Displaying items by tag: demand

India: The credit agency ICRA forecasts that cement demand will grow by 4.5% in the 2018 – 2019 financial year due to growth in the housing sector and higher infrastructure spending. Improved rural incomes, higher rural credit and increased allocation for rural, agriculture and allied sectors are also likely to increase the demand for rural housing, according to the Press Trust of India.

Indian cement production rose by 2.7% to 217Mt in the nine months from April to December 2017 from 211Mt in the previous year. However, the first three months of this period, from April to June 2017, saw production drop due to local issues across the country such as a sand shortage, the implementation of Real Estate Regulatory Authority (RERA) Act and a drought. The following quarter then saw a fall in production due to the introduction of the Goods and Services Tax (GST), continued sand shortages and inclement weather. ICRA predicts that cement demand will grow by 3% for the remainder of the 2017 – 2018 financial year due to a boost in production in December 2017.

South Africa: PPC estimates that local cement demand fell by 3 – 4% in 2017 due to a lack of large infrastructure projects. In an operating update for the nine months to 31 December 2017 it reported that its cement sales volumes fell by 1 – 2% year-on-year, although it had increased its prices. It increased its exports by 23%. The cement producer also reported that its Slurry Kiln 9 project was 90% complete, with commissioning scheduled for the second quarter of 2018.

Elsewhere in Africa, PPC’s sales volumes rose by 20 – 30% in Rwanda due to a rise in bulk cement sales and higher exports. In Zimbabwe sales volumes grew by 30 – 40% supported by retail sales.

Mozambique: The African Elephant cement grinding plant is operating at a third of its production capacity due to low demand. The Chinese-owned plant near Pemba, Cabo Delgado in the north of the country is producing around 300t/day despite the plant’s production capacity of 1000t/day, according to sources quoted by the Mozambique News Agency. The plant’s manager expects demand to pickup once investment in the gas industry increase. The company has suffered from imports from Tanzania.

It’s been a pessimistic month for the Indian cement industry with Ministry of Commerce & Industry data showing that cement production has fallen year-on-year every month since December 2016. This was followed by the Cement Manufacturers Association (CMA) saying that the industry was sitting on 100Mt/yr of excess production capacity. Now, the credit ratings agency ICRA has followed the data and downgraded its forecast for cement demand growth to not more than 4% for the 2017 - 2018 financial year.

Graph 1: Annual cement production in India. Source: Ministry of Commerce & Industry.

Graph 2: Monthly cement production growth rate year-on-year in India: Source: Ministry of Commerce & Industry.

Graph 1 shows a production peak in the 2015 - 2016 financial year before falling monthly production broke the trend in the 2016 - 2017 period. Graph 2 pinpoints the month it started to go wrong, November 2016, when the government introduced its demonetisation policy. Production growth went negative the following month in December 2017 and it hasn’t managed to right itself since then and grow. It’s convenient to blame the government for the slump in production but it troughed in February 2017 before taking a lower level of decline since then.

The Reserve Bank of India (RBI) annual report in August 2017 suggests that the policy failed in its principal purpose of reducing the kind of corruption that a cash heavy economy can hide such as tax avoidance. People reportedly managed to find ways to bypass the bank deposit limit and may have successfully laundered large amounts of cash without being caught. However, as commentators like the Financial Times have pointed out, the longer term implications of forcing the economy towards digital payments and increasing the tax base could yet be beneficial overall.

Graph 3: Cement production capacity utilisation rates in India. Source: UltraTech Cement.

Moving on, the CMA has blamed production overcapacity for the current mess and Graph 3 shows the problem starkly. If anything the CMA appears to have downplayed the over capacity crisis facing India, as UltraTech Cement’s figures (using data from the Department of Industrial Policy and Promotion) show an overcapacity of 155Mt in the 2016 – 2017 year and this will grow to a forecast 157Mt in the next financial year, even though the utilisation rate is expected to rise slightly. UltraTech Cement’s estimates don’t see the utilisation rate topping 70% until the 2020 – 2021 financial year. Analysts quoted in the Mint business newspaper concur, although they reckoned it would the rate would bounce sooner, in 2019 - 2020. Last month when the CMA moaned about the industry's excess capacity it pinned its hopes on infrastructure schemes like the Mumbai-Ahmedabad bullet train. This prompted an official at JK Cements to say that he didn't think that one train line was going to make much of a difference.

This is one reason why ICRA’s and the other credit agencies’ growth rate forecasts for cement demand are important, because they indicate how fast India might be able to close the gap between production capcity and demand. Unfortunately demonetisation scuppered ICRA’s growth prediciton for 2016 – 2017. It forecast a rate of 6% but it actually fell by 1.2%! So downgrading its forecast for 2017 – 2018, with fears of weather and the implementation of the Goods and Services Tax (GST) in the second half of the year, is ominious. Major cement producers such as Ultratech Cement and Ambuja Cement have based their road to recovery in their latest investor presentations on a 6% growth rate or higher. Pitch it lower and the gap doesn’t close. Here’s hoping for a brisk second half.

Bolivia: Coboce, Itacamba Cemento, Soboce and Fancesa have all reported weakened demand for cement in the first half of 2017. Coboce’s sales growth has slowed year-on-year to 5% due to a reduced local government spending on infrastructure projects and poor weather, according to the El Deber newspaper. Despite this the cement producer expects sale to grow by 6 – 8% as a whole for 2017. Sales of the Camba cement brand produced by Itacamba Cemento have increased and this brand now holds 30% of all sales in Santa Cruz. Fancesa has seen a sharp contraction of its market share in Santa Cruz to 35% from 57%, although this now appears to have stabilised. The company is now targeting Cochabamba and Potosi.

India: The credit ratings agency ICRA has forecast that cement demand is likely to increase by 5% year-on-year in the 2017 – 2018 financial year due to increases in infrastructure and residential housing. In a report on the Indian cement sector it said that demand for cement fell by 1.2% to 280Mt in the 2016 – 2017 period, according to the Hindu newspaper. It added that the government’s demonetisation policy had decreased sales volumes by 9% between November 2016 and March 2017 as construction activity fell. However, in July 2016 ICRA failed to anticipate the negative effects of demonetisation predicting that cement demand would grow by 6% in the 2016 – 2017. Since then sales picked up by 17% in April 2017 leading to the current optimistic outlook.

India: The Cement Manufacturers Association (CMA) says that demand for cement is likely to grow in the second half of the Indian financial year due to the new Goods and Services Tax (GST) and increased infrastructure spending. The cement industry is also expected to benefit from a 30% reduction in logistic costs due to simplified state border checks, according to the Press Trust of India. The CMA’s forecast follows a fall in growth for the cement industry in the previous financial year.

Philippines: The Board of Investments (BOI) is seeking investment in the cement sector as it expects demand to double to 40Mt/yr by 2020 due to a peak in government infrastructure spending. At the same time Department of Trade and Industry (TI) Undersecretary for industry promotions group Ceferino S Rodolfo confirmed that two companies are preparing to build new integrated plants, according to the Manila Bulletin newspaper. Both companies are obtaining permits for their projects but Rodolfo would not confirm their identifies. DMCI Holdings was reported in the local press as being interested in building a plant Antique's Semirara Island in early June 2017.

India: The cement industry is expected to grow at 6-7% in the current 2017-2018 fiscal year, which runs from 1 April 2017 to 31 March 2018, according to HeidelbergCement India. The company said that, while infrastructure (including a focus on concrete roads), affordable housing programmes and the prospect of a normal monsoon augur well for the industry, oversupply may restrict the ability to pass on any input cost increases.

Russia: Sibirsky Cement expects that demand for cement in Siberia will fall by 8 – 10% to 4.7 - 4.8Mt in 2017. The cement producer said that its output decreased by 22% to 2.15Mt from its Kemerovo Region-based Topkinsky Cement, by 3% to 0.75Mt from its Krasnoyarsky Cement plant and by 10% to 0.27Mt from its Timlyuisky cement plant, according to the Prime Tass news agency. Overall its cement production fell by 17% year-on-year to 3.17Mt in 2016. It has blamed falling production on an overall decline in Russia’s cement market.