PPC, SA’s largest
cement producer, has warned that weak demand due to increased imports in
Southern Africa, as well as SA’s poor economy, could hamper producers’ growth
prospects and ability to increase prices.
The unfavourable
market conditions could adversely affect the creation of jobs in the sector,
according to PPC chairman Jabu Moleketi.
In the company’s
2019 annual report, Moleketi blamed weak cement demand on the pressures facing
consumers and lack of construction activity.
“This was further
exacerbated by increased cement imports and the growth of third-party blenders,
which detracted from market-related pricing. This combination of factors makes
it difficult for the industry players to achieve sustainable pricing, grow
their business and, in the long term, could adversely impact cement producers’
ability to create job opportunities in the sector,” Moleketi said.
Construction market
intelligence firm Industry Insight said in June imports of cement to SA
increased by 45% year-on-year in April 2019 to 129,684 tons compared to 89,453
tons imported in April 2018.
This brings the
annual increase for the first four months of 2019 to 13.2%, totalling 313,714
tons. Overall cement imports increased by 85% in 2018. Vietnam remained the
primary exporter of cement into SA.
Industry Insight
said the bulk of the cement from Vietnam in April 2019 entered SA through the
ports of Durban (74%), followed by 14% through the ports of Cape Town and 12%
in Port Elizabeth.
Moleketi said
unlike in Southern Africa, projected GDP growth rates remained favourable in
the rest of Africa “and we are well positioned to benefit from improved growth
prospects and relatively low cement consumption”.
Apart from SA, PPC
also does business in Botswana, Zimbabwe, Rwanda, the Democratic Republic of
Congo (DRC) and Ethiopia.
“[The] overall
outlook in the (rest of Africa) remains positive, despite pockets of challenges
in specific regions. The market in Rwanda continues to flourish, and we anticipate
that the post-election backdrop in the DRC lays the foundation to unlock
further demand and possible recovery in cement prices,” he said.
Moleketi said PPC’s strategy entailed investing in new plants in
countries with high growth and low cement per capita consumption. PPC said,
based on the assumption that sub-Saharan Africa excluding SA was developing and
urbanising, the growth in cement consumption was likely to continue at 6% per
year.
Departing PPC CEO
Johan Claassen said the company expected the “challenging” market conditions in
the Southern African cement and materials business to persist “given weak
demand and competitive pressures”.
Claassen is set to
retire after 30 years at PPC. Former Lafarge Holcim veteran Roland van Wiljne
will replace him.
PPC shares rose 2.24% to R5.01 on Tuesday, pushing its gains to 6.6% over the past two days.https://www.businesslive.co.za/bd/companies/industrials/2019-07-30-ppc-flags-weak-consumer-demand-and-cement-imports/
