With global economic growth having been revised downwards for the last few cycles, 2012 is expected to have ended with a 3.2% rise. Though the year ended with the long fabled “green shoots” of growth perhaps creeping into the vocabulary again, the expansion is uneven, uncertain and fragile. The impact on the construction sectors remains material and in some regions (notably Southern Europe) maintains a chokehold.
World cement volumes to grow by 4.9% p.a. on average through 2017
Worldwide cement consumption expanded 4.1 percent in 2012 and passed, based on the CW Group’s preliminary estimates, 3.73 billion tons for the year. As economic struggled, the estimate for the year was revised down by the firm from the previous 2012E view of 3.78 billion tons. On a longer-term basis, the CW Group sees global cement consumption expand by 4.9% on average per year through 2017. Global per capita cement consumption rose from 448 kilos in 2009, to 539 kilos in 2012 and expected to continue on to 645 kilos by 2017.
“Even though we remain cautiously optimistic that recovery is gaining a foothold in some of the core markets and problems in Europe are slowly being contained, if not resolved, many markets are still in the balance. In particular, we are happy to see the US turn-around progressing, but are also a bit nervous about some of the larger emerging markets if global economic conditions deteriorate,”
Ex-China manufacturing capacity utilization hits bottom in 2012
A rough measure of profit health and outlook for cement plant capex, cement manufacturing utilization rates point to improved conditions ahead. Having peaked in 2009 at 68.1%, but since deteriorating to 66.6% in 2012, the CW Group estimates that the bottom may have been found for the global ex-China manufacturing capacity utilization. When China is included, the recovery trend strengthened in 2012 to 77.2% after hitting bottom in 2010 at 75.6%.
“Based on a bottom-up tracking of greenfield and brownfield cement plant projects, as well as permanent and semi-permanent closures, we see utilizations improving through 2017 to 82%. However, with an abundance of new projects in growth markets, we do caution as we see supply outpacing demand in some markets,” explained Claudia Stefanoiu, Senior Analyst with the CW Group’s European Analytics Team.
Regional divergence: North America bungee jumps, frontier markets remain exciting, while Europe sinks into the abyss
Perhaps surprisingly, North America is projected to show one of the strongest consumption volume growth trends out of the global regions through 2017. In fact, we expect demand in North America, even on the conservative basis we use for the region, to trend just marginally above the demand growth in the Middle East of 7.1% per year on average. But the strong forward growth patterns for the two are based in part on fundamentally different drivers with North America being a recovery story in the US (we still do not expect to see a return to peak demand volumes during our forecast horizon), while the Middle East is driven by strong “new” growth in Saudi Arabia, Iraq and to a smaller extent, recovery in the UAE, Syria and Oman.
We expect growth in China to moderate, but stay positive as the government is dead set to stimulate growth through infrastructure programs. Frontier markets in Sub-Saharan Africa and some recovering North African markets (e.g., Libya) will continue making this area an exciting market where we expect over 6 percent growth on average through 2017 for the region as a whole. Latin America is expected to decelerate somewhat, falling to 5.6% on average as Brazil growth moderates, while Asia ex-China will see growth accelerating with Indonesia and Philippines seeing strong growth in the next years.
Western Europe will slowly start showing a pulse again in the next few years as markets bottom out and the weakest (Greece, Portugal, Spain) run out of room to fall much further. Eastern Europe and the CIS will do better however, driven by the non-European markets in the near term with the region’s demand growing 5.2% per year on average through 2017.
About the GCVFR
The CW Group’s Global Cement Volume Forecast Report is a twice-yearly update on projections for cement volumes at the national, regional and global basis. The report brings together the CW Group’s principal research team to provide the latest insights on the evolution of cement volume trends for over 50 important cement markets worldwide, as well as regional and global totals: http://www.cwgrp.com/
The report contains the CW Group’s 1H2013 outlook for:
• National cement consumption (tonnages, 2012E-2017F)
• National cement production (tonnages, 2012E-2017F)
• Industry-wide utilization rate (%, 2012E-2017F)
• Cement production capacity (integrated & grinding tonnages, 2012E-2017F)
The 1H2013 forecast is a data-oriented forecast report, providing extensive details on the outlook for key cement markets around the world. The 2H2013 update (also included in the subscription price) additionally includes overviews of country dynamics for the report coverage universe.
About the CW Group
The CW Group is a leading advisory and research boutique focused on the global cement and adjacent sectors. The firm, headquartered in New York, USA, offers management strategy and M&A advisory, business decision support and research services to a wide range of cement manufacturing and building material groups, investors, engineering companies, coal miners, port operators, shippers and other stakeholders.
The CW Group is organized into three teams, aligned with our different client needs: Advisory (advisory.cwgrp.com)