FCC

Care Ratings Report

2020-05-29

Outbreak of the COVID-19 pandemic in the Indian sub-continent which forced the government to announce a nationwide lockdown, 25th March 2020 onwards affected the domestic cement production during FY20. Construction activity across the country was halted, which is normally at its peak in the month of March, affected the cement offtake. Production fell by 24.7 percent during March 2020 as compared with the 15.7 percent growth achieved during March 2019.

Capacity

As per Cement Manufacturers Association, India accounts for over 8% of the overall global installed capacity. Region wise, the Southern region comprises of 35% of the total cement capacity followed by the Northern, Eastern, Western and Central region comprising of 20%, 18%, 14% and 13% of the capacity respectively.

Chart 2:

Installed capacity and Capacity Utilization rate of Cement Manufacturers (Unit: Million Tonnes)

Installed Capacity of domestic cement manufacturers has increased at a CAGR of 7.1 % during FY16-20. Manufacturers have been able to maintain a capacity utilization rate above 65 % between FY15-19 but prolonged rains in many parts of the country and with the temporary closure of cement plants during the government enforced lockdown has led to the capacity utilization rate to fall from 70 % during FY19 to 61 percent during FY20.

Demand Drivers for the Cement Industry

Cement demand is closely linked to the housing and infrastructure sector. Increasing demand coming from affordable housing and construction work for government infrastructure projects like roads, metros, airports, irrigation etc. should ideally support the demand for cement going forward.

Tags :