a review of global cement industry trends...global cement demand growth is slowing global financial...
TRANSCRIPT
A review of global cement industry trends CONCREATECH, NEW DELHI, NOVEMBER 2018
Thomas Armstrong, Managing Editor
International Cement Review
Evolution of global cement demand, 1990-2018F
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
(Mt)
Emerging Markets Mature Markets China
World
demand
CAGR 5.1%
1990-2017
Peak demand
(2014): 4.15bnt
Demand x 4
1990-2017
China’s sustained pace of high growth
China’s pace of growth greatly outpaced Rest of World (RoW) for decades
China CAGR 9.6% (1990-2017) – multi-year double-digit growth, vs CAGR 2.5% RoW;
CAGR 7% Indian Sub-Continent
-15%
-10%
-5%
0%
5%
10%
15%
20%
25%
China vs RoW cement demand YoY growth, 1990-2020F
China: YoY Change (%) RoW YoY Change (%)
Global
financial crisis
China resets
to lower
consumption
Global cement demand growth is slowing
Global financial crisis saw global growth fall in 2008-09, but demand largely offset by Chinese growth
Peak demand achieved in 2010, when China and RoW growth was synchonised in post GFC rebound
General deceleration since 2010, contracting in 2015 due to negative Chinese growth (first time ever)
2,765 2,832 3,000
3,312
3,585 3,746
4,034 4,152 4,053 4,124 4,142
3,967 3,970 3,987
8%
2%
6%
10.4%
8%
4%
8%
3%
-2%
2%
0%
-4%
0% 0%
-6%
-4%
-2%
0%
2%
4%
6%
8%
10%
12%
-
500
1,000
1,500
2,000
2,500
3,000
3,500
4,000
4,500
2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F
Yo
Y C
han
ge
(Mt)
Global cement demand, 2007-2020E
World (Mt) YoY Change (%)
Asia dominates top cement consuming nations
284
97 75 66 60 57 55 54 54 49 47 42 41 39 30 29 29 28 28
0
50
100
150
200
250
300
350
(Mt)
Top cement consuming nations, 2017
Consumption (Mt)
Rank Country
Consumption
(Mt)
Rank 2017
vs 2016
1 China 2386 – 2 India 284 – 3 United States 97 – 4 Turkey 75 – 5 Indonesia 66 – 6 Vietnam 60 +2
7 South Korea 57 +2
8 Russia 55 +2
9 Egypt 54 -3 10 Brazil 54 -3 11 Iran 49 +1 12 Saudi Arabia 47 -1 13 Japan 42 – 14 Mexico 41 – 15 Pakistan 39 – 16 Philippines 30 +3 17 Thailand 29 -1 18 Germany 29 -1 19 Algeria 28 -1 20 Bangladesh 28 –
Per capita cement consumption
0
500
1000
1500
2000
2500
3000
3500
Qata
r
Bahra
in
UA
E
Lu
xe
mbo
urg
Ma
ca
u
Le
ban
on
Tun
isia
Mo
nte
neg
ro
Iran
Egypt
Bhuta
n
Kazakhsta
n
Ma
uritius
Re
unio
n
Pale
stine
Tha
iland
Iraq
Surin
am
e
Bela
rus
Cypru
s
Ca
mbo
dia
Slo
vakia
Japa
n
Cro
atia
Bra
zil
Bulg
aria
Me
xic
o
Djib
outi
Sri L
anka
Esto
nia
Uzbe
kis
tan
Vene
zu
ela
Gam
bia
Serb
ia
Spain
Ne
therl
and
s
Sw
ede
n
Mo
ldova
Para
gu
ay
Ango
la
Benin
Gha
na
Ukra
ine
Sw
azila
nd
Puert
o R
ico
Ne
pal
Cô
te d
'Ivo
ire
Cu
ba
Nic
ara
gua
Zam
bia
Lib
eria
Tan
za
nia
Eth
iopia
Eritr
ea
Ch
ad
Co
ngo
- D
em
. R
ep
ublic
Nig
er
(Kg
)
Per capita cement consumption: world (kg)
Cement Consumption Per Capita (kg)
Median World Av.
Per capita trends
World average 563kg
Median 287kg
Highest 2950kg
Lowest 19kg
Mind the gap – growing surplus capacity has eroded utlisation rates
Global capacity reached 6.2Bnta in 2016
Consumption growth has lagged capacity growth: consumption increased by 25 per cent between 2010 and 2016, while capacity increased by 40 per cent
Surplus capacity doubled from 1.06bnta in 2010 to 2bnta
Worldwide utilisation rates therefore dropped from 76% in 2010 to 67% in 2016
Worldwide utilisation rates outside of China fell from 70% to 61%: equivalent to 124Mta capacity added annually between 2010-16
Pressure on prices and profitability of cement companies
3312
4371
3746
5244
4155
5695
4129
6138
76%
71%
73%
67%
60%
62%
64%
66%
68%
70%
72%
74%
76%
78%
80%
-
1,000
2,000
3,000
4,000
5,000
6,000
7,000
2010 2010 2012 2012 2014 2014 2016 2016
(Mta
)
World capacity (Mta) vs demand (Mt), utilisation rate (%), 2010-2016
Cement Capacity (Mta) UtlisationDemand (Mt)
Regional economic growth trends
GDP levels have stabilised since the global financial crisis in 2008-09, but world growth expected to soften on back of slower growth in China and US
Expectation that India will be achieving high, sustained annual growth, while China’s expansions softens
Emerging Asia growth around 6% vs 4% world average and 2% advanced economies
-6
-4
-2
0
2
4
6
8
10
12Y
oY
change (
%)
Annual GDP growth, world and regions, 2008-2023F
World Advanced economies
Emerging and developing Asia Latin America and the Caribbean
Middle East and North Africa Sub-Saharan Africa
India China
0
1
2
3
4
5
6
7
8
9
An
nu
al
gro
wth
(%
)
Selected GDP growth rates, 2018E and 2022F
2018E 2022F
Regional growth – current trends
-15%
-10%
-5%
0%
5%
10%
15%C
han
ge (
%)
Regional growth rates, annual (YoY), 2016 & 2018E
2016 2018
Regional cement demand growth
-5%
2%
0%
-10%
-3% -3%
2% 1%
2%
4% 3% 4% 3%
6%
1%
12%
6% 7%
6%
0%
6% 6% 5% 5%
1%
4%
-3%
-1%
1%
-15%
-10%
-5%
0%
5%
10%
15%
2015 2016 2017 2018E 2019F 2020F
( Y
oY
% C
han
ge)
Cement demand growth rates, China, RoW, Asia, 2015-2020E
China (Mt) World (excl. China) Indian Sub-Continent South Asia North Asia excl China
Strong pipeline of new capacity under construction
328Mta cement capacity under construction worldwide (ex. China) – vs 188Mt additional consumption
New projects concentrated in Africa and Asia
Strong future project pipeline: 419Mta new cement capacity announced, not all will materialise
90
63 57
41 35
20
10 6 5 1
119
87
124
17
38
18
7 2 2 3 1 1
0
20
40
60
80
100
120
140
Mta
New cement capacity, worldwide (ex China), 2018
Under construction Announced
Asian per capita consumption trends
1716
1542
1102
995 979 916
860 829
734
643 619 569
432 418 375 373
333 298 284 283 253 216 208 196 185 182 179 171
135
0
200
400
600
800
1000
1200
1400
1600
1800
2000
(Kg
)
Per capita cement consumption, Asia (kg)
Cement Consumption Per Capita (kg)
Median World Av.
Cement consumption vs GDP
0
100
200
300
400
500
600
700
800
900
1000
1100
1200
1300
1400
1500
0 10,000 20,000 30,000 40,000 50,000 60,000
Ce
me
nt co
nsu
mp
tio
n p
er
ca
pita
(kg
)
GDP per capita (US$)
Cement consumption vs GDP - per capita
Indian sub-continent’s thriving cement sector
Indian sub-continent: demand (Mt)
Country 2017 2018E
India 284 324
Pakistan 39 42
Bangladesh 28 30
Myanmar 9 10
Sri Lanka 6 6
Nepal 5 6
Afghanistan 5 5
Bhutan 1 1
Total (Mt) 377 423
% Change 0.9% 12.3%
5.8%
10.6%
14.2%
7.1%
3.4% 4.8%
7.1%
3.1%
6.5%
0.9%
12.3%
6.5% 7.1%
0%
5%
10%
15%
20%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F
Yo
Y C
han
ge (
%)
Indian sub-continent: demand (YoY % change)
Regional markets dominated by India (75%) followed by Pakistan and Bangladesh
Very high regional economic growth: India 7.3%, Bangladesh 7%
Bounce back in demand growth as three largest markets post strong growth rates, returning to long-term CAGR of 6-7% over 2019-20
Lowest per capita consumption levels of the three Asian regions at 208kg; well below world av.
64% utilisation rate – but demand growth should match supply growth in India, lag in Pakistan.
India – robust demand and supply growth
325 350 356
479 490 502 517
532
254 270 274
288 284
324 344
369
78% 77%
60% 58%
65% 67% 70%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0
100
200
300
400
500
600
2013A 2014A 2015A 2016A 2017A 2018E 2019F 2020F
Mt
Capacity (Mta) Consumption (Mt) Utilisation (Mta)
Second largest market worldwide, with strong project growth in demand due to fundamentals (economic and demographic drivers), low per capita consumption
Second largest population at 1.33bn, set to overtake China by 2023 (IMF).
Demand growth accelerating from 5% (2013-18) to 6-7% annually over next two years
Utilisation rates set to recover from 58% in 2017 to 70% by 2020 as demand growth exceeds capacity additions (+15Mta, down from +35Mta)
Pop (2018): 1.334m (1.3% annual
growth)
GDP growth: 7.4% (2018)
Urbanisation rate: 34%
Per capita consumption: 216kg
• Cap: 502Mta (x2 over 10yrs)
• Demand 2018E: 324Mt / +14%
• Utilisation rate: 65%
(increasing)
• Surplus: 178Mta
• Demand CAGR 2013-18E: 5%
+35Mta capacity
(2013-18E)
India – technology and sustainability
✓ Modern cement facilities with advanced
technology: 50% of capacity less than 10
years old
• 99% dry process
• Large capacities: 4500-12000tpd kilns
✓ Best-in-class performance:
• Heat consumption (kcal/t cl): 650-750
• Power consumption (kWh/t cem): 70-90
• Waste heat recovery power generation
widely used
✓High use of fly ash slag to reduce clinker
rate.
Challenge: average Thermal Substitution
Rate of 4%
Sustainability performance:
> Dalmia and Shree top ranked
worldwide on climate preparedness
(CDP)
> CO2 emissions reduced by 36% from
1.12/t cement in 1996 to 0.719/t cement.
Target: reduce emissions intensity to
0.35t of CO2 per tonne cement by 2050,
requiring US$29-50bn investment.
North Asia – regional slowdown accelerates led by China
North Asia: demand (Mt)
Country 2017 2018E
China 2386 2149
South Korea 57 52
Japan 42 42
Taiwan 10 10
North Korea 7 7
Hong Kong 6 6
Mongolia 3 3
Macau 1 1
Total 2512 2270
% Change -0.2% -9.6%
Regional market dominated by China, followed by South Korea and Japan
Mature cement markets in structural decline
Advanced economies (slower GDP growth), high urbanisation (59-100%), low consumption growth/potential
Highest per capita consumption levels of the three Asian regions at 1542kg; well above world av.
75% utilisation rate – taking into account China’s ongoing industry reform
3.4%
14.5% 14.3%
10.3%
5.7%
10.3%
2.6%
-4.8%
2.4%
-0.2%
-9.6%
-2.5% -2.3%
-15%
-10%
-5%
0%
5%
10%
15%
20%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F
Yo
Y C
han
ge (
%)
North Asia: demand (YoY % change)
China resets to new demand course; industry restructures
-
500
1,000
1,500
2,000
2,500
3,000
19
90
19
92
19
94
19
96
19
98
20
00
20
02
20
04
20
06
20
08
20
10
20
12
20
14
20
16
20
18
20
20
20
22
20
24
20
26
20
28
20
30
(Mt)
China cement consumption, 1990-2030F
2014-2030
CAGR -2.7%
PCC: 1805kg
PCC: 1100kg
1990-2014
CAGR 11%
Building boom over? Shift from intensive real estate and infrastructure construction to stable, sustainable consumption: new normal
Long-term demand to decline (CAGR -2.7% then plateau)
Supply side reform of energy-intensive, polluter industry
Utlisation rate to recover from 68% in 2016 to 80% by 2020: reduction of 400mt clinker capacity over period
Stop new capacity, strengthened environmental regulation/upgrading, off-peak production
Consolidation: top 10 companies clinker capacity: 60% by 2020
Shift from exporter to importer (Vietnam)
1H18: cement production fell steeply: -10%
Improvement of supply-demand balance = utlisation rates recovering
Conch gross profit margin climbed by 11.86% to 44.83%
Prices: CNBM reported 1H18 v 1H20: +25%
Globalisation: One Belt, One Road (OBOR)
South Asia
8.8%
2.6%
6.6% 6.1% 6.1% 6.5% 5.5% 6.1%
-0.4%
5.6% 6.0% 4.7% 4.9%
-5%
0%
5%
10%
15%
20%
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018E 2019F 2020F
Yo
Y C
han
ge (
%)
South Asia: demand (YoY % change) South Asia: demand (Mt)
Country 2017 2018E
Indonesia 66 70
Vietnam 60 66
Philippines 30 32
Thailand 29 30
Malaysia 20 20
Cambodia 6 6
Singapore 5 5
Laos 4 4
Brunei 0 0
Timor-Leste 0 0
Total 221 234
% Change 5.6% 6.0% Region combines high-growth emerging economies more mature economies (Singapore, Malaysia)
Annual demand trending at 6% (sub-norm growth in 2016 as Thailand, Malaysia, Indonesia stalled)
Per capita consumption below average: 336kg
Range of urbanisation trends: 35% Vietnam, 47% Philippines, 54% Indonesia vs 75% Malaysia and 100% Singapore
High-growth markets: Indonesia, Vietnam, Philippines
But: high capex phase, resulting in low price environment and exportable surplus
Asian companies dominate cement industry groups
525
335 318
195
104 102 91 92 83 83 76 60 55 53 49 48 46 44 39 40 36 34 30 29 27 27 23
0
100
200
300
400
500
600M
ta
Production capacities of major cement producers, 2017