Domestic Thai cement sales in May 09 contracted 13% YoY to 2.05Mt, a sequential weakening from the 11% contraction seen in April 09, according to SCB Securities.
The 5M09 domestic sales reached 10Mt, down 12%YoY. If the negative momentum continues, the fall in local demand for 2009 could end at the higher end of the range, 10-15% YoY.
A lack of new projects in the private construction sector and delayed capital expenditures continue to erode the domestic volume base. Public sector construction activities that are relevant to the cement industry are limited to paving and minor repairs of structures and road networks, projects that are not cement intensive. Falling agricultural output is generally negative to cement consumption in the provincial areas. Implementation of larger public sector projects has been delayed; the Purple Line Mass Transit Route, with at least Contract 1 expected to be signed since April, has yet to move beyond the negotiating table.
In 2007 and part of 2008, the weakness in sales in the domestic market was offset by the good top line contribution from exports. This year, however, exports have been generally poor. Cement export volume slipped 7%YoY to 1.4Mt in May. This is a reversal of the positive, rebounding trend seen in Mar and Apr, +14% YoY and +22% YoY, respectively. The 5M09 export volume contracted 6% YoY to 6Mt. However, thanks to the 13% YoY effective increase in export price, mainly due to baht weakness, the total value of cement exports rose 5% YoY to Bt8.5bn.
The Thai industry is now entering the seasonal downturn of the construction business as the rainy season arrives in full strength. With cement demand momentum still weakening, prices in the domestic market are expected to fall. As per conversation with Siam City Cement, prices in Apr/May were down by Bt100-150/t to about Bt1500-1,600/t due to competition and increased contribution of lower-priced products such as mortar to the overall product portfolio.
Source: SCB Securities: 2 July 2009