We estimate cementitious volumes (including imported cement) for South Africa were negative at 3% to 4% for calendar 2017 and between 4% and 5% for the financial year. PPC's South African equivalent volumes decreased 3% for both the calendar and financial years. Regional volumes were also 3% down.
PPC's inland volumes, including Gauteng, were below the prior period in a market hard hit by slow economic activity and low business confidence levels in the construction and building sectors.
In addition, the coastal region faced the impact of drought on cement demand in some areas, which in turn affected volumes. However, as day zero was pushed out and the construction industry found alternate sources of water, the confidence to start building again revived demand and volumes in the last months of the year.
Imports rose 26% in 2017, after declining over 2015 and 2016. As no duties apply to China, that country's imports escalated from 3% of total imports in 2014 to 76% in 2017. Imports from Pakistan were flat on 2016, with no volumes noted for three consecutive quarters from Q4 2016 to Q2 2017. The industry will continue to monitor new imports. Year-on-year increases were recorded for Durban (41%), Cape Town (3%) and Port Elizabeth (62%).
PPC decided to lead and hold firm as best as possible on price increases in the review period, with increases passed through only in selected regions and sectors in August 2017 and again in January 2018. Clearly, passing increases in a declining market will always be challenging. The fact that increases were accepted in selected areas reflects PPC's brand strength and total value proposition of consistent product quality, industry-leading delivery service and our highly respected technical support team. As such, PPC was able to increase the average selling price by 2% (2,5% on regional) from the prior year.
Our customers and their needs remain our key focus in this competitive market, and we have concentrated on strategies to address those needs, particularly in our product portfolio and route-to-market.
- National footprint: the ability to supply product to national customers in all nine provinces
- Experienced sales team: knowledge of the market
- Strong relationships with customers at all levels (from sales consultants to executives)
- Excellent customer service and deliveries
- Strong brand nationally: well known for over 126 years. Strong heritage as one of few South African companies listed on the JSE since 1910
- Consistent quality products
- Excellent team assisting customers with technical solutions
Cement demand roughly tracks real GDP and gross fixed capital formation, and to a lesser extent the producer price index (PPI) and consumer price index (CPI). In 2017, real GDP registered 0,9% growth and is forecast to improve modestly to 1,4% for 2018 and 2,1% for 2019 (Bureau of Economic Research, Stellenbosch University).
After real gross fixed capital formation (fixed investment) contracted significantly by 3,9% in 2016, a slight improvement of 0,1% was recorded for 2017. Analysis shows that when the disaggregate factors of fixed investment are considered (private non-residential, private residential, government and public corporation fixed investment), private non-residential fixed investment is the major driver of cement demand. The improvement in overall fixed investment was led by a significant 6,4% year-on-year increase from the government sector. However, this sector is expected to contract by 3,3% in 2018, stabilise in 2019 and increase to 3% in 2020. Although public and private fixed investment contracted in 2017, they are expected to increase from 2018.
South Africa produces a full range of products: