Cement consumption long-term growth intact, Thailand

Cement consumption long-term growth intact, Thailand
Published: 04 August 2005

Thai cement consumption growth decelerated in 2H05 and also decelerated to eight per cent YoY in 2Q05 from 18% in 1Q05. Cement consumption grew by 13% YoY in 1H05. According to analysts, cement demand growth will sustain at high single-digits for the rest of the year. This is to take into account the effects from slow sales in the rainy season and the construction slowdown in the residential industry.  
 
Cement growth of 11% for 2005E and 12% for 2006E is as follows. Cement growth was revised up to 11% in 2005E from 10% to take into account the higher than expected growth in 1Q05. Growth of 12% in 2006E will likely be mainly driven by mega-projects: consumption from the public sector will grow by 40%, which will more than offset the slowdown in the housing industry.  
 
Cement prices are not to rise in the near term. A slight decline in cement prices is expected to be witnessed in August from the low season sales in the rainy season. Retail cement prices have increased due to inflationary pressure from higher transportation costs since March. Cement companies will not raise cement prices much further from the current level to put pressure on consumers in the near term. However, they may consider adjusting cement prices up at yearend when consumption growth from the public sector grows more evident.  
 
The 31% stake in TPI Polene held by Thai Petrochemical Industry will be auctioned on August 9. Investors will bid more than the Bt40/share required by TPI’s debt planner given that they are not allowed to do due diligence and they would not have managerial control over TPIPL from the deal. In this case, it will be up to the creditors to decide whether to sell the shares. There will be negotiations between creditors and potential investors.