Displaying items by tag: Consumption

Morocco: Cement consumption fell by 6.91% to 3.31Mt in the first three months of 2018 from 3.55Mt in the same period of 2017. Consumption decreased particularly in the Dakhla - Oued Ed-Dahab, Fès - Meknès and Béni Mellal - Khénifra regions according to Ministry of Housing data. It also dropped sharply in March 2018 by 15.1% to 1.24Mt.

Spain: Oficemen, the Spanish Cement Association, says that cement consumption grew by 11% year-on-year to 12.3Mt in 2017. The association expects it to rise by 12% to 13.7Mt in 2018. However, the cement consumed in 2017 is well below the high recorded in 2007. This has been due, in part, to a decrease in the amount of cement used in infrastructure projects. Cement used in civil works decreased by 75% to 5Mt in 2017 from 19Mt in 2008.

Exports of cement fell by 10% to below 9Mt, mainly due to a ‘loss of competiveness’ caused by growing local electricity prices. The association added that Spain is the largest exporter in the European Union and the eighth largest exporter of cement worldwide.

France: Bénédicte de Bonnechose of the Syndicat Français de l’Industrie Cimentière (SFIC), the French cement union, says that the market is expected to have grown by 3 - 4% in 2017. Cement consumption reached 17.5Mt in 2016, according to the Agence France Press. De Bonnechose described the growth as a ‘sharp signal’ that the French cement industry was recovering following hitting its lowest levels since the 1960s.

Indonesia: Semen Indonesia forecasts that domestic cement consumption will grow at a rate of 5 – 7% year-on-year in 2018, a lower rate than the level of 7.8% recorded for the first 11 months of 2017. Semen Indonesia corporate secretary Agung Wiharto said that the prediction was based on continued demand for cement from government infrastructure projects, according to the Jakarta Post. The company also took other factors - such as inflation, political stability and market confidence - into account in its sales projection. Indocement has also forecast a cement consumption growth rate of 5 – 6% in 2018. Both companies reported reduced earnings in the third quarter of 2017.

Spain: Cement consumption is expected to have risen by 10% year-on-year to 12.3Mt in Spain during 2017. This represents the highest consumption by the sector since 2012. It is still massively down on the 25Mt/yr consumption seen during the building boom experienced by the country prior to the economic downturn.

Exports, which had been a ‘lifesaver’ for the sector during the crisis, fell by 7.6% year-on-year in the first eight months of 2017 to 5.8Mt. Spain exported 9.1Mt of cement in 2016.

Pakistan: According to the All Pakistan Cement Manufacturers Association (APCMA) Pakistan’s cement exports continued to decline in October 2017. Exports fell by 14.6% month-on-month to 443,000t, due in part to higher domestic cement consumption. However the APCMA stated that falling exports were a concern while some Pakistani cement capacity remains idle.

The largest fall in exports was via sea, rather than overland exports to immediate neighbours. This was despite the northern part of the country, closest to India and Afghanistan, consuming 3.14Mt of cement. This is the first time that the region has consumed more than 3Mt in a single month. In October 2016 the north of Pakistan consumed 2.5Mt of cement. In the south, demand also increased from 0.52Mt in October 2016 to 0.63Mt in October 2017.

Forget the news stories about poor markets in Colombia and Brazil. Argentina is riding a construction boom right now. Local producer Loma Negra recently ran an initial public offering and it picked a good time to do it. It aimed to generate up to US$800m from the flotation and in the end it raised over US$1bn. Good news for its Brazilian owner InterCement no doubt, which was last reported as aiming to sell a 32% stake in the company in order to cover its debts. More cheer must have followed from Loma Negra’s third quarter results this week. Its cement sales volumes rose by 9% in the latest quarter to 1.72Mt due to expanding local construction activity.

Graph 1: Cement production and consumption in Argentina Q1 – 3, 2008 – 2017. Source: Asociación de Fabricantes de Cemento Portland (AFCP).

As Graph 1 shows its experience mirrors the wider industry. Cement production rose by almost the same rate for the industry as whole, by 10% year-on-year to 3.19Mt for the quarter, according to Asociación de Fabricantes de Cemento Portland (AFCP) data. For the nine months as a whole production has also risen by 9% to 8.7Mt. This figure is the third highest in the last decade since 2008. Production peaked in 2015 before dropping a major 10Mt following a subdued construction industry in the wake of devaluation of the Argentinean Peso in late 2015 and early 2016. At the time LafargeHolcim, the operator of Holcim Argentina, also blamed the negative influence of neighbouring Brazil’s own financial woes. The economy has bounced back giving the country’s its highest nine month cement consumption figure, 8.8Mt, in the last decade.

Earlier in the year LafargeHolcim said it was importing 0.25Mt of cement into Argentina between May 2017 and April 2018 because it couldn’t meet local demand from its own plants. Given the over-abundance of clinker in the world one might be forgiven for being sceptical about this claim. Bolivia’s Itacamba announced it was also exporting cement to Argentina this week. However, the other point to note from the graph is that consumption has been about 90,500t higher than production so far in 2017. This is an envious position for local producers to be in. One more striking feature that sticks out from the graph above is the undulating curve than both production and consumption has. The Argentinean economy has been through the ringer in recent years and this shows in the ups and downs of the figures.

From the perspective of the three major domestic producers, Loma Negra’s sales revenue rose by 53.9% year-on-year to US$620m in the first nine months of 2017. Its adjusted earnings before interest, taxation, depreciation and amortisation (EBITDA) rose by a whopping 73% to US$157m. Cementos Avellaneda, owned by Spain Cementos Mollins and Brazil’s Votorantim, reported similar good news with its overall results boosted by the Argentine market. Its sales revenue in the country rose by 28.3% to Euro130m and its EBITDA rose by 59.5% to Euro32.4m. Although Mollins did make the point that inflation had been particular problem in Argentina, although its impact had been ‘greatly’ outweighed by price rises. LafargeHolcim has had its problems globally so far in 2017 but Argentina hasn’t been one of them. Its operations in the country have been propping up the group’s Latin American results each quarter so far in 2017. Despite being one of its smaller regions by sales revenues, its sales and earnings delivered some of the group’s highest growth in the third quarter of 2017.

In this kind of environment new production capacity can’t be far away. Sure enough Cementos Avellaneda plans to increases the capacity of its San Luís cement grinding plant by 0.7Mt to 1Mt/yr by the second quarter of 2019. US$200m has been earmarked for the project.

So, great news for Argentina and proof that poor markets can turn around. The Brazilian cement association SNIC reckoned in October 2017 that the rate decline of cement sales was slowing, suggesting that the bottom of the downturn was in sight. On the evidence of the current situation in Argentina once the market does revive, South America will be the place to watch.

ARM Cement’s declining fortunes this week may signal the end of the current growth cycle in the Kenyan cement industry. The cement producer posted a 20% year-on-year drop in its sales revenue to US$52m for the first half of 2017. Its financial returns have been turbulent since 2015. However, inward investment from the UK’s CDC Group in 2016 had appeared to help the company enabling it to pay of debts and even consider an upgrade project to the grinding capacity at its Athi River plant.

Graph 1: Cement production in Kenya for first half of year, 2013 - 2017. Source: Kenya National Bureau of Statistics.

Graph 2: Cement consumption in Kenya for first five months of year, 2013 - 2017. Source: Kenya National Bureau of Statistics.

Unfortunately it now appears that the Kenyan cement market may have peaked in 2016. As can be seen from Kenya National Bureau of Statistics figures in Graph 1 and 2, production hit a high of 3.31Mt in the first half of 2016 and it has fallen to 3.18Mt for the same period in 2017. Consumption too has fallen, to 2.5Mt for the first five months of 2017. At the same time the value of building plans approved by the Nairobi City Council dropped by 12% to US$1.02bn for the first five months of 2017 with falls in both residential and non-residential applications although the decline in residential was more pronounced. One of the country’s larger infrastructure projects, the Standard Gauge Railway from Mombasa to Nairobi entered its final stage of construction towards the end of 2016 with the completion of track laying.

Bamburi Cement has also reported falling revenue and profit so far in 2017. Its turnover fell by 8% to US$170 and its profit decreased by 36% to US$18m for the half year. Bamburi blamed it on a contracting market, low private sector investment leading to residential sector issues, delays in some infrastructure projects and droughts. The drought also hit the company’s operating profit via higher energy costs. On the plus side though Bamburi’s subsidiary in neighbouring Uganda did record a good performance.

It’s likely that the general election in Kenya in early August 2017 has slowed down the construction industry through uncertainty about infrastructure investment and general fears about political unrest. Thankfully these latter concerns have appeared unfounded so far but the memory of the disorder following the poll in 2007, where over 1000 people died, remains acute. And of course the 2017 election is not over yet following the intervention of the Supreme Court to nullify the result of the first ballot and call for a second. A longer election period with the impending rerun will further add to the pressure on the construction and cement industries.

An industry report on East Africa in February 2017 by the Dyer & Blair Investment Bank fleshes out much of the situation in the region. One particular point it makes though is that, as it stands at present, building materials may be too expensive to grow the market fully. Dyer & Blair suggest that lower construction costs and more affordable home ownership methods might be the key to driving low end housing demands and in turn this might grow cement consumption.

With lots of new production capacity coming online both locally and in neighbouring countries such as Uganda and Ethiopia, the Kenyan cement market faces the dilemma of trying to balance the medium to long-term demographics with the picture on the ground. Low per capita cement consumption suggests growing markets but if the demand isn’t present in the short term then the impetus for cement producers to expand shrivels especially with aggressive imports, rising energy costs and growing local competition. Once the election period finishes the picture will be clearer but the boom times may have abated for now.

Germany: The German Cement Works Association (VDZ) expects cement consumption to continue growing in 2017. The pronouncement follows data showing that consumption rose by 3.2% year-on-year in the country to 27.5Mt in 2016. VDZ president Christian Knell attributed the growth to a high level of building activity and good weather. Looking forward to the rest of 2017, he said that housing and infrastructure projects are expected to support the growth of cement sales.

Spain: The Spanish cement makers association Oficemen says that cement consumption grew by 11% year-on-year to 4.9Mt in the first five months of 2017. It attributed the rise to increased residential housing construction. The association forecasts that, if the growth continues, the consumption may reach 12.3Mt in 2017, the strongest figure since 2012.

However, exports have fallen by 7.6% to 3.76Mt. Oficemen said that this decline has reduced the benefit of improvements in the domestic market and kept production capacity levels of 50% at cement plants. It also raised recent increases in electricity costs as cutting the competiveness of the industry’s exports.