All eyes on the ASEAN

The southeast Asian cement markets of the Philippines, Vietnam and Thailand are set for continued growth in 2015, while elsewhere in the region there is plenty to keep investors interested.

Philippines – sustained growth ahead
Cement industry sales in the Philippines have benefitted from robust demand thanks to bustling construction activity nationwide. Last year sales increased by 8.7 per cent YoY, according to the Cement Manufacturers’ Cement Association of the Philippines (CeMAP). Local market sales reached 21.3Mt compared to 19.6Mt in 2013 underpinned by continuous growth in construction projects.

Volumes have been benefitting from strong public and private spending. On top of this, some major private-public projects are being implemented. The residential sector continued to be supported by favourable economic conditions such as stable levels of inflation and mortgage rates, and healthy remittances inflows. As the government is raising its infrastructure spend to 5.1 per cent of GDP in 2015, cement producers can look forward to sustained growth. There is also ongoing reconstruction and rehabilitation work following super-typhoon Yolanda (Haiyan), which hit the Philippines in November 2013. Annual growth rates of around 8.2-8.5 per cent are expected to increase in 2015-16 on the back of similar increases in GDP, taking consumption to around 25Mt by the end of the forecast period.

Vietnam: redressing the balance
Following a sharp decrease in cement demand on the back of an economic slowdown and the bursting of the real estate bubble, consumption has gradually been on the rise in Vietnam since 2012. Domestic sales are estimated to have hit 50.5Mt in 2014, roughly on a par with record levels last seen in 2010.

With domestic capacity estimated to be 79.5Mt by the end of last year, oversupply still remains a major concern but exporting has become an increasingly-attractive option to cope with surplus volumes. Almost all the cement producers with capacities of 1Mta and above are exporting, with destinations including other southeast Asian countries (notably Indonesia and Malaysia), Bangladesh, Middle East and Africa (Guinea, Congo, Mozambique, Sierra Leone, etc). Exports have risen from 2.01Mt in 2010 to around 20Mt in 2014. Hoping to continue building on this platform, the country's Ministry of Construction is forecasting exports of 25-26Mt this year.

Thai turning point
After increasing by seven per cent in 2013 to a record level of 30.08Mt, last year Thai demand fell by one per cent as political turmoil caused a delay in infrastructure projects. This year, however, the country is on course to improve its economic shape as private and public investments continue to recover against a more stable political backdrop. With a functioning government now in place, the restoration of public spending programmes that were blocked by political and legal challenges look set to stimulate the economy.

The country's leading cement producer SGC Cement is confident on the outlook for Thai cement demand, estimating that it will increase by around 5-6 per cent this year as state infrastructure and commercial projects get into gear. The implementation of planned large public transport investment projects will also start this year, although the bulk of them will most likely be implemented starting in 2016.

ASEAN opportunities
Earlier this week SGC reported that its cement business achieved a six per cent increase in revenues last year, driven largely by ASEAN operations. Increasing its presence in the region still remains a key focus for the company. With four new cement plants in the pipeline, it is confident that it is on the right path and will be able to supply to increased market demands as scheduled. Cement plants in Indonesia and Cambodia will start commercial operations this year, while the production facilities in Myanmar and Laos will follow in 2016 and 2017, respectively.

With southeast Asian nations targeting full economic integration by year-end through the ASEAN Economic Community (AEC), SCG anticipates double-digit demand growth for cement and building materials in Cambodia, Laos, Myanmar and Vietnam. Beyond its existing operations, the Thai conglomerate has also said it is interested in finding new partners in Indonesia, Vietnam and Myanmar through merger and acquisition activity. Commenting on the prospects, Siam Cement Group's President and CEO, Kan Trakulhoon, said this week: “SCG Cement is very confident in ASEAN’s economic potential. We expect that 2015 will be the golden year for the region.”

With many Asian cement markets holding immense growth potential, Cemtech Asia 2015, to be held over 21-24 June, offers a timely opportunity to learn more on the latest regional trends, as well as hear about the latest advances in cement technology. For more information, visit: www.Cemtech.com/Asia2015