Argentina's market resurgence

Argentina's economy posted growth of 17.9 per cent YoY in the second quarter of 2021, recovering strongly after the contraction in the same period of 2020. One of the areas driving this pick-up is the construction sector, which has been seeing a resurgence in demand after the impacts of the COVID-19 pandemic last year.

The country is also set to go to the polls for a mid-term election on 14 November, but the government, led by Alberto Fernandez, has already weathered a blow as opposition parties won several important races in a congressional primary vote held last month. If this carries through to the election, the government could lose its majority in the Senate. The decline in the president’s popularity has been attributed to Argentina's economic recession and strict lockdown restrictions, which exacerbated the country’s economic struggle even further.

However, the government announced the lifting of almost all COVID-related restrictions last week, citing the falling rates of cases and deaths in the country. This move could unshackle the economy and the construction sector, giving way to further improvement in demand.

As for cement consumption, it climbed 18.2 per cent YoY to 1.084Mt in August this year, according to the Asociación de Fabricantes de Cemento Portland (AFCP). Pent-up demand has seen volumes rise since restrictions were eased and they have the potential to keep increasing on the back of the positive signs shown by the residential market and construction sector.

Loma Negra, the largest cement producer in the domestic market, saw its 2Q21 net revenue advance 46.6 per cent YoY to ARS14,269m (US$147m). The company noted that this was mainly driven by its core cement segment, with bagged cement sales soaring on account of household and retail demand rising above pre-pandemic levels. The company is also due to commission its 2.7Mta L’Amalí expansion project, which represents an investment of around US$350m.

Earlier this year, Holcim Argentina also inaugurated a new clinker production and grinding line at its Malagueño unit, increasing capacity to 4.7Mta from around 2.2Mta. “The new production line is a great bet on the domestic market; and responds to the growing national demand for materials for residential construction, private investment and infrastructure works necessary to sustain the growth potential of Argentina,” said Christian Dedeu, CEO of Holcim Argentina.

Outlook
Looking ahead, it is key that the country maintains the economic recovery that is expected to be seen in 2021. However, with uncertainty high in the run-up to the mid-term elections, it remains to be seen what the outcome will be and whether the resulting policies from those in power are enough to avert another economic crisis for the country.

Meanwhile, cement producers are investing in expansions which would take the country to around 23Mta of capacity on a consumption which is expected to reach 11-11.5Mta in 2022. It is clear that cement manufacturers are keen to invest to support the country’s booming residential and infrastructure segments over the coming years. As consumption climbs 36 per cent YoY in the 8M21, producers will be hoping that, whatever the economic outcome is on the larger scale, Argentina’s residential and construction sector can maintain the pace generated over the past few months.