Global cement markets Current and future trends

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1 Global cement markets Current and future trends Presented at CemTech conference Dubai, February 2015 M O R G A N S T A N L E Y R E S E A R C H Europe Morgan Stanley & Co. International plc+ Yuri Serov yuri.serov@morganstanley.com Alejandra Pereda alejandra.pereda@morganstanley.com Morgan Stanley does and seeks to do business with companies covered in Morgan Stanley Research. As a result, investors should be aware that the firm may have a conflict of interest that could affect the objectivity of Morgan Stanley Research. Investors should consider Morgan Stanley Research as only a single factor in making their investment decision. For analyst certification and other important disclosures, refer to the Disclosure Section, located at the end of this report. += Analysts employed by non-u.s. affiliates are not registered with FINRA, may not be associated persons of the member and may not be subject to NASD/NYSE restrictions on communications with a subject company, public appearances and trading securities held by a research analyst account. All information as at January 27, 2014

2 Global economy is continuing along a bumpy, below-par and brittle recovery path, with cycles in many countries remaining out of sync GDP growth rate E 2015E 2016E Developed markets Australia 1.5% 2.2% 2.6% 3.6% 2.3% 3.2% 1.9% 2.3% Canada -2.7% 3.4% 2.5% 1.7% 2.0% 2.3% 1.8% 1.5% France -2.9% 2.0% 2.1% 0.3% 0.3% 0.4% 0.7% 1.4% Germany -5.1% 3.9% 3.4% 0.9% 0.5% 1.4% 1.1% 1.8% Greece -3.1% -4.9% -7.1% -7.0% -3.9% 1.0% 2.2% 3.0% Italy -5.5% 1.7% 0.5% -2.4% -1.9% -0.4% 0.2% 1.0% Japan -5.5% 4.7% -0.5% 1.5% 1.5% 0.0% 0.6% 1.8% Netherlands -3.3% 1.1% 1.7% -1.6% -0.7% 0.7% 1.3% 1.6% Spain -3.8% -0.2% 0.1% -1.6% -1.2% 1.3% 2.2% 2.2% United Kingdom -4.3% 1.9% 1.6% 0.7% 1.7% 2.7% 2.5% 1.9% United States -2.8% 2.5% 1.6% 2.3% 2.2% 2.4% 3.3% 2.4% Emerging markets Argentina 0.1% 9.1% 8.6% 0.9% 2.9% -1.5% -1.0% 1.6% Brazil -0.3% 7.5% 2.7% 1.0% 2.5% 0.2% -0.3% 1.3% China 9.2% 10.4% 9.3% 7.7% 7.7% 7.4% 7.0% 7.2% Colombia 1.7% 4.0% 6.6% 4.0% 4.7% 4.7% 4.2% 4.5% India 8.5% 10.3% 6.6% 4.7% 5.0% 5.3% 6.3% 6.8% Indonesia 4.6% 6.2% 6.5% 6.3% 5.8% 5.0% 5.3% 5.5% Malaysia -1.5% 7.4% 5.2% 5.6% 4.7% 5.8% 5.3% 5.4% Mexico -4.7% 5.1% 4.0% 4.0% 1.1% 2.1% 3.8% 4.1% Nigeria 9.6% 10.6% 4.9% 4.3% 5.4% 6.2% 4.8% 5.2% Poland 1.6% 3.9% 4.5% 2.0% 1.6% 3.3% 3.1% 3.7% Russia -7.8% 4.5% 4.3% 3.4% 1.3% 0.4% -5.6% -2.5% South Africa -1.5% 3.1% 3.6% 2.5% 1.9% 1.3% 2.5% 3.0% South Korea 0.7% 6.5% 3.7% 2.3% 3.0% 3.4% 3.7% 3.7% Thailand -2.3% 7.8% 0.1% 6.5% 2.9% 0.6% 3.6% 4.0% Turkey -4.8% 9.2% 8.8% 2.1% 4.1% 3.3% 3.4% 3.4% Ukraine -14.8% 4.1% 5.2% 0.3% -0.0% -6.8% -4.3% 4.0% Global 0.0% 5.4% 4.1% 3.4% 3.3% 3.2% 3.5% 3.9% Global economy is continuing along the path of what Morgan Stanley economists call a bumpy, below-par and brittle (BBB) recovery The global economy remains out of sync, with many countries in different stages of their respective cycles However, overall growth is gathering pace from a recent low point in 2013 towards c.4% in 2016e This could become one of the longest expansions on record, as we are already five years away from the last global recession Oil prices, if they remain at a lower level, can add to global growth but will negatively affect oil exporting countries Two risks bear particular watching: US growth surprises on the upside and interest rates rise earlier than expected; this could harm vulnerable emerging economies Chinese rebalancing and concurrent slowdown result in deflationary pressures, which get exported thus denting growth in Asia and around the globe Source: IMF, Morgan Stanley Research estimates (E) 2

3 Supported by improving global economies, we see generally brighter prospects ahead for global cement demand, with a few trouble spots Consumption growth by region y-o-y% CAGR Western Europe 3.7% 1.4% 5.0% 0.0% -9.8% -19.5% -6.3% -0.5% -14.5% -6.1% -1.1% 1.1% 2.5% 4.1% 4.4% 2.4% -5.0% 2.2% Eastern Europe 8.0% 9.7% 15.7% 7.6% 0.2% -12.6% 3.0% 8.6% -4.5% 6.0% 2.2% 4.0% 4.2% 4.4% 4.1% 4.1% 3.9% 3.8% Former Soviet Union 13.5% 11.8% 13.8% 16.8% 0.2% -23.4% 9.5% 10.8% 9.6% 6.5% 2.6% -8.5% 1.9% 4.8% 3.7% 2.2% 6.3% 1.0% North America 6.8% 4.9% -0.3% -7.9% -15.8% -26.3% 0.9% 2.3% 8.7% 3.4% 6.7% 7.1% 7.3% 4.3% 2.2% 0.2% -3.0% 4.6% Latin America 4.0% 8.7% 11.9% 8.5% 5.9% -2.4% 5.6% 6.9% 4.5% 2.1% 1.9% 0.6% 0.9% 4.0% 4.0% 3.7% 5.5% 2.5% MENA 6.3% 11.1% 7.6% 11.8% 10.2% 7.8% 6.6% 1.6% 4.1% 1.5% -1.1% 3.1% 4.4% 5.1% 4.6% 4.3% 6.8% 3.4% Sub-Saharan Africa 7.7% 11.0% 11.8% 15.7% 1.9% 5.3% 3.3% 11.4% 9.6% 8.6% 3.7% 5.1% 7.0% 7.4% 7.1% 6.9% 8.6% 6.2% China 14.9% 9.6% 14.9% 13.1% 3.3% 18.3% 14.4% 10.0% 7.3% 10.0% 2.6% 2.2% 2.0% 1.5% 0.5% -0.6% 11.5% 1.3% India 4.7% 10.2% 12.2% 8.9% 5.0% 10.6% 7.2% 6.2% 6.7% 3.8% 6.1% 8.4% 9.5% 8.5% 8.0% 7.5% 7.5% 8.0% North Asia -4.1% -7.0% 2.5% -0.8% -4.3% -8.9% -2.5% 2.0% 1.8% 4.2% -0.4% 0.3% 0.4% 0.4% 0.4% 0.6% -1.8% 0.3% South Asia 6.6% 7.6% 4.3% 5.7% 8.0% 6.3% 8.2% 6.1% 7.5% 4.6% 3.8% 6.0% 6.2% 6.3% 6.0% 6.0% 6.5% 5.7% Australia/Pacific 11.3% 6.4% -0.5% 6.5% 3.8% -8.5% 1.0% 0.4% 5.3% -0.5% 1.3% -0.7% -2.5% 0.7% 2.0% 2.4% 2.4% 0.5% 9.0% 7.5% 10.7% 9.0% 1.8% 6.4% 9.6% 7.7% 5.6% 7.1% 2.5% 2.7% 3.1% 3.1% 2.4% 1.6% 7.4% 2.6% World ex-china 4.8% 5.9% 7.3% 5.5% 0.4% -4.7% 3.9% 4.8% 3.3% 3.0% 2.3% 3.3% 4.8% 5.4% 5.0% 4.5% 3.4% 4.2% EM ex-china 5.6% 7.6% 9.8% 9.3% 5.1% 0.7% 6.1% 5.8% 5.1% 3.9% 2.4% 3.4% 5.1% 5.8% 5.5% 5.2% 5.9% 4.6% 2014 marked a further step down in global ex- China cement demand growth, primarily driven by: MENA (because of wars in Iraq and Libya and a slowdown in Iran) Former Soviet Union (mostly as a result of the conflict in Ukraine) North Asia (as reform boost in Japan dissipated) Eastern Europe & Sub-Saharan Africa (slowdowns from double-digit growth in Turkey and Nigeria) This was partially offset by bottoming of demand in Western Europe, the start of an upcycle in India and better volumes in North America Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) We see global growth adding c.1 pp in 2015 Almost 3/4 of global (ex-china) incremental volumes in 2015 come from five markets: India, the US, Indonesia, Saudi Arabia and Turkey Improvement in negative trends in the places like Iran, Iraq and Thailand should also contribute The region with the most negative outlook remains the Former Soviet Union, while Latin America is also subdued despite an improvement in Mexico We now project the expansion rate of 4.5% for the world ex-china after the completion of recovery 3

4 We have mostly maintained our outer years forecasts, however, 2014 and 2015 got further trimmed largely on geopolitical events and a few economic corrections Consumption Current forecast CemTech Kuala Lumpur, Jun 2014 Change in forecast Cumulative 2014E 2015E 2016E 2017E 2018E 2014E 2015E 2016E 2017E 2018E 2014E 2015E 2016E 2017E 2018E E Western Europe -1.1% 1.1% 2.5% 4.1% 4.4% -0.6% 2.0% 3.1% 3.9% 4.2% -0.5% -0.9% -0.6% 0.2% 0.2% -1.7% Eastern Europe 2.2% 4.0% 4.2% 4.4% 4.1% 3.2% 2.8% 3.4% 3.6% 3.7% -1.0% 1.3% 0.8% 0.8% 0.4% 2.2% Former Soviet Union 2.6% -8.5% 1.9% 4.8% 3.7% -2.1% 3.8% 4.6% 4.8% 3.2% 4.7% -12.3% -2.6% - 0.5% -10.2% North America 6.7% 7.1% 7.3% 4.3% 2.2% 6.1% 7.3% 7.0% 5.7% 1.7% 0.6% -0.2% 0.4% -1.4% 0.5% -0.1% Latin America 1.9% 0.6% 0.9% 4.0% 4.0% 3.1% 2.7% 4.2% 3.9% 3.9% -1.2% -2.1% -3.4% 0.1% 0.2% -6.3% MENA -1.1% 3.1% 4.4% 5.1% 4.6% 3.1% 5.9% 5.3% 4.5% 4.2% -4.3% -2.9% -1.0% 0.6% 0.4% -7.0% Sub-Saharan Africa 3.7% 5.1% 7.0% 7.4% 7.1% 6.4% 7.2% 7.2% 7.1% 7.2% -2.7% -2.0% -0.2% 0.3% -0.1% -4.7% China 2.6% 2.2% 2.0% 1.5% 0.5% 2.8% 2.2% 2.0% 1.5% 0.5% -0.2% % India 6.1% 8.4% 9.5% 8.5% 8.0% 5.3% 7.5% 8.2% 8.2% 7.8% 0.8% 1.0% 1.3% 0.3% 0.2% 3.7% North Asia -0.4% 0.3% 0.4% 0.4% 0.4% 1.4% 0.6% 0.4% 0.4% 0.6% -1.8% -0.3% % -2.3% South Asia 3.8% 6.0% 6.2% 6.3% 6.0% 3.5% 5.1% 6.0% 6.1% 5.8% 0.3% 0.9% 0.2% 0.2% 0.2% 1.8% Australia/Pacific 1.3% -0.7% -2.5% 0.7% 2.0% -0.8% -2.7% -4.1% 1.2% 4.2% 2.1% 1.9% 1.6% -0.5% -2.1% 2.9% 2.5% 2.7% 3.1% 3.1% 2.4% 2.9% 3.2% 3.3% 3.0% 2.3% -0.4% -0.6% -0.2% 0.1% 0.1% -1.0% World ex-china 2.3% 3.3% 4.8% 5.4% 5.0% 3.1% 4.7% 5.2% 5.1% 4.7% -0.8% -1.4% -0.4% 0.2% 0.3% -2.0% EM ex-china 2.4% 3.4% 5.1% 5.8% 5.5% 3.2% 5.0% 5.6% 5.4% 5.2% -0.8% -1.6% -0.5% 0.4% 0.3% -2.2% The biggest decrease to the 2014 forecast came from dramatic events in Iraq in the second half of last year Lower oil prices had positive effects in some countries (e.g. Thailand, Chile, Turkey) but negative in others (e.g. Russia, Mexico, Sub- Saharan Africa) We expected a recession in Russia in 2014 as a fallout from the conflict in Ukraine, but it got moved to 2015 and worsened Deeper than initially expected economic slowdowns in Latin America and Iran also contributed to the cuts In later years there were limited changes to our forecasts In oil importing countries lower expenditure on fuel should result in higher available resources to spend on consumption and investments while for oil exporters it means lower government and corporate earnings and lower spending Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) 4

5 Global supply-demand balance is still struggling to mend, hence average cement prices are continuing to underperform 5.0% 4.0% 3.0% 2.0% Change in production less capacity brought on line World ex-china (% of prior year production) 4.0% 2.0% It is extraordinary and probably unprecedented that for eight years, during , growth in new capacity additions ex-china (mostly EM) will have exceeded growth in demand 1.0% % -2.0% -3.0% -4.0% % Our analysis demonstrates that in most normally competitive markets capacity utilisation is the single most important determinant of cement prices this chart shows that on a global basis -5.0% -6.0% -7.0% -8.0% -9.0% -10.0% -4.0% -6.0% -8.0% The chart overlays a proxy for changes in global capacity utilisation with changes in real cement prices, clearly demonstrating the relationship although there is some year-to-year volatility Change in production less capacity, shifted by one year E 2015E 2016E 2017E 2018E Change in real selling price (r.h.a) The analysis suggests that cement price change (ex-inflation) will remain slightly negative in 2015 and will only turn positive in the following year The bars on the chart show the difference between incremental cement volumes and new capacity additions The bars are shifted forward by one year The line is global change in cement prices in local currencies excluding inflation Source: Industry and National sources, Report, IMF, FLSmidth, Morgan Stanley Research estimates (E) 5

6 Regionally India and North America are the most promising regions for prices Cement price change E 2015E 2016E 2017E 2018E Western Europe 3.8% -0.6% -1.5% 0.5% 1.7% 2.8% 2.8% Eastern Europe 5.5% 5.2% 3.4% 6.0% 3.3% 4.5% 6.1% Former Soviet Union 15.4% 0.4% 1.2% 6.4% 7.7% 8.4% 8.7% North America 2.9% 4.8% 3.1% 3.5% 3.1% 2.4% 1.8% Latin America 6.3% 3.8% 6.5% 7.5% 7.9% 5.8% 6.2% MENA 9.4% 13.1% 9.5% 8.0% 7.8% 9.0% 9.1% Sub-Saharan Africa 8.9% 4.7% 6.7% 5.4% 5.1% 7.4% 7.5% China -14.5% -3.0% 3.8% 2.3% 2.0% 3.0% 3.0% India 11.2% -3.8% 0.4% 8.5% 10.0% 9.5% 9.5% North Asia 6.6% 1.0% 2.2% 1.7% 2.0% 2.3% 2.4% South Asia 3.7% 4.9% 3.9% 4.6% 5.2% 4.7% 5.1% Australia/Pacific 0.4% -0.6% -2.7% -1.3% 2.1% 2.4% 2.4% -5.1% -0.1% 3.8% 3.7% 3.6% 4.4% 4.5% World ex-china 7.3% 3.8% 3.9% 5.7% 6.1% 6.3% 6.5% ex-china, India, US 6.8% 5.1% 4.6% 5.3% 5.5% 5.8% 6.2% Cement price change ex-inflation E 2015E 2016E 2017E 2018E Western Europe 1.3% -1.9% -2.0% -0.4% 0.3% 1.1% 1.1% Eastern Europe -1.0% % 1.0% -1.1% - 1.5% Former Soviet Union 7.5% -5.8% -6.4% -5.6% -0.3% 1.6% 1.9% North America 0.9% 3.3% 1.4% 3.6% 1.0% 0.4% -0.2% Latin America 0.6% -2.7% -1.8% -1.4% -0.5% 0.1% 0.5% MENA -1.7% 1.3% 1.0% -1.2% -0.9% 0.3% 0.5% Sub-Saharan Africa -2.0% -3.8% -2.0% -2.1% -1.5% 0.9% 1.1% China -16.7% -5.5% 1.7% 0.3% -0.4% - - India 0.9% -12.1% -6.4% 2.4% 3.7% 3.8% 3.7% North Asia 5.4% 0.1% 0.3% % South Asia -2.0% -0.4% -1.2% -0.7% 0.4% 0.2% 0.6% Australia/Pacific -1.3% -2.8% -5.0% -3.3% -0.3% % -4.2% 0.2% % 0.4% 0.5% World ex-china 0.5% -2.5% -2.0% -0.4% 0.4% 1.0% 1.2% ex-china, India, US 0.4% -1.0% -1.4% -1.2% -0.4% 0.4% 0.8% Real cement prices (ex-inflation) collapsed in double digits in 2012 in China and in 2013 in India, dragging global prices down In India a recovery from an effective price war is to start unfolding after a slowdown in capacity additions and faster demand growth On the other hand, the United States is the one major market consistently showing positive pricing trends (ex-inflation) since 2012 In the US prices should continue moving ahead of inflation until we expect the recovery to run out of steam in around 2017 Looking into the future, much of the better global performance in prices is concentrated in the markets of India and the US Price change is shown in local currency In the rest of the world (ex-china) we see real cement prices turning positive only in 2017 Better energy prices will continue to help offset the effects of weak pricing in 2015, with the cost of coal and petcoke still on a downward path Source: Industry and National sources, company data, Morgan Stanley Research estimates (E) 6

7 Increasing industry fragmentation is also not helping with near-term price dynamics 40% 38% 36% Global cement companies: % of global sales ex-china The share in the world (ex-china) of cement sales controlled by global cement majors was rising rapidly before the financial crisis because of a strong investment drive and consolidation 34% 32% 30% A particular jump in 2004 was after the takeovers of Dyckerhoff, Indocement and RMC 28% 26% However, since the crisis it has been sliding quite visibly 24% 22% 20% % of global sales (ex-china) Partially this is explained by a higher weighting of Western Europe in the portfolios of these companies compared with the region s weight in global volumes However, undeniably this is also because of a substantial influx of new capacity investments from other companies and especially many newcomers Global companies are those where the domestic market does not dominate the business make-up: Buzzi Unicem, Cemex, HeidelbergCement, Holcim, Italcementi, Lafarge Source: Company Data, Industry and National sources, Report, Morgan Stanley Research 7

8 In this presentation we also look beyond the forecast period what will the world of cement look like in 25 years, in 2040? Estimates on the following pages do not represent our official forecast, they are an exploratory scenario of what global cement consumption may look like in the long term Any long-range forecasts are inherently uncertain and should be viewed with caution We rely on third party forecasts as a key input into our calculation rather than our own long-term GDP forecasts produced by IHS and population projections from the UN Besides the economic and demographic dynamics, even though they are the most important factors, there are plenty of other drivers for cement consumption, which are hard to capture scientifically, including availability and traditional use of materials, household formation rates, as well as the country terrain However, given that a typical cement plant lasts for some 50 years, it is important to have an idea of the direction of future long-term development globally and by region to inform today s investment decisions Analysis shows that the regional composition of global cement consumption will change significantly over the next 25 years with widely different potential for growth for different regions 8

9 Fundamental cement demand properties underlie our long-term estimates Consumption per capita (kg) Consumption per unit of GDP (kt / 2010 PPP USD) 1, Libya Spain 800 Greece Portugal Italy 700 Tunisia Malaysia Slovenia Turkey 600 Taiwan Switzerland Egypt 500 Algeria Australia Morocco Kazakhstan Poland Czech Republic Japan Hong Kong 400 Russia Iraq Hungary Norway Germany United States Gabon Canada 300 Brazil Argentina United Kingdom BoliviaColombia 200 India Indonesia Nigeria 100Ethiopia Consumption per capita vs. GDP per capita, Afghanistan Togo 140 Laos Vietnam Egypt China GDP per capita (2010 PPP USD k) Algeria 80 IraqTunisia Oman Libya Ethiopia 60 India Turkey Indonesia Malaysia 40 Nigeria Brazil Colombia Russia South Korea Portugal Italy Hungary New Zealand Taiwan Switzerland 20 United Kingdom United States Cement intensity of GDP vs. GDP per capita, GDP per capita (2010 PPP USD k) Economics and demographics are the key drivers of cement demand to produce our long-term estimates we rely on two well-established relationships between cement consumption, GDP and population First, the cement bell curve shows that cement consumption per capita tends to rise initially with rising GDP per capita, but then falls as countries mature In the development phase the country builds its industrial base and infrastructure and growing incomes allow consumers to invest in their own housing In later stages of development, the drivers of growth go into reverse and demand for cement tends to fall Secondly, cement intensity of GDP is usually highest at early stages of a country s growth, but it tends to be significantly lower in developed economies Investment is paramount for early economic growth As the structure of the economy transforms to become more manufacturing and then service orientated, importance of investments falls As inputs we use long-range GDP forecasts from IHS and population projections by the United Nations Source: Industry and National sources, Report, Morgan Stanley Research 9

10 Other sources of variability in demand also influence the result Consumption per capita (kg) Country ruggedness vs. cement consumption per capita 1,000 Lebanon 900 Taiwan Greece 800 Israel Italy 700 Austria Slovenia Switzerland 600 Japan Turkey 500 Croatia Germany 400 France Slovakia Poland Mexico Norway Denmark Russia 300 United Kingdom Chile Argentina Terrain is one of the factors that differentiates cement consumption rates between countries Countries with a rugged terrain require more cement-intensive methods of building Transportation infrastructure in mountainous areas needs more tunnels and bridges There are other reasons, of course, for differences in cement demand Availability and traditional use of materials differs (cement vs. bricks vs. timber) Household formation rates differ between countries % 20% 30% 40% 50% 60% 70% 80% Country ruggedness index We have made manual adjustments to account for some of the most obvious irregularities, although this exercise is necessarily imprecise Source: N. Nunn and D. Puga "Ruggedness: The blessing of bad geography in Africa", published in Review of Economics and Statistics, Feb 2012, Morgan Stanley Research. The analysis is based on the period from the early 1990s to Only countries with GDP per capita higher than $10,000 are included (PPP basis, constant 2010 prices), excluding countries that experienced construction bubbles, like Ireland or Spain. 10

11 Total long-term cement demand estimate comes close to 4.5 billion tonnes, around the average level of next five years, with the world s regions much more balanced 5,000 4,500 Global cement consumption (mt) Long-term cement consumption should increase strongly in emerging markets ex- China, near stagnate in developed markets and fall dramatically in China 4, ,500 3,000 2, China and India would make up just over 20% of global demand each in 2040, compared to 60% for China and 6% for India now 2,000 1,500 1, Sub-Saharan Africa is set for the biggest break-through, increasing to 10% of total demand from negligible levels now E 2016E 2018E Developed markets Eastern Europe Latin America MENA Sub-Saharan Africa China India Asia ex-china/india E Developed markets and MENA could deliver sub-1% growth beyond the forecast period while Latin America and Asia look set to expand their shares Source: Industry and National sources, Report, Cembureau, IHS, UN, Morgan Stanley Research estimates (E) 11

12 Sub-Saharan Africa looks set to be the fastest growing region, followed by India, while China would have to undergo a dramatic adjustment Consumption (mt) E 2019E 2040E Developed markets Eastern Europe Latin America MENA Sub-Saharan Africa China ,614 2,461 2, India Asia ex-china/india ,140 1,325 1,589 2,141 3,007 4,113 4,669 4,420 World ex-china ,032 1,215 1,393 1,652 2,070 3,490 EM ex-china ,087 1,365 1,742 3,145 CAGR, period prior to year shown E 2019E 2040E Developed markets 3.4% 0.7% -2.3% 2.7% -0.7% 1.9% 0.9% -6.1% -1.3% 2.7% 0.2% Eastern Europe 5.9% 2.3% 0.4% 2.0% -12.7% 0.0% 4.9% 3.2% 5.3% 2.4% 1.3% Latin America 9.3% 7.3% -1.4% 3.9% 4.3% 3.3% -0.0% 6.4% 4.1% 2.6% 2.8% MENA 12.5% 14.2% 11.5% -2.5% 5.2% 2.2% 5.5% 9.7% 2.5% 4.3% 0.5% Sub-Saharan Africa 9.2% 3.2% 0.6% 1.4% 2.3% 5.3% 7.2% 9.1% 7.4% 6.7% 6.1% China 10.2% 15.5% 10.4% 11.5% 13.2% 7.3% 10.7% 11.7% 8.8% 1.1% -4.8% India 0.9% 6.9% 8.4% 9.0% 3.2% 12.6% 5.1% 9.4% 6.0% 8.4% 4.2% Asia ex-china/india 13.6% 7.2% 4.3% 6.9% 11.2% -2.0% 6.3% 3.5% 4.8% 5.1% 2.4% 5.5% 3.8% 1.6% 4.1% 3.1% 3.7% 6.1% 7.0% 6.5% 2.6% -0.3% World ex-china 5.0% 3.2% 0.6% 2.8% 0.1% 2.0% 3.3% 2.8% 3.5% 4.6% 2.5% EM ex-china 7.0% 5.7% 2.9% 2.8% 0.6% 2.1% 4.7% 6.4% 4.7% 5.0% 2.9% In Sub-Saharan Africa growth could be rapid, but even after 25 years at this pace consumption per capita wuold still come out below 300 kg, suggesting further potential In China the rebalancing of an investmentheavy economy would result in a substantial correction Although very deep, this kind of fall is not unprecedented Countries like Japan, South Korea and especially Taiwan have had adjustments of similar, even if a bit smaller magnitude We expect practically no growth in developed markets beyond the recovery over the next five years MENA, the region with the second highest per capita rates, looks unlikely to grow much as well, especially if long-term hydrocarbon prices do not increase strongly Source: Industry and National sources, Report, Cembureau, IHS, UN, Morgan Stanley Research estimates (E) 12

13 Over time cement consumption is set to about double in emerging markets ex-china 3,500 Global cement consumption ex-china/dm (mt) There is still significant potential for structural growth in most emerging economies in the world 3,000 2,500 2, The largest absolute increase is estimated for India and the largest percentage rise is reserved for Sub-Saharan Africa 1,500 1, Analysis shows that in the long-term the split of cement consumption much more closely follows the shares of population in the world E 2016E 2018E Eastern Europe Latin America MENA Sub-Saharan Africa India Asia ex-china/india E with the exception of Sub-Saharan Africa, where it should still remain short of the appropriate level given an extremely low starting point Source: Industry and National sources, Report, Cembureau, IHS, UN, Morgan Stanley Research estimates (E) 13

14 In developed markets cement consumption per capita is set to remain at c.350 kg, unchanged after the completion of the current recovery 1, Consumption per capita (kg) What has happened in developed markets in the financial crisis was not a disaster, but a conversion of regional consumption per capita rates In Western Europe North, cement consumption peaked long ago, in the early 1970s, following the completion of post-war reconstruction E 2016E 2018E Western Europe, North North America Western Europe, Mediterranean Developed Asia/Australia Consumption per capita vs. GDP, developed markets The Mediterranean countries went further given a lower starting point, but then consumption was over-stimulated first by EU accession, and then by the credit bubble, before a recent collapse The trajectory in Asia (mainly, Japan) was similar until the early 1980s, followed by an asset bubble, which has been deflating for the past 20 years now In North America consumption per capita has cycled around c.325 kg for the past 60 years there is no reason to suggest that this will change In the long-term we expect consumption per capita in developed markets to remain at c.350 kg E 2019E Consumption per capita (kg) Consumption per unit of GDP (kt / 2010 PPP USD) (r.h.a.) E while cement intensity of GDP should continue its downward exponential trend Source: Industry and National sources, Report, Cembureau, IMF, Morgan Stanley Research estimates (E) 14

15 In China cement consumption is near the levels where it tends to peak; we think it will have to go down from here Cumulative consumption per capita to peak (tonne) Cumulative consumption per capita through history shows how much a country has built in total for each resident Calculated from 1950 (since after the end of World War II), the measure has reached c.20 tonnes on average when consumption per capita peaked 5-1,800 1,600 Western Europe South Korea - China Australia North America Japan Consumption per capita vs. GDP per capita Hong Kong Taiwan China is already above that level; we expect a turn in the next few years even though consumption per capita is forecast to go further up before it peaks This view is supported by the government efforts to re-focus the economy from an investment-driven to consumption-led model Consumption per capita (kg) 1,400 1,200 1, GDP per capita (2010 PPP USD k) China in At the same time, China faces fundamental headwinds from a reversal of the demographic tide, slowing growth in productivity, overcapacity in many sectors and balance sheet deleveraging Experiences of other Asian countries also support this forecast; in their context our long-range estimate for China appears reasonable China Japan South Korea Taiwan Source: Industry and National sources, Report, Cembureau, IMF, IHS, UN, Morgan Stanley Research estimates (E) 15

16 The biggest global challenge will be how to absorb massive Chinese capacity, which will be freed up Change in cement consumption (mt) Almost 1.7 billion tonnes of cement is the estimated reduction in demand in China to ,500 1,000 Asia ex- China/India, 270 India, 530 A clear concern for the global cement industry would be how much of this amount will be exported to other markets (500) Eastern Europe, 70 Sub-Saharan Africa, 325 Latin America, 165 China, (1,675) MENA, 40 Developed markets, 20 The answer is probably a small portion given that most plants are away from the coast but even 15% would cover almost all of the incremental needs in the rest of Asia ex-india At the same time, India is estimated to add more than half a billion tonnes of cement in addition to the growth forecast for the next five years (1,000) (1,500) And in Sub-Saharan Africa the estimated increase in volumes is to c.3.5x the 2019 level (and almost 5x compared to today) (2,000) Source: IHS, UN, Morgan Stanley Research estimates (E) 16

17 The trend growth rate for consumption per capita in emerging markets (ex-china) comes to 1.8%, close to the average of the last 40 years; in developed markets it will be zero Consumption per capita change, EM ex-china Consumption per capita change, DM 12.5% 12.5% 10.0% 10.0% 7.5% 7.5% 5.0% 5.0% 2.5% 2.5% -2.5% -2.5% -5.0% -5.0% -7.5% -7.5% 17 Source: Industry and National sources, Cembureau, Report, IMF, Morgan Stanley Research estimates (E) E 2016E 2018E 2032E 2034E 2036E 2038E 2040E Emerging markets ex-china 12.5% Consumption per capita change, world ex-china 10.0% 7.5% 5.0% 2.5% -2.5% -5.0% -7.5% E 2016E 2018E 2032E 2034E 2036E 2038E 2040E World ex-china E 2016E 2018E 2032E 2034E 2036E 2038E 2040E Developed markets Consumption per capita (kg) E 2016E 2018E 2040E Developed markets Emerging markets ex-china

18 Regional cement forecasts: developed markets Cement consumption Western Europe, change y-o-y% France 8.2% -6.7% -3.8% -5.3% -3.2% 0.9% 3.6% 3.1% 2.7% Germany 11.0% -3.5% -2.2% 2.6% 1.1% 1.5% 1.5% 0.2% -2.1% Greece -35.0% -32.5% -7.5% 5.0% 7.5% 9.0% 9.0% 7.5% 2.5% Italy -3.2% -22.1% -14.9% -7.1% -1.6% 1.2% 3.9% 6.9% 6.0% Spain -16.4% -34.0% -20.1% 0.3% 6.2% 6.1% 13.2% 16.8% 6.6% United Kingdom 7.6% -7.1% 11.9% 4.3% 3.5% 3.8% 5.0% 3.2% 1.5% Others 4.0% -9.9% -3.7% -0.4% 2.0% 2.7% 2.4% 2.0% 2.0% -0.5% -14.5% -6.1% -1.1% 1.1% 2.5% 4.1% 4.4% 2.4% North America, change y-o-y% Canada 0.6% 7.0% -3.5% 0.2% -1.3% 0.7% 3.0% 2.6% 2.0% United States 2.6% 8.9% 4.2% 7.4% 8.0% 8.0% 4.4% 2.1% 0.0% 2.3% 8.7% 3.4% 6.7% 7.1% 7.3% 4.3% 2.2% 0.2% Australia/Pacific, change y-o-y% Australia 0.7% 4.8% -1.3% 0.8% -1.8% -3.7% 0.1% 1.8% 2.3% Others -1.0% 8.2% 3.5% 4.1% 4.0% 2.8% 2.8% 2.9% 2.9% 0.4% 5.3% -0.5% 1.3% -0.7% -2.5% 0.7% 2.0% 2.4% Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) France Very poor sentiment and high government debt keep construction trends under pressure Better (but still falling) new housing volumes should start flattening the negative trajectory into 2015 Germany Despite industry hopes, this is not a growth market A post-crisis bounce in new housing has run its course; no further expansion is likely given worsened demographics with other sectors barely growing too Spain After an -80% fall cement demand has bottomed We see the start of a recovery from 2015, initially driven by government investments in infrastructure United States Outlook is well supported, with residential and nonresidential construction both adding to expansion Lower oil prices impact on shale business may be a concern, but total economic effect should be positive Australia Housing boom of last year seems to be fizzling out as the economy slows and unemployment creeps up At the same time, the resources 'capex cliff is set to produce falls in private infrastructure of above 20% 18

19 Regional cement forecasts: Eastern Europe and the Former Soviet Union Cement consumption Eastern Europe, change y-o-y% Poland 21.3% -16.6% -8.5% 6.1% 3.4% 6.9% 5.8% 3.8% 3.5% Romania 4.3% 3.5% -7.3% 0.8% 3.5% 3.8% 4.0% 4.0% 4.0% Turkey 9.5% 1.0% 15.7% 1.6% 4.5% 3.8% 4.3% 4.3% 4.5% Others -1.2% -10.5% -3.9% 1.6% 3.1% 3.3% 3.7% 3.5% 3.4% 8.6% -4.5% 6.0% 2.2% 4.0% 4.2% 4.4% 4.1% 4.1% Former Soviet Union, change y-o-y% Russia 15.6% 13.2% 7.0% 2.5% -13.5% -0.5% 3.5% 2.5% 0.0% Ukraine 15.3% -6.2% -1.5% -10.5% -10.5% 6.5% 11.0% 5.0% 4.5% Others 0.0% 8.0% 8.4% 6.8% 3.2% 5.5% 5.6% 5.5% 5.4% 10.8% 9.6% 6.5% 2.6% -8.5% 1.9% 4.8% 3.7% 2.2% Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) Poland After a tremendous Q and difficult following months the market seems to be finding its footing We expect a pause in growth in 2015, but reacceleration afterwards with infrastructure leading the way driven by new EU funds Turkey Demand slowed progressively through 2014 due to higher interest rates and a slowing economy We expect a moderately positive outlook despite high levels of construction, as lower oil prices will be clearly beneficial for the Turkish economy Russia Demand in 2014 stayed up despite an unfolding geopolitical crisis supported by a mini-housing boom as people looked for protection against uncertainty 2015 does not promise anything positive after the oil price has collapsed and short-term interest rates have been hiked to 17% Ukraine Economic crisis and a war in the east of the country destroyed non-residential and infrastructure demand, even as housing continued to grow slightly Further economic restructuring will ensure further falls, though we see a later bounce from low levels 19

20 Regional cement forecasts: Latin America Cement consumption Latin America, change y-o-y% Argentina 11.9% -8.3% 11.8% -3.5% -1.0% 2.6% 5.0% 4.0% 3.5% Brazil 8.0% 7.0% 2.3% 2.0% -3.5% -3.5% 3.5% 3.5% 2.7% Colombia 13.8% 3.4% 3.5% 9.8% 4.0% 4.0% 5.5% 5.5% 5.0% Ecuador 7.9% 5.6% 9.5% -2.0% 2.5% 4.0% 5.5% 5.0% 5.0% Mexico 2.3% 2.5% -5.8% 3.8% 4.0% 3.0% 3.5% 4.0% 4.0% Others 6.6% 6.1% 5.2% 0.3% 3.0% 3.5% 4.3% 4.3% 4.3% 6.9% 4.5% 2.1% 1.9% 0.6% 0.9% 4.0% 4.0% 3.7% Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) Argentina The cement industry is continuing on a rollercoaster ride with demand falling again in 2014 The economy is in a two year recession with the elections later in the year not helping confidence Brazil The economy has struggled since 2012, the end of commodity & credit booms is putting further pressure Significant fiscal consolidation is a major headwind A recent corruption scandal around Petrobras and construction companies creates more uncertainty Colombia The economy leapt from a cyclical downturn in 2014 The country is expected to roll out a substantial infrastructure programme supporting future demand However, lower oil prices will be very unhelpful Mexico Construction is recovering from a plunge in 2013 The outlook should be positive, with the government looking to make a large push into infrastructure and structural reforms progressing if not for the plunge in the price of crude oil 20

21 Regional cement forecasts: Middle East and Africa Cement consumption MENA, change y-o-y% Algeria 3.2% 5.1% 9.7% 5.8% 1.0% 3.8% 3.4% 3.3% 3.9% Egypt 0.9% 5.0% -2.0% 3.6% 4.3% 4.3% 4.4% 4.5% 4.5% Iran 2.9% 2.9% -0.7% -6.5% 0.7% 2.2% 2.7% 2.7% 2.7% Iraq 36.8% 12.5% 8.8% -20.0% -10.0% 8.1% 20.0% 14.5% 9.6% Morocco 10.7% -1.6% -6.3% -5.4% -2.0% 4.0% 7.8% 6.9% 5.9% Saudi Arabia 13.7% 12.7% 4.4% 2.4% 7.5% 5.0% 3.4% 3.4% 2.9% UAE -8.7% -18.5% -10.5% 4.3% 7.5% 10.0% 10.0% 7.0% 5.1% Others -14.0% 1.0% 3.4% 0.8% 4.8% 4.2% 5.2% 4.4% 4.7% 1.6% 4.1% 1.5% -1.1% 3.1% 4.4% 5.1% 4.6% 4.3% Sub-Saharan Africa, change y-o-y% Nigeria 8.3% 7.7% 14.4% 0.3% 3.5% 7.2% 9.0% 8.0% 8.0% South Africa 3.3% 2.9% 5.3% -1.6% 2.5% 3.0% 3.5% 3.8% 3.3% Others 14.6% 11.8% 7.3% 5.9% 6.1% 7.7% 7.5% 7.4% 7.2% 11.4% 9.6% 8.6% 3.7% 5.1% 7.0% 7.4% 7.1% 6.9% Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) Algeria Government has extensive plans for investments in rail, road and housing projects however falling oil prices are resulting in an unsustainable budget deficit rationalisation of spending has started, which will lead to slower growth Egypt Financial assistance from Gulf states has brought stability, as well as funding for investments Political stabilisation is helping with market confidence, which is supportive for the outlook Production has been affected by gas supply issues; the industry is gradually moving to the use of coal Nigeria Growth has come to a sudden halt initially for the industry s operational issues, but now the reduction in oil earnings is creating further obstacles to growth Displacement of imports with local cement will go on Saudi Arabia The construction industry has been adjusting to new legislative environment for expatriate labour The pipeline of infrastructure projects is vast and investments should re-accelerate despite falling oil prices, but oil will probably temper future growth 21

22 Regional cement forecasts: Asia-Pacific Cement consumption China 10.0% 7.3% 10.0% 2.6% 2.2% 2.0% 1.5% 0.5% -0.6% India 6.2% 6.7% 3.8% 6.1% 8.4% 9.5% 8.5% 8.0% 7.5% South Asia, change y-o-y% Bangladesh 6.7% 3.8% -3.0% 10.0% 6.4% 7.8% 8.0% 8.0% 8.0% Indonesia 16.0% 16.1% 7.6% 1.6% 7.8% 8.4% 8.0% 6.8% 6.5% Malaysia 7.1% 4.8% 0.5% 5.2% 4.2% 5.4% 5.0% 5.0% 5.0% Pakistan 0.7% 8.7% 2.1% 7.7% 6.8% 6.4% 6.0% 6.0% 5.5% Philippines 1.1% 17.7% 7.8% 9.2% 7.8% 5.8% 7.5% 6.5% 6.5% Thailand 4.6% 10.9% 10.0% -0.4% 5.8% 4.0% 4.5% 4.5% 4.5% Vietnam -2.0% -7.5% 2.0% 4.0% 4.6% 4.6% 4.6% 4.7% 5.5% Others 14.0% 12.2% 4.1% 2.3% 3.7% 6.4% 6.8% 6.8% 6.9% 6.1% 7.5% 4.6% 3.8% 6.0% 6.2% 6.3% 6.0% 6.0% North Asia, change y-o-y% Japan 2.0% 4.5% 6.3% -0.3% % -0.5% -0.5% - South Korea -1.9% -1.6% 2.8% -1.6% 0.5% 0.5% 0.5% 0.5% 0.5% Taiwan 7.2% -1.1% 2.4% -0.8% -2.9% -0.5% -0.5% -0.5% -0.5% Others 12.6% 7.4% 3.9% 3.3% 3.4% 3.5% 3.6% 3.4% 3.3% 2.0% 1.8% 4.2% -0.4% 0.3% 0.4% 0.4% 0.4% 0.6% China Property market correction appears to have started with both sales and starts falling Infrastructure demand has remained resilient so far, but it may be affected as fewer land purchases will hit the funding of local governments India The election of a government with a strong mandate for development promises an inflexion in investments Macro indicators have been improving with inflation falling to multi-year lows; the Central Bank has now started the interest rate reduction cycle Cement demand has already shown signs of acceleration growing by c.9% since May Indonesia The market experienced rapid growth in with a property boom stimulated by low interest rates Subsequent interest rate rises have slowed property demand significantly in recent quarters, with elections in 2014 bringing further instability The main issue facing the industry now is a large influx of new capacity Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) 22

23 Recent cement trends Africa & Middle East Asia China 20% 20% 30% 15% 15% 20% 10% 10% 10% 5% 5% 0% 0% 0% -10% -5% -5% -20% -10% -10% -30% Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 30% 20% 10% 0% -10% -20% -30% Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 20% 10% 0% -10% -20% -30% Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 20% 15% 10% 5% 0% -5% -10% Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 20% 10% 0% -10% -20% -30% Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 Eastern Europe India Latin America 20% 15% 10% 5% 0% -5% -10% Mar '08 Jul '08 Nov '08 Mar '09 Jul '09 Nov '09 Mar '10 Jul '10 Nov '10 Mar '11 Jul '11 Nov '11 Mar '12 Jul '12 Nov '12 Mar '13 Jul '13 Nov '13 Mar '14 Jul '14 Nov '14 North America Western Europe Graphs show unweighted average across the markets belonging to each region. The change y-o-y is a 3-month moving average, with the exception of the last two months. Source: Industry and National Sources, Bloomberg, Datastream, Morgan Stanley Research 23

24 Appendix: cement consumption and production by country Consumption of cement (mt) Western Europe France Germany Greece Italy Spain United Kingdom Others Eastern Europe Poland Romania Turkey Others Former Soviet Union Russia Ukraine Others North America Canada United States Latin America Argentina Brazil Colombia Ecuador Mexico Others MENA Algeria Egypt Iran Iraq Morocco Saudi Arabia United Arab Emirate Others Sub-Saharan Africa Nigeria South Africa Others China 2,032 2,181 2,400 2,461 2,516 2,565 2,603 2,616 2,600 India North Asia Japan South Korea Taiwan Others South Asia Bangladesh Indonesia Malaysia Pakistan Philippines Thailand Vietnam Others Australia/Pacific Australia Others World 3,580 3,770 4,030 4,130 4,240 4,370 4,510 4,620 4,690 ex-china 1,548 1,589 1,630 1,669 1,724 1,805 1,907 2,004 2,090 Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) Western Europe France Germany Greece Italy Spain United Kingdom Others Eastern Europe Poland Romania Turkey Others Former Soviet Union Russia Ukraine Others North America Canada United States Latin America Argentina Brazil Colombia Ecuador Mexico Others MENA Algeria Egypt Iran Iraq Morocco Saudi Arabia United Arab Emirate Others Sub-Saharan Africa Nigeria South Africa Others China 2,058 2,193 2,404 2,465 2,518 2,567 2,604 2,616 2,600 India North Asia Japan South Korea Taiwan Others South Asia Bangladesh Indonesia Malaysia Pakistan Philippines Thailand Vietnam Others Australia/Pacific Australia Others World 3,580 3,770 4,030 4,130 4,240 4,370 4,510 4,620 4,690 ex-china 1,522 1,577 1,626 1,665 1,722 1,803 1,906 2,004 2,090 24

25 Appendix: change in cement consumption and consumption per capita Change in consumption of cement Western Europe France 8.2% -6.7% -3.8% -5.3% -3.2% 0.9% 3.6% 3.1% 2.7% Germany 11.0% -3.5% -2.2% 2.6% 1.1% 1.5% 1.5% 0.2% -2.1% Greece -35.0% -32.5% -7.5% 5.0% 7.5% 9.0% 9.0% 7.5% 2.5% Italy -3.2% -22.1% -14.9% -7.1% -1.6% 1.2% 3.9% 6.9% 6.0% Spain -16.4% -34.0% -20.1% 0.3% 6.2% 6.1% 13.2% 16.8% 6.6% United Kingdom 7.6% -7.1% 11.9% 4.3% 3.5% 3.8% 5.0% 3.2% 1.5% Others 4.0% -9.9% -3.7% -0.4% 2.0% 2.7% 2.4% 2.0% 2.0% Eastern Europe Poland 21.3% -16.6% -8.5% 6.1% 3.4% 6.9% 5.8% 3.8% 3.5% Romania 4.3% 3.5% -7.3% 0.8% 3.5% 3.8% 4.0% 4.0% 4.0% Turkey 9.5% 1.0% 15.7% 1.6% 4.5% 3.8% 4.3% 4.3% 4.5% Others -1.2% -10.5% -3.9% 1.6% 3.1% 3.3% 3.7% 3.5% 3.4% FSU Russia 15.6% 13.2% 7.0% 2.5% -13.5% -0.5% 3.5% 2.5% 0.0% Ukraine 15.3% -6.2% -1.5% -10.5% -10.5% 6.5% 11.0% 5.0% 4.5% Others 0.0% 8.0% 8.4% 6.8% 3.2% 5.5% 5.6% 5.5% 5.4% North America Canada 0.6% 7.0% -3.5% 0.2% -1.3% 0.7% 3.0% 2.6% 2.0% United States 2.6% 8.9% 4.2% 7.4% 8.0% 8.0% 4.4% 2.1% 0.0% Latin America Argentina 11.9% -8.3% 11.8% -3.5% -1.0% 2.6% 5.0% 4.0% 3.5% Brazil 8.0% 7.0% 2.3% 2.0% -3.5% -3.5% 3.5% 3.5% 2.7% Colombia 13.8% 3.4% 3.5% 9.8% 4.0% 4.0% 5.5% 5.5% 5.0% Ecuador 7.9% 5.6% 9.5% -2.0% 2.5% 4.0% 5.5% 5.0% 5.0% Mexico 2.3% 2.5% -5.8% 3.8% 4.0% 3.0% 3.5% 4.0% 4.0% Others 6.6% 6.1% 5.2% 0.3% 3.0% 3.5% 4.3% 4.3% 4.3% MENA Algeria 3.2% 5.1% 9.7% 5.8% 1.0% 3.8% 3.4% 3.3% 3.9% Egypt 0.9% 5.0% -2.0% 3.6% 4.3% 4.3% 4.4% 4.5% 4.5% Iran 2.9% 2.9% -0.7% -6.5% 0.7% 2.2% 2.7% 2.7% 2.7% Iraq 36.8% 12.5% 8.8% -20.0% -10.0% 8.1% 20.0% 14.5% 9.6% Morocco 10.7% -1.6% -6.3% -5.4% -2.0% 4.0% 7.8% 6.9% 5.9% Saudi Arabia 13.7% 12.7% 4.4% 2.4% 7.5% 5.0% 3.4% 3.4% 2.9% United Arab Emirate -8.7% -18.5% -10.5% 4.3% 7.5% 10.0% 10.0% 7.0% 5.1% Others -14.0% 1.0% 3.4% 0.8% 4.8% 4.2% 5.2% 4.4% 4.7% Sub-Saharan Africa Nigeria 8.3% 7.7% 14.4% 0.3% 3.5% 7.2% 9.0% 8.0% 8.0% South Africa 3.3% 2.9% 5.3% -1.6% 2.5% 3.0% 3.5% 3.8% 3.3% Others 14.6% 11.8% 7.3% 5.9% 6.1% 7.7% 7.5% 7.4% 7.2% China 10.0% 7.3% 10.0% 2.6% 2.2% 2.0% 1.5% 0.5% -0.6% India 6.2% 6.7% 3.8% 6.1% 8.4% 9.5% 8.5% 8.0% 7.5% North Asia Japan 2.0% 4.5% 6.3% -0.3% 0.0% -0.5% -0.5% -0.5% 0.0% South Korea -1.9% -1.6% 2.8% -1.6% 0.5% 0.5% 0.5% 0.5% 0.5% Taiwan 7.2% -1.1% 2.4% -0.8% -2.9% -0.5% -0.5% -0.5% -0.5% Others 12.6% 7.4% 3.9% 3.3% 3.4% 3.5% 3.6% 3.4% 3.3% South Asia Bangladesh 6.7% 3.8% -3.0% 10.0% 6.4% 7.8% 8.0% 8.0% 8.0% Indonesia 16.0% 16.1% 7.6% 1.6% 7.8% 8.4% 8.0% 6.8% 6.5% Malaysia 7.1% 4.8% 0.5% 5.2% 4.2% 5.4% 5.0% 5.0% 5.0% Pakistan 0.7% 8.7% 2.1% 7.7% 6.8% 6.4% 6.0% 6.0% 5.5% Philippines 1.1% 17.7% 7.8% 9.2% 7.8% 5.8% 7.5% 6.5% 6.5% Thailand 4.6% 10.9% 10.0% -0.4% 5.8% 4.0% 4.5% 4.5% 4.5% Vietnam -2.0% -7.5% 2.0% 4.0% 4.6% 4.6% 4.6% 4.7% 5.5% Others 14.0% 12.2% 4.1% 2.3% 3.7% 6.4% 6.8% 6.8% 6.9% Australia/Pacific Australia 0.7% 4.8% -1.3% 0.8% -1.8% -3.7% 0.1% 1.8% 2.3% Others -1.0% 8.2% 3.5% 4.1% 4.0% 2.8% 2.8% 2.9% 2.9% World 7.7% 5.6% 7.1% 2.5% 2.7% 3.1% 3.1% 2.4% 1.6% ex-china 4.8% 3.3% 3.0% 2.3% 3.3% 4.8% 5.4% 5.0% 4.5% Source: Industry and National sources, Report, Morgan Stanley Research estimates (E) Consumption per capita (kg) Western Europe France Germany Greece Italy Spain United Kingdom Others Eastern Europe Poland Romania Turkey Others FSU Russia Ukraine Others North America Canada United States Latin America Argentina Brazil Colombia Ecuador Mexico Others MENA Algeria Egypt Iran Iraq Morocco Saudi Arabia 1,655 1,813 1,842 1,847 1,946 2,004 2,032 2,060 2,078 United Arab Emirate 1,369 1, ,063 1,137 1,183 1,206 Others Sub-Saharan Africa Nigeria South Africa Others China 1,508 1,611 1,763 1,800 1,830 1,858 1,876 1,875 1,855 India North Asia Japan South Korea Taiwan Others South Asia Bangladesh Indonesia Malaysia Pakistan Philippines Thailand Vietnam Others Australia/Pacific Australia Others World ex-china