Brazil's SNIC urges short-term caution with sunnier outlook from 2022

Brazil's SNIC urges short-term caution with sunnier outlook from 2022
18 May 2021

Commenting on the latest consumption data of the Brazilian cement market, the country’s cement association, SNIC cautioned against too much optimism for 2021: “The cuts in the federal government budget, mainly in activities such as infrastructure and housing programmes such as Casa Verde Amarela, macroeconomic instability, exchange rate devaluation, inflation, rising unemployment, the slow pace of vaccination and the loss of the wage bill come reducing optimism and further increasing the uncertainty and caution of the Brazilian productive sector.”

“The results are positively surprising so far, but still unsustainable, as indicated by the GDP projection for Civil Construction with the significant drop from four to 2.5 per cent. Sales are being supported, for the most part, by the residential real estate market and this imposes caution on the cement industry for the future. The diversification of the demand source is essential and the results of the auctions in April point to the return of the infrastructure segment as an important medium of consumption in the medium term,” said Paulo Camillo Penna, president of SNIC. As a result, the organisation expects market growth of 1-2 per cent for 2021.

In addition, the industry’s results remains affected by significant readjustments in prices of coke, electricity, refractories, packaging and spare parts, which were all impacted by the high exchange rates.

Medium- to long-term outlook
Therefore, more sustainable demand growth is not expected before 2022, particularly in terms of the infrastructure segment. Last month's auctions generated investments of BRL48bn (US$9.1bn) in port terminals, subways, highways, railways, airports and sanitation projects. There is still a good stock of new concessions and assets to be disputed, especially the Presidente Dutra highway, Congonhas and Santos do Dumont airports and the Ferrogrão railway, among many others, according to SNIC.

The expectation is that due to the success of the events in Alagoas and Rio de Janeiro made possible due to the approval of the new legal framework for sanitation, other municipalities will be incorporated into the new development model of the sector. Currently, Brazil’s development bank, BNDES, has five new concessions in line to be made, totalling BRL17bn in investments (Amapá, Porto Alegre, Rio Grande do Sul, Alagoas and Ceará).

Published under Cement News