FCC

Cement demand seen rising 8-9 pc in FY24 over 9 pc growth

2023-04-20

According to a report, the government's ongoing push to create infrastructure will increase cement consumption this fiscal year by 8–9% on top of a 9% growth in FY22, which will aid in the sector's return to profitability. According to India Ratings, which has a neutral outlook for the sector for the year, the sector will remain strong despite the substantial investment pipeline thanks to a recovery in profitability despite inflationary pressure and stable balance sheets.

According to the agency, demand would increase by 8–9% in FY24 compared to a projected 9% increase in FY23, giving the industry a five-year compounded annual growth rate of 4.5%.

The agricultural industry and the emphasis on finishing affordable housing developments will be additional major drivers. But the research also stated that there could be a downside risk if the monsoon was affected by the El Nino's expected negative impact.

Nonetheless, despite the huge growth plans, capacity utilisation will still be below 70%, up from 65% in FY23. It anticipates that 75% of the 150 million tonnes of announced expansion will likely begin production in FY23–25. However, because the majority of the capacity growth is occurring in grinding plants, clinker utilisation is projected to stay 800-1,000 basis points higher than cement utilisation, indicating a higher effective utilisation rate.

The southern market, which is followed by the western region, has the highest potential for inorganic expansion due to the high level of fragmentation and the abundance of small-to-mid sized firms.