Unexpected saviour for cement sales

With comparatively low cement sales volumes as a result of the construction industry downturn, the cement industry has looked to the sale of bagged cement in rural areas to bolster supply.

Speaking at mining industry association ASPASA’s annual CEO’s seminar in one of his last public appearances, the late Pieter Fourie of Sephaku Cement said that strong sales of bagged cement in far-flung areas had played a major role in cushioning the effect of the slump caused by the Covid-19 pandemic and other lingering economic factors.

While the construction industry and consumer markets have taken a hammering in recent years, home improvement and small builder activity has shown growth, with more people staying or returning home, where they are undertaking smaller projects.

Shrinking market

The local market is estimated to require 13 million tons of cement per annum, while cement producers are producing 19 million tons of cement. Simultaneously, legal and illegal imports of cements continue, adding further pressure to an already over-supplied market.

With two new producers entering the industry since 2014, the market is understandably distressed and the strongerthan-expected demand from rural areas is considered a boon for producers able to reach these customers.

Fourie summed up the four most important challenges the market faces at present: • Uncertainty: There is a lot of political instability and the economic outlook

1 million tons, while demand has tapered off to 13 million tons. • Opportunity: Despite the challenges, companies need to put strategies in place to deal with rising opportunities. Largescale infrastructure development projects are on the cards, consumer spending is increasing and the public and private sectors are re-aligning their priorities in a post-Covid-19 world.

Planning a comeback

Until now, the cement industry has undertaken major cost-cutting exercises and mothballed less economical kilns. Investment has been at a low 16% of market value for some time and will require a major jump-start to get back to pre-World Cup boom figures.

Commenting after the presentation, ASPASA director Nico Pienaar said that these events showed how critical the infrastructure programmes mooted by government were to the construction industry and, by default, to the cement and building material industries.

“With the current low levels of investment in the industry, different approaches are needed and saviours may come out of different directions than anticipated – such as rural bagged cement sales, DIY and home improvements as an example,” said Pienaar.

after the Covid-19 lockdown may not be conducive to growth. Carbon taxes and power grid failures also create uncertainty. • Sustainability: Most companies in the construction industry are suffering from distressed balanced sheets, reduced margins and a situation where prices for bulk cement are at 2014 levels. • Over-supply: With the entry of

Sephaku Cement and Mamba Cement, the estimated capacity of the industry is 19 million tons and imports account for

“The local market is estimated to require 13 million tons of cement per annum, while cement producers are producing 19 million tons of cement.”