Commodities

Covid 2.0 adversely impacts domestic cement production

Our Bureau Hyderabad | Updated on June 14, 2021

On lockdown relaxation, the overall pent-up demand is expected to drive the off-take.

The Covid-19 second wave has adversely impacted domestic cement production, with the all India production in April and May 2021 lower than April and May 2019.

With most states imposing lockdowns due to the spread of Covid-19 infections to rural regions, the cement off-take has been affected.

As per ICRA, the recovery in the rural regions is expected to be gradual. However, the overall pent-up demand is likely to drive the off-take once lockdowns are relaxed.

Anupama Reddy, Assistant Vice President & Sector Head, ICRA, says, "While the sales volumes are expected to be lower by 25% Q-o-Q in Q1 FY2022 (41 MT); the pent-up demand is expected to push the volumes starting Q2 FY2022. The cement companies have undertaken price hikes in April 2021 driven by the increase in the input costs, primarily power and fuel expenses and freight expenses over the last few months."

In terms of sales trend, the Covid-19 disruption adversely impacted the cement demand in FY2021 resulting in the sharpest de-growth over the last decade. Domestic cement production reported a decline of 12% Y-o-Y to 294 million MT. The significant impact on production was felt in Q1 FY2021 with a production contraction due to the nationwide lockdown's adverse effect with the construction activities coming to a halt, primarily in April 2020.

While the production picked up in Q2 and Q3 FY2021 supported by rural demand, it remained lower on a Y-o-Y basis. This rebound in production was driven by sustained rural housing demand and pick up in the infrastructure activity. The production in March 2021 at 32.9 million MT, almost reached a pre-covid level high of 33.1 million MT, reported in March 2019.

 

 

Published on June 14, 2021

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