Drought in the Amazon worries the cement industry – 10/09/2023 – Market

Drought in the Amazon worries the cement industry – 10/09/2023 – Market

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Cement producers in Brazil maintained this Monday (9) the expectation of lower sales in 2023 after the greater than expected drop in sales in the previous year, still feeling a scenario of high interest rates, weakness in economic activity and the impact of the climate .

The sector, which in 2022 saw a 2.8% drop in sales, expects a decline of around 1% in sales this year, to around 62.2 million tons, according to data released this Monday by the entity that represents the input manufacturers, Snic.

“The problem of drought in the Amazon and the rains in the South have worried us a lot,” said the president of Snic, Paulo Camillo Penna. “Climate change has become a reality for civil construction and the demand for cement,” said the executive.

According to him, if on the one hand the drought in the Amazon makes cement distribution logistics difficult, the heavy rains that are hitting the south of the country this semester have hampered the progress of works and, consequently, the demand for the input.

Penna’s prediction at the beginning of the year, of a warmer second half of the year due to a climate that used to be drier, the effect of falling interest rates and expectations surrounding the Minha Casa Minha Vida and PAC programs, has not yet been confirmed. .

Cement sales in September, for example, fell 5.1% compared to a year earlier, to 5.24 million tons, with all regions of the country showing negative numbers, especially the southern states, which suffered a drop of 8 .1%, according to Snic figures.

On a business day basis, September sales also fell year-on-year, falling 2.5% to around 232 thousand tons.

September’s performance came after an August increase of just 1.4% and a 0.7% drop in July.

In the year, sales accumulated a drop of 2%, to 46.85 million tons, according to Snic, with the North of the country suffering the biggest drop, of 4.1%, followed by declines of 3.9% in the Central-West, 3.8% in the South and 0.9% in the Southeast. Only the Northeast saw an increase in cement sales in the year up to September, a slight 0.3%.

“The fall was very strong in September. There is still unequal competition between financial and real estate assets,” said Penna about the still high level of interest rates, despite the beginning of the reduction cycle by the Central Bank.

The numbers from the cement sector are echoed in other segments of the economy, such as the steel industry, which records an apparent declining consumption of steel, aggravated by strong imports. The construction industry is expected to grow 1.5%, a sharp slowdown compared to almost 7% in 2022.

But unlike other segments, the cement industry depends almost exclusively on domestic demand, which today is 70% dependent on real estate projects, unlike previous years when the balance tipped towards large infrastructure works.

“Until it takes off (the reformulated MCMV), we are deprived of significant development,” said Penna, citing that only the housing program relaunched by the government of Luiz Inácio Lula da Silva would be capable of generating consumption of 2 million to 3 million tons of cement per year.

While this does not happen, the cement industry is experiencing an idle level of around 34% of its capacity of 94 million tons, according to data from Snic. “This worries the sector,” said Penna. He cited the cement industry’s plan to invest around R$3 billion by 2030 to adapt factories to use waste co-processing, a way of reducing CO2 emissions by burning material — such as discarded tires — in production furnaces. of cement.

“Last year we lost 1.8 million tons of sales. And this year until September there were 800 thousand tons of loss. But with the expectation of maturation of the MCMV and the advancement of the concessions process… we may have a less impactful loss this year so that we can grow again in 2024. This seems quite doable”, said Penna.

The executive also cited among the factors for optimism about next year the progress of the Desenrola debt renegotiation program. “We may have an improvement in the number of employees.”

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