Czech cement market can ride the construction wave

This week Cemex reported that its cement sales in the Czech Republic had increased by 70 per cent and yet it had still made a net loss of US$13.18m in 2018. Cemex's 2018 results were impacted by the merger of Cemex Group companies and Cemex Development Sro in May 2018. The company points to insufficient capacities and tensions in the labour market as potential hiccups down the line.

Cemex is the second-largest player in this market with an integrated 1.2Mta cement plant as well as a 0.3Mta grinding plant in in Prachovice. However, despite modest increases in Czech cement demand since the market crash of 2008, the company has not yet fully turned around results.

Construction revival
The Czech construction sector is currently enjoying a boom period. Output grew by 9.2 per cent last year, which was the largest advance since 2003. Housing permits reached 27,600 in 2018, up 3.6 per cent YoY and the highest number since 2019, says analysts ING.

The annual level of completed flats in Prague is around 4000 units, while demand is estimated at 5500-6000 units a year. Multi-dwelling houses rose to 7300 units in 2018, up 0.5 per cent YoY.

Moreover, large infrastructure projects are also driving cement demand with projects such as the EUR132m contract for the new section of the D35 motorway, which was awarded to Strabag in February 2019. This construction project will see a new four-lane connection with two interchanges on the 12.6km section between Opatovice and Casy. The work includes the construction of 25 bridge structures, seven of which will cross the motorway and the remaining 18 will form part of the carriageway. The largest bridge will have a height of 1060m and will cross the river Elbe floodplain. The contract also involves the complete renewal of the concrete surface of the D1 motorway between Velky Beranov and Merin, a 14.8km section, which will take three years to complete. 

"The construction sector will continue growing thanks to building construction, with a significant contribution coming from residential construction. The value of public contracts awarded so far indicates that civil engineering is likely to rise as well," Cemex said.

Cement sales rise
The Czech Republic’s cement market also appears to be advancing well on the back of the construction growth with cement consumption in 2018 up by 7.7 per cent  to 4.25Mt from 3.95Mt in 2017, while production increased to 4.43Mt in 2018, up 10 per cent YoY.

Cement Hranice (Buzzi Unicem group) operates a 1.1Mta integrated plant and picked up a 10 per cent YoY rise in cement sales in 2018.

Meanwhile, LafargeHolcim has also started a positive investment drive of US$2.4m to renovate its 1.2Mta Cizkovice cement plant and the company reported cement sales up by 11 per cent YoY in 2018.

HeidelbergCement is the market leader with its Ceskomoravsky Cement subsidiary operating two integrated plants in Mokrá and Radotin with a combined capacity of 2.27Mta. ICR has a full plant report on the Ceskomoravsky cement plant in its ICR September issue - out soon!