Cement demand to rise six per cent in FY17
According to the rating agency Icra, the cement demand growth which was relatively muted at five per cent in fiscal 2015-16 and 3.4 per cent in April-May 2016, is expected to be six per cent this fiscal on the back of better monsoons and a pick-up in the infrastructure segment.
Sabyasachi Majumdar, Senior Vice-President, Icra Ratings said, “The expansion is also likely to lead to better prices, especially in the northern and eastern states, which are seeing a good off take of the key building material. The pick-up in the infrastructure segment will be primarily in sectors like roads and housing during the next one year. This apart, there is a likelihood of a recovery in the rural demand from the second half of fiscal 2016-17, given the expectations of a better monsoon. With the pace of new capacity addition slowing down, we expect capacity utilization and the supply-demand scenario to show an improvement, especially in fiscal 2017-18, which should support cement prices and profitability indicators for cement manufacturers.”
As per the agency, the April-May decline in demand growth was primarily due to the continued weak rural demand (especially in Maharashtra, which was impacted by a drought in calendar year 2015) and a slowdown in the pace of infra execution, partly due to the unavailability of water. Demand in south India also moderated during April-May 2016 when compared to fourth quarter of 2015-16. In the north, a demand uptick and better pricing discipline resulted in the rebound of cement prices to Rs 305- 335 per bag (50kg) in April-June 2016 from a low of Rs 225-240 per bag in the first three months of 2016.In the west, cement prices stayed subdued during first quarter of this fiscal, in the range of Rs 260-265 per bag. In the east, April-June prices stood at around Rs 315 per bag.