America is projected to be robust, driven by strong GDP growth, increased infrastructure and housing demand (particularly in the southern United States), and government-backed infrastructure initiatives.17 Evie Gardner, “Cement 2024 – stagflation,” World Cement, January 11, 2024. Additionally, reshoring and friendshoring are expected to bolster private sector infrastructure investments. This balance of supply and demand is expected to support a healthy pricing environment, particularly given the relatively consolidated nature of the North American cement market.
As North America seeks to meet this high demand, it is expected to encounter material and labor shortages. These will be key drivers for adoption, since SCMs and fillers can replace clinker in a clinker-constrained market. Already, all available GGBFS in the United States (approximately three million to five million metric tons, both local and imported) is used, as well as 15 million metric tons of fly ash.18 “Minerals Yearbook 2021 (Volume I. -- Metals and Minerals),” National Minerals Information Center, US Geological Survey, 2023; 2022 coal combustion product (CCP) production & use survey report, American Coal Ash Association, 2022. To meet growing demand, North America is expected to rely on traditional industrial SCMs (GGBFS, fly ash, limestone) longer than the European Union, because traditional manufacturing is not expected to be converted as quickly.
The US concrete industry, known for its fragmentation and emphasis on flexibility, is less likely to see the same level of vertical integration expected in Europe. In addition, state and federal regulations in the United States are beginning to take shape, including climate disclosure rules, legislation such as the Infrastructure Investment and Jobs Act, standards for lower-carbon materials in government projects, and state-driven carbon taxes and green premiums, such as California’s Buy Clean California Act and New York’s Local Law 97.
Other markets across the world will see their own shifts in cementitious markets, driven partly by local dynamics and partly by global trade flows. Below, we outline considerations across key regions.
The global cement industry could turn around its sluggish growth and declining multiples over the next ten years. However, as in every journey, not everyone will succeed. Four mindset shifts could make the difference between winning and losing:
Looking forward, the global cement industry could achieve greater growth from novel solutions, higher margins, and greater global integration. However, to succeed in the coming cementitious landscape, players will need to play offense and act fast. As the new blueprint of the cement industry takes shape between 2025 and 2035, those that are first to the table stand to reap the greatest rewards.
Fabian Apel is a partner in McKinsey’s London office, Fabian Metzeler is a partner in the Dusseldorf office, Jose Luis Blanco is a senior partner in the New York office, Patrick Schulze is a partner in the Berlin office, Shailesh Lekhwani is an alumnus of the Houston office, and Thomas Czigler is an expert in the Frankfurt office.
concrete expansion joint filler foam The authors wish to thank Eleftherios Charalambous and Qiao Xie for their contributions to this article.