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Italian cement industry contracted again in 2016

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World Cement,

Italian cement production and consumption fall in 2016, according to CW Research, continuing a almost a decade of falls following the Financial Crisis in 2008. Production fell 7% in 2016, while consumption was down 10% at 18 million t – down from a pre-Financial Crisis peak of 47 million t in 2006.

“As many other developed markets, Italian construction activity – public works as well as private building – slowed sharply [following the Financial Crisis], said CW Research Managing Director and Head of Research, Robert Madeira.

“The persistent weakness has been exacerbated by a struggling banking sector that has seen multiple shocks in the past years,” Madeira continued. “Furthermore, a slowdown in the broader economy, with the political gridlock and a potential euro-zone exit, has slapped energy out of an economic recovery.”

The collapse in Italian cement demand has seen a process of rationalisation within the Italian cement industry, with many cement plants closed or idled. Cement pricing has also suffered as the main demand segments face challenges in securing projects.

“Other the past six years, the Italian cement market has undergone a painful transition and adapted to a new business environment and to lower levels of activity,” said Raluca Cercel, Lead Analyst at CW Research. “This has led to a consolidation of the market, absorbing smaller players, increasing efficiency, and improving synergies.”

In addition to the HeidelbergCement-Italcementi megamerger, Sacci has been absorbed by Cementir, while Buzzi Unicem reached a strategic agreement with Wietersdorfer to improve costs and logistics.

This pain may, however, be paying off, with CW Research forecasting support for stronger cement priced in the medium term as cement demand stabilises and industry consolidation reduces excess supply.

“Challenges no doubt remain for the Italian cement markets, to no small extent held hostage by an uncertain economic outlook for Italy. However, CW Research believes that the worst is behind the sector, as it has taken arduous steps to restructure and adjust to the present market reality,” CW Research concluded.

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