Cement industry to add 75 million MT capacity despite slower growth

02 Dec 2024 CW Team

India's cement industry is set to expand by 70-75 million metric tonnes (MT) over the next two years, according to ICRA. Of this, 33-37 million MT will come from clinker capacity, while grinding capacity will account for the remainder.

In FY2025, 33-35 million MT of capacity is expected to be added, with 37-39 million MT projected for FY2026. The eastern and southern regions will lead this growth, contributing 38-40 million MT collectively over the two fiscal years. Despite this expansion, capacity utilisation is forecasted to remain moderate, improving slightly to 71% in FY2025 from 70% in FY2024, driven by increased cement production.

ICRA revised its growth outlook for cement volumes in FY2025, lowering the expected year-on-year growth to 4-5% (445-450 million MT), down from the earlier estimate of 7-8%. This adjustment is attributed to a slowdown in construction activities in the housing and infrastructure sectors, following the General Elections.

However, the second half of FY2025 (H2 FY2025) is expected to see recovery, driven by strong rural consumption due to healthy monsoons, robust kharif crop output, and high reservoir levels supporting rabi sowing. Urban housing demand is also likely to support cement volumes.

Despite these positive trends, the operating profit per tonne (OPBITDA/MT) of cement companies is projected to decline by 12-15% year-on-year in FY2025, to Rs 820-850 per tonne, according to Tushar Bharambe, Assistant Vice President and Sector Head, Corporate Ratings at ICRA.

Increased government spending on infrastructure projects is anticipated to boost construction activity in H2 FY2025, offering further support to the cement sector. However, overall profitability is expected to remain under pressure for the fiscal year. (ET)

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