CW Research sees world cement demand growth pause in 2014

1H2014 Global Cement Volume Forecast Report (GCVFR) predicts that global cement demand will pause in 2014 at 3.9 percent YoY, following a stronger-than-expected 2013.

 

In 2013, global cement demand expanded 6.6 percent to 3.99 billion tons on surging Chinese demand, but growth will moderate 3.7 percent per year on average through 2018.

Even though CW Research believes ex-China growth remaining positive beyond 2014, the shape of the growth curve flattened for the longer term as some of the largest cement markets, including India, Brazil, Saudi Arabia, and Indonesia, dial back. A major negative revision for 2014 was for Africa (2.5 percentage points lower), mostly driven by North Africa where countries, such as Egypt and Morocco, are still struggling to find footing, or continue seeing turbulence.

However, CW Research is more optimistic that Western Europe will manage to build support for a recovery in 2014; the area is the only region in our forecast that we have upgraded (+0.5 percentage points) on benign core markets. Nonetheless, the region as a whole will still be in the red for 2014 on an overall one percent decline in cement consumption ÔÇô the only region as a whole that is expected to contract in 2014.

ÔÇ£Many pieces are still looking to gel in the global cement demand puzzle,ÔÇØ says Robert Madeira, CW Group Managing Director & Head of Research.┬á He adds: ÔÇ£Once again we reverted to economic and political fundamentals of countries in dissecting growth and revising our outlook; we are reminded that the Chinese political will to drive growth with shovel-ready initiatives is not to be underestimated, even though we believe the current trajectory remains unsustainable. Emerging markets, in defiance of economic coupling theories, largely disappointed which we see part of a general moderation in the near term.ÔÇØ

Worldwide cement production capacity is forecast to expand at 2.9 percent per year on average, exceeding 5.4 billion tons in annual production capacity by 2018 . On a net basis, the total addition is estimated at over 730 million tons in annual production capacity during the period. Of these additions, China and India will account for 41 and 14 percent, respectively, of the total.

In North America the green shoots of growth seem to have taken a hold for real. Barring any early economic frost, the region may turn out to see one of the highest CAGR for 2013-2018 as it recovers with utilization rates climbing.

Even though Western Europe is home to some of the hardest hit countries in terms of utilization rate (e.g., Spain, Greece), the region overall will see utilization rates in the 60s though 2018.

On the other hand, Eastern Europe & CIS is still expected to operate below 60 percent utilization rate by 2018 as its nations diverge to two extremes. Cement companies in the European areas (e.g., Romania, Bulgaria, Hungary and Ukraine), while further east in the CIS countries volume growth should remain exciting with new capacity to alleviate cement imports (e.g., Azerbaijan, Kazakhstan).

ÔÇ£In some respects we are seeing a reversal of fortunes,ÔÇØ says Claudia Stefanoiu, Senior Analyst with the team. ÔÇ£North America growth taking steady steps towards peak volumes, while important parts of Africa and Latin America face weakness, India demand wavers. But CW Research also sees relative islands in the swirls of growth: Indonesia, Malaysia, Russia, Nigeria, Saudi Arabia, and Iraq firmly anchor the ÔÇ£high growth clubÔÇØ, with Brazil taking a step outÔÇØ, she adds.

World consumption growth is expected to remain sluggish from 2013 to 2018 in most of Europe and selective markets from each region. More consistent increases are noted mostly in Africa, South America and South East Asia, particularly after 2014, supporting global YoY growth seen peaking in 2016. Overall, CW Research sees demand expanding between 3.5 and 4 percent per year for the coming years, expanding from 3.99 billion tons in 2013 to 4.78 billion tons in 2018.

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For further information, or to arrange an interview with the analyst, please contact Raluca Neagu, Market Services & Marketing Consultant at the CW Group at either [email protected], or +40-741-520-372.