India’s Cement Demand Growth Slows to 7-8%
The demand for cement in India is expected to grow by 7-8% this year, reaching around 475 million tonnes, according to CRISIL Ratings. This is a slowdown from the 11% growth seen between 2022 and 2024. Despite this, cement companies’ profitability is expected to remain stable at Rs 975-1,000 per tonne, above the decade average of Rs 963 per tonne.
Factors Affecting Cement Demand
In the first quarter, demand grew by only 3% due to a heatwave and labor shortages during elections. Similar growth is expected in the second quarter due to seasonal factors. However, a healthy monsoon is expected to boost rural housing demand, which makes up 55-60% of cement demand.
Government Spending and Infrastructure
Government infrastructure spending, accounting for 30% of cement demand, is expected to increase from the third quarter, supporting demand growth. Sehul Bhatt from CRISIL Market Intelligence predicts a rebound in the second half of the year, with demand rising 9-11% due to improved labor availability and increased government spending.
Challenges and Risks
Cement prices fell by 6% in the first half of the year, but profitability remains stable due to lower power and fuel costs. Ankit Kedia from CRISIL Ratings notes that operating leverage benefits are expected as volume growth matches capacity addition. However, risks include potential downturns in construction activity, reduced infrastructure spending, and fluctuations in commodity and energy prices.
Doubts Revealed
Cement Demand -: Cement demand refers to how much cement people and companies want to buy and use. Cement is a key material used in building houses, roads, and other structures.
CRISIL Ratings -: CRISIL Ratings is a company that gives ratings and analysis about the financial health of businesses and industries. They help people understand how well a company or industry is doing.
Fiscal Year -: A fiscal year is a 12-month period that companies and governments use for accounting and budgeting. In India, it starts on April 1st and ends on March 31st of the next year.
Heatwave -: A heatwave is a period of very hot weather that can make it difficult for people to work outside. It can slow down construction work, which affects cement demand.
Elections -: Elections are when people vote to choose their leaders, like the Prime Minister or local government officials. During elections, some construction projects might slow down or stop.
Monsoon -: The monsoon is a season in India when it rains a lot. Good rains can help farmers and increase the demand for building materials like cement in rural areas.
Infrastructure Spending -: Infrastructure spending is when the government spends money to build things like roads, bridges, and schools. This can increase the demand for cement.
Energy Prices -: Energy prices refer to the cost of power and fuel. If these prices go up, it can make it more expensive to produce cement.