Challenges and opportunities in the cement market in Peru amid low investment.

In the last year and a half, the cement market in Peru has faced a series of significant challenges, primarily stemming from a decrease in private sector investment. Although there has been notable growth in public works, which increased by 26.3% between January and July of this year, the cement industry has not managed to experience sustained growth. According to Guido Valdivia, executive director of the Peruvian Chamber of Construction (Capeco), this sector has seen a stagnation in its shipments, with no notable increase recorded in any month. Despite this situation, the most recent figures show a slight stabilization in national cement dispatches, with volumes fluctuating between 900,000 and 1,020,000 tons. However, this new equilibrium is below the levels reached in 2021 and 2022, representing a 4% decline compared to the previous year, according to data from the Cement Producers Association (Asocem). This context raises questions about the sector's ability to recover in the coming months. Historically, cement dispatches are expected to improve in the last months of the year, a trend that could offer a modest recovery in demand. However, Valdivia warns that, although a slight growth is anticipated in the second half of the year, it could be a rebound effect following the poor performance of the sector in the second half of 2023. It is estimated that the growth of the Gross Domestic Product (GDP) of construction could be around 3.7% or 4%, after an 8% decline in the previous year. Self-construction continues to be the driving force behind cement demand in the country, representing a crucial part of the market. According to the Group for Analysis and Development (GRADE), nearly 71% of urban housing results from this practice, and in peripheral areas, this percentage rises to 90%. On the other hand, real estate projects also play an important role, though to a lesser extent, contributing to a more stable demand due to the growth of the urban sector. Another relevant aspect of the cement industry is the role of public works in the construction of critical infrastructure, although its impact is less compared to self-construction. Infrastructure such as roads, bridges, and hospitals remains fundamental for the country's development, highlighting the need for a balance in resource allocation between these sectors. The cement market in Peru is dominated by large companies, of which three—Pacasmayo, Unacem, and Yura—control approximately 90% of the market. Despite the entry of new competitors, such as Cemento Inca and Cemex, consolidation in the market has made distribution a key factor. Valdivia explains that the geography and territorialization of the market have made it difficult for new companies to compete effectively with established players. Recently, Holcim has entered the Peruvian market through the acquisition of Comacsa and Mixercon, seeking a growth strategy that combines both organic expansion and acquisitions. Norberto Ledea, CEO of Holcim Peru, mentions that the company plans to diversify its offerings, aiming for one-third of its growth to come from cement, another third from aggregates and concrete, and the final third from solutions and finishing products for construction. Pacasmayo, one of the strongest competitors in the northern part of the country, has implemented digitalization processes in its marketing chain, thereby optimizing its operations and improving customer experience. Meanwhile, UNACEM seeks to consolidate its leadership through the quality of its products and a focus on sustainability and innovation, with a solid presence in the central market. Distribution channels are another critical issue in the sector, as many new companies struggle to establish themselves due to the lack of an adequate network. Holcim, although it does not have its own sales points, will be able to utilize Disensa, a network of construction materials franchises, which will give it a competitive advantage in market access. Finally, the dynamics of the cement market in Peru continue to evolve with the arrival of new players and the need to adapt to a changing environment. Competition will focus not only on production and distribution but also on innovation and the ability of companies to respond to the needs of a constantly transforming sector. The market's ability to recover in the coming months will depend on several factors, including the level of investment in infrastructure, the evolution of self-construction, and the adaptation of companies to the new market realities.