Global cement consumption to soften on Chinese slowdown

With economic growth fading out in some markets and improving in others, the overall macroeconomic scenario is moving towards a cloudier period. Cement demand will continue to grow outside China, but at a slower pace.

This article originally appeared in CemWeek 46. Click on the image to read the full article

Based on its reading of the macroeconomic scenario, trends on the construction sector, and geopolitical factors, CW Research has prepared a forecast on cement demand between 2018 and 2023. China, responsible for half of the world's demand, is reaching a maturity level that foretells a prolonged, but controlled decline in cement consumption. Faced with this new cycle, Beijing has introduced swift measures to limit production and capacity that will also have an impact on the local demand. Meanwhile, cement consumption is expected to continue its growth in the rest of the world. However, economic prosperity is starting to fade out and regional risks could rapidly turn into a full-blown recession.

Macro-Economic Scenario

The global economy is currently experiencing a period of stabilization. With few exceptions, global economies are growing in tandem, especially since Brazil and Russia managed to partly recover from their recessions. However, there are some risks that must be accounted for, including the upcoming election cycles in Europe and United States. Anti-EU parties continue to gain traction, threatening investor's confidence on the euro market, while in the United States, mid-term elections may create some turbulence on the economy and the stock market after a prolonged period of growing productivity and confidence. Also, the full effect of the ongoing trade war between the United States and China has not yet been assessed, and the unsolved questions regarding the North-American Free Trade Agreement persist. Finally, an increase in interest rates could increase volatility in the international markets.

The latest forecast indicates that the global economy will continue to grow in the coming years. However, some markets may experience a slowdown, as is the case of China. The local economy is reaching a new level of maturity, and the advanced countries that have already experienced a period of strong growth find it difficult to maintain it.

Some economies, including the United Kingdom and Turkey, are already facing slow gross domestic product growth, with the latter expected to face a recession in the coming quarters as it goes through a period of monetary chaos and political instability. To the contrary, emerging and developing economies in Asia are experiencing a period of both strong domestic demand and exports. Similarly, oil exporters in Northern Africa and the Middle East are benefiting from an increase in the price of crude, but they require further economic diversification in order to avoid future shocks. Finally, the sub-Saharan region has benefited from an increase in commodity prices and from a recovery in its largest economy, Nigeria.

Demand

Cement demand has been positively influenced by the current macroeconomic scenario, achieving healthy levels of growth. Likewise, it is also exposed to the aforementioned risks. Those risks could rapidly lead to a new recession and, as the past trends show, the global economy is characterized by periods of growth followed by periods of recession (...)

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