Cement sales tipped to soar in run-up to 2010

Cement sales tipped to soar in run-up to 2010
Published: 11 January 2007

Pretoria Portland Cement (PPC), Africa’s biggest cement maker, says South African demand for the building material will rise for a sixth year as the government builds stadiums, roads and railways for the 2010 Fifa World Cup.

Sales in Africa’s biggest economy might increase 6%-8% this year, PPC chief operating officer Orrie Fenn said yesterday.

Cement sales rose 11% to 13,19-million tons last year. Government is spending R372bn to build five new stadiums, the Gautrain rapid rail link and other infrastructure projects in preparation for the first soccer World Cup in Africa.

Residential spending is also expected to grow this year as interest rates remain near a historical low.

“The growth is still there,” Fenn said. “The big infrastructure spend has taken off, residential building is still strong and there is lots of activity in the nonresidential area.”

The Reserve Bank almost halved its interest rate to 7% between June 2003 and April 2005, boosting spending on homes. It has since raised rates by 150 basis points, slowing demand.

“Rates have ticked up, but they are nowhere near historical highs,” said Cavan Osborne, an analyst at Credit Suisse Standard Securities in Cape Town. “There are still a lot of people building houses. There is accelerating demand from construction.”

Osborne estimates cement sales will grow 7% this year.

Carl Grim, CEO of builder and cement maker Aveng, said yesterday that sales might rise in the first half of this year and slow in the second half. Aveng owns 46% of Holcim SA, the country’s number two cement producer. The balance is held by Switzerland’s Holcim.

Demand has outstripped supply, forcing PPC and other producers to import cement for the first time in more than 25 years. PPC may import as much as 500000 tons this year.