Strong domestic demand offsetting rising energy cost

Strong domestic demand offsetting rising energy cost
16 March 2005

Thailand’s January cement sales were very impressive compared with an average growth of 12 per cent for last year and 5 per cent growth for 2003. Conservative forecast is maintained for domestic cement demand at 10-15 per cent this year on rising cement demand from public infrastructure projects, while demand growth from the property sector will be slower than last year. Despite pressures from rising costs, strong high margin domestic demand is expected to help reduce cost pressure on cement margins.  

Among Thai cement producers, Siam Cement (SCC) is viewed as the winner. SCC should be the prime beneficiary of rising domestic demand due to its ample capacity and its utilization rates were only 70 per cent in 2004 compared with Siam City Cement’s (SCCC) 90 per cent and TPI Polene (TPIPL) 95 per cent.  

SCC will have the least impact from rising coal and transportation costs as it has its own cheap domestic lignite sources to blend with imported coal from Indonesia, while TPIPL and SCCC use 100 per cent imported coal. In addition, SCC will have less impact from rising diesel oil prices as it has cement plants located in good locations in North, Central and Southern Thailand, while its competitors are located only in Central Thailand, reports KGI Securities (Thailand)

Published under Cement News