2013-09-23 14:23:11 - According to the 2H2013 Global Cement Volume Forecast Report (GCVFR) released in early September by CW Research, the cement markets around the world begun stabilizing, even if Europe is further downgraded, as well as some other emerging markets. The twice yearly report projects a slight uptick in world cement demand, driven by an upgrade of Chinese demand. Europe, North Africa, Middle East and parts of Latin America see heavy downgrades in the short-term and medium-term.
CW Research’s forecast for the current year was revised to 3.92 billion tons, up 4.9 percent compared to last year. However, in the mid-2013 update, world cement ex-China consumption growth rate advanced at its slowest pace since the crisis in 2008 – 2009, rising only 2.7 percent to 1.6 billion tons.
“Even though we have a bottom-up approach, where we model each country individually, we can see in the aggregate that the global economy remains mired in a morass of headwinds and optimism has waned in many markets at a dramatic pace. Geopolitical issues aside, weaker global resource trade keeps pressuring emerging markets, fuelling inflation in some cases, lack of public spending in others. The drag is taking its toll
on construction and we are materially less optimistic about 2013 and 2014 than we were six months ago,” Robert Madeira, CW Group Managing Director and Head of Research said.
In spite of that, in the long run and from a global perspective, the CW Research forecast looks more optimistic, but mainly as a result of Chinese performance. For many regions growth remains muted and uncertain. Growth outside China is expected to pick up speed during 2014, but will remain lower than what was projected in the first half of 2013. Worldwide, most regions trend weak, with European markets taking the heaviest hit and cement demand volumes still shrinking sharply.
Africa is just a bit better, but the overall situation looks gloomy, at least in the short run, driven by troubled Northern markets. The forecast for the region as a whole is thus down and the trend is influenced by the important, relatively large markets in the North. From Morocco in the West, where consumption is highly influenced by housing policy, to regional giant, Egypt, in the East, where the situation is particularly difficult as a result of civil unrest and security risks. There are also some exciting exceptions, from of Algeria, which has emerged as a leading regional cement importer, taking over the mantle from Nigeria.
China, on the other hand, has surprised and defied earlier predictions of demise as the government has poured resources into the infrastructure construction sector as a favored conduit of economic stimulus.
CW Research sees the current global cement leader building on positive results from 2012 and during the first half of 2013. With the upward revision in the Chinese outlook, the 2013 Global Cement Volume Forecast Report outlook has been raised on the back of a strong production growth in the first half of 2013, which also contributed to an upswing of the longer-term revised trend. As a result, the world cement volume forecast expanded upwards 0.2 percent for 2013 and 0.4 percent for 2014.
Overall, cement consumption is expected to expand by 5.2 percent per year on average through 2017. Excluding China, we remain with a 4.9 percent growth per year on average, generated outside Asia’s giant.
The per capita cement consumption is estimated to increase from an average of 560 kg in 2013 to more than 650 kilos in 2017. Excluding China, the 2012 and 2013 per capita cement consumption levels remain largely unchanged, at about 280 kg per person.
Regional dynamics confirm global evolutions
A brief look at the CW Research data from a regional perspective reveals similar patterns for the cement industry - mainly contractions for the near future, followed by positive growth in the medium and long run. Figures indicate major episodic volume dips that CW Research believes will mean revert - for instance in the U.S., Brazil and India. Nonetheless, the suffering for these markets is part of a developing process, while others, also undergoing important structural contractions, such as Spain and Greece, are unlikely to reach their former glory again in the medium term.
The downward revisions for the current and the next year are not only limited to the developed markets of Western Europe. CW Research also sees traditional growth markets slowing down almost to a standstill. Examples include Brazil, Egypt, Colombia and India – the latter to a lesser extent. This puts a negative drag on the evolutions in Latin America and Africa, in particular in the short term.
“The much-expected bounce-back of North America is somewhat late to arrive in 2013, but there is hope for 2014. Western Europe, on the other hand, will most probably stay into the red for the entire forecast period,” said Claudia Stefanoiu, Senior Analyst with the CW Research team.
“The Africa contraction in 2013 was driven by political instability, but the effect was offset by strong growth in many markets of the Sub-Saharan region,” Stefanoiu added.
Across many countries in the emerging markets, the cement sectors have been hit hard as a result of the global economic conditions, and this is increasingly showing up in local construction activity and cement demand. Notably, Americas, Brazil, Colombia and Mexico have all slowed down, while India, though still expected to expand in 2013 is fraying at the edges. As a barometer, before the U.S. economic activity starts picking up, CW Research estimates that several disparate markets worldwide will continue to struggle and face volatile conditions.
Forecast points to sluggish global market
Beyond 2013, global growth will remain sluggish through 2017. European countries will be hit harder while some recovery is expected in most countries in Latin America and Asia.
China will maintain its position as the world’s leader in cement consumption, with its share of the global market jumping to almost 60 percent starting 2013. The biggest loser will be Western Europe, whose share will decrease from 5.4 percent in 2009 to 2.6 percent in 2017.
Questioned on whether there is some light in sight for the global cement industry, CW Group’s Robert Madeira said: “We do feel that we are bouncing around the low point in many key markets. This should set the stage for a recovery, though we may continue to see volatility in volumes, as global as well as local uncertainties work themselves through the system. Capacity additions are likely to be muted, as risk appetite in many markets is weaker and operators are more careful in placing bets. However, as someone said: “there is always a bull market somewhere” – the current environment just requires more discipline in identifying these opportunities than historically perhaps, but they are out there.”
About the Report
CW Research’s Global Cement Volume Forecast Report (GCVFR) is a twice-yearly update (February and September of each year) on 5-year projections for world cement volumes at the national, regional and global basis. The GCVFR is available in hard copy format for USD 1,750 (plus shipping & handling), including the February as well as September updates, and has data sets in Excel available as an additional option.
The Global Cement Volume Forecast Report provides the latest insights on the evolution of global cement volume trends with details on 58 important cement markets worldwide, as well as regional and global totals. Both the February and September updates are data-oriented forecasts that contain the CW Group’s latest multi-year outlook for country-by-country cement consumption (tonnages), cement production (tonnages), net-trade estimates (tonnages), industry-wide utilization rates (percentage) and cement production capacities (integrated & grinding tonnages). The mid-year update (also included in the subscription price) is an extended report, additionally including executive briefs of country macro - as well as supply-demand dynamics for the GCVFR coverage universe.
The GCVFR is built on the CW Group’s industry-leading and proprietary databases and the industry’s most extensive market intelligence platform. In addition, it combines CW Research analysts’ views with inputs from multiple other external analysts, industry associations, market observations, monthly tracking information, discussions with executives and management at cement manufacturing groups, plus a CW Group quantitative overlay model (econometric and statistical quant models).
For more information and a complete table of contents please visit the CW Research website at research.cwgrp.com
in the Sector Reports section - research.cwgrp.com/products
About CW Group
The New York-headquartered CW Group is a leading advisory, research and business intelligence boutique aligned along three pillars: CW Advisory, CW Research and multiple Business Intelligence verticals.
CW Advisory supports senior management in addressing their most challenging strategic, financial and operational issues as well as providing M&A advice. CW Research provides value added industry reports, multi-client studies and business research services.
The Business Intelligence pillar is based on rigorous and up-to-date information and data management, providing market updates to our clients in a self-service format through our focused industry portals, including CemWeek.com, CoalWeek.com, BulkWeek.com, BMWeek.com and IPPWeek.com.
The CW Group has a multi-industry orientation, with particularly recognized sector expertise in cement & heavy building materials, energy & solid fuels (coal and pet coke), mining, dry bulk cargo and international paper & pulp markets.