By Accommodation Times News Service
Cement production registered a slow growth of 4.6% during April-July 2016; however this was higher than the 1.4% growth in production during April-July last year
Demand for cement is expected to increase at 6% in the current financial year, against 4.6% during the last financial year, which is likely to support cement prices in the near term, says rating agency ICRA.
Pick-up in the infrastructure segment, primarily road and housing segments, and likelihood of a recovery in the rural demand from the second half of the current financial year, given the better monsoons, are likely to be mainly demand drivers.
“While the government’s emphasis on the infrastructure projects is likely to result in increased public sector investments, revival of the public private partnership (PPP) is critical to improve the pace of infrastructure development,” said Sabyasachi Majumdar, senior vice president, ICRA Ratings.
Cement production registered a slow growth of 4.6% during April-July 2016; however this was higher than the 1.4% growth in production during April-July last year.
ICRA estimates the utilisation at 68% in FY2017 given the capacity overhang, but an improvement is likely to 71% in FY2018, driven both by pick-up in demand as well as the slowdown in new capacity addition.
“This in turn will support cement prices and profitability indicators for cement manufacturers, especially in FY2018,” it said.
It also estimates the benefits of energy cost savings are likely to get diluted going forward, given the recent increase in the coal and pet coke prices. “Despite a decline in the energy cost savings during Q2 FY2017, north Indian cement manufacturers would report better profit numbers for H1 FY2017 vis-a-vis H1 FY2016 supported by the significant increase in cement prices,” ICRA said.