Displaying items by tag: Consumption

Indonesia: It seems that not a week goes past without a forecast, announcement or other report about the continued boom in the Indonesian cement industry. Similarly, there is a steady stream of expansion announcements to accommodate the future demand. In light of another round of impressive cement statistics, what's the story for Indonesia in 2012 and beyond?

In the three months to 31 March 2012 Indonesia produced 12.5Mt of cement, an 18% rise on the first quarter of 2011. In the whole of that year, the cement industry turned out a massive 17% more cement than in 2010. These headline increases are certainly impressive and show that if the first quarter of 2012 was repeated three more times throughout the rest of the year, Indonesia would hit its 53Mt production forecast. This is more than double the cement production of 1998 (22Mt/yr in the midst of the Asian banking crisis) and, while from a low base, the values represent incredible sustained year-on-year demand growth.

But what is the potential of the Indonesian cement industry? This can be assessed by looking one of Indonesia's neighbours, namely Malaysia, and doing a quick thought-experiment. What would the Indonesian cement industry look like if the country were to suddenly develop demands and cement consumption patterns like Malaysia does today? Indonesia has a population 8.3 times higher than Malaysia¹ and a cement consumption/capita rate approximately 2.4 times lower.² Assuming current Indonesian cement consumption to be 50Mt, if all of the people in Indonesia were to suddenly start using cement like Malaysia does today, the country's cement industry would have to be nearly 1000Mt/yr to support demand!

While this is clearly not the case today and is unlikely to be fully realised, Indonesia will continue to develop economically. As it does, the world's fourth most populous nation will need more cement. How much is open to debate, but even if a small percentage of that hypothetical 1000Mt can be realised, it will certainly justify the current rush to add extra capacity. This is now especially likely in light of the December 2011 relaxation of land acquisition rules, which will make it easier to build both cement projects and the large construction projects that need cement.

Click here for much more on the cement industries of Indonesia and Malaysia (as well as Vietnam) from the April 2012 issue of Global Cement Magazine.

1. CIA World Factbook website, https://www.cia.gov/library/publications/the-world-factbook.

2. Cement consumption per capita data for Malaysia taken from Lafarge 2010 Annual Report. (http://www.lafarge.com/04112011-customers_activities-cement_market_2010-uk.pdf). Malaysia is a representative comparison for Indonesia based on its GDP to cement consumption ratio.

Pakistan: Cement manufacturers in Pakistan are regretting their decision to increase capacity as consumption has remained stagnant over the past four years, according to the All Pakistan Cement Manufacturers Association (APCMA). Exports are also declining, forcing the sector to operate at 69% of its installed capacity.

An APCMA spokesman explained how capacities were increased when the economy was booming and that most of the plant capacities were increased in the northern part of the country. For these regions Afghanistan was the only export market but its potential was limited. Exports to India were limited at that time and today as well due to many non-tariff barriers erected by India.

The spokesman regretted that the growth during the past four years had been much below expectations and that the government also failed to provide funds for, what he called, 'essential' infrastructure. The fierce competition between the mills sitting on huge capacities kept the rates of the commodity much below the average inflation in the country, he added. Rates of inputs of the industry increased in line with the inflation and rupee devaluation while the cement prices increased by just 6% from the average cement rates in 2006.

The APCMA spokesman added that exports, which provided some relief to the industry in the past few years, have declined at a rapid pace during the first eight months of the current fiscal year (July 2011 to February 2012). During this period the decline in exports was 5.57% to 5.62Mt from 5.95Mt during the corresponding period in 2010-2011. He said that exports to India, mostly via train, had increased by 39.5%.

China: On 5 March 2012 Premier Wen Jiabao lowered China's growth target for 2012 to 7.5% from 8%, signalling Beijing's determination to manage a 'soft landing' to moderate its runaway economic expansion. The slowdown will likely hit China's construction sector, which accounts for most of China's rampant cement consumption. China exported only 10.6Mt/yr of cement in 2011, just 1.1% of national output. The worries over China's plans are affecting certainty in all major materials markets.

Credit Suisse described China's more moderate growth target as 'acceptance of slower medium-term growth.' It also said that infrastructure spending was on a downward trend due to the completion of many large highway, railway and airport projects.

Despite this, Guo Wensan the chairman of China's largest cement producer Anhui Conch, has announced that demand for cement remains strong in China. He said that the government's drive to push the construction of subsidised affordable housing is successfully offsetting declining cement demand from the private housing market.

Guo said that cement demand from the 10 million affordable housing units started in 2011 will peak from the second quarter of 2012 onwards. "This year there will be another 7 million public housing starts, so we remain confident," he said. Guo added that the cement industry has benefited from consolidation since the start of 2011, which has seen the removal of older, inefficient kilns and the closure of some companies.

South Korea: South Korea's cement exports reached an all-time high in 2011 as domestic manufacturers turned their eyes overseas amid a deepening domestic property slump.

The Korea Cement Association (KCA) said that South Korean cement manufacturers exported a total of 4.49Mt of cement in 2011, up a massive 62% from the 2.77Mt exported in 2010. The total amount of clinker and cement exported by South Korea rose to 9.97Mt, surpassing the 2010 record of 7.53Mt.

The KCA said that the long-running slump in the local construction market had forced its domestic companies to make inroads into overseas markets and diversify their business portfolios. "Cement makers sought to sell their products in overseas markets because the local demand for cement was so low," said an official from a local cement manufacturer.

Thailand: The Thai cement industry is still waiting to see more details of the government's programme for infrastructure projects following the recent devastating floods. It is anxious to determine whether growth will exceed the normal annual rate of 3-5%. The government so far has not laid out clear plans on repairing the flood damage to roads and other infrastructure installations or for how it intends to bolster the Kingdom's disaster-protection system with floodways and/or drainage tunnels.

Kan Trakulhoon, president and chief executive officer of Siam Cement Group, said that demand for the cement in 2012 was now anticipated to grow by 5%. This rate is expected to continue for several years thanks to the demand for repairs to roads, houses and other buildings, as well as improving the flood-protection system and constructing new homes. However, it has to wait for an outline of new infrastructure projects from the government before making a clear forecast of cement demand in 2012 and the medium-term.

Trakulhoon said that sales of building materials had bright growth prospects after the flood water recedes. "Because of the floods, the demand for high-rise condominiums in central Bangkok will be higher. I have always believed that the number of high-rise residences such as condominiums has not reached saturation. I have an optimistic view that demand for cement will keep growing."

Trakulhoon also pointed to the overall improved sales of building materials and cement in October 2011 as evidence for his optimism. In that month, sales of cement in the centre of Thailand dropped by 40% but sales in the north, south and northeast were good, indicating a strong background of cement growth.

Chantana Sukhumanont, executive vice president of Siam City Cement, the country's second-largest cement producer, pointed out that restoration itself does not require particularly large amounts of cement. She said that cement consumption in 2012 would not grow significantly from building restoration, highlighting a greater need for fittings and finishings such as plumbing fixtures and electrical wiring.

India: Cement consumption in India fell for the first time in nearly 20 years in the three months to 30 June 2011, with a political impasse in large consumer states holding up infrastructure and realty projects. Demand fell by 0.68% during the period compared with the corresponding period in 2010 but demand changes were different depending on location. In Andhra Pradesh, demand contracted by 21% and in Karnataka it was down by 8.04%, according to data from Cement Manufacturers' Association (CMA).

Elsewhere, demand was down by 2% in June 2011 in Kerala and in Tamil Nadu, it was down by 1.9%. In comparison Gujarat saw cement demand grow by 4.9%, but growth was less strong than the same period of 2010, when 15% cement demand growth was seen.

The demand for cement is not assisted by problems that are expected to hinder government's proposed USD107bn investment in state road development during the 12th Plan period. The government has cited a lack of capacity in the private sector to make large investments, political sensitivity surrounding road-tolling, land acquisition disputes (which have caused a slow-down and resentment from locals at the site of the Formula 1 circuit site in Greater Noida, Uttar Pradesh) and a shortage of trained manpower as key problem-areas that may hamper the execution of the programme, due to start in 2012.

It is estimated that because of these problems, around 80% of the cost of the proposed investment will have to be met by public funds. The plan includes the construction of over 30,000km of new dual-carriageways, 5000km of four-lane highways and another 41,500km of single-track roads that are due for restructuring. The plan stipulates that the roads will be finished with either cement-based finishes or asphalt.