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Cement in 2014: Bubble Trouble – Part 3

World Cement,

Read Part 2 here.

Chinese underpinned by the Third Plenum

The cement market in China in 2013 was surprising, registering strong growth in demand as public works spending picked up and the real estate sector began to bubble up again. Fixed asset investment also remained very high. Cement consumption is likely to slow from a circa 8% growth in 2013 toward a level of 6 – 7% in 2014. The structural reforms announced at the recent Third Plenum will help to underpin the market. Nevertheless, the scope for continued increases in both public works and real estate are relatively limited. Water management and rural demand remain useful drivers of cement demand.

Modest growth in India

India will hold general elections in May 2014. In this case, public works spending will probably remain stagnant for most of the year, with the current paralysis due to corruption scandals being replaced by time taken for the next government to settle in. Meanwhile, high interest rates will restrict growth in the housing market, while the currency remains at risk from capital outflows. Rising costs are also creating problems for cement producers. Overall, 2014 will be a relatively modest year, with cement demand rising by around 3 – 4%.

Solid growth in other Asian markets

In the Far Eastern countries, the outlook is generally positive and a 3 – 4% growth in 2014 cement demand is expected. This region is at risk of currency attacks and capital flight due to the end of US money printing. This will probably cause a slowdown in demand, rather than deeper problems. Myanmar will continue to grow strongly in 2014 due to foreign investment, with double-digit growth in cement demand. Indonesia will remain slow at 5 – 6% as a result of elections, exchange rate uncertainty and the previous overheating in the economy. The Philippines is likely to be driven by strong reconstruction demand due to the terrible devastation caused by Typhoon Haiyan. In Japan, 3 – 4% growth is predicted, with the higher sales tax being offset by stimulus measures and rapidly growing business confidence. Vietnam and South Korea are likely to stabilise after two years of falling demand. Growth in Thailand will slow to a 3 – 4% rate in 2014 due to growing political and economic uncertainty. Malaysia may experience 4 – 5% growth as public works pick up momentum.

Africa – a sharp acceleration

2014 is likely to be a strong year for African cement demand, with a growth in consumption of more than 5%. West Africa remains very strong with surging housing demand in Nigeria and pre-election spending likely to kick in. In Ghana there remains a deep backlog in housing and the cement market is now better supplied due to rising imports. In North Africa a return to growth of 1 – 2% is predicted in Egypt because of the more stable political scene and aid from Gulf countries. However, fuel issues are an unresolved problem in Egypt. Algeria remains buoyant and will likely increase imports in 2014 with a 7 – 8% growth in demand. Libya is threatening to unravel as its political position grows more precarious. Despite the significant hurdles, another 5 – 7% growth in cement demand in 2014 is predicted. In East Africa, a recovery in Kenyan demand toward double-digit growth is likely in 2014 after a dismal year in 2013. Tanzania and Ethiopia will experience similar growth, although new cement capacity in the countries is creating a more competitive environment for producers.

Written by Imran Akram, IA Cement Ltd. This is an abridged version of the full article, which appeared in the January 2014 issue of World Cement. Subscribers can view the full article by logging in.

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