CRISIL project cement demand in India to grow 7-8% this fiscal year
Published by Alfie Lloyd-Perks,
Editorial Assistant
World Cement,
Cement demand is set to grow slower at 7 – 8% on-year to 475 million t (MT) this fiscal, after clocking a compound annual growth rate of 11% between fiscals 2022 and 2024.
However, operating profitability[1] of cement players is likely to sustain at Rs 975 – 1,000 per t, above the decadal average of Rs 963 per t. This, coupled with strong balance sheets, will keep credit profiles stable.
A CRISIL Ratings analysis of 18 cement makers, accounting for over 85% of domestic sales volume, indicates as much.
India’s cement demand grew only 3% in the first quarter of this fiscal, owing to an extended heatwave and shortage of labour during general elections. It is estimated to have grown at a similar pace in the second quarter as well owing to seasonal weakness. However, second half is likely to bode well for the sector.
Growth in housing segment, which accounts for 55 – 60% of cement demand, will see a likely revival in rural housing demand supported by the healthy monsoon this year.
Similarly, government spending on infrastructure development, which accounts for 30% of cement demand, will support demand too. On a high base, total allocation to six core cement-related infrastructure sectors in the Union Budget has increased 6% for this fiscal, with the overall quantum of capital expenditure (capex) remaining reasonably high. Though actual spending was sluggish until July, the government’s capex is likely to accelerate from the third quarter of this fiscal which will boost cement demand from the infrastructure segment.
Says Sehul Bhatt, Director- Research, CRISIL Market Intelligence and Analytics “Cement demand is expected to rebound in the second half of this fiscal (which typically accounts for more than half of the annual sales), as construction activity gathers pace across infrastructure and housing segments post-monsoon. Healthy monsoon, improved labour availability after the festive season, and pick-up in government spending on infrastructure and housing (under the Pradhan Mantri Awas Yojana) should drive demand up 9 – 11% in the second half, taking the annual growth tally to 7 – 8%.”
Says Ankit Kedia, Director, CRISIL Ratings, “Power and fuel cost (30% of total production cost) could decrease Rs 135 – 145 per t this fiscal as average coal/ pet coke prices have declined and are currently stable. Operating leverage benefit of Rs 30 per t is also expected as volume growth has been in sync with the pace of capacity addition thereby keeping the utilisation levels strong. This will offset marginal increase in the raw material prices and will keep operating profitability of cement makers rangebound at Rs 975 – 1,000 per t this fiscal. This expectation factors some pull-back in cement prices during the second half of the fiscal as demand revives.”
Click here for free registration to World Cement
Read the article online at: https://www.worldcement.com/indian-subcontinent/14102024/crisil-project-cement-demand-in-india-to-grow-7-8-this-fiscal-year/
You might also like
Summit Materials Inc reports third quarter 2024 results
Summit Materials, Inc. have announced their results for the third quarter ending September 28, 2024