The market for cement has been on an upward trend over the past year, signalling an underlying strength in the SA economy, PPC chief operating officer John Blackbeard said at the weekend.
Blackbeard said that an upsurge in government spending in infrastructure had been much talked about in the past but the cement industry was seeing evidence that this is happening.
Apart from a downward glitch in November, the trend has been upwards, and the growth in building and construction is expected to continue this year.
'Our chairman, Warren Clewlow, has spoken about the need for an increase in gross fixed capital formation, and we think things have finally been turning around, with investment in airports, toll roads and Coega harbour,' he said.
He indicated that the Coega project alone would ' be a huge boost to cement sales. There's a turnaround there. There is a general sense of optimism in our customer base.'
Blackbeard said that the government was delivering the right economic climate for growth, with inflation coming down and 'with the prospect of a reduction in interest rates in the not-too-far-distant future'.
He said that the upswing was evident both in infrastructure spending and in investment in houses, clinics, schools and office blocks.
'We've come out of a period of three or four years of low or declining cement growth,' said Blackbeard. 'Last year, we had a positive growth of 4,3% and our indications are that it could be the same type of number this year.
'We have some spare capacity and we can meet this increased demand.' He said that cement sales along with sales of new cars were one of the barometers for the health of the local economy. Blackbeard also stressed that as there were no SA import duties on cement, this was a competitive industry.
Earlier, Blackbeard had dismissed industry speculation that PPC was imposing price increases for its cement of more than 25%. 'Our price increases in January 2003 have averaged less than 10,5%,' he said. However, he explained that there are occasions where increases would have been higher.
For instance, if a contract which has run for several years comes to an end, the customer could be paying less than the norm, because the price rises within the contract might have been lower than inflation.
In such a case, in a new negotiation, this customer might be faced with a larger-than-normal price rise, to catch up with inflation.
Similarly, a customer in a remote area might have benefited from a special transport deal, but changes in the availability of transport could also trigger an unusually high price increase.
According to Blackbeard, with about 2500 customers for PPC cement, there would always be price variations, but it would be wrong to conclude from an isolated example that prices were soaring across the board.
The issue of pricing is a sensitive one, with steel maker Iscor under fire from some of its customers for a steady series of price hikes, and the government keeping a close eye on price rises in the food sector.
