"Our latest mid-2012 forecast shows an increased bifurcation in (cement-consumption) growths across regions; we see prolonged challenges in the developed world, led by more dramatic than anticipated declines in Western Europe," Robert Madeira, CW Group managing director, said of the research group's global outlook.
The group also lowered its expectations, partially on spill-over effects from European deceleration, for cement consumption in Eastern Europe-CIS, Middle East, Latin America and China regions.
"This said, we see hope in Africa and, encouragingly, in North America," said Madeira. "No doubt we are setting the stage for what we expect to be a global shift in strategic dynamics and emerging corporate champions."
The latest Global Cement Volume Forecast Report (GCVFR) by the CW Group—a global cement-industry advisory and analytics firm—shows global cement consumption, ex-China, expanding at 3.7 percent in 2012 to reach 1.561 billion tons. The increase is down from 4 percent consumption volume growth in 2011, when worldwide cement demand ex-China reached 1.494 billion tons.
Economic headwinds in Western Europe have turned gale-force. Cement volumes have frayed, even though they looked in late 2011 like they would stabilize in some core markets, with volumes turning negative and plunging in Southern Europe.
Parts of Northern Europe have shown a surprising resilience, with Norway demonstrating exceptional strength. CW does not expect this pattern to evolve materially. And the deterioration is spreading; many parts of Eastern Europe and CIS are starting to struggle, albeit with pockets of robust growth such as in Russia and some ex-Soviet states.
Latin America largely remains robust, offset by weakness in Mexico and the Caribbean. Overall, the region is expected to grow at a slightly slower pace than in CW's update for the first half of 2012 (H1 2012).
Africa remains an exciting cement market, particularly the Sub-Saharan region. The CW forecast has been revised upwards by over 4 percent for 2012, driven by strength across many frontier markets, notably in Nigeria.
Asia ex-China also remains strong, and an uptick in volumes is expected, accelerating into 2013 and 2014. In particular, several countries in Maritime Southeast Asia are showing strong recoveries, lead by the Philippines and Indonesia with 2012 year-over-year growth in the double digits. South Asia has faced a bit of a bumpy ride, but we remain positive on the outlook for India as well as Pakistan.
China continues to perform, and some of the worst fears of falling off the cliff seem to have abated. CW lowered its outlook somewhat for the country, but believe growth is likely to continue in the near-to-medium term.
On the capacity side, few countries are expected to be able to improve utilization rates in the near-to-medium term. The operating environment in some countries will improve relative to their volume troughs, but the set of countries that will operate flat out, such as Algeria and Saudi Arabia, is small.
Outlook more cloudy than ever
Although slow growth is expected to continue at a global level, CW says the outlook is more cloudy than ever, allowing greater uncertainty in its forecast than usual. Competing macroeconomic forces -- persistent European drag on robust (albeit fraying at the margins) growth in emerging markets -- create a tug-of-war between cement market
fundamentals and global economic linkages.
The CW Group recognizes the challenges ahead, and we advise our clients to more than usual keep revisiting market assumptions and outlook based on changing conditions. With the current market, the biggest error is not in revising forecasts but rather in relying on static models.