Private construction to increase Thailand's cement demand

Private construction to increase Thailand's cement demand
13 February 2019

Cement demand in Thailand is forecast to increase in the next few years after a recovery in the private construction sector, says Fitch Ratings.

Fitch Ratings expects high-single-digit growth for cement demand in Thailand in 2019, while cement sales data from the Office of Industrial Economics in 3Q18 reported 3.7 per cent YoY growth and a further 2.8 per cent growth in 4Q18. Domestic cement demand for all of 2018 remained low at 0.8 per cent growth YoY.

"Cement consumption should rise from a pick-up in residential property development, mass-transit extensions and a strong pipeline of new commercial buildings, including several mega mixed-use projects in key Bangkok city areas. This should not only boost sales volume, but also improve product prices and operators' profitability," according to Fitch Ratings. "Fitch expects the profit margins of cement and building materials businesses to gradually improve over the next three years.

"Oversupply in the domestic market and a profitability gap between domestic sales and exports are driving local cement producers to expand regionally. While other operating markets have also seen challenging conditions, similarly to Thailand, diverse cash flow sources should help reduce cash flow volatility across the business cycle and single-market concentration risks over medium to longer term," the report summarises.

Private construction accounts for 60 per cent of Thailand's cement consumption. As this sector regains momentum Fitch predicts profit margins of cement companies to rise over the next three years.

In addition, more than THB3trn (US$98.5bn) in government mega projects will be spent in 2018-26, especially on the mass transit system.

Published under Cement News