Cement demand growth is expected to slow 7-8% to 475 million tonnes (MT) in the current fiscal due to lower construction activity, reduced infrastructure spending and geo-political risk, Crisil said in a research note. Demand in the sector grew at a compound annual growth rate (CAGR) of 11% between fiscal 2022 and 2024, the rating agency said.
The first quarter of FY25 experienced a slow growth of 3% in cement demand due to labour shortage and prolonged heatwaves. The credit rating agency, however, had an optimistic view of demand growth in the second half of fiscal 2025 on increasing demand in rural housing and healthy monsoons.
Besides monsoon and rural housing, lower power and fuel costs may offset higher raw material costs.
This will reduce cement prices and in effect spruce up demand, Crisil said in the research note. “Power and fuel cost (~30% of total production cost) could decrease ₹135-145 per tonne this fiscal as average coal/ pet coke prices have declined and are currently stable,” Ankit Kedia, Director, Crisil Ratings, said in the note.
“This will offset marginal increase in the raw material prices and will keep operating profitability of cement makers rangebound at ₹975-1,000 per tonne this fiscal. This expectation factors some pull-back in cement prices during the second half of the fiscal as demand revives,” he added.
Slower demand, however, is not expected to hit operating profits as it is expected to be between ₹975 and ₹1,000 per tonne, which is more than the decadal average of ₹963 per tonne.
Published - October 14, 2024 07:01 pm IST
