Earlier in the year, cement companies in India forecast that demand would pick up in October of this year, having been somewhat sluggish in recent times. However, newspapers such as the Business Standard, the Economic Times and website Money Control are now reporting that the cement sector may not see a revival in demand until FY17. Infrastructure spending has not kicked in as hoped, though it is still on the cards.
India has the second biggest cement industry in the world, but there is significant surplus capacity. Capacity utilisation is estimated at 70 – 72%, meaning that almost 110 million t of capacity is unutilised. Business Standard reports that demand growth may not exceed 3% in FY16, which would be the worst growth rate thus far this century. In the first two months of this fiscal, growth was 1%, and this came off the back of about 2% growth in 2H15. Though analysts expect some initial signs of revival in the final quarter of this fiscal, it is unlikely to be enough to save the whole year.
In particular, north India is expected to suffer. Prices have already fallen to around 35% below their southern counterparts and in a recent report Ambit Capital suggested that there is limited scope for improvement this year, blaming weak government tendering.
Edited from various sources by Katherine Guenioui
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