Cement demand growth slows
Growth in domestic cement demand is expected to decline to around 7% in FY20, according to credit ratings agency ICRA. This compares to a 13% demand growth in FY19.
Relative weakness in cement offtake in Q1FY20 is indicative of the slowdown.
Average prices for FY20 are, however, likely to be better than FY19, while costs will be lower, supporting near-term profitability for cement companies.
In the note, Sabyasachi Majumdar, Senior Vice President & Group Head – Corporate Ratings, ICRA, said “We expect cement demand growth to taper off in FY2020 after a strong double-digit growth in the previous year. The is already being reflected in tepid growth in Q1 FY2020, on the back of slowing of the project execution on account of general elections (usually resulting in labour unavailability). In Q2 FY2020, consumption is expected to be on lower side owing to the monsoon season.”
ICRA expects demand to pick up in Q3 FY20, likely to be driven by housing, primarily rural housing and affordable housing, and improved focus on infrastructure segments, mainly road, railway and irrigation projects.