J.P. Morgan retains a constructive stance on two leading European cement producers, stating that Heidelberg Materials AG and Holcim Ltd are well placed to remain among the best stocks in the building materials sector through 2035, even if carbon-pricing outcomes prove weaker than currently expected.
Heidelberg Materials AG
The bank keeps an "overweight" recommendation on Heidelberg Materials, citing the company's role as a prominent sector "decarbonizer." Under a scenario that assumes a lower carbon price of c40 per tonne and a slower removal of free allowances, J.P. Morgan calculates that Heidelberg would only need about a 10% cumulative price increase by 2035 to neutralize the extra costs stemming from the EU Emissions Trading System (EU ETS). The broker notes that sector-wide pricing could rise by more than that level, which would create a favorable spread between selling prices and costs. J.P. Morgan highlights Heidelberg's operational scale, its investments in carbon-reduction technology and its track record of pricing discipline as reasons it ranks highly among European construction materials ideas.
Holcim Ltd
Holcim is also assigned an "overweight" rating. J.P. Morgan points to comparable structural strengths: significant investment in decarbonisation, development of low-carbon cement offerings and resilience to regulatory tightening and carbon-price volatility. The broker expects that industry-level pricing strength, even if carbon prices are lower than base assumptions, would help support margins. Holcim is viewed as positioned to benefit from disciplined supply and an environment of improving construction volumes, factors that keep it among the preferred names in the sector, according to the firm.
Implications and positioning
J.P. Morgan's analysis rests on two pillars: the ability of companies to pass on incremental EU ETS costs through pricing, and the relative advantage of firms that have proactively invested in carbon-reduction measures. Both companies are judged to combine scale with decarbonisation progress and demonstrated pricing discipline, which the broker sees as key to preserving margins under alternative carbon-price trajectories through 2035.
Limitations
The bank’s conclusions are framed around a specific weaker carbon-price scenario ( c40/tonne) and a slower phase-out of free allowances; outcomes that differ materially from those assumptions could alter the assessment. J.P. Morgan's view focuses on structural advantages rather than guaranteeing future results.