Cement production to decline
Cement production in 2016-17 is likely to see a year-on-year (y-o-y) decline for the first time since 2001 as the 8 November demonetisation hit the building sector, analysts said.
India’s cement industry is estimated to have a capacity of about 420 million tonnes (mt). Production typically grows 5-6% a year, and caters to the housing, infrastructure and commercial sectors. The industry recovered from the demonetisation’s shock faster than expected, with the southern markets affected the least.
According to HDFC Securities Ltd, production volume in January fell about 13% y-o-y, the first such decline since January 2001. The sector will likely see a decline in volume this fiscal, which was last seen in fiscal 2001, its analysts Ankur Kulshrestha and Sarfaraz Singh wrote in a 2 March report.
“Our channel checks across the country show cement demand, though still weak, is recovering from the effect of this move. Though states undergoing political processes (UP and Punjab) are an exception to this recovery as of now, there is a possibility demand may pick up once the government formation is complete,” Kulshrestha and Singh wrote.
It is highly likely this fiscal may end with a marginal y-o-y decline for the cement sector, CLSA said in a 1 March note to clients. “Cement production (as per Index of Industrial Production) declined 13.3% y-o-y in Jan-17 which was the sharpest decline in several months,” it said. “For full-year FY17, there is a strong chance industry volumes would be down slightly, a first in over 15 years.”