Built to last: The plans of Peru's Unacem to help create sustainable and resilient infrastructure

Companies like Peruvian cement and energy group Unacem will be crucial to supply materials that are needed to build resilient infrastructure as extreme weather events become more common.

In addition, Unacem is also seeking to be an industry trailblazer and reduce its carbon footprint by using alternative fuels.

BNamericas spoke with Unacem CEO Pedro Lerner on the sidelines of the APEC CEO Summit about cement, concrete and energy production, and growth prospects for the coming year.

BNamericas: Why did Unacem get involved with the APEC CEO Summit, becoming a partner and participating in panels?

Lerner: There are several reasons. First, because Peru is the host country, and I think that the country's brand should be promoted internationally. Second, because we operate in five countries, all five of which are in the Pacific basin – Peru, Chile, Ecuador, Colombia and the US – and three of them are APEC member economies.

Finally, having participated in the sustainability panel in the context of climate change is important for the industry in which we operate, involving cement, concrete and electric energy, which are sectors that will play an important role in mitigating and adapting to climate change.

BNamericas: Why mitigation and adaptation?

Lerner: Mitigation because it is a carbon-intensive industry. On the adaptation side because cement is essential for building resilient infrastructure that can withstand the increasingly extreme events of climate change. There is a lot of talk about rising ocean levels, which translates into dikes, roads, canals, and infrastructure capable of withstanding various natural disasters.

[Concrete and cement] are resilient, inexpensive materials, and at the moment there is no large-scale substitute. Therefore, they play a fundamental role in climate change adaptation strategies.

BNamericas: And what strategies are you seeking to implement to reduce your carbon footprint?

Lerner: Talking specifically about energy, one is the use of alternative fuels. Cement production processes require a large amount of heat; to obtain it, fossil fuels such as coal, oil or natural gas are used.

Along these lines, cement technology is advancing to burn less carbon-intensive heat sources such as biomass or waste-derived fuels. At our operations in Ecuador, we have managed to replace up to 60% of the fossil fuels in one of the kilns; and in the US, we’re replacing part of the fossil fuels with pistachio shell derivatives.

BNamericas: What's the potential for waste-derived fuels?

Lerner: There is, in general, huge potential for waste processing. In Europe, a whole recycling policy has been designed to eliminate the need for landfills. What can no longer be reused, and which in theory would end up in landfills and dumps, can be processed in cement kilns.

There is the potential to be an important ally in solving a sanitary problem; but it’s important that regulatory frameworks allow industries like ours to enter the garbage business as an ally.

BNamericas: And what kind of renewable energy initiatives have been implemented in Peru?

Lerner: In Peru, we have made progress in terms of electricity. Our El Platanal hydroelectric plant, which operates within the national interconnected system, supplies electricity to all of our industrial operations. I would say that we’re one of the few cement companies in the world that is supplied with 100% renewable hydroelectric energy.

Celepsa, the group's company responsible for the hydroelectric plant, is also developing a portfolio of renewable projects, solar and wind, to be able to grow in the renewable electricity generation sector. That’s our focus.

BNamericas: At what stage is it?

Today, we’re in the study phase of renewable energy projects. We will probably see the Unacem group starting operating solar and wind power plants between 2027 and 2030.

BNamericas: What's your assessment of the construction sector for 2024?

Lerner: In Peru, the construction sector has not grown, at least regarding cement shipments, compared to 2023; but there have been certain changes.

In the first half of 2024, a contraction was seen in the self-construction sector, but this was offset by an increase in the progress of large infrastructure projects.

In the second half, however, there was an upturn in the first category, which is making 2024 similar to 2023.

BNamericas: And what about 2025?

Lerner: Considering that it will be a pre-election year, we’re being cautious with our projections. We believe that, at least in Peru, in terms of volumes, it will be in line with 2024 or there will be slight growth.

At the group level, considering all the regions where we operate, we project slightly higher growth.

BNamericas: Last year you closed the purchase of a cement company in the US for more than US$300mn. How is this operation advancing?

Lerner: We’re consolidating the operation. As of December 2022, in the US, we had an operation of 700,000 short tons of cement [per year]; and today we have a capacity of 2.1Mt/y. We’re developing the commercialization of the acquisition we made in the state of California.

Overall, the Unacem Group's growth drivers in 2025 will be our operations in the US and our electric power business.

BNamericas: And how do you see the Chilean market?

Lerner: We see that investment in infrastructure has increased, but not the construction of new housing. This is reflected in the permits for new housing, which are not being granted.

The Chilean construction sector is also facing exchange rate pressure, which is challenging because some of the materials used to produce cement – clinker imports – are priced in dollars. The latter is putting pressure on the margins of cement and concrete operators.