Spotlight: Rocky road ahead for Brazilian cement producers

The volume of cement sales in Brazil dipped in the first two months of 2022, dimming expectations even further in what is already expected to be a difficult year for the construction industry.

Domestic cement sales dropped to 9.27Mt in January-February, down 4% from the same period of 2021, according to cement producers association SNIC.

"If we at least have a neutral performance this year, with no growth compared with last year, I will celebrate, but even though we're still at the beginning of the year, the scenario points to a possible decline in sales this year," SNIC president Paulo Camillo Penna (pictured) told BNamericas.

Cement sales in Brazil were up 6.6% to 64.7Mt last year, albeit against a low base of comparison in the pandemic-hit 2020. 

According to Penna, the combination of high interest rates and inflationary pressures is undermining the confidence of Brazilians. 

Cement sales are closely tied to the real estate industry, which accounts for around 70% of total sales, while infrastructure projects are responsible for approximately 10% of sales. 

"The various concession projects in the infrastructure and sanitation area in Brazil in recent years will likely generate an increase in cement demand in those sectors. Generally, we have a lag of about four years from the time a concession contract is auctioned until that materializes in cement sales," said Penna, who added that concessions contracts for sanitation projects already signed are likely to generate cement sales of around 50bn reais (US$10bn) in coming years. 

Meanwhile, companies in the cement industry are facing cost pressures.

“The strong pressure on commodity prices is affecting the world. The situation is exacerbated by Russia's war against Ukraine, which will inevitably affect the prices of oil, gas, coal and coke in the global market," said Penna. 

Raw material costs for cement producers are expected to remain high, especially those linked to thermal energy, and particularly petcoke.