Lafarge predicts a poor 2014 for the South African cement industry

Lafarge SA is forecasting a poor year for South African cement sales in 2014, with CEO Thierry Legrand saying: “There is no doubt that prospects for growth in the South African market in the foreseeable future are neither as buoyant as we would like, nor quite as positive as we were forecasting this time last year.”

Legrand claims the company is still positive about the country’s long-term growth prospects, and stands by its decision to invest in a R1.2 billion expansion project, but expects that its existing capacity in the main plant will be sufficient until 2020. He says the company’s volumes grew by some 3.5% last year, but stand to grow no more than 2.5% this year, just slightly under South Africa’s GDP growth forecast.

An alternative cement forecast

This is in contrast to a report from Frost and Sullivan in mid-September, which forecast that US$1 trillion would be spent on investment in cement in South Africa, Zambia and Zimbabwe between now and 2018. The research group put existing capacity in southern Africa at 14.9 million t and estimated that this would increase to 18.1 million t by 2018, with new plants increasing cement production capacity. One of these plants is Nigerian-owned Sephaku, which is set to enter production later this year.

Input costs have risen for South Africa’s cement producers, as fuel and electricity costs increased while cement prices have been unable to catch up. The Frost and Sullivan report noted: “While on the one hand production is rising, the costs associated with production are also escalating as a result of soaring electricity and fuel prices”. Cement imports are also a potential cause for concern, as they make up about 5% of the total cement market in the country. Despite accusations over the quality of cement imported from Pakistan, for example, it is expected that the quantity will continue to increase next year.

As an added element in this discussion, the 2014 elections may also result in slowing construction activity, as has been the trend in previous election years.

Edited from various sources by Katherine Guenioui