SOUTH AFRICA: Some concrete signs of construction recovery as April cement sales grow

Cement sales data for April showed the first increase this year at 1.1% as compared to last year. This is all the more impressive given that many building contractors had a mini-shutdown between Good Friday (April 22) and Workers'' Day (May 2), similar to their December closure.

If one adjusts for the number of sales days this April compared with last April, there was a 6.7% y/y increase according to the Cement and Concrete Institute.

Annual cement sales peaked in 2007 at 14.1 million tons before declining by 4.6% in 2008. The global financial crisis resulted in a further 12.5% slump in 2009, before the decline eased to a 7.8% last year.

In the first four months of this year there was only a 1.9% y/y fall. The prospects are that this year could see the first annual increase after three years of decline.

The 12-month moving average is now at 10.8 million tons, just barely above three quarters of the 2007 annual total. This near 25% decline in cement volumes has impacted on the profitability of cement producers.

PPC, South Africa''s largest cement producer, said in March that due to difficult trading conditions, financial results for the six months ending March 31 were expected to decrease by more than 30% compared with those for the six months ending March 31 2010.

PPC will next week release its interim results for the six months ended March this year. Real fixed capital spending inched higher in the final quarter of 2010, which was the third consecutive quarter of slow, but positive growth in this demand category.

This followed five quarters of contraction. In the final quarter of 2010, public corporations such as Eskom and Transnet raised their capital outlays, resulting in a rise in construction spending in the electricity and transport sub-sectors. Private business enterprises also increased their real fixed capital formation marginally, notably in the mining and communication sectors. Mining is a large user of cement for lining tunnels and shafts.

The sector has been boosted by the rise in commodity prices.