Slowdown likely to hit cement sector next fiscal: India Ratings

Cement demand is likely to remain sluggish next fiscal with around 5—6 per cent growth impacted by slowdown in construction and infrastructure sectors, India Ratings and Services said in a report today.

India’s cement sector had clocked 5.6 per cent growth in 2012—13 and the projected growth of 5—6 per cent next fiscal would be supported by an expected increase in demand from the rural sector and Tier—II and Tier—III cities.

There could also be some uptick in demand from the second half, it said adding, election results would impact overall growth in construction activities.

The rating agency has, however, maintained its “stable to negative” outlook for the sector for the next fiscal.

The slowdown in construction and allied activities would led to shrink the capacity utilisation of the cement companies further between 70 per cent and 75 per cent in FY’14 and FY’15 compared to 76 per cent recorded in the previous fiscal.

Capacity utilisation would be the highest in the Eastern region at 80—85 per cent followed by Western region at 70—80 per cent and would be the lowest in Southern India at 56—58 per cent.

As such overall capacity addition is likely to moderate as incremental demand will be lower than incremental supply.

Capacity additions would grow at a CAGR of six per cent till FY’16 while demand may pick up by over 4 per cent in the same period. Southern India will continue to face a demand—supply imbalance.

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