The Indian cement sector will grow 4 – 5% in FY18, after a dip in demand growth to 3 – 3.5% in FY17 on the back of demonetisation, according to India Rating and Research (Ind-Ra). Profitability in the sector will be around the FY16 and estimated FY17 levels as demand growth offsets rising costs.
Demand will be “driven largely by the demand stemming from infrastructure activities and a revival in housing demand in rural areas,” the ratings agency said. Both are areas where government spending plays a key role.
Government spending on the housing sector is expected to grow by 38% to INR290 billion (US$4.34 billion), while spending by the Ministry of Road Transport and Highways will increase by 23% to INR649 billion (US$7.02 billion).
Stable demand growth will help cement manufacturers cope with increased fuel costs, as companies will be able to pass on cost increases to customers. The price of petcoke and coal almost double since September 2016. Current increases in crude oil prices are also likely to lead to an increased in diesel prices, said Ind-Ra.
Capacity is expected to increase by 50 million tpy between FY16 and FY18, a CAGR of 6% - alightly ahead of the 4.9% growth seen between FY13 and FY16. Utilisation will remain steady, however, at around 70% during FY18, after a dip in FY17 due to the fall in demand growth.
Read the article online at: https://www.worldcement.com/indian-subcontinent/03032017/indian-cement-demand-growth-to-stabilise-in-2018/