Increased infrastructural spending by the government, numerous planned projects by public corporations, low-cost housing projects, and the revival of residential building construction are factors that are likely to spur the demand for cement in South Africa over the next few years, according to a recent study.
Production and Investment Analysis of the South African Cement Industry, finds that the total demand for cement in South Africa was 14.9Mt in 2008 and estimates this to reach 23.1Mt in 2015. The markets segments covered in this research service are mining, civil construction, independent blenders, concrete product manufacturers, ready-mix producers, and building construction.
"The residential building construction sector is the largest user of cement in South Africa, accounting for approximately 50.0 per cent of consumption each year," says Frost & Sullivan Industry Analyst Litiya Matakala. "The development of low-cost housing over the period 2010 to 2015 is expected to be the single largest demand driver for the cement industry in South Africa."
The government plans to deliver an estimated 630,000 housing units per annum between 2010 and 2015, assuring cement suppliers a high and steady demand for cement.
The rising energy costs are, however, a major challenge for South African cement manufacturers. Energy costs account for a significant portion of the total costs of producing and distributing cement. Hence, the operating margins of cement producers are coming under more pressure, with the costs of diesel, coal, and electricity increasing.
"The cost of energy is likely to remain a key challenge for cement producers over the period 2010 to 2015 due to the planned electricity tariff hikes by the state power producer Eskom, and the spiralling cost and demand for steam coal, as the global economy recovers from the downturn," explains Matakala.
Source: Frost & Sullivan