THAILAND: Demand for cement seen rising by 10%

Domestic cement consumption is expected to grow by nearly 10% this year to return to pre-recession levels even though demand is likely to slow in the property sector, says Siam City Cement Plc (SCCC).

One-million-tonne factories in Cambodia, Burma possible in five years, says Mr Arto.

Thailand's second-largest cement manufacturer said construction of the Purple and Red mass-transit train lines would drive demand to increase in 2011 from about 25 million tonnes last year.

But speculation in the property sector, in which a large number of condominiums were built in 2010, will recede somewhat this year because of oversupply, said Philippe Arto, managing director of SCCC.

"For us, the industry's growth is quite good. Overall, the mood is optimistic," said Mr Arto, but he noted the country's exports, exchange rate, and energy prices might negatively affect the economy and also cement demand this year.

The company has secured coal supply from several contracts in the past six months. This will help soften the impact of rising coal prices driven by the severe floods in Australia, the world's largest coal exporter, he added.

SCCC, which is one-third owned by Switzerland-based Holcim, is studying the feasibility of building cement plants in Cambodia and Dawei in Burma in terms of demand and potential local partners.

The company expects to make a decision on Cambodia this year while a Burma decision should take 12 to 18 months to finalise, he said.

"Demand in Burma and Cambodia is growing faster than in the Thai market," Mr Arto said. "I think that in five years, it is possible for us to have factories in both countries with a capacity of one million to 1.5 million tonnes."

Surachai Pramualcharoenkit, an analyst from Kim Eng Securities, said rising interest rates and bids by banks to tighten property loans might affect the growth of cement demand.

Kim Eng projects cement consumption to grow by 5-10% to 27.5 million tonnes this year from 7-8% growth in 2010.

"Production cost is our major concern for SCCC this year as coal price has gone up significantly," Mr Surachai said. Energy costs account for 70% of production costs for cement.

SCCC launched its "Green Heart" site yesterday at to promote its green products, projects and activities related to environmental conservation such as the Green School projects.

Shares of SCCC closed yesterday on the Stock Exchange of Thailand at 230 baht, down one baht, in trade worth 50 million baht.