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Pretoria – Last month’s steep 22% increase in cement sales is attributable to dealers stockpiling cement ahead of price increases, say industry leaders.
They reckon these figures are too good to be true and come in the wake of 4.2% growth in average daily sales volumes last year, compared with 2010.
AfriSam chief executive Dr Stephan Olivier says last month's good sales were thanks to not much rain, but he reckons the figure was artificially boosted by dealers buying additional stock before a rise in cement prices.
So far this month sales do not reflect a similar sharp increase, he says.
In a newsletter Pretoria Portland Cement (PPC) points out that the big increase took place against the background of exceptionally poor sales in January 2011. The group also confirms that cement usually sells exceptionally well in a month preceding a price increase. Last year PPC, which is the biggest cement producer, raised its prices in January, but this year postponed the increase to February.
NPC Cimpor chief executive Piet Strauss says experience has taught him to draw no conclusions about cement sales before the Easter weekend. He says there are too many factors that can have an influence, such as the builders’ holiday, rainfall and price increases. He agrees that the 22% does not reflect a true picture of the market.
Charlene Lamb, communications manager at Lafarge, says her company increased its prices last month. Sales volumes started to grow from the second half of last year, but she believes forward purchases may have inflated the January figure.
Elsie Snyman, chief executive of construction data service Industry Insight says more cement has been imported over the past year. In the first 11 months of 2011, according to figures from the Department of Trade & Industry, a total of 410 000 tonnes was imported, mainly from India and Pakistan.
Imports are however less practical if the rand strengthens, as was recently the case. A stronger rand can return market share to local producers.
Snyman says importation actually affects only the Eastern Cape and KwaZulu-Natal markets. An increase in building by the private sector has certainly stimulated cement sales in the Northern Cape, North West and Mpumalanga.
Demand for cement is however outpacing the approval of building plans in the private sector. This indicates that government expenditure is playing an increasing role in the cement market, says Snyman.
All producers are cautiously optimistic about prospects. This year Lafarge expects a 3% growth for the industry and AfriSam speaks of 2% to 5%.
Olivier says the country's production capacity is currently underutilised.
The four big producers can together manufacture more than 17m tonnes of cement a year, compared with the total consumption of 11.2m tonnes last year.
Among the existing cement producers, AfriSam recently experienced difficulties at shareholder level. The Public Investment Corporation however assumed control and restructured the debt, positioning the company better for the future.
Lafarge did not wish to respond to rumours that its South African operations are for sale. According to overseas reports the company is considering this step as part of rationalising the international group, and an Indian company may be interested.
Local players however say that parties like Sephaku and Conticem could benefit from purchasing Lafarge’s plants. Depending on how much they have invested in their own new plants and what Lafarge’s price would be, the purchase could easily quickly give a new player a share of the market.
Existing producers will probably struggle to get around the Competition Commission should they wish to acquire Lafarge’s operations.
There are two newcomers on the horizon – Sephaku, supported by Nigerian cement group Dangote as shareholder, and Conticem, with the Chinese Jidong cement group. Both have indicated that they are preparing to produce cement within the next year or so.
They reckon these figures are too good to be true and come in the wake of 4.2% growth in average daily sales volumes last year, compared with 2010.
AfriSam chief executive Dr Stephan Olivier says last month's good sales were thanks to not much rain, but he reckons the figure was artificially boosted by dealers buying additional stock before a rise in cement prices.
So far this month sales do not reflect a similar sharp increase, he says.
In a newsletter Pretoria Portland Cement (PPC) points out that the big increase took place against the background of exceptionally poor sales in January 2011. The group also confirms that cement usually sells exceptionally well in a month preceding a price increase. Last year PPC, which is the biggest cement producer, raised its prices in January, but this year postponed the increase to February.
NPC Cimpor chief executive Piet Strauss says experience has taught him to draw no conclusions about cement sales before the Easter weekend. He says there are too many factors that can have an influence, such as the builders’ holiday, rainfall and price increases. He agrees that the 22% does not reflect a true picture of the market.
Charlene Lamb, communications manager at Lafarge, says her company increased its prices last month. Sales volumes started to grow from the second half of last year, but she believes forward purchases may have inflated the January figure.
Elsie Snyman, chief executive of construction data service Industry Insight says more cement has been imported over the past year. In the first 11 months of 2011, according to figures from the Department of Trade & Industry, a total of 410 000 tonnes was imported, mainly from India and Pakistan.
Imports are however less practical if the rand strengthens, as was recently the case. A stronger rand can return market share to local producers.
Snyman says importation actually affects only the Eastern Cape and KwaZulu-Natal markets. An increase in building by the private sector has certainly stimulated cement sales in the Northern Cape, North West and Mpumalanga.
Demand for cement is however outpacing the approval of building plans in the private sector. This indicates that government expenditure is playing an increasing role in the cement market, says Snyman.
All producers are cautiously optimistic about prospects. This year Lafarge expects a 3% growth for the industry and AfriSam speaks of 2% to 5%.
Olivier says the country's production capacity is currently underutilised.
The four big producers can together manufacture more than 17m tonnes of cement a year, compared with the total consumption of 11.2m tonnes last year.
Among the existing cement producers, AfriSam recently experienced difficulties at shareholder level. The Public Investment Corporation however assumed control and restructured the debt, positioning the company better for the future.
Lafarge did not wish to respond to rumours that its South African operations are for sale. According to overseas reports the company is considering this step as part of rationalising the international group, and an Indian company may be interested.
Local players however say that parties like Sephaku and Conticem could benefit from purchasing Lafarge’s plants. Depending on how much they have invested in their own new plants and what Lafarge’s price would be, the purchase could easily quickly give a new player a share of the market.
Existing producers will probably struggle to get around the Competition Commission should they wish to acquire Lafarge’s operations.
There are two newcomers on the horizon – Sephaku, supported by Nigerian cement group Dangote as shareholder, and Conticem, with the Chinese Jidong cement group. Both have indicated that they are preparing to produce cement within the next year or so.
