Signs of improvement in emerging markets?

The world’s four-largest emerging markets of Brazil, Russia, India and China (BRIC) noted a simultaneous improvement in their economies for the first time in the last three years in 1H17.

Growth in cement demand in these four countries has varied considerably during this time. While Brazilian cement consumption is still down, the Russian market appears to be recovering. An improving outlook is also emerging for India and continued restructuring in the Chinese industry raises hope for improving cement prices.

China
For the world’s largest cement market, China, cement demand has remained largely stable although monthly YoY growth has moved slowly but surely into negative territory from June onward. In terms of YtD demand, growth has varied between -0.5 per cent (March) and 0.6 per cent (February). By August 2017 domestic YtD demand reached 1536.8Mt, slightly below the 1541.2Mt reported in August 2016.

Meanwhile, the government continues its drive to restructure the industry, taking out inefficient capacity and limiting the construction of greenfield plants in a bid to reduce overcapacity in the sector, which is particularly acute in Xinjiang province. This has helped to shore up cement prices, along with the country’s stricter measures that promote energy saving and environmental protection such as the new environmental tax from 1 January 2018.

Russia
Russian cement output reflected some unsteadiness in the first eight months of 2017, reporting a contraction of -7.7 and -5.3 per cent in January and February, respectively but edging up by a very modest 0.9 per cent the following month. This pick-up was short-lived with April, June and July all seeing production contract by around six per cent. However, output increased again in August by 3.5 per cent to 6.33Mt.

Looking forward to better times, the country’s largest producer, Eurocement, is considering investment in a new Kaliningrad plant in the Danor industrial park in Guruyevsky district of the exclave while Anhui Conch of China plans to start building a 5000tpd works in the Ulyanovsk region in the spring of 2018 for commissioning in late 2020.

India
India’s cement producers have been waiting a long time for a pick-up in the domestic market and the trend now appears to be moving that way. While the market contracted at a double-digit rate in January and February as it felt the impact of demonetisation, the downturn abated in the March-to-May period with YoY decreases in cement demand decelerating from six to 0.2 per cent. Ramadan and the introduction of the Good Sales Tax proved a setback for Indian cement companies but as the summer progressed cement consumption growth headed in a more positive direction, limiting the downturn in the market to -1.3 per cent by the end of August and resulting in a YtD consumption of 186.509Mt, some 6.5 per cent lower when compared with 8M16.

Brazil
In Brazil the cement market remains volatile and significant YoY market contraction was noted, particularly in February (-15.3 per cent), April (-16 per cent) and July (-10.5 per cent). Total domestic cement consumption over the first nine months of 2017 expanded to 40.449Mt, but this advance was not the product of solid, sustained YoY growth as market contraction was in double-digit figures.