Construction companies and building material suppliers appear set to suffer a backlash from booming demand in the residential building sector.
Shortages of basic building materials such as bricks are emerging as lower interest rates and consumer confidence continue to fuel demand for building in the residential sector.
Against this backdrop, Merrill Lynch has adjusted its cement volume growth forecast for SA’s largest cement producer, PPC, down from 10% to 7%.
Merrill Lynch said it became evident after discussions with management that domestic cement volume growth would more than likely be restricted by complementary or related material and skills shortages.
Building industry body Masterbuilders SA’s Pierre Fourie said on Friday that shortages would intensify if interest rates were maintained or reduced. This could see building costs rising next year, he said.
Merrill Lynch has also revised its headline earnings forecast for PPC for the 2005 financial year upwards to R14,88 from R14,33.
This is partly because PPC has indicated that Spoornet’s steep tariff hikes would be recovered through cement price increases.
Merrill Lynch previously assumed that PPC would absorb transport cost hikes.