Peru's Domestic Cement Consumption Expected to Grow After Two Years of Decline

After experiencing a downturn in 2022 and 2023, Peru's domestic cement consumption is projected to rebound in 2024, aligning with the construction sector's anticipated growth.

Peru's Domestic Cement Consumption Expected to Grow After Two Years of Decline
Photo by Willian Justen de Vasconcellos / Unsplash

Peru's construction sector is on the brink of recovery, with domestic cement consumption forecasted to increase this year following a two-year slump. Scotiabank predicts a resurgence in line with the construction sector's expected annual growth rate of 3.7% for 2024. This optimistic outlook comes after a challenging period marked by an 11.6% decline in cement consumption in 2023, as reported by the National Institute of Statistics and Informatics (INEI). The decrease was attributed to social conflicts, adverse weather conditions, and a spike in food prices that impacted consumer spending capacity during the first half of 2023.

Despite a slight improvement in cement consumption during the second half of 2023, particularly in the central region of the country, it was insufficient to offset the overall annual downturn. However, 2024 holds promise for a positive shift, driven by an increase in public investment projects, especially by subnational governments, and a rise in cement demand from the self-construction segment, which accounts for 60% to 70% of annual consumption. The absence of exogenous factors that previously affected income levels, such as social protests and a lower-than-expected impact from El Niño, is expected to further support this recovery.

Additionally, the development of transportation infrastructure projects, mining sector projects, and even the real estate sector are anticipated to boost cement consumption. Scotiabank's projection for the first quarter of 2024 suggests that cement consumption will enter positive territory, partly due to a base effect, considering the low consumption recorded in the first quarter of 2023 was the lowest since the second quarter of 2020, at the height of the pandemic's impact.

The bank's forecast is supported by a 9% increase in cement dispatch in January 2024, marking the end of 16 months of decline. This rebound is partly attributed to a base effect, considering a 15% drop in January 2023. For the first quarter of 2024, cement consumption is expected to align closely with the projected growth of over 5% for the construction sector.