Thai cement industry outlook

Thai cement industry outlook
Published: 23 November 2004

In 2004, the Thai cement industry exhibited healthy growth after seeing a slowdown in the year before. Demand for cement at home has been high, thanks to favorable construction-related investment domestically, both in private and public construction projects. However, construction-related activities have been confronted with rising costs in raw materials, thus adversely affecting building contractors and leading to delays in construction projects on the whole. Worse, spates of negative factors - namely volatility in the world’s oil prices, unrest in the South, and the re-emergence of the bird flu - have all dented consumer and business sector confidence. As a result, private investment has seen a slowdown over the latter half of this year. From January to September of this year, domestic sales volume of cement totalled 20.5Mt, a year-on-year increase of 13 per cent.

Meanwhile, cement production topped 26.5Mt, rising by 8.9 per cent over the same period of last year. Kasikorn Research Center (KRC) expects that cement sales volume domestically this year will total around 27.3 million tons, increasing 12.7 per cent, year-on-year against the 24.2Mt in 2003. Domestic demand for cement is likely to cause cement production in 2004 to total some 35.6Mt, growing 9.4 per cent over the 32.5Mt recorded in 2003. Capacity utilization in the cement industry this year is projected to be around 63.3 per cent, rising from 57.6 last year.

Looking ahead for the cement industry in 2005, it is forecast to continue with steady growth, albeit at a slower pace than the year before, thanks to domestic construction-related investment. KRC expects that investment in domestic construction next year will top around Bt680 billion, an increase of 10 percent at constant prices, year-on-year (slowing modestly from a projected growth of 11 per cent for 2004) which will result in healthy growth in demand for construction materials. KRC estimates that domestic demand for cement in 2005 will total around 30 million tons, rising by around 9.9 per cent.

Cement production in 2005 is expected to increase to 38.3Mt, growing around 8 per cent, stemming from higher domestic demand while exports will likely fall. It is expected that capacity utilisation in cement manufacturing will increase to 68 percent in 2005. The full production capacity of the domestic cement industry is around 54Mt, and even if production were increased by around 2.5-3Mta, it would take 2-3 years for them to require expansion of production capacity. KRC expects that in 2007, the capacity utilisation of the cement manufacturing industry could possibly exceed 75 percent.