2021 Expectations

This week, we take a look at the major developments in the largest cement markets over 2020 and consider what lies ahead in 2021.

USA
Over the last few months, the US has faced a tumultuous presidential election process which has finally concluded with the inauguration of President Joe Biden. In the first ten months of 2020, cement consumption edged up 0.1 per cent YoY to 85.69Mt. This was despite a strong performance in the first quarter, before the devastating impact of the COVID-19 outbreak on the country. The country is currently leading in both deaths and total cases of COVID-19, with this set to be the most significant challenge for the country to overcome in 2021.

However, the new administration has already announced a US$2trn infrastructure plan for the next four years. A carbon tax is reportedly one of the methods that could be employed to finance this large-scale plan, according to CNBC. As we have seen in other areas of the cement sector, this would have a huge impact on domestic cement producers.

Europe
In Europe, where carbon trading is already established through a cap-and-trade system (EU ETS), carbon prices have risen to EUR34.25, driven by Phase IV of the trading scheme which will see the overall number of emissions allowances decline by 2.2 per cent. The move underpins the increasing importance of sustainability and finding green solutions for the global cement industry. Furthermore, the European Green Deal policies, which aim to accelerate the decarbonisation of the EU economy, will create momentum for producers to embrace lower carbon technologies.

The impact of the pandemic on volumes has been mixed. In Germany, one of the region’s largest cement markets, continued to expand throughout 2020, with first half growth up 9 per cent compared to the same period a year earlier.

On the other hand, cement consumption in Spain dipped 9.7 per cent YoY to 13.29Mt in 2020. While the decline began at the very start of the year, it was exacerbated by the COVID-19 lockdown. Looking ahead, the country’s cement association has stated that the best outcome for public works investment in 2021 would be for it to remain in line with last year.

India
In 2020 cement demand in India was heavily impacted by the combined impacts of COVID-19 at the start of the year and the resultant movement of migrant workers away from urban centres, followed by the monsoon season. However, a rise in government-led infrastructure works aided incremental cement demand towards the end of 2020.

Pent-up urban demand is also expected to improve with the gradual return of the migrant work force, according to UltraTech’s 3QFY20-21 report. With strong rural growth, a revival in manufacturing sentiment, and buoyancy in GST and tax collections, the company expects demand to grow further into 2021.

The International Monetary Fund (IMF) has also delivered a positive sentiment for the country, backing it to post an 8.8 per cent expansion in GDP for 2020. This is an important show of confidence as India prepares to announce its Union Budget 2021 on 1 February, which will have a very real impact for the construction industry going forwards.

China
China’s cement industry has weathered the storms of 2020 particularly well, posting a 1.6 per cent YoY increase in production to 2.377bnt for the year. In December alone, the country saw 3203 construction projects begin, representing a total investment of CNY2.69trn (US$415.6bn).

This year will also mark the beginning of China’s 14th Five Year Plan (FYP) (2021-2025), which details the direction of the country’s economic and social development for the next five years. The release of this plan is eagerly anticipated as it is the first FYP to be released since the country’s emphatic recovery from the economic downturn caused by COVID-19 and the US-China trade war which began in 2018. The full plan will be released in March, but indicators suggest that it will be focused on building domestic infrastructure and demand, thereby advancing its economy even further.

Many provinces have already set a goal for infrastructure construction this year. For example, Hubei Province aims to ensure more than CNY100bn of investment in road and waterway projects.

Looking ahead
Overall, while considerable uncertainty remains, the outlook for the industry is largely positive for the coming year. Supporting this, BNP Paribas have forecasted global cement consumption to advance four per cent YoY to 4bnt in 2021.

For more information on how global cement markets may develop over the year, make sure to register for Cemtech MEA 2021.