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PPC expects growth in cement demand, despite current conditions

PPC expects growth in cement demand, despite current conditions

Photo by Duane Daws

23rd September 2015

By: Megan van Wyngaardt

Creamer Media Contributing Editor Online

  

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Aggregate products manufacturer PPC estimates that between 2016 and 2020 an additional 2.4-million tons of cement will be required to meet the forecast demand, which is set to outpace growth in gross domestic product.

It believed that by 2020, demand in cement would be between 16-million tons and 17-million tons a year. For the remainder of this year, it forecast cement consumption to reach 14-million tons; levels last seen in 2007.

However, the cement producer stressed that for the year to date, its South African cement volume growth had remained flat. Excluding subsidiary Safika Cement, volumes in PPC’s core business declined by 4% and average selling prices also fell by 2%.

“Competitor intensity has led to substantial customer churn, with the worst affected areas being Mpumalanga and Polokwane,” PPC said in a presentation at the RMB Morgan Stanley conference in Cape Town on Wednesday.

Volumes in Gauteng also declined, but the construction segment showed some resilience, while volumes in the coastal regions were also under pressure.

However, the company noted that positive performance had started to emerge.

Meanwhile, it noted that with antidumping duties of between 14% and 77% imposed on Pakistani cement in May, the operating environment in South Africa had improved.

“Imports from Pakistan have declined substantially in the second quarter,” PPC noted, adding that between January and May, 11 vessels landed in South Africa carrying imported cement, but this declined to two vessels between June and August.

“However, the dramatic reduction in shipping rates is of major concern,” the company stated.

PPC advised that the cement industry would continue to engage with the authorities to align dumping duties across Pakistani producers.

Further, PPC’s expansion strategy remained on track, following the opening of a new plant in land-locked Rwanda, in August.

Construction of the $170-million, 600 000 t/y plant at the company’s 51%-owned Cimerwa started in 2013 and, by June, the company completed civil construction, mechanical erection and electrical installations.

In the Democratic Republic of Congo (DR), PPC subsidiary PPC Barnet had also made progress with its $280-million, one-million-ton-a-year plant, which was 45% complete. “Commissioning of the project remains on track for end-2016, while civil construction would be completed by end-September,” the company added.

Further, it had already started structural steel and mechanical erection work on key items, and ordered the main transformers, substation and PPC switchyard.

PPC expected permanent power to be available on site by end-June 2016.

“This will prove a game-changer for both the region and the country as the DRC is currently a net importer of cement," PPC Barnet DRC MD Craig Waterson said.

With infrastructure development a priority in Central Africa and investment by government and the private sector reflecting the region’s positive growth rate, the plant’s construction had created significant interest within and beyond the country’s borders. The plant at Kimpese was well placed to service not only the Kinshasa market but also the southern provinces of Kongo Central and Bandundu. The port at Kinshasa also offered access to the Congo river, providing a route to the interior of the country.

Its impact would also be felt at a local level in terms of job creation and overall social and community upliftment.

Further, the PPC Barnet DRC technical school Centre de Formation Technique would at the end of September be celebrating the graduation of its first intake of students  – many of whom were hoping to pursue careers in the manufacturing and construction sectors.

Roads in and around the plant had also been upgraded and a bridge built to improve transport infrastructure in the region.

Edited by Tracy Hancock
Creamer Media Contributing Editor

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