Cement makers to add 150-160 MTPA capacity by FY28: Crisil

India’s cement sector will add 150-160 million tonne per annum (MTPA) capacity by FY28 through both organic and inorganic routes, Crisil said in a research report released on Tuesday. 

Growth will be led by increased demand across sectors like infrastructure and housing, the report said..

In FY25, demand is expected to grow a moderate 4-6 per cent on a high base of the previous three fiscals and rising raw material cost and a flat base will lead to an uptick of 1-3 per cent in prices to ₹400-₹405 per 50 kg bag, the report added.

Over the last five fiscals, the industry added 119 MTPA capacity to reach a total of 595 MTPA.

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As much as 70-75 MT of the capacity addition is expected to be commissioned next fiscal, with 50-55 per cent concentrated in the eastern and central regions, the report mentioned adding that large players will account almost half (50-55 per cent) of the planned capacity addition.

“Robust demand in the past two fiscals has bolstered the balance sheets of large players and some mid-sized ones with strong market presence, prompting them to expand capacity on the back of healthy cash accrual and credit profile,” Crisil, a research and ratings agency, said in its report. 

Demand for FY24 is projected to grow 10-12 per cent, driven by government push to affordable housing and pre-election spending on infrastructure.

Incremental supply and heightened competition will limit price growth to 0-1 per cent, while maintaining prices at ₹390- ₹395 per 50 kg bag levels. Utilisation across cement makers will be at 70-75 per cent levels. 

According to Miren Lodha, Director-Research, CRISIL Market Intelligence and Analytics, cement prices slipped marginally, by 1 per cent during April-December 2023, marking a trend reversal after four years of growth. 

“With cement makers adding 35-40 MTPA of capacity this fiscal, the highest in more than a decade, and acquired capacities being ramped up, a significant increase in supply would test market discipline and restrict the increase in prices to only 0-1 per cent,” he said. 

CRISIL Research forecasts a 13-15 per cent correction in power and fuel costs this fiscal on the back of softening crude oil and coal prices. 

Prices of petcoke and imported non-coking coal — key fuels used for making cement—have softened by 30 per cent and 50 per cent on-year, respectively. 

Freight expenditure is also expected to slip 0-2 per cent due to higher volume and moderation in diesel prices.

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The capacity share of large players increased to 48 per cent, from a previous 45 per cent.

“A slew of mergers and acquisitions in the sector over this period resulted in a transfer of 110-115 MTPA capacity, of which large players acquired 43-45 MTPA. Further, their organic capacity addition stood at 50-52 MTPA,” the report mentioned. 

The pace of consolidation has accelerated this fiscal, with more than 20 MTPA of capacity acquired over April- December 2023, it added. 

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