Most large cement companies have restarted production after remaining shut for almost a month due to the Covid-19 lockdown. The government had relaxed norms for industrial activities in comparatively less Covid-19-affected green and orange zones.

However, demand from real estate and infrastructure projects is expected to be low with many migrant workers moving back to their native states during the arduous 42-day lockdown.

Currently, cement companies are operating at the lowest possible utilisation levels as dealers are not willing to stock up due to uncertainty in demand and prediction of a normal south-west monsoon starting next month.

Moreover, restrictions continue to remain in place on despatches from dealer godowns located in the orange zone. Besides availability of truck drivers and labour for loading and unloading, restrictions on truck movements in most Covid-19-affected zones remain the key challenge.

Currently, sales volumes are expected at about 20-25 per cent of normal levels, with demand coming largely from rural areas, which are in the Covid-19 green zones.

Prices of raw materials, such as petcoke, coal, diesel, fly-ash and slag, which account for 80-85 per cent of production cost, could remain under control due to subdued demand.

Anupama Reddy, Assistant Vice President, ICRA Ratings, said demand for cement is expected to decline by about 12 per cent this fiscal.

Salary cuts and job losses due to Covid-19 are also likely to result in low housing demand, which accounts for 65 per cent of overall cement sales, while construction activity will pick up gradually owing to limited labour availability and lower-than-anticipated spending by the government on infrastructure, she said.

Despite weak demand, fall in cement prices would be limited to about 1-3 per cent across markets, given the industry exhibits pricing discipline, she added.

Manish Valecha, Research Analyst, Anand Rathi Research, said though many infrastructure and road projects have started, demand remains muted as these are expected to consume only 5-10 per cent cement in their projects.

“We believe prices will be firm as companies cover high fixed costs due to lower utilisation. Lower raw material prices should also boost cement companies,” he added.