According to data from the Peruvian Cement Association (ASOCEM), local industrial investment may rebound in March 2017. In March 2017, Peru's cement production rose slightly year-on-year to 790,000 tons, the first increase in cement production since July 2016. Although cement production rose in March, it still fell by 4.5% to about 2.35 million tons in the first quarter of 2017, but any rebound is encouraging.
Figure 1: Cement production in Peru (million tons)
Source: Peruvian Cement Association
Figure 1 shows that Peru's cement production peaked in 2014 and began to decline, but its production remained above the annual production level in 2012. Cementos Pacasmayo, one of Peru's three largest cement companies, blamed a wave of strong investments in late 2015 to prevent El Niño, which led to a sharp decline in cement production in 2016. Considering the decline in cement production in 2015, it is relatively optimistic from the analysis point of view. It also blamed the widening corruption scandal at Petrobras for delaying the Peruvian government's infrastructure investments.
Another highlight of ASOCEM's latest release is the import data, shown in Figure 2. Overall cement and clinker imports hover around 10-15% of local production, but this has changed since 2014. Cementos Pacasmayo reported in the fourth quarter of 2016 that it had begun replacing imported clinker with clinker produced at its new Piura plant. In 2015 and 2016, the vast majority of Cementos Pacasmayo's cement came from Vietnam. According to data released by Vietnam's General Administration of Customs on Monday, Vietnam's local exports increased by 11% year-on-year to 4.82 million tons in 2017, and Peru is one of the important destinations. It is also worth noting that in February 2017, Peru began to import 30800 tons of raw materials from China, while in 2015 and 2016, China was not Peru's raw material exporter.
Despite recent adjustments in production and import trends, the landscape of Peru's cement industry has not changed significantly. There are currently three main cement producers in the country: UNACEM, Cementos Pacasmayo and Grupo Gloria, which account for 49%, 43% and 8% of the local production capacity of 11.4 million tons per year, respectively. Pacasmayo's current main market is in the north of Peru, UNACEM's production and market is in the coastal region of central Peru near Lima, while Grupo Gloria's subsidiary is mainly located in the south of Peru.
Figure 2: Imports of cement and clinker in Peru (million tons)
Source: Peruvian Cement Association
As mentioned above, Cementos Pacasmayo has been expanding its capacity through its Piura plant since mid-2015. Gloria Group purchased the Cementos Otorongo cement plant from Votorantim in mid-2016, a project to build a cement plant in southern Peru. In addition, Cemex announced earlier in 2016 that it had received permission from the Peruvian government to build a cement grinding station in Lima. Financially, UNACEM's 2016 revenue fell 4% year over year to about $573 million. Cementos Pacasmayo also saw a small drop in sales, about $381 million, and earnings before interest and taxes from its cement business fell 4.6% to $118 million.
Despite a 6% decline in construction in 2016, Peru's construction industry, like many African countries, has good prospects and a lot of room for development in the medium term. Peru's GDP began to rebound after hitting an all-time low of 2.4% in 2014. As long as the newly elected Kuczynski government starts to pay attention to infrastructure and invest in infrastructure, the benefits will be quickly transmitted to the cement industry. Cement manufacturers are very cautious about investing in terminals and grinding equipment, and once they start investing in this area, it shows that they are confident in the market.
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