Help Desk -
9958816305, 9810335381

Elections and infra boost to push cement demand – Care Rating

Infra News - Published on Wed, 09 May 2018

Image Source:
Financial Express reported that the cement production in India is expected to cross 310 million tonne during the current fiscal, with a rise of 6.5%, a marginal increase over previous fiscal’s 6.3% growth. While the demand from housing and real estate sectors is expected to grow by around 7%, demand from infrastructure segment is expected to rise by 8-10%, said an analysis done by Care Ratings.

With two major states (Rajasthan and Madhya Pradesh) going into assembly elections followed by general elections in first and second quarters of 2019, the demand from infrastructure and construction is expected to peak in central, eastern and western region. Utilisation in cement capacity across regions is expected to improve during the year to around 67% as compared to 65% in the just ended fiscal 2018.

The prices are expected to remain range bound and may fall further with addition of new capacity especially in the southern region. All-India prices are expected to remain in the range of INR 317 (+/- 5% per bag post GST) during the year.

Further fall in prices may be indicative of improvement in installed capacity utilisation especially in southern region. Increase in pet coke prices in the global markets and global crude oil price leading to increase in domestic diesel prices would impact operating margins of major players during the year, the analysis pointed out.

The demand from affordable housing is expected to sustain on the back of the government allocating INR 6,500 crore for urban housing. Completion of the same would lead to an incremental demand of 1-1.5% (3-4.5 million tonne) for cement in FY19. Additionally, the monsoon forecasts for the year indicate normal rainfall, which should lead to sustained demand from rural housing segment. We expect the housing and real estate segment to grow by 6-7%, the analysis pointed out.

Similarly, infrastructure segment may continue to remain in focus during the year as far as demand for cement is concerned. Development of national highways is expected to contribute 2-3 million tonne of incremental demand for cement.

Demand from various projects at proposed smart cities and under-construction metro rail projects at various stages of development in 14 cities are some of the projects expected to drive demand for cement during the fiscal 2019. The development of the above-mentioned projects across the geography is expected to improve capacity utilisation of cement plants across the 5 regions. Election in some of the key states in southern, northern and central regions followed by the general election in 2019 would ensure faster implementation of sanctioned projects. The infrastructure segment is expected to grow by 8-10%, the analysis added.

The cement industry witnessed a revival during FY18, backed by government spending on infrastructure. Cement production grew at 6.3% in FY18 as against -1.2% during FY17. Construction of houses under the ‘Housing for All’ scheme and Pradhan Mantri Awas Yojana (PMAY) have been major drivers of demand from the housing segment especially in the rural areas. Infrastructure projects under Bharatmala, Sagarmala and smart cities continued to drive demand from infrastructure segment.

The real estate sector witnessed disruption in the construction and sales activity beginning demonetisation exercise in November 2016. The disruption continued with builders taking a cautious approach to Rera implementation, temporarily halting new sales or construction. Implementation of Rera in May 2017 impacted the demand for cement from real estate segment in first and second quarters of FY18.

Cement production during fiscal 2018 stood at 297.6 million tonne, a 6.3% growth over the previous year’s (fiscal 2017’s) 280 million tonne. Total installed capacity stood at approximately 455 million tonne.

Cement prices have remained rangebound in the past 4 years. They are mainly driven by regional capacity, utilisation levels and demand within the region. The price variation across regions contract when there is steady demand from both retail and institutional cement consumers. Western and eastern regions with favourable demand continue to record higher price for cement. Southern region, with the highest installed cement capacity in the country, (approximately 158 million tonne), continued to witness lowest cement prices. The prices in southern region are expected to remain subdued over the next 12-18 months.

Availability of sand is a major challenge globally which affects construction activity. India has been facing acute shortage of sand across states especially in northern and southern region. Even though sand seems to be an abundant resource, the availability of sand required for construction is scarce in these regions. Sand is largely illegally mined across many of the states in southern and northern regions, and the respective state governments have been trying to curb the same, in order to boost their tax revenues. This has led to a sudden drop in sand availability for construction.

Source :

Posted By : Nanda Koijam on Wed, 09 May 2018
Related News from Infra segment