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Beyond BRICS: cement trends in the emerging markets

World Cement,


This is an abridged version of the full article, which appeared in the December 2012 issue of World Cement. Subscribers can view the full article by logging in.

In 2012, the BRIC nations – Brazil, Russia, India and China – have begun to lose some of their shine. GDP growth is slowing in China, Brazil and India. As a result, the only BRIC nation likely to record double-digit growth in cement consumption in 2012 is Russia.

Since the term BRIC was coined by Goldman Sachs’ Jim O’Neill in 2001, a series of new acronyms have emerged to describe the next set of growth markets. In 2005, Goldman Sachs coined the phrase the ‘Next Eleven’ (Bangladesh, Egypt, Indonesia, Iran, Mexico, Nigeria, Pakistan, Philippines, Turkey, South Korea and Vietnam). Of these nations, the MIKT (Mexico, Indonesia, South Korea and Turkey) accounted for 75% of GDP at the end of 2011. By way of comparison, BRIC GDP was US$13.5 trillion in 2011 compared to MIKT at US$3.9 trillion. The acronym CIVETS was coined by Robert Ward from The Economist in 2009, and refers to Colombia, Indonesia, Vietnam, Egypt, Turkey and South Africa.

Eastern Europe

Cement markets in Eastern Europe face a difficult environment. Due to the Eurozone crisis, there is pressure on exports, investment flows and financing. In some countries, as much as 75% of bank lending was being made by Western European banks, who are now busily repatriating capital to their domestic markets.

The market in Poland has deteriorated sharply since the summer, when the European football championships were held in Poland/Ukraine. The Polish Government has been cutting back spending on infrastructure, while new cement capacities have come online at an awkward time.

Hungary and the Czech Republic are in economic recession, with budget cutbacks affecting infrastructure and consumer sentiment. The housing markets in Slovenia, Slovakia and Hungary are forecast to fall by 20% in 2012. Modest growth is expected in the Ukraine, which has held up surprisingly well despite political uncertainty and the end of the football championships. There is also some recovery in Romania and Bulgaria, from an extremely low base given a more than 40% drop in market demand since the peak.

Cement consumption per capita typically stands in the 200 – 300 kg range for most countries in Eastern Europe and the medium to long-term outlook is fairly positive. Many countries are accustomed to austerity programmes and these economies can adjust and downsize far more quickly than their counterparts in Western Europe. Accordingly, the region is likely to continue to outperform Western Europe. Excluding the Russian market, Eastern Europe as a whole is predicted to record broadly flat demand in 2013.

Latin America

Cement demand in Latin America has enjoyed something of a renaissance in recent years. After years of underperforming other emerging market regions, cement demand has grown by almost 6% pa on average in the last eight years.

Latin American cement volumes have generally shown growth in 2012. In particular, markets in Colombia, Peru and Chile all reported close to or above double-digit growth in cement volumes in the first half. However, the region is highly exposed to commodity prices and the US economy.

In Chile, Colombia and Peru, cement demand is very strong at present, and a significant increase in volumes, driven by residential demand and infrastructure projects, is expected. In Colombia, the level of affordable housing is growing; there is a new free trade agreement with the US and the mortgage sector is expanding rapidly (although in time this might create an asset bubble). In Peru the booming construction sector rose nearly 16% in the first quarter alone, resulting in office vacancy rates of just 1% in Lima.

Cement consumption per capita is remarkably consistent across the countries of Latin America, with 250 kg being the average. This figure is well below the global average, and augurs well for long-term growth in cement demand in the region.

Middle East

Markets in the Gulf are generally enjoying robust cement demand growth, boosted by high oil prices and strong infrastructure spending by governments keen to avoid any further social unrest.

A key question mark for cement markets in the Gulf is where consumption per capita will settle in the medium to long-term. Although current rates are the highest in the world, this has been the case for several years, and it has not prevented continued high growth rates in many countries.

Africa

Cement demand in Africa continues to enjoy strong growth too, with exciting long-term prospects due to the very low levels of consumption per capita. This year represents a return to growth across the whole of Africa.

Consumption per capita remains below 200 kg for most countries in Africa. As a result, long-term prospects are positive. A freeze in overseas investments, particularly from China, remains the key risk going forward. However, the substantial infrastructure bottlenecks across Africa are being reduced each year, which seems to pave the way for an annual 6 – 8% growth in cement consumption for the next 3 – 5 years. Per capita consumption is significantly higher in North African nations such as Algeria and Libya; however, these countries are underpinned by oil and gas reserves that allow for further demand growth.

Rest of Asia

Demand is currently buoyant across most countries in Asia. Excluding the big markets of China and India, cement consumption is expected to grow by 5.5% in 2012. Rather like African markets, this region has seen the return of broad-based growth in most countries during 2012.

Looking ahead toward 2013

Growth in 2013 may be in the range of 4 – 7% for most emerging market regions, with a flat Eastern Europe being the main exception due to its proximity to the Eurozone. The main risks include a hard landing in China and a decline in commodity prices.

Imran Akram, IA Cement Ltd, UK. This is an abridged version of the full article, which appeared in the December 2012 issue of World Cement. Subscribers can view the full article by logging in.

Read the article online at: https://www.worldcement.com/europe-cis/28112012/cement_industry_emerging_markets_trends_765/


 

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