Cement demand is set to grow slower at 7-8 per cent year-on-year to 475 million tonnes this fiscal, after clocking a compound annual growth rate of 11 per cent between FY22 and FY24. <\/p>\n
However, operating profitability of cement players is likely to sustain at \u20b9975-\u20b91,000 per tonne, above the decadal average of \u20b9963 per tonne, according to CRISIL Ratings after analysing 18 cement makers, accounting for over 85 per cent of domestic sales volume.<\/p>\n
India\u2019s cement demand grew only 3 per cent in the first quarter of this fiscal, owing to an extended heatwave and shortage of labour during general elections. <\/p>\n
It is estimated to have grown at a similar pace in the second quarter as well, owing to seasonal weakness. However, the second half is likely to bode well for the sector, it said.<\/p>\n
Growth in the housing segment, which accounts for 55-60 per cent of cement demand, will likely see a revival in rural housing demand supported by the healthy monsoon this year.<\/p>\n
Though the government allocation to the infrastructure sector was higher, actual spending was sluggish until July. It is expected to accelerate from the third quarter of this fiscal year, boosting\u00a0 cement demand from the infrastructure segment.<\/p>\n
Sehul Bhatt, Director- Research, CRISIL Market Intelligence and Analytics said cement demand is expected to rebound in the second half of this fiscal year as construction activity gathers pace post-monsoon.<\/p>\n
Improved labour availability after the festive season, and pick-up in government spending should drive demand up 9-11 per cent in the second half, taking the annual growth tally to 7-8 per cent, he said.<\/p>\n
Ankit Kedia, Director, CRISIL Ratings said power and fuel costs will fall to \u20b9135-145 per tonne this fiscal as average coal\/pet coke prices have declined and are currently stable.<\/p>\n
An operating leverage benefit of \u20b930 per tonne is also expected as volume growth has been in sync with the pace of capacity addition thereby keeping the utilisation levels strong. This will offset a marginal increase in raw material prices and will keep operating profitability of cement makers range bound at \u20b9975-\u20b91,000 per tonne this fiscal. <\/p>\n
These factors should somewhat pull-back in cement prices during the second half of the fiscal as demand revives, he said.<\/p>\n