Edelweiss Research expects strong volume growth trend to extend into Q4FY18 as well, aided by low base and foresee improved margins.
Global cement consumption is forecasted to expand 0.7 per cent per year on average in the period from 2017 to 2022. According to CW Research's 1H2018 update of the Global Cement Volume Forecast Report (GCVFR), global ex-China demand is expected to rise at an annual average rate of 3.6 per cent, with advanced growth expected in most economies - a trend bound to be disrupted by a decline in China's cement demand.
As noted by Tea Vukicevic, CW Group's Associate Analyst: 'over the next five years, we are expecting to witness a separation in cement demand growth patterns. Global ex-China consumption will experience a healthy growth over the forecast period, but China's 50 per cent share of the total consumption will weaken global demand levels.'
Latin America & Africa to rebound
Despite an overall improvement in economic indices, and thus in cement consumption, regional uncertainties remain regarding the continuity of this rising trend.
'For the first time in decades, economic growth was almost ubiquitous in the year that just ended. But alarms are bound to sound off when so many countries are experiencing synchronized growth, and especially when geopolitical risks are lurking in the shadows. But in 2017 the cloud of uncertainty hanging over the current macro landscape did little to deter growth in cement consumption,' observes Robert Madeira, CW Group's Managing Director and Head of Research.
On a regional level, CW Research downgraded its previous US demand forecast for 2018, due to political instability and uncertainty around trade agreements that could damage investor confidence.
In 2017, demand in Latin America performed worse than previously expected. Nonetheless, regional demand in 2018 is projected to pick up, with Brazil, Colombia, Mexico and Chile recovering from low levels. Looking onwards, CW Research expects the region to recover by 2022, growing at a yearly average of two percent, driven by Mexico and Argentina's fast-growing cement markets.
Regional cement demand in Africa performed around four percent worse than previously anticipated, on the back of sluggish demand in Nigeria and high political instability in Kenya. Nevertheless, large housing deficit and a growing middle class population will contribute to higher demand in the coming years.
Asia ex-China remains the fastest-growing region, with markets such as India, Bangladesh and Philippines driving an annual average growth rate of 3.8 per cent. Despite declining in 2017, Indian cement demand is expected to rebound quite fast, as large infrastructure projects are now approaching the construction phase, and the budget for affordable housing has been doubled.
China to curb demand
The Chinese cement market is expected to eliminate about 290 MT of capacity by 2022, while the rest of the world is expected to add 450 MT. The largest capacity additions in the 2017-2022 period will take place in Africa and Asia ex-China. However, the global growth will be counterbalanced by China's stricter eliminations.
Over a 33-year period, CW Research expects cement demand to decrease to around 3.9 billion tonne. The declining trend will be more pronounced in China, whose capacity rationalisation efforts will pose the main obstacle to demand growth, together with cement substitutes, and emission regulations.