The BRICs come under pressure

The BRICs come under pressure
Published: 08 April 2016


While the cement world has been concentrating on the slowdown in China and the large-scale mergers in India's cement sector, there has been little notice to the plight of other BRIC countries that are underperforming and are not attracting the investment that had previously put them at the top of the growth chart.


The Economist Intelligence Unit this week observed that: "It has been clear for some time that the BRICs has had its day. While China and India have largely lived up to the grouping's characteristics of being fast-growing economies of rising importance, Brazil and Russia have long disappointed."

Brazil's cement landscape slows
In terms of the cement market outlook there has been a marked drop-off in the ability to foster new capacity projects and cement demand slipped 6.1 per cent to 4.6Mt in Brazil in March, according to statistics gathered by the Brazilian National Cement Industries Union, SNIC. If we look at the YoY figures the domestic market has dropped from 71.4Mt in 2014 to 64.9Mt in 2015, or by approximately 10 per cent.
This week there was further bad news. Votorantim has been down-rated by Fitch Ratings and faces a hefty BRL1.5bn (US$0.41bn) fine from the antitrust authority, CADE, which will impact on its earnings.
Elsewhere, Cimpor recorded a 30.3 per cent decline in its 2015 turnover from Brazil, where it has a cement capacity of 18.3Mta, while cement and clinker sales in the South American country were down 16.3 per cent to 10.45Mt in 2015.

Russian strategies are starting to change
In Russia the outlook is hardly better with oil prices falling and economic sanctions affecting market confidence. The cement sector is not immune either from such influences. ICR's March issue contained an interesting report which noted that construction output contracted by seven per cent in 2015, while cement consumption was estimated to have decreased to 63Mt from 71.5Mt in 2014.

The powerhouse in Russia's cement industry is Eurocement and its activity will be closely watched with a multitude of new capacity projects destined to be built for it by China's Sinoma and also KHD Humboldt Wedag's subsidiary ZAB Zementanlagenbau GmbH Dessau. But has the Russian cement giant overestimated domestic demand? It has been fully embroiled in working out a debt restructuring plan with Sberbank in recent weeks and has been forced to relinquish its shareholding in LafargeHolcim.
Meanwhile, HeidelbergCement and Buzzi Unicem have also found the Russian market biting into their earnings, although Dyckerhoff's cement deliveries were said to be up in February 2016 mainly because of the inclusion of the Korkino cement works.