What to expect for Brazil's cement industry in 2023

The Brazilian cement industry is expected to post weak growth in 2023, but recovering part of its 2022 losses thanks to increasing sanitation and paving projects. 

After cement sales contracted 2.8% last year to slightly over 63Mt (million tonnes), volumes are projected to grow by up to 1% this year. 

The 2022 drop in sales came after three years of expansion and was partly due to fewer small construction projects, a business area that had grown in previous years during the pandemic, with many families carrying out home improvements.

The president of cement producers’ association SNIC, Paulo Camillo Penna, talks with BNamericas about the outlook for this year.

BNamericas: After the drop seen last year, what’s the outlook for cement sales in Brazil in 2023?

Penna: Going back a little in time, between 2019 and 2021 the cement sector was going through a process of recovering ground that it had lost in previous years. 

Because of this, when we started 2022, we thought it would be a good result if we managed to have stability compared to the numbers for 2021, but we ended last year with a drop in sales of 2.8%.

For 2023, our projection is for a slight recovery, with cement sales growing between 0.8% and 1%.

BNamericas: What is the reason for this expected growth?

Penna: This partial recovery will take place during what is still an uncertain scenario for this year, but with some important signs given by the new federal government.

Among these important signals for the cement sector is the plan for more investments in low-income housing. This is an important issue for us to reduce our housing deficit, which is currently around 6mn units and, in addition, it’s an important signal for civil construction.

BNamericas: Are there other reasons behind this expected expansion?

Penna: The second reason for this recovery is the fact that in recent years we had a total of 50bn reais [US$9.8bn] in concession contracts and PPPs signed in the water and sanitation area. 

These contracts will only begin to be reflected in cement purchases around three years after being signed, so in 2023 we’ll see higher demand related to those first contracts signed.

Another important reason is the fact that the government has said it wants to accelerate investments in infrastructure, mainly in repairing highways, and we’re starting to see a trend of greater demand for rigid concrete pavement.

BNamericas: In Brazil, asphalt paving still dominates, instead of the use of rigid concrete pavement. How do you plan to change this?

Penna: We’re already starting to see greater demand for rigid pavement in highway projects in states such as Santa Catarina, Paraná and Rio Grande do Sul. This demand is both for highway projects and also for urban streets and avenues. There is great potential to be explored.

In Buenos Aires, for example, 70% of the streets use rigid pavement, which has a positive impact in terms of lower maintenance costs and also generates lower fuel consumption.

In Brazil, the use of rigid pavement within the main cities is close to zero, and is only used in some stretches of BRTs [bus rapid transit systems].

Also, if we consider that only 20% of roads in Brazil are paved, we can see there is huge potential for expanding the use of rigid pavement in the country.

We’re working to foster the rigid pavement culture. There is a process of dialogue and greater knowledge among state authorities, so that we can use rigid pavement more, due to its greater durability.

Historically, there are two classic numbers to compare flexible pavement, which is asphalt, which has a useful life of 10 years, while rigid concrete pavement reaches 20 years of durability, but I would say that today, with new technologies employed, rigid pavement lasts for 30 years.

BNamericas: Is it possible to set a long-term cement sales target?

Penna: This year, at some point, we’ll start to see a reduction in interest rates, and this will generate a positive effect on cement demand. Next year is likely to be a year of even more robust expansion than 2023.

Brazil has very incipient infrastructure, where there is a great need for investment in new transportation modes and all this will lead to more investments and more use of cement.

But we have to remember that we’re still in a phase of recovering lost ground.

We closed last year with around 63Mt sold. In 2014, the volume was 72Mt, so there is still a lot of room for recovery.

BNamericas: Do you see potential for growth in infrastructure's contribution to cement sales?

Penna: In recent years, what has really been promoting the sale of cement was the real estate sector. Now, about 50% of cement demand is for residential construction, while 10% is for commercial and industrial construction.

Today only 10% of cement is demanded by the infrastructure area, while in 2011 this number was 25%. This shows that Brazil has a great need for investments in infrastructure to match the demand we had 10 years ago.