Cement demand seen to rebound to prepandemic levels in 2021

After a sharp sales contraction this year due to coronavirus pandemic-related business disruptions, Philippine demand for cement is seen to rebound next year to levels matching the market in 2019 as infrastructure-building activities pick up pace.

This is according to Nabil Francis, president and chief executive officer of Republic Cement & Building Materials, a joint venture between Aboitiz Equity Ventures (AEV) and CRH plc.

“When it comes to market demand, our forecast is that in 2021 we will get back to 35 million tons for the Philippine market, which is more or less the level in 2019,” Francis said during an AEV briefing last week.

For this year, however, he expected local cement demand to contract by 15 percent. Before the pandemic, he was expecting a 9-percent growth in demand from 2019 levels.

While the pandemic has pushed back other businesses by three years, Francis said for the cement industry, the slump would only be for one year, suggesting a V-shaped recovery.

He noted that cement demand had already started to rebound in the third quarter, estimating a 7-percent year-on-year growth, as builders replenished their cement stocks after months of lockdown.

In the case of Republic Cement, he said all of its six plants were now up and running but observing strict social distancing and safety protocols amid the lingering pandemic.

Francis said demand next year would likely be more bullish on the infrastructure side while other segments, including individual house-building, would likely lag.

In the first nine months of 2019, Republic Cement contributed an income of P400 million to AEV, 37 percent lower year-on-year as COVID-19 dramatically slowed down construction activities, particularly during the enforcement of community quarantines. However, this marked a turnaround from the P10-million net loss in the first six months, suggesting a strong business recovery in the third quarter.

He said Republic Cement had been caught in a “perfect storm” as when the pandemic hit the country, the group was just commissioning new equipment to expand capacity. Nonetheless, he said the company was committed to grow its production capacity to close to 9.7 million tons by the end of this year, in anticipation of a spike in demand arising from the “Build, Build, Build” infrastructure program of the government.

“Our vision remains intact for the future: to be the best managed company of the industry and ramp up new equipment. We are remaining optimistic for next year,” Francis said.

Francis noted, however, that the local industry was threatened by the influx of imported cement. —DORIS DUMLAO-ABADILLA INQ