Thailand’s cement industry trend in 2007: domestic market is a key factor

Thailand’s cement industry trend in 2007: domestic market is a key factor
Published: 04 December 2006

The trend of the cement industry in 2007 is projected to rely on domestic market as the key driver, in particular, private investment in construction/real estate business. Kasikorn Research Center (KResearch) forecasts that the domestic demand for cement in 2007 will total about 29.5Mt, growing 1.7 per cent against the sales of 29Mt in 2006.

This growth is attributed to certain positive factors, eg, demand for cement to repair damaged homes and property from flooding during rebuilding from the end 2006 through to the beginning of 2007, and the government’s expedited budgetary disbursements, etc. There will also be other factors, e.g., a clearer political direction and trend toward lower domestic interest rates in 2007 instilling more confidence with consumers toward home buying decisions, and falling energy cost that also reduces the production costs of raw materials for construction. 
 
Cement exports in 2007 are also forecast to be negatively effected by the stronger Baht, which is projected to appreciate further next year, in addition to a projection that the world’s major economies, i.e., the US and the EU, may slow. These factors will put export volume in 2007 at around 14.1 million tons, falling from the forecast for 2006 that cement exports will total 14.6 million tons, or a drop by 3.2 percent. 
 
For the overall trend in 2007, cement business will mainly depend on the domestic market where the key variable will be the growth of real estate business and construction of the private sector, i.e., construction and housing business. Increased production capacity that has emerged in the cement industry toward the end of 2006 may intensify competition in this business and pressure entrepreneurs to engage in more price-cutting competition.