Rate of global demand appears to have slowed in April

Rate of global demand appears to have slowed in April
Published: 26 May 2011

Data on cement demand in April is currently available for 11 of the 19 countries where Jefferies track monthly shipments data. It increased in April in all eight of the emerging markets, but the growth rate slowed in five of these countries. Demand in developed markets was generally weaker in April 2011 than in April 2010, but this was partly because there was one less working day this year.

Growth slows in developed countries. The weaker demand in Western Europe in April was mainly caused by there being one less working day this year than in April 2010. Adjusting for this we estimate that on alike-for-like basis cement demand increased by 3-4% in both France and Germany. This is a slower growth rate than earlier this year, confirming the benefit from the milder weather in the earlier months of 2011. The 17.5% decline in Spanish cement consumption in April 2011 was disappointing after the fall of only 1.6% in the first three months of this year.

Demand slows less than expected in Eastern Europe. The rate of growth in cement demand slowed in Eastern Europe in April 2011, after being boosted by milder weather earlier this year. However, cement demand in April 2011 was still 7.5% higher than in April 2010 in Russia. It was also up 8.3% in the Ukraine and 17.4% greater  in Poland, where it benefited from a easier comparative in April 2010.

Growth slowing in Brazil. The rate of growth in cement demand slowed in Brazil in March and April. In our view this was mainly due to the strong comparatives in 2010. Conversely, the rate of growth in demand increased in Argentina during April.

Strong growth continues in China, but slows slightly in Indonesia. In China, cement production in April 2011 was 15.2% higher than in April 2010, resulting in a similar rate of growth in April to the last three months (15.1%). In Indonesia, the rate of growth slowed slightly in April 2011 to 6.8%.

A slower rate of growth in shipments will, in Jefferies view, make it more difficult for the cement industry to increase cement prices. The house estimates that in 1Q11, despite volume increases averaging 8.1% for the seven companies that Jefferies have under coverage, prices were only 1-2% higher than in 1Q10, despite costs increasing by around 5%. Jefferies expect the gap to narrow, as the annual price increases in Europe and North America typically weren’t implemented until 1 April. However, the slowing in the rate of growth in demand in these regions in April will in Jefferies view make it more difficult to achieve these price increases.