Displaying items by tag: Infrastructure

Australia: Adbri says that it expects growth in domestic cement demand to continue beyond a present residential construction boom. The Australian Financial Review newspaper has reported that Adbri chief executive Nick Miller believes that house building has undergone a nationwide ‘pull-forward’ in the wake of the coronavirus outbreak. The producer says that the government’s planned US$116bn infrastructure spend would insure a medium-term increase in cement demand. It gave as an example the Western Sydney Aerotropolis, which will require 500,000m³ of concrete. The company currently derives 45% of sales from non-residential construction.

India: Road Transport and MSME Minister Nitin Gadkari says that ‘huge demand’ is being created for steel and cement companies due to the rapid construction of road infrastructure. However, he also accused the industries of creating cartels and exploiting people, according to the Press Trust of India. The minister said that the government is now looking for some alternative for steel and cement. At a webinar Gadkari said that road construction has reached 37km/day day.

Kazakhstan: Steppe Cement’s cement sales in the first quarter of 2021 were US$11.3m, up by 22% year-on-year from US$9.27m in the first quarter of 2020. Volumes increased by 13% to 266,000t from 236,000t. The company said that it remained close to full capacity utilisation. It says that it increased its Kazakh cement market share to over 13%. The market grew by 12% year-on-year in total. The producer reported an 11% price rise and constant levels of tariffs and rental expenses.

Steppe Cement forecast an increase in domestic cement demand due to government infrastructure and housing projects.

US: The Portland Cement Association (PCA) has predicted a rise in US cement demand in 2021 and 2022 in its Spring 2021 Cement Consumption and Construction Activity Outlook. The report stated that mortgage rates are expected to remain low throughout 2021, prompting single-family construction. Non-residential cement consumption declines are expected to continue from 2020 in to 2021 and 2022, though with decreasing impact. Predicted oil price rises will increase oil well cement consumption.

The association welcomed a proposed US$2.2Tn eight-year federal government infrastructure spending programme. Chief economist and senior vice president Ed Sullivan warned of the proposal’s inherent political weakness in its inclusion of US$1.2Tn-worth of low or no-cement projects. He said that the opposition would latch on to this as grounds to oppose the necessary tax rises for the funding.

Sullivan said, “This recovery is predicated on continued progress in fighting Covid-19. The rapid pace of vaccinations and increased mask usage have resulted in a decline in death rates from over 3,000 daily in January 2021 to less than 825 daily in April 2021.” said Sullivan. “The Institute of Health Metrics and Evaluation (IHME)’s current forecast suggests a sustained and significant decline in daily Covid-19 deaths to less than 170. Progress associated with Covid-19 is the critical factor in the near-term outlook.” He added, “After committing to spending US$5.2Tn in Covid-19 relief and adding another US$2.0Tn in operations, the federal US debt could rise by US$7.0Tn in 2020 - 2021. This puts the discussion of the Biden US$2.2Tn infrastructure proposal into context. The proposal must pay for itself, which means higher taxes. While investing in traditional infrastructure such as roads and bridges has bi-partisan appeal, tax increases and some programmes dubiously labelled as infrastructure have caused concern. This concern threatens the potential passage of the initiative.”

US: Cemex USA, part of Mexico-based Cemex, has won a contract to supply 90,700t of cement and 153,000m³ of concrete for the latest phase of construction of the Houston Grand Parkway. The cement and concrete will help build the road’s I-1 and I-2 sections. The ring road around Houston is the longest of its kind in the US. Cemex USA will provide a portable central mix plant for the project.

Texas regional president Scott Ducoff said “Cemex USA is proud to be part of an iconic infrastructure project in our headquarters city of Houston, and one that will help ease traffic and improve local travel for commuters.” He added “Completing the Grand Parkway is a significant endeavour and opportunity for us to continue to innovate how we efficiently and effectively deliver our best-in-class materials to meet the demands of inspiring projects such as this one.”

Several of South Africa’s cement and concrete producers joined up in early March 2021 to form an industry association called Cement & Concrete SA (CCSA). The Concrete Institute, Concrete Society of Southern Africa and the Association of Cementitious Material Producers established the organisation to, “take the lead on all matters relating to cement and concrete in South Africa.” Setting up an organisation like this takes time and it fits with the move in recent years of thinking about the whole building materials chain rather than just focusing on one part. The country is also in the first phase of its carbon tax and no doubt producers feel they need to make a renewed effort to fight their corner. Other aspects such as promoting the ‘value creation story’ of the cement and concrete industry in South Africa, research and training also makes sense.

The timing here is compelling due to the ongoing review of anti-dumping measures that were levied by the International Trade Administration Commission of South Africa (ITAC) upon imports by Pakistan-based cement producers. Local media in South Africa reported that ITAC started reviewing the tariffs in December 2020 in a process expected to take up to 18 months in duration. As reported in January 2021 (GCW 489), imports to the country fell after ITAC introduced tariffs in 2015 but they have started to edge up since then, particularly from producers in other countries such as Vietnam and China. Separately, the CCSA may have scored an early victory with the news that its application that government-based infrastructure projects should only use locally-produced cement was working its way through the government.

Looking at the general market, PPC reported ‘muted’ sales of cement in April and May 2020 due to the country’s first coronavirus-related lockdown from late March 2020. Similar to some other countries, construction projects halted and cement plants stopped producing. However, the market bounced back as the restrictions were relaxed with strong sales from June 2020 to September 2020 for the leading producer. It noted that the increase in volumes was mainly due to consumer retail although it noted that government infrastructure cement demand was also starting to be felt. PPC’s cement sales volumes fell by 5 – 10% in South Africa and Botswana from April to June 2020 but then rose by 20 – 25% from July to September 2020. The continuation of this sales momentum was also noted in October and November 2020. Dangote Cement’s operations in the country reported a similar situation, with sales up by 7% year-on-year in the first nine months of 2020 due to a surge in home improvement related demand after the first lockdown ended. Similar to PPC, it reckoned that demand increased by 25 - 30% year-on-year in the third quarter of 2020 as limitations in travel and entertainment led to some people saving money instead.

After the summer sales bounce, producers were soon complaining about rising import levels in the autumn of 2020 with volumes catching up with the amounts recorded in 2019. Hence the ITAC review is a timely reminder of the perils facing local producers.

South Africa’s general coronavirus experience has been an outlier compared to the rest of Africa with higher cases and deaths reported. Yet, it’s still reported lower per capita rates than many comparable countries in Europe and the Americas. Like the UK and Brazil, the country also holds the dubious distinction of having a coronavirus variant named after it. Its cement market appeared to snap back with pent up demand following the lifting of restrictions in common with other countries that implemented tougher public health rules. At which point the importers caught up again a few months later. The effects of South Africa’s second wave of coronavirus led to a lockdown in late December 2020. The effects upon building materials sales are likely to be less drastic than previously because this lockdown has had lighter restrictions compared to March 2020. Surrounded by all of this, the CCSA has sure picked a busy time to start work.

Many Saudi Arabian cement producers have reported increased annual sales and profits in recent weeks. Southern Province Cement’s sales revenue rose by 27% year-on-year to US$440m in 2020 from US$347m in 2019. Net Profit after zakat and tax increased to US$162m from US$123m. Other producers enjoyed similar boosts. The reason can be seen in the country’s domestic cement sales. They rose by 21% year-on-year to 51Mt in 2020 from 42Mt in 2019. After a promising start to the year the coronavirus pandemic hit local production hard in the second quarter of 2020. However, it nearly doubled year-on-year in June 2020 and kept up the pace thereafter.

Graph 1: Domestic cement sales in Saudi Arabia, 2010 – 2020. Source: Yamama Cement.

Graph 1 above puts the cement sales in 2020 into context over the last decade. Sales hit a high in 2015 but then started to wane as infrastructure spending dried up due to lower oil prices and decreased government spending. A ban on exporting cement was subsequently relaxed but the general market appeared to adapt to the new situation. This changed significantly in 2020 with analysts attributing the turnaround to programs organised by the Ministry of Housing. This growth has carried into 2021 with NCB Capital forecasting an increase of 3.5% in local cement sales in 2021 due to the ongoing housing programs, the country’s so-called ‘Giga’ projects and investment by its sovereign wealth fund, the Public Investment Fund (PIF), as part of its 2021 - 2025 strategy. They reported that demand created by the country’s large-scale projects began to be felt along the supply chain in the fourth quarter of 2020 and associated contracts have started to be issued.

To give an example of the scale of some of these schemes, one of the proposed giga projects is to build a new city called Neom from scratch near the Red Sea coast. The resulting conurbation is intended to showcase new technologies and diversify the Saudi Arabian economy away from hydrocarbons. It has a price tag of US$500bn. An airport was built in 2019 and a next step was announced in January 2021, introducing a 160km linear city without roads called ‘The Line.’ Doubtless it will require lots of cement to realise the dream in whatever forms it happens to end up taking.

The wider picture here is that global oil prices hit a low in April 2020 as coronavirus lockdowns triggered a worldwide drop in demand although they then started to recover. The International Monetary Fund (IMF) estimates that Saudi Arabia’s gross domestic product fell by just under 4% in 2020. In response the PIF has upped its investment in the local economy including in the ‘Giga’ projects like Neom. There has been scepticism internationally about whether these projects will progress any further beyond press releases and actually get built. However, the cement producers’ financial results, cement sales figures and reporting from analysts like NCB Capital show that some investment is happening and it’s having results. The sector still faces a battle against overcapacity. It had a production utilisation rate of just under 70% despite the increase in cement production in 2020. Yet cement producers in Saudi Arabia have done well. While the Saudi Arabian government continues to spend on infrastructure in order to rebalance its economy this looks set to continue.

Saudi Arabia: NCB Capital has predicted a growth in Saudi cement sales of 4% year-on-year to 52.8Mt in 2021. The investment and analyst division of National Commercial Bank described the sector’s outlook as ‘positive,’ due to on-going housing programmes and the Public Investment Fund’s 2021 – 2025 strategy, as well as a pick-up in infrastructure projects.

Spain: Cemex is supplying cement to the site of the upcoming Santolea Canyon dam in Aragon. The 59m-high structure will hold a 105hm³ reservoir, which will provide water to 2000 surrounding farms. Concrete pouring began at the site in March 2020 and is scheduled to reach completion in mid-2021.

Europe, the Middle East, Africa, and Asia regional president Sergio Menendez said, "We are very proud of our participation in the construction of the Santolea Canyon dam, a key project requiring materials and solutions of the highest technical and environmental specifications. The new Santolea dam will greatly contribute to support sustainable growth in the region”.

Spain: Oficemen, the Spanish cement association, reports that domestic cement consumption fell by 10% year-on-year to 13.3Mt in 2020 from 14.7Mt in 2019. Consumption at this level was last reported in 1967. The 12-month accumulated consumption figure began to fall in April 2020 due to Covid-19 restrictions and the association does not expect growth in 2021 despite an improvement in December 2020. Cement and clinker exports fell by 3.4% to 5.99Mt from 6.20Mt. It has forecast anything between a 3% rise and a 3% fall in consumption in 2021, due to coronavirus-related uncertainty.

The figures suggest that capacity utilisation in the cement industry is at roughly 60% nationally, according to the El Economista newspaper. Oficemen president Víctor García Brosa said that this level ‘cannot be indefinitely maintained.’ The association called for a recovery plan committed to infrastructure development, residential construction and rehabilitation and energy efficient transport.