New research from Morgan Stanley predicts that worldwide cement demand excluding China has turned a corner and will grow at an annualised rate of 4.0% between 2016 and 2020.
The investment firm is particularly bullish about India, South Asia and sub-Saharan Africa, all of which it forecasts will see consumption grow by more than 5%/pa over the period (with Indian demand set to expand at 6.7%). However, consumption in China is predicted to fall by 1.2% YoY to 2020.
The research note predicts that real prices will begin to increase from 2017 as consumption starts to exceed available supply, although gains will be modest at no more than one per cent per year over the next four years.
Morgan Stanley is particularly positive about the prospects of LafargeHolcim as the latter operates in precisely the emerging market nations that are expected to see consumption rise most strongly.
China aside, Morgan Stanley expects that global capacity utilisation will hit 70% by 2019 and continue to rise in 2020. Furthermore, the research note argues that Chinese overcapacity will give rise to a restructuring of the industry in that country rather than the export of surplus cement to other markets in the region.
