Grey prospects: Flattish demand growth for cement likely this fiscal

Domestic cement demand growth is expected to be flat this fiscal against the decade-high growth of 13 per cent in the previous year.

Flattish growth notwithstanding, capacity additions of 20-22 million tonnes per annum through this year and next fiscal against 17 mtpa in FY2019 are likely to pull down industry’s capacity utilisation in the current fiscal.

Anupama Reddy, Assistant Vice-President, ICRA Ratings, said most of the incremental supplies are not fully integrated and are backed by old limestone mining leases.

Also, given that the grinding capacity addition is higher in relation to the clinker capacities for these new units, the actual production from new capacities could be lower, Reddy added.

East to lead expansion

The eastern region is expected to lead the expansion and is likely to add 15-19 mtpa by March 2021. Increase in capacities with no commensurate increase in demand would result in decline in utilisation rate to 68 per cent in FY2020 from 71 per cent in the previous fiscal.

In the first nine months of this fiscal, the industry cement production at 247.4 mt is marginally higher by 0.7 per cent compared to the same period last year.

Production has been increasing on a month-on-month basis since last September. Double-digit growth in cement demand, of 11.8 per cent, was witnessed in December 2019.

At the pan-India level, prices in most markets are higher compared to the corresponding period of the previous year. In Mumbai and Hyderabad markets, prices are higher by 7-8 per cent and in Delhi, 20-25 per cent over the last 10 months

Prices witnessed increase in the range of ₹5-20 per 50-kg bag across regions in January-February 2020.

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