Displaying items by tag: Forecast

Ukraine: Ukrcement, the Ukrainian cement association, expects cement production to drop by 7% in 2013, a decrease of up to 684,000t, compared to a production of up to 9.28Mt in 2012. In an interview with Ukranian News, executive director of the association Petro Lopatiyev attributed the slowdown in production to an 'unfavourable' situation in the construction market.

According to the association, in 2012 cement production fell by 7% compared to a production of 9.77Mt in 2011. Clinker production fell by 16% to 6.28Mt. Exports of cement from Ukraine fell by 5.2% or 8964t to 164,548t in 2012, compared with 2011.

In 2012, imports comprised 1% of the market with a volume of 94,516t. However, Ukrcement fears that cement may be dumped in the Ukranian market from the neighbouring territory Transdniestria. The breakaway Moldovan territory has a stagnant constuction market and a lower cost of cement production than Ukraine. The association wants the Ministry of Economic Development and Trade to hold an anti-dumping investigation.

In other developments Ukrcement has called for a switch to European standards of cement production from 2014. At present, Ukraine has two cement production standards: the Ukrainian one called ДСТУ Б В.2.7-46:2010 and one identical to a European standard called ДСТУ Б EN 197-1:2008.

The Ukrcement association was created in 2004 during a reorganisation of the Ukrainian cement industry. There are over 15 enterprises engaged in cement production with a total production capacity of over 20Mt/yr.

US: Improving underlying economic fundamentals, the existence of large pent-up demand balances and the diminishment of economic 'fiscal cliff' uncertainty will combine to result in strong growth rates in 2013 and an increase in cement consumption, according to a new forecast by the Portland Cement Association (PCA).

According to the latest forecast there will be 8.1% growth in cement consumption in 2013 compared to 2012, significantly higher than the tepid growth projected in the PCA's autumn 2012 report. The upward revisions reflect adjustments made in light of the recent fiscal cliff accord, recognition of stronger economic momentum and markedly more optimistic assessments regarding residential construction activity. The January 2013 report marked 2012 consumption at 78.5Mt, an 8.9% increase compared to cement consumption in 2011.

"Growth in 2013 cement consumption will be largely driven by gains in residential construction," said PCA Chief Economist Ed Sullivan. "Housing starts should reach nearly 950,000 units, with single family construction near 700,000 starts during 2013. We see starts hitting the one million mark in 2014 or 2015."

Sullivan did caution, however, that the first quarter of 2013 would actually show declines compared to the same period in 2012. "It is important to point out that this potential decline in first quarter growth rates does not signal a weakening in market fundamentals, but rather a hangover from favourable 2012 weather conditions," said Sullivan. "Stronger gains in cement consumption growth are expected during the second quarter."

The accelerated consumption predicted during the second half of 2013 should carry into the following year, when the PCA projects a cement consumption increase of 8.3%. The PCA also upwardly revised its long-range projections for 2015-2017. Annual growth during that period is expected to be as high as 9.2%/yr.

China: Jiangxi Wannianqing Cement, a Shenzhen-listed producer of cement and clinker, has estimated that the company's net profit has decreased by 60-70% year-on-year in 2012 compared to a net profit of US$81.4m in 2011. The company made the announcement in a performance forecast that was released on 14 January 2012.

India: India Ratings has revised its outlook for Indian cement manufacturers to 'stable to negative' for 2013 from 'negative' in 2012, driven by limited downside risk for demand. The ratings agency also expects consolidation in the medium-to-long-term with large-scale merger and acquisition activities, according to a report. "We expect consolidation in cement industry in the medium-to-long-term with large merger and acquisition activities in the sector," the rating agency said.

The agency expects credit profiles of large cement firms with superior cost positions and a presence across India to remain stable in 2013. However, smaller companies, with unfavourable cost structures and regional concentrations, are likely to be under pressure.

With growth of the housing sector at 13% and that of the commercial real estate sector (CRE) at 4% until November 2012, India Ratings expects cement demand to grow by 5-8% year-on-year in 2013. Cement production volume in 2012 was mainly driven by a relatively robust activity in housing and commercial real estate. From September 2010 to March 2012, the average growth in credit to the housing sector was around 15-16% in commercial real estate.

Large integrated players, those that are among the top five in the country in terms of production capacity, are likely to have median earnings before interest, taxes, depreciation and amortization (EBITDA) margins in the range of 23-24% in 2013, comparable to the levels seen in the 2012 financial year. However, smaller or partially-integrated players are likely to exhibit margins ranging from 17-19%, lower than the median margins observed for such companies in 2012 financial year, the report said.

With regards to consolidation the report says that the top five companies, constituting around 50% of the industry capacity, enjoy a better cost-structure driven by significant vertical integration and locational advantage with respect to sourcing of raw materials and market access.

"Most other companies, because of lack of one or more of these factors, have a weaker competitive position. The industry economics and the regulatory actions exhibited by the Competition Commission of India (CCI) may push marginal players to consolidate", the ratings agency said.

Russia: Eurocement Group expects cement product consumption to grow by 12% in Russia in 2012 and by 8% - 10% in 2013, according to its president Mikhail Skorokhod.

"We expect cement product consumption to reach 64Mt this year, compared to 56Mt in 2011. There will be growth of over 12%. This is very significant growth and all construction complex needs in Russia are covered by high quality cement from Russian manufacturers," he said. The forecast for the rise in cement consumption in 2013 is 8%-10%, to around 70Mt, this highest output in the post-Soviet period, according to Skorokhod. The production capacity of cement plants in Russia has grown by around 20Mt/yr since 2009.

Skorokhod estimated that the rise in cement prices over the 'past few years' was comparable to the rise in the cost of natural monopoly services and tariffs, from 7% to 15% per year. He predicted that the price of cement would also fall by this range as new capacity comes on line.

Eurocement announced its plans to invest US$388m in a 1.3Mt/yr plant Sverdlovsk plant on 3 December 2012. The Russian construction materials group has 16 cement plants in Russia, Ukraine and Uzbekistan with a combined production capacity of 39.2Mt/yr of cement.

US: A forecast from the Portland Cement Association (PCA) expects a 7.5% rise in cement consumption in 2012. However, the association says that these gains could be immediately erased in 2013 if the so-called US 'fiscal cliff' is not resolved. The fiscal cliff refers to tax increases of US$400bn and federal spending cuts of US$200m currently scheduled to come into effect on 1 January 2013.

If the US House of Congress resolves the fiscal cliff during its session in 2012, the PCA expects the economy to continue to grow and cement consumption in 2013 to increase by 6%. Adversely, even if Congress addresses the policies by the first quarter of 2013, this delay will cause significant economic harm and cause a 2.7% drop in cement consumption.

"Because we believe the odds for either outcome are even, we have adopted a forecasting approach that minimises up and downside risk," said Ed Sullivan, the chief economist at the PCA. "Our baseline scenario blends the two possible outcomes and projects a 1.8% increase in cement consumption in 2013."

Sullivan also reported that the longer the US Congress delays in addressing the fiscal cliff, the greater the adverse effect on economic growth and construction activity in particular. "If no action is taken by mid-2013, the country could be headed into a severe recession," said Sullivan.

According to the PCA report, cement consumption from 1 January 2012 to 30 September 2012 had increased by 10% compared to 2011, with 16 consecutive months of growth. Sullivan attributed this growth to the return of consumer confidence, a strong housing market and, most importantly, growth in employment.

US: Growth in home construction and favourable weather conditions have helped to boost the consumption of cement in the first half 2012, according to a report released on 3 August 2012 by the Portland Cement Association (PCA).

In its report the PCA forecasts that cement consumption will be 6.9% higher by the end of 2012 compared with the end of 2011. The association, however, warned that there is some uncertainty about the state of the industry going beyond 2012. In a news release, it put much of the blame for the uncertainty on the US Congress.

Economists worry that the inability of Congress to find common ground on tax cuts expiring and the automatic spending cuts set to kick in at the end of 2012 could force the nation over a 'fiscal cliff', driving the economy back into recession.

"If Congress fails to address the fiscal cliff issue during the first or second quarter of 2013 there is the potential for severe adverse economic consequences that could slow the recovery process, potentially leading to a severe decline in 2013 cement consumption," said Ed Sullivan, the PCA's chief economist.

Cement industry results from China have all told an alarming story this week: profits for the first half of 2012 look set to fall by more than 50% year-on-year.

China Resources Cement Holdings warned that its first-half earnings were down sharply. China National Materials Co. Ltd. (Sinoma), the cement equipment and engineering services provider, and Gansu Qilianshan Cement, a small Shanghai-listed cement producer, have both forecast similar drops. Sinoma blamed its drop in profit partly on an overseas project but 'interestingly' no further information was released detailing which project.

Previous to this in June 2012 Anhui Conch Cement warned that its net profit would fall by more than 50% due to weak demand and falling product prices. In May 2012 China National Building Material Co Ltd (CNBM) reported that its net profit for the first quarter of 2012 was down by 45% year-on-year. In April 2012 Jidong Cement reported an increase in its net loss for the first quarter and a year-on-year revenue drop of 14%.

Each of the Chinese big players in the cement industry have issued profit warnings of a similar scale suggesting that the Chinese market faces a uniform downturn or that a slowdown is being centrally managed. Official signs that the Chinese industry faced a slowdown emerged in March 2012 when the national growth target was lowered, analysts' predictions were released forecasting weakened profits for the nation's main producers and government officials admitted that overcapacity loomed within five years.

According to OneStone Research data on the Chinese market in 2010 CNBM, Anhui Conch, Jidong and Sinoma represented over 20% of Chinese capacity. To give these figures some perspective, in 2011 CNBM's profit was US$1.7bn. Holcim's operating profit for the same period was US$2bn and Lafarge's operating income was US$2.74bn. Even halved, CNBM's profit is a massive figure for a company with less of an international presence than the European multinationals.

Australia: Boral, Australia's leading building materials supplier, has downgraded its overall profit forecast for the second time in two months, saying earnings could be as much as US$75.5m lower than it expected in February 2012. The downgrade comes with predictions that the group will announce asset writedowns when it delivers its full-year result in August 2012.

It is now expected that Boral will post a net profit before significant items for the current financial year in the range of US$100-110m. The company has continued to blame the profit downgrades on bad weather and weak conditions in the property and construction market and said that an early maintenance shutdown at Waurn Ponds Cement Works in Victoria was also weighing on earnings.