Cement demand to recover soon for construction industry

With the commencement of the construction season this year, cement demand and price recovery are expected in the coming months. According to the Emkay Research report, the input prices of cement have seen moderation, and a sustainable improvement in demand and price is crucial for profitability in the cement sector. During the second quarter (Q2)of FY22, higher prices of cement affected the domestic cement players, with an 11% year-on-year (YoY) drop and 17% sequential drop in earnings before interest, taxes, depreciation and amortisation (EBITDA) per tonne. The cement volumes had dropped during October and November in 2021 due to the surge in monsoon season across the country and a sharp decline in volumes in the East region. According to the JM Financial report, a 9% compound annual growth rate (CAGR) is expected during FY22-24 and limited supply growth of 13% over FY22-24. According to ICICI Securities, nearly 60% of the 42 million tonnes (mt) clinker and over 80 mt cement capacities will be added in the East and central regions in FY22-24. Nearly 30% of the cement capacities are to be added by the end of FY23 and expects to see growth from FY24, while another 30% of capacities will get commissioned in FY24. The pipeline capacity has increased by 27%, against 14% for large peers is expected to drive growth and market shares while lowering regional concentration risk. UltraTech Cement will continue to grow business and profitability in FY21-24E backed by low-cost brownfield expansion projects and increased cost efficiencies. It has planned to expand 20 mt capacities in the next two to three years in high-growth utilisation markets of East, North and Central India to ensure fast ramp-up and higher volumes. Image Source