Domestic cement demand rose impressively by 16 per cent YoY and 10 per cent MoM to 2.4Mt in February. Cement demand for the first two months also grew by 11 per cent YoY to 4.1Mt Cement demand continued to grow at double-digits in 1Q04, and strong growth is attributed to active construction activity in the residential property market. The forecast assumes cement demand to grow at a conservative rate of 5 per cent. However, based on current strong construction activity in both residential and retail markets, it appears that cement demand this year will beat expectation. An indicator supporting cement demand growth is the total construction area permitted, which increased by 34 per cent YoY to 18.5m square meters in 2003.
The upside potential on cement demand is driven by the government’s plan to spend Bt1.5 trillion on infrastructure projects during the next five years. Assuming government spending of Bt100bn per year for these infrastructure projects during the next five years, cement demand would increase by approximately 1.3Mt, which is roughly equivalent to an additional 5 per cent cement demand growth per annum.
Cement price for mixed cement in the Bangkok metropolitan area has softened slightly this month by Bt60/tonne MoM to Bt2074 per tonne for mixed cement and Bt2369 per tonne for Portland cement. The decline was mainly due to seasonalities from expected weak sales from long holidays this month. Cement companies will reconsider cement prices after the holidays in the third week of this month. Currently, cement companies are achieving an average price of Bt1708/tonne for mixed cement versus the ex-factory price ceiling of Bt1958/tonne, and average price of Bt1,984/tonne for Portland cement versus the ex-factory price of Bt2294/tonne. The achieved prices are noted to be similar to the level at yearend 2003. Even though there is little room for retail cement prices to rise, lower discounts on bulk cement is expected to see. Market survey revealed that the selling price of bulk cement has risen by Bt100/tonne this year. This should lead to a slight increase in average achieved cement prices.
Cement exports in the first two months in 2003 were sustained at 2.3Mt, rising very slightly by one per cent YoY. Major cement players in Thailand expect to reduce their exports this year and focus more on domestic sales due to higher freight costs and baht appreciation against the US dollar.