Positive outlook for Mexican producers
This week Banco Santander reported that it has given a positive outlook for two cement producers in Mexico, following the rise in cement prices in the country as production volumes look set to climb by 5.6 per cent in 2016 to 52.5Mt. This must be welcome news for Cemex that has been forced to dispose of assets in several countries to meet its debt requirements with the latest being the sale of the Odessa plant in the USA to Grupo Cementos Chihuahua (GCC).
The Mexican market has remained a source of strength as cement prices have steadily escalated. In 2015, the National Institute of Statistics calculated that annual cement prices had risen 6.7 per cent and this trend is continuing in 2016.
Net sales for Cemex rose by seven per cent in Mexico in 2Q16 to US$796m while EBITDA increased by 18 per cent to US$302m, reflecting a strong pricing environment.
Cement maker Elementia SAB de CV (Cementos Fortaleza Group) has also been active in raising cement prices and the cement division achieved 33 per cent increase in EBITDA to US$31.2m (MXN586m) during the 1H16. Cement sales for the company rose by 34 per cent in the first half to reach US$74.7m (MXN1.44bn).
Meanwhile, GCC’s domestic cement sales in 2Q16 rose 14.8 per cent on the same period in 2015 with an eight per cent rise in sales volumes. The company also reports that its electricity and fuel costs in Mexico were also lower, which helped its margins.
In terms of cement volume, LafargeHolcim slipped compared to its rivals in 1H16, seeing its shipments fall 3.9 per cent, but its cement price was up 15.9 per cent.
Economy in a positive development phase
While the global economic markets have been held back by China’s retraction in growth, the slump in the oil markets and the Brexit vote, Mexico saw its GDP rise 2.5 per cent in 2015 and the IMF is forecasting a further growth of 2.5 per cent in 2016. Structural government reforms have also boosted the participation of private firms in construction and this investment now accounts for 75 per cent of construction projects in Mexico, according to analysts Seale & Associates.
Delays hold back construction growth
Meanwhile, the government’s national infrastructure programme (PNI) that begun in 2014 has had to be extended a further year from 2017 to 2018 as it is behind schedule. “Of the 80 roads in the plan, 57 have been completed. Regarding highways, 26 out of the 52 included in the programme have been delivered,” said Oscar Vallejo, infrastructure undersecretary at the transport ministry.
PNI covers developments across six sectors in all: communications and transport, energy, water, health, urban development and housing, plus tourism. Further analysis by the El Financiero newspaper revealed that 61 of the 223 projects included in the programme were less than 10 per cent complete, while 28 per cent of the 223 projects had been completed at the end of July 2016.
However, the higher cement prices are being backed up by higher demand for cement coming from the private construction of shopping malls, hotel infrastructure and a growing retail segment. The Mexico City Airport Group is also busy with the construction of its US$520m new airport that is set to open in 2020 with two terminals and five runways. The budget for this year alone on the construction of the main terminal building, fuel terminal and boarding platforms is US$288m.
More energy-efficient production on the way
Cement producers in Mexico are also achieving efficiency gains as they continue to modernise and expand. Cruz Azul opened a second line at its Palmar de Bravo plant in the state of Pueblo in December 2015, taking its cement capacity up to 2.7Mta.
Corporación Moctezuma (Buzzi Unicem Group) is bringing online a new Loesche LM 53.3+3C cement mill at its Apazapan plant in 4Q16 as well as a dynamic classifier. The VRM will be capable of operating at 205tph.
In addition, Elementia has invested in a 1.5Mta expansion of its Atotonilco de Tula cement plant in Hidalgo. The completion of this project is scheduled for 2017.
