Cement demand to fall 25% this fiscal

Our Bureau Mumbai | Updated on July 20, 2020

Cement offtake effectively dried up over the last 40 days, and with the lockdown being extended across different regions, the sale has fallen sharply in the June quarter.   -  G R N SOMASHEKAR

Prices may fall marginally as companies cut production accordingly

The prolonged Covid lockdown is expected to pull down cement demand by 22-25 per cent in this fiscal against 10-12 per cent estimated in April.

Despite significant decline in demand, cement prices are likely to remain unchanged or fall marginally as cement companies cut production to match the demand. This, along with benign power and fuel costs, is likely to result in modest compression in operating profit by 150-200 basis points this fiscal, said an ICRA Ratings study.

Anupama Reddy, Assistant Vice-President, ICRA Ratings, said the demand offtake effectively dried up over the last 40 days and with the lockdown being extended across different regions, demand has fallen sharply in the June quarter. A meaningful recovery is expected only in the second half post-monsoons.

However, she said rural demand should improve with healthy rabi harvest, timely onset of monsoon and expectation of normal rainfall to support the kharif crop sowing.

The residential real estate sector is already under stress for a prolonged period due to weak affordability, subdued demand conditions and high inventory overhang. The liquidity crisis has further impacted the real estate sector.

New housing project launches are likely to get deferred due to operational issues, increasing economic uncertainties leading to subdued demand and fall in developer inflows. The recovery in real estate projects is are expected to be gradual and may take a few quarters to revert to normalcy, said ICRA Ratings.

Given the Government’s priority to fight the pandemic, the investment in infrastructure can get pushed back, particularly by the State governments in view of fiscal constraints, it added.

Reddy said the capacity addition of 14-15 mt this fiscal against the earlier estimates of about 20 mt as companies preserve liquidity in face of demand slowdown. Given the sharp contraction in demand, the industry utilisation levels are expected to decline to about 50 per cent in FY’21 from 68 per cent logged last fiscal.

Published on July 20, 2020

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