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Global viewpoint: Asia’s cement markets

World Cement,

Cement consumption in Indonesia is expected to grow during 2014 at a similar pace as in 2013, despite price increases introduced by cement producers in an attempt to compensate for the higher cost of electricity and projected lower income growth. Indonesian Cement Association Chairman Widodo Santoso has predicted that cement consumption will rise by 6 – 7% this year.

Political unrest in Thailand is affecting the country’s cement industry. Siam Cement Plc says that domestic cement demand growth this year will be lower than the 7% posted in 2013. For Siam Cement, the country’s largest cement manufacturer, losses incurred by subdued demand have been offset by the increased demand for petrochemicals (the company is also the biggest producer of downstream chemicals). One of the poorest countries in Southeast Asia is Myanmar, but the government is actively encouraging foreign investment and this together with funds from the World Bank, and others, will be key in developing much needed health, education and construction projects in the country. Privatisation of state-owned cement plants has begun, while joint ventures with some of the major international players are being encouraged.

The Ministry of Construction in Vietnam estimates that cement consumption will reach 62 – 63 million t this year, i.e., a slight improvement of 1.5 – 3% on the figure for 2013. At present, the country operates 106 cement plants. The predicted oversupply this year will be 8 – 12 million t. An export goal of 14 million t has been set, the same as last year. Vietnam’s construction material market has seen slight recovery but significant improvements in purchasing power cannot be expected.

As a result of a rise in construction activity and an increase in the government’s budget for infrastructure and housing programmes, plus ongoing reconstruction projects in the aftermath of the Haiyan typhoon, sustained growth is expected in the Philippines this year, according to a forecast from Cemex Philippines. The company is planning to allocate about US$80 million to finance an upgrade of its Naga plant. This will add approximately 1.5 million tpa capacity and the expansion of terminals and distribution centres. Lafarge Republic is investing in a new grinding mill facility for its Norzagaray plant. Holcim Philippines is delaying construction of the US$450 – 550 million cement facility in Bulacen as the company shifts its focus elsewhere in Southeast Asia.

The CIMB Investment Bank in Malaysia has indicated that volume growth in the cement industry is generally expected to be 4 – 5% during 2014, driven by the 10th Malaysian Plan Economic Transformation Programme (ETP). This was confirmed by Lafarge Malaysia BHD, the country’s largest cement producer. The company expects to see stable growth in construction activities driven by continued investment and infrastructure development. It is spending RM3 million on building a construction development laboratory in Petaling Jaya, Selangor.

In Pakistan at the beginning of 2014, a spokesman for the All Pakistan Cement Manufacturers Association reported that cement sales in December 2013 and in the first six months of the current fiscal year (2013 – 14) saw the highest-ever domestic dispatches in the country. Exports to India have been declining since the two countries opened their borders for liberal bilateral trade, not because of lack of cement but due to non-tariff barriers. Cement exports to Afghanistan had also been declining for the last six months of 2013. At the time of writing, the main news on the cement industry in India mentions further consolidation during 2014 and continued weak demand and rising costs. In March, it was reported in the Indian press that Hi-Bond Cement is planning to build a new 3 million tpa plant in Rajasthan. Daily Nation reported that post-war reconstruction in Sri Lanka had increased opportunities for South Indian cement exporters to ship their products into a hungry construction market on the island. Sri Lanka’s construction industry has been a keen economic driver since 2012. It is known that India Cements, Dalmia Cements and Ramco Cements are currently shipping cement into Sri Lanka, thus easing overcapacity for the Indian companies.

Real GDP in China this year will remain stable at about 7.2% y/y, partly due to inflation. As a result of the government’s efforts to tackle overcapacity issues, smaller and inefficient participants in these industries will face pressure on rising costs and policy uncertainties. It is expected that the government will continue to encourage private sector infrastructure investment, particularly in building ‘networks of cities’ in the midwestern and northeastern regions. In the cement industry the days of double-digit growth have completely faded. To control pollution, Hebei province announced goals of cutting excess capacity in high polluting industries, including a 15 million t cut in cement by 2017. Cement plants in Beijing, Tianjing and Hebei are subject to sporadic suspensions whenever air quality worsens. A Vice Minister of Industry and Information Technology has said that the government will ban new projects in several industries including cement before 2017 and will concentrate on cleaning up existing projects that have violated rules relating to curbing pollution. Predictions indicate that cement consumption this year will reach 2.5 billion t.

Written by Paul Maxwell-Cook. This is an abridged version of the full article, which appeared in the July 2014 issue of World Cement. Subscribers can view the full article by logging in.

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