PPC, SA’s largest cement producer, has warned that weak demand due to increased imports in Southern Africa, as well as SA's poor economy, could hamper producers’ growth prospects and ability to increase prices.
The unfavourable market conditions could adversely affect the creation of jobs in the sector, according to PPC chairman Jabu Moleketi.
In his comments in the company’s 2019 annual report, Moleketi blamed weak cement demand on the pressures facing consumers and lack of construction activity.
“This was further exacerbated by increased cement imports and the growth of third-party blenders, which detracted from market-related pricing. This combination of factors makes it difficult for the industry players to achieve sustainable pricing, grow their business and, in the long term, could adversely impact cement producers’ ability to create job opportunities in the sector,” Moleketi said.
Construction market intelligence firm Industry Insight said in June imports of cement to SA increased by 45% year-on-year in April 2019 to 129,684 tons compared to 89,453 tons imported in April 2018.
This brings the annual increase for the first four months of 2019 to 13.2%, totalling 313,714 tons. Overall cement imports increased by 85% in 2018. Vietnam remained the primary exporter of cement into SA.
Industry Insight said the bulk of the cement from Vietnam in April 2019 entered SA through the ports of Durban (74%), followed by 14% through the ports of Cape Town and 12% in Port Elizabeth.
Moleketi said unlike in Southern Africa, projected GDP growth rates remained favourable in the rest of Africa “and we are well positioned to benefit from improved growth prospects and relatively low cement consumption”.
Apart from SA, PPC also does business in Botswana, Zimbabwe, Rwanda, the Democratic Republic of Congo (DRC) and Ethiopia.
“[The] overall outlook in the (rest of Africa) remains positive, despite pockets of challenges in specific regions. The market in Rwanda continues to flourish, and we anticipate that the post-election backdrop in the DRC lays the foundation to unlock further demand and possible recovery in cement prices,” he said.
Moleketi said PPC’s strategy entailed investing in new plants in countries with high growth and low cement per capita consumption. PPC said, based on the assumption that sub-Saharan Africa excluding SA was developing and urbanising, the growth in cement consumption was likely to continue at 6% per year.
Departing PPC CEO Johan Claassen said the company expected the “challenging” market conditions in the Southern African cement and materials business to persist “given weak demand and competitive pressures”.
Claassen said subsidiary PPC Barnet in the DRC was well positioned to take advantage of growth in that country.
“The post-election backdrop should create a platform to unlock latent cement demand, and GDP growth is projected to increase by 4.3% in 2019,” he said.
Claassen is set to retire after 30 years at PPC. Former Lafarge Holcim veteran Roland van Wiljne will replace him.
PPC shares rose 2.24% to R5.01 on Tuesday, pushing its gains to 6.6% over the past two days.