Editorial comment
While parts of the Western world mull over the possibility of a double-dip recession, the emerging markets continue to blossom. Recent reports have forecast capacities to grow 5% in Brazil, 2% in Russia, and a mega 25% in India in 2011 – 2013, and although M&A activity is rife in China as the country attempts to streamline its cement industry, consumption there is set to increase by around 6% in 2012. But enough of the BRICs, what about the EAGLEs? Spanish banking group BBVA devised this grouping acronym as an evolution of the BRICs concept, which was felt to be both limited and limiting. EAGLEs, or Emerging and Growth-Leading Economies, include any country that will ‘contribute more to global GDP growth than the average of the largest developed economies during the next ten years’*. Fundamentally, the EAGLEs are selected based on their incremental GDP growth, rather than GDP size. BBVA estimated the average growth of the G6 (i.e. the G7 minus the USA) countries’ GDP in PPP terms at US$400 billion over the next ten years. The bank then identified ten countries whose incremental GDP growth is estimated to be greater than this average, namely: China, India, Brazil, South Korea, Indonesia, Russia, Mexico, Turkey, Egypt and Taiwan (listed in order of size from biggest to smallest). Unlike the BRICs, the EAGLEs are not set in stone and can be adjusted as growth rates change.
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So how will the cement industry fare in the EAGLEs? Let’s review. We already know that China is growing strong; capacity in India is on the up though utilisation rates are down; Brazil is expected to add 33 million t of additional capacity over the next five years. Analysts put cement consumption in South Korea at around 43.1 million t this year, forecast to decline to 42.2 million in 2012, but GDP is expected to increase by US$0.7 trillion (or 4.2%) between 2010 and 2020, according to the BBVA report. Contrast this with Italy, the smallest G7 economy, which is set to add US$0.2 trillion to its GDP in the same period. Indonesia, with current capacity of 43.6 million t of cement, looks set to add 1.3 million t in 2012 and another 2.3 million t in 2013, and is also expected to add US$ 0.7 trillion to GDP (5.5%) between 2010 and 2020. Russia, as mentioned previously, will add 2% capacity in the next couple of years, while consumption this year is forecast to grow by 12%. (Interesting to note that Russian GDP lags behind that of both Indonesia and South Korea – so much for BRICs.) After a slight decrease in cement consumption in 2010, it looks like Mexico is doing better this year and BBVA forecasts a US$0.5 trillion increase in GDP from 2010 to 2020. Turkey, as we know from earlier features, is performing incredibly well, overtaking China in 2009 to become the world’s biggest cement exporter. Egypt will have had a tough 2011 (to the point that it could lose its EAGLE status); analysts estimate a -5.5% decline in cement consumption this year, but growth will return next year and 2013 should see consumption up by about 1.4 million t from 2010 levels. And finally to Taiwan, which is predicted to see incremental GDP growth of US$0.5 trillion by 2020, and in 2010 stood seventh in the world in terms of cement exporting nations, at over 7 million t.
Well, a quick tour of the EAGLEs shows a lot of promise for the cement industry, but key growth markets are missing. Significant capacity increases in the likes of Iran, Nigeria, Vietnam, Pakistan and Saudi Arabia mark these for our attention too – and certainly all of these regions will be covered in our Regional Reports throughout the year. Perhaps we need to think of our own, cement-specific acronym. I suggest cement MAGPIEs – Markets Achieving Growth where Production Increases are Essential. (Better acronyms welcomed – please send yours to the address below.)
