The cement industry is one of the strategic industries of Malaysia. It acts as the feeder to several other industries like real-estate, construction and infrastructure. The industry witnessed a period of subdued growth during 2006-2010. However, cement consumption has grown in the last two years owing to the development of key infrastructure projects under the 10th Malaysia Plan and Economic Transformation Programme (ETP).

The recent growth in demand for cement is driving companies towards capacity expansion. By the end of 2013, the total installed capacity in Malaysia is expected to increase by around 25%. Many companies have commissioned new projects for enhancing their existing capacity. Around 80% of cement produced in Malaysia is consumed by the domestic market itself and the remainder is exported. Indonesia, Singapore and Sri Lanka are the major export destinations. Annual cement consumption recorded a growth of more than 5% year on year in 2012 backed by strong demand arising from residential and civil construction sectors.

The outlook for the Malaysian cement industry is positive backed by stable domestic demand and government support for infrastructure development under the 10th Malaysia Plan and ETP. The major challenges in front of the Malaysian cement industry are rising fuel prices and rising transportation costs. The industry will also have to meet global pollution and emission standards which will take considerable amount of investment.

Key Points:

• The Malaysian government has allocated MYR 230bn for development expenditure under the 10th Malaysia Plan (2011-2015). The government has decided to invest substantive portion of the amount in developing infrastructure across the country.

• The recent growth in demand for cement is driving companies towards capacity expansion. By the end of 2013, the total installed capacity in Malaysia is expected to increase by around 25%. West Malaysia leads in terms of integrated production capacity accounting for around 90% of the existing capacity while East Malaysia accounts for 10%.

• During 2006-2010, the annual cement consumption in Malaysia was stagnant and grew at a CAGR of only 0.5%. However, the industry has witnessed a steep demand recovery in the last two years. In FY12, the consumption grew by 5.9% year on year after growing by 6.3% y/y in FY11.

• Rise in cement demand has also led to increased imports of cement in the country. The ratio of imports as a percentage of total consumption rose to 20% in FY12. The major portion of imports predominantly came from China.