CW Research: Global Cement Demand to Contract by 2.7% in 2015
CW Research’s 2H2015 Extended Update to its benchmark Global Cement Volume Forecast Report (GCVFR), the advisory and research boutique’s twice-yearly outlook for worldwide cement market volumes, forecasts 2015 world cement demand to see a worldwide decline of 2.7 percent, reaching 4.0 billion tons.
The research team also revises its longer-term global outlook down to 2.4 percent per year on average through 2020. This downgrade in world cement demand is driven to no small extent by a negative revision of Chinese demand, but also because of a global confluence of various macroeconomic and geopolitical factors. Notably, Europe and parts of Latin America see significant downgrades in the short and medium term, while North America led by the United States re-emerges as a tentative volume growth driver.
“The cement world is taking it on the chin in 2015; geopolitical, security, commodity, and fiscal risks have gained prominence in 2015 and have resulted in a marked deterioration on the growth prospects for the global cement markets. Undoubtedly, there remain some compelling markets for cement volume growth, but the overall outlook in the short term has a negative bias,” explains Robert Madeira, CW Group Managing Director and Head of Research.
According to CW Research, a structural shift in the Chinese economy has resulted in decline in cement consumption. Moreover, it is expected that the Chinese market will further contract in 2016, before stabilizing and returning to growth in the latter part of the forecast period. For India, the world’s second largest cement market, CW Research expects production capacity and consumption to expand over the next five years as economic growth is in a recovery mode. Nonetheless, consumption is expected to increase by only one percent in 2015, much lower than 2014’s percentage level.
Meanwhile, CW Research forecasts strong cement consumption growth in North America and mid-single digit growth for the United States between 2015 and 2020. The forecast for Western Europe expects a contraction in 2015 with volumes declining by 2 percent, with a projected average growth of 2 percent from 2015 to 2020 as the region deals with various macroeconomic challenges.
CW Research also estimates a modest growth for Eastern Europe and CIS Region between 2015 and 2020. Nonetheless, the report shows that this region is expected to witness a decline in consumption of 3 percent in 2015 primarily as a result of contraction in Russia. Latin America, despite registering a decline in consumption of 1 percent in 2015, is expected to recover and grow at a CAGR of 3.6 percent over the period 2015-2020.
Africa and the Middle East regions have been negatively impacted by the sudden slowdown in the Chinese economy and the collapse in commodity prices. This has added to existing problems and negatively affected cement demand in large markets such as Brazil and Peru in Latin America and Morocco and Tunisia in Africa, leading to a downward revision in short-term cement demand.
Forecast with a sluggish global recovery
Overall, the 2H2015 Global Cement Volume Forecast Report (GCVFR) predicts gives a muted positive outlook on the future of cement volumes. Over the forecast period 2015 to 2020, global demand is expected to grow at a slower pace. Capacity additions will likely see rationalization and further optimization of utilization rates as companies adapt to a slow growth environment. Bright spots such as the United States, India, Nigeria, Saudi Arabia and Colombia provide optimism in spite of the overarching gloomy picture.