According to CW Research’s 2017 Sri Lanka Cement Market Report, the country’s cement demand rose 13%/year on average from 2010-2016.
In the next five years, demand is expected to continue growing, albeit at a more moderate pace as public works and infrastructure investments slow.
Between 2010-2016, the country’s cement demand was driven by investment in infrastructure and the country’s urgency for reconstruction work after the long civil war that ended in 2009, says the report from
However, demand started to slow in 2015 as the newly-elected government suspended work on large-scale infrastructure projects, following corruption concerns around the tendering process involving Chinese bidders.
“The long-term and latent need for cement is clear and present in Sri Lanka; much work is still to be done after years of unrest,” says Robert Madeira, CW managing director and head of research.
“The challenge will be to find the fiscal strength to implement projects while relying on still largely imported cementitious materials to meet demand.”
In 2016, cement demand levels improved after the government announced the construction projects could proceed based on the binding nature of the Chinese construction contracts. Following the decision green-lighting work on infrastructure projects, cement demand reached approximately seven million tonnes.
Today, Sri Lanka counts on one integrated and three grinding cement manufacturing plants, as well as several import terminals. Cement grinding capacity will increase 14% by 2021, but the additional cement production capacity will still be insufficient to meet domestic demand.
The cement production units in the country are controlled by Tokyo Cement, HeidelbergCement, Siam City Cement and Ultratech, following recent M&A activity in the sector.
As the fourth largest cement importing market in the world, Sri Lanka receives substantial supplies of cement and clinker from multiple countries, including India, Pakistan, Indonesia, Malaysia and Vietnam.
In the long run, given that no new integrated cement production capacity has been announced, manufacturers will remain dependent on imported clinker for their cement grinding operations.
Consequently, Sri Lanka is expected to remain a major importer of cementitious materials in the coming years.
As Raluca Cercel, senior analyst with CW Research highlights: “Poor limestone availability in the country is limiting the ability to effectively put in place domestic clinker production lines, leaving manufacturers subject to the fluctuations of clinker prices imported from India and Vietnam.
“This said, exploration work continues and the search is on for quality limestone.”
From 2016-2021, cement demand levels will continue to be supported by infrastructure projects and growing housing market in Sri Lanka. Construction activity is expected to grow at an annual average of eight percent over the next few years, encouraged by increasing home ownership, large government infrastructure projects, and surging demand for high-rise buildings.
