Supplies of cement in South Africa are tight, but the extent of the shortage is “somewhat exaggerated”, according to John Gomersall, the chief executive of Pretoria Portland Cement (PPC).
Gomersall admitted that customers could not phone up a building merchant today and get cement delivered tomorrow, but the same applied, for instance, to windows, reinforced steel and roof trusses.
He said PPC had slowed its cement imports and had not brought in any imports by sea in the past couple of months, although it brought in cement from its Zimbabwe operation when it could.
Albert Corcos, the chief executive of Lafarge South Africa, has also questioned whether there was a cement shortage. He said the firm had experienced difficulty in moving cement it had imported.
Consultancy Econometrix reported this week that annual growth in cement sales dipped to 11.1 percent last month after surging to an extraordinary 18.2 percent YoY rate in April and a 16.8 per cent annual rate for the first quarter.
Although the growth rate slowed in May, Econometrix concluded that high growth would be sustained for the next few years “even if at a slightly lower rate than … during the first four months of 2007”.
Gomersall said demand for cement in the Western Cape was up only two per cent YoY and PPC was moving quite a bit of cement from there to the inland region.
“Industry sales are definitely not running at double-digit growth although there is still good growth. I suspect that the inland region, particularly Gauteng, is quite strong, but some of the rural areas seem a bit down,” he said.
Using projections from PPC’s database of new and approved projects, Gomersall poured cold water on talk that there would be insufficient cement for the massive state infrastructure programme and 2010 soccer World Cup projects.
However, he said customers needed to plan ahead and give PPC advance warning to allow the company to plan ahead.
According to the database, the Gautrain rapid rail project would require a “top end of 400,000t of cement in total” over four years, he said.
The entire Gauteng market was 6Mta.
Gomersall said the five new World Cup stadiums would consume about 170,000t of cement. Contracts for upgrades to stadiums in Johannesburg, Pretoria, Bloemfontein and Rustenburg had not yet been awarded, but indications were that they would require 20,000t of cement each.
Using a generous projection of 300,000 to 325,000t of cement for the stadiums, only about 85,000t was in Gauteng. The rest was spread around the country and this market, including Botswana and Lesotho, would grow to 15.5Mt this year.
Gomersall also countered speculation that “millions of tons of cement” would be needed for the six power stations to be built by Eskom.
Using the 4100MW Matimba plant as a gauge, he said: “We are not talking about more than 20 000 tons a power station per year, and they will not all start at the same time.”
He stressed that PPC was not just trying to put a damper on speculation about cement shortages, but “to bring a touch of reality to the talk of future massive shortages of cement”.
PPC’s R1.4 billion Dwaalboom Batsweledi expansion project in Limpopo and the R604m upgrade at its Hercules plant in Pretoria would increase its capacity by 1.6Mta by mid-2009, mainly for inland supply.
Lafarge SA is investing R1.2bn to increase its cement capacity by 1Mta
Natal Portland Cement, owned by Cimpor Cimentos de Portugal, is expanding its Simuma plant at a cost of R800 million, which is likely to eliminate most of the cement imports into KwaZulu-Natal.