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Our latest look at South America starts by posing the question: how far can the market in Brazil keep growing? As Graph 1 shows below, cement sales skyrocketed through the coronavirus pandemic, due to a general recovery locally that started in 2018 and relatively weak lockdown measures compared to other countries. Rolling annual totals on a monthly basis from the National Cement Industry Association (SNIC) suggest that this growth period tailed off from May 2021. SNIC was also keen to point out that, despite nearly hitting nearly a 20% growth rate at one point, the sector was still 11% behind where it was before the lull that lasted from 2015 to 2018. As ever the association has an eye on potential risks. At present these include legislative reforms, price inflation and carbon pricing. It noted that Mexico, Colombia, Chile and Argentina all price carbon already but said that the country ‘has a great ally in the Brazilian cement industry’ on the issue.

Elsewhere the big story in Brazil has been

The story so far for the first half of 2021 has been one of recovery following the coronavirus-related lockdowns in the same period in 2020. Market restrictions ended, production curbs were rescinded and revenue and sales volumes grew.

Many of the larger multinational cement producers have released their financial results and sales revenues show a gap-tooth pattern for the first halves of 2019, 2020 and 2021. Sales for LafargeHolcim, HeidelbergCement and Cemex all took a knock of around 10% from 2019 to 2020. Generally, sales have increased from 2019 to 2021 for the more regional-based companies such as Cemex or Buzzi Unicem. The larger multinational producers like Holcim and HeidelbergCement bounced back from the dip in 2020 but comparisons with the first half of 2019 are less favourable. Like-for-like comparisons between 2019 and 2021 are not available but both companies have been refocusing their portfolios in recent years making it hard to gain a sense of exactly what’s going on. These trends

There has been a significant investment in the South Korean cement industry this week with the news that Hanil Hyundai Cement has ordered a steam-based waste heat recovery (WHR) system from Japan-based Kawasaki Heavy Industries. The 22.6MW system will be used on two of the production lines at the Yeongwol plant in Gangwon Province. The supplier says that installation is expected to generate about 30% of the energy the plant needs and save around 10,000t/yr of CO₂ in the process. Delivery is scheduled for late 2022.

This order may be the first investment following the announcement in late June 2021 that the state-owned Korea Development Bank had pledged around US$870m towards supporting the cement sector in making carbon reduction upgrades by 2025. These are intended to include moving away from burning fossil fuels in cement production and increasing the use of recycling materials. At the time of the agreement between the bank and the Korea Cement Association (KCA), Hanil Hyundai Cement

Two news stories merit a closer look at Argentina this week. Firstly, Loma Negra fired up the kiln on its new 2.7Mt/yr production line at the L’Amalí cement plant in Olavarría. Work on the US$350m started in 2017 but was delayed due to the coronavirus pandemic. Notably, engineers from China-based Sinoma International Engineering, who built the plant, caused a stir when they arrived in Argentina in full personal protective equipment in late 2020 to continue work on the project. Full commissioning of the second line at the plant is scheduled for July or August 2021.

Almost at the same time, the Argentine government announced it had persuaded local building materials producers to stick to reference prices for construction materials, including cement, in order to control inflation. Loma Negra, Cemento Avellaneda and Petroquímica Comodoro Rivadavia (PCR) were said to be on board with the ‘voluntary’ plan. Building materials prices generally were reported to have risen 85% year-on-year in May 2021

Another week and it’s another commodity story related to the effects of coronavirus. This time the Indian press and financial analysts have started to notice a shift in the fuel mix of some of the major producers from petcoke to coal. UltraTech Cement moved to 30% petcoke and 60% imported coal in the fourth quarter of its 2021 financial year that ended on 31 March 2021. This compares to a reported mix of 77% and 10% in the previous year according to Mint. Dalmia Bharat reduced its share of petcoke to 52% in the fourth quarter from 70% in the third quarter, while its coal mix was 35 - 40% in the fourth quarter.

Price is the driver here. UltraTech Cement’s chief financial officer Atul Daga

India: Rating agency ICRA has forecast that Indian cement production will rise by 12% year-on-year to 332Mt in 2022. It said that pent-up pre-Covid-19 lockdown demand, rural housing demand and a pickup in infrastructure activity would drive the rise. ICRA predicted that demand would rise by a further 8% year-on-year to 358Mt.

In the first quarter of the 2022 financial year, domestic rose by 44% year-on-year and by 2% compared to the first quarter of the 2020 financial year to 142Mt. ICRA estimated that the top 12 Indian cement producers will record their highest ever average operating profit per tonne of cementitious material in the 2022 financial year. It said that this is likely to occur due to an increase in net sales realisation and cost optimisation measures.

Mexico: Cemex CEO Fernando Gonzalez has estimated that the impacts of the Covid-19 outbreak will cost the group US$100m in 2021. Gonzalez attributed the anticipated negative effect on full-year earnings before interest, taxation, depreciation and amortisation (EBITDA) to supply chain disruptions and currency effects, especially on the Mexican Peso, as well as delays to projects globally.

Spain: Consumption of cement in the first eight months of 2021 was 9.58Mt nationally, up by 13% year-on-year from 8.48Mt in the first eight months of 2020. The Spanish Cement Industry Association (Oficemen) says that consumption remains 2% below pre-Covid-19 outbreak levels in the corresponding period of 2019. The El Economista newspaper has reported that the association has forecast full-year cement consumption of 14.6Mt in 2020, slightly below the full-year 2019 figure of 14.7Mt.

President José Cascajero said "These levels put us on the path to have a growth in future years that is hopeful. The recovery of infrastructure, which has returned to being the primary source of demand, and residential building, has allowed both consumption and expectations to be substantially improved since April 2021.”

In 2022, he forecast year-on-year demand growth of 3 - 5%, due in part to the positive impacts of the EU post-Covid-19 outbreak recovery fund. Cascajero warned of the

Oman: Raysut Cement has said that it will commission its upcoming 1Mt/yr Duqm plant, the country’s first clinker grinding plant, in late 2021. The cost of the project is US$30m. The company’s global capacity target is 10Mt/yr by 2022 and 22Mt/yr ‘in the near future.’ It operates the 3Mt/yr Salalah cement plant in Oman and holds minority stakes in three East African grinding plants.

Support services and business development chief Yousef Ahmed Alawi Alibrahim said “This has been a challenging year for manufacturing industries in general, but RCC has been able to negotiate the hurdles with effective planning focusing on health and safety.”

India: Cement companies produced 82Mt of cement in the three-month period ending on 30 June 2021, the first quarter of the 2022 financial year, corresponding to growth of 54% year-on-year. Production in the quarter declined by 12% quarter-on-quarter, due to the proliferation of new state Covid-19 lockdowns from April 2021 onwards. The Hitavada newspaper has reported that ratings agency ICRA forecast that full-year production will rise by 12% in the 2022 financial year, on account of pent-up demand, growing rural housing demand and a pick-up in infrastructure activity. It nonetheless estimated that production will remain 2% below pre-Covid-19 outbreak 2020 financial year levels, with continuing high costs due to rising fuel prices. In the first quarter of the 2022 financial year, coal prices more than doubled and petcoke prices rose by 98% year-on-year.