OREANDA-NEWS. Fitch Ratings says demand for cement and building materials in Thailand will accelerate with the government's planned infrastructure investments over the near term. However, a slow recovery of demand from the residential segment should soften the pace of overall demand growth in 2016.

The infrastructure investments will continue to be a key driver for cement and building materials over the next few years. The accelerated project implementation in rails, roads, harbours, and airports is worth around THB1.8trn from late-2015 through to 2021. Fitch expects cement, which holds the largest share of structural building materials in terms of sales value, to recover with a demand growth of 3%-5% in 2016.

Overall demand for cement declined in 2H14 and continued to ease in 9M15, even though the demand from government projects grew at about 10% yoy in 9M15. The pullback was felt mainly in the residential segment, which has the highest contribution - of about 50% - in the cement market. The effectiveness of government spending to stimulate demand in late-2015 should be largely offset by weak residential and commercial segments.

Fitch expects cement demand from government projects to grow at a faster pace in 2016 while the demand from residential construction should show merely a slight improvement, despite the recent government stimulus scheme on residential properties in October 2015. The measures would rather encourage sales of property developers' inventories than new construction - and, more importantly, the remaining weak purchasing power should outweigh the benefits from the schemes.

The leading cement producers in Thailand - The Siam Cement Public Company Limited (A(tha)/Stable), Siam City Cement Public Company Limited ( A(tha)/Stable), and TPI Polene Public Company Limited (TPIPL, not rated) - should receive the windfall from government projects and be able to enhance their operating performance in 2016. These firms reported lower revenue and EBITDA from cement and building materials in 9M15. Fitch believes that the expected rising domestic demand in 2016 should also partially absorb new capacity from TPIPL's expansion of about four million tons per annum which is planned to start operations in 4Q15 or 1Q16.