FLS, the world’s largest manufacturer of cement plants, earlier today increased its estimate of the amount of new annual cement capacity that will be ordered in 2008, outside of China. It now expects 150Mt of new capacity to be ordered. Previously it had been forecasting 125-150Mt (reports JP Morgan analysts).
FLS estimates that 30% of the cement capacity ordered so far in 2008 was for Africa, 25% for India, 13% for Europe, 11% for the Rest of Asia and 10% for Russia. The main change this year compared with previous years has been the further decline in new orders from the Middle East. This has been more than offset by an increase in orders from Africa, Europe and India.
FLS estimates that historically there is typically a two year lag between new capacity being ordered and it coming onstream, although it is currently extended by around six months due to the level of demand. With this increase in expected new capacity, we expect global cement capacity utilisation outside China to decline by four percentage points in 2008 to 86%, and then by a further 4 percentage points to 82% in 2009. JP Morgan estimates that capacity utilisation will then decline by a further nine percentage points in 2010 to 73%. However, these estimates exclude any offsetting closures, which FLS estimates could boost capacity utilisation by around one percentage point a year. Adjusting for this, capacity utilisation would decline to around 76% in 2010.
FLS estimates that demand for new cement capacity outside China will average 75-125Mt a year during the next three years, and then decline longer term to 60-75mt a year.