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Cement production softens on weak housing sector

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World Cement,

Cement production in the first quarter of the Indian financial year (1QFY17) stood at 72.67 million t, according to a recent report from CARE Ratings, a fall of 3.9% on the same period a year before. The softer market conditions followed low activity in the real estate and housing sectors, which typically account for two-thirds of cement consumption.

The real estate sector has been hit by the implementation of the Real Estate (Regulatory and Development) Act (RERA), under which states are required to establish a new regulatory authority to deal with the real estate sector.

“The newly implemented act, along with regulations and compliances, is making developers cautions,” CARE Ratings said. As a result, the company expects soft market conditions in the real estate and housing sectors to continue “as clarity on RERA implementation would continue to evolve” over the next few quarters.

As a result of the weakness in the real estate sector, as well as higher government spending, infrastructure will account for a higher proportion of India’s cement production, reaching 15% during the current financial year.

“Road and public infrastructure development is expected to push demand for cement in the two coming quarters,” CARE Ratings said.

Looking ahead, the ratings agency expects cement production to start to recover in 3QFY17, as activity in the real estate and housing sectors picks up. Meanwhile, Smart City and national highway projects will fuel demand in the infrastructure sector.

“Implementation in the first batch of 20 Smart Cities has already taken off in stages,” CARE Ratings concluded, “For the remaining 40 Smart Cities chosen in September 2016, we expect the project implementation to begin in 3QFY17, which should drive demand for cement.”

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