Demand for Cement expected to rise
Cement production is expected to grow at 6-7% in the current fiscal year, driven by pick-up in affordable and rural housing segments and infrastructure, a report says.
However, rising costs are likely to put pressure on the operating profitability of cement firms in the coming quarters, Icra said in its report, adding the manufacturers’ ability to secure price increases remains the key.
“We expect cement demand growth of 6-7% in FY2019, driven by a pick-up in the affordable and rural housing segments and infrastructure, primarily road and irrigation projects,” said Sabyasachi Majumdar, senior VP, Icra. According to the rating agency, cement production remained healthy in the first four months of FY19, reporting a 14.7% year-on-year (YoY) growth.
Production remained in the range of 27.5-28.6mt during the April-June period, clocking the highest at 28.6 mt in June. It declined in July by 9.3% on a month-on-month (MoM) basis owing to the monsoons, when cement consumption is on the lower side. However, it remained high by 10.8% on a YoY basis, at close to 26 mt.
The trend was supported by demand, driven primarily by low-cost housing (in south – AP and Telangana; and in the east – except Bihar) and a pick-up in the execution of infrastructure projects (in south – AP and Telangana and in the eastern and western regions), the report said. Icra said the pressure on prices will continue in the second quarter of FY19, owing to the monsoons, which have an adverse impact on cement demand.