Cement industry to witness improved demand from July 2021
Cement

Cement industry to witness improved demand from July 2021

According to CARE Ratings, the demand for cement will improve in a calibrated manner from July 2021 onwards. CARE Rating states that a double-digit cement volume growth seems unlikely at present for FY22, considering the uncertainty for the constantly evolving covid situation in the country. However, it also states that the profitability for cement players expects to remain healthy during FY22, considering the factors such as expected higher volumes and continuing pricing power enjoyed by cement companies which are likely to balance the cost pressures considerably. In terms of debt, most of the cement companies will be seen to continue their focus on strengthening their balance sheet during FY22. Moreover, the report says that profits for FY22 will remain moderate due to increasing input costs for pet coke, diesel, coal, and packing materials.

Today, the economic conditions of our country remain volatile. Considering this into account, the unlocking process that was earlier predicted for May 2021, has now been pushed to July 2021.This has affected the overall demand for cement for Q1FY22. The second wave came with a lot of uncertainties and shattered the overall demand during the last quarter of FY21. On the one hand, we see that the supply constraints are low because of the reopening of operations for the cement manufacturing companies; however, with a higher rate of infection in the rural areas, the demand for cement from rural areas has weakened.

CARE Ratings expects that for FY22, the domestic cement production may grow by around 4% to 7% y-o-y after two consecutive years of de-growth against the initial estimate of 11% to 14%. Demand for cement will directly depend on factors like the government’s push and spending towards infrastructure creation and development, pent-up urban demand, and continuing rural demand. However, the severity of ongoing pandemic will have a direct impact on the timelines for demand revival for the cement industry.

Looking at Q1FY21, which was severely hit by the pandemic, the industry witnessed a swift recovery wherein domestic cement production reached 88% of pre-Covid levels (88% of Q2FY20), states CARE Rating report. It further reports that during Q2FY21 and for Q3FY21, production was 96% of the corresponding period the previous year. Monthly domestic cement reached pre-Covid levels during March 2021 and was approximating to March 2019 levels. Overall, the domestic cement production has fallen by 12% during FY21 as compared to FY20 as against the initial estimate of de-growth of 25% to 30% made in April 2020.

For FY22, CARE Ratings estimates its entire portfolio of investment-grade cement companies will report stable performance with the aggregate rated debt of around Rs 23,964 cr. Most cement companies will be focusing on strengthening their balance sheets. However, it also states that the profitability for cement players is expected to remain moderate during FY22, due to increasing input costs especially for pet coke, diesel, coal, and packing materials. Furthermore, CARE Rating also states that the liquidity for a majority of the CARE-rated investment grade portfolio is likely to remain strong or adequate in FY 2022.

Some of the key drivers identified by CARE Rating are-

Positives
Increased capital outlay towards infrastructure creation by 26% to Rs 5.54 lakh cr.
Enhanced outlay of Rs118,101 crore for MoRTH of which Rs 108,230 cr is for capital.
Central Counterpart Funding to various metros aggregating to Rs 88,059 cr.
Proposals to further incentivise and boost affordable housing.
Pent up urban demand and continuing rural demand.

Negatives
Slow pick up of demand with ongoing Covid II
Increase in input costs
Excess capacities

According to CARE Ratings, the demand for cement will improve in a calibrated manner from July 2021 onwards. CARE Rating states that a double-digit cement volume growth seems unlikely at present for FY22, considering the uncertainty for the constantly evolving covid situation in the country. However, it also states that the profitability for cement players expects to remain healthy during FY22, considering the factors such as expected higher volumes and continuing pricing power enjoyed by cement companies which are likely to balance the cost pressures considerably. In terms of debt, most of the cement companies will be seen to continue their focus on strengthening their balance sheet during FY22. Moreover, the report says that profits for FY22 will remain moderate due to increasing input costs for pet coke, diesel, coal, and packing materials. Today, the economic conditions of our country remain volatile. Considering this into account, the unlocking process that was earlier predicted for May 2021, has now been pushed to July 2021.This has affected the overall demand for cement for Q1FY22. The second wave came with a lot of uncertainties and shattered the overall demand during the last quarter of FY21. On the one hand, we see that the supply constraints are low because of the reopening of operations for the cement manufacturing companies; however, with a higher rate of infection in the rural areas, the demand for cement from rural areas has weakened. CARE Ratings expects that for FY22, the domestic cement production may grow by around 4% to 7% y-o-y after two consecutive years of de-growth against the initial estimate of 11% to 14%. Demand for cement will directly depend on factors like the government’s push and spending towards infrastructure creation and development, pent-up urban demand, and continuing rural demand. However, the severity of ongoing pandemic will have a direct impact on the timelines for demand revival for the cement industry. Looking at Q1FY21, which was severely hit by the pandemic, the industry witnessed a swift recovery wherein domestic cement production reached 88% of pre-Covid levels (88% of Q2FY20), states CARE Rating report. It further reports that during Q2FY21 and for Q3FY21, production was 96% of the corresponding period the previous year. Monthly domestic cement reached pre-Covid levels during March 2021 and was approximating to March 2019 levels. Overall, the domestic cement production has fallen by 12% during FY21 as compared to FY20 as against the initial estimate of de-growth of 25% to 30% made in April 2020. For FY22, CARE Ratings estimates its entire portfolio of investment-grade cement companies will report stable performance with the aggregate rated debt of around Rs 23,964 cr. Most cement companies will be focusing on strengthening their balance sheets. However, it also states that the profitability for cement players is expected to remain moderate during FY22, due to increasing input costs especially for pet coke, diesel, coal, and packing materials. Furthermore, CARE Rating also states that the liquidity for a majority of the CARE-rated investment grade portfolio is likely to remain strong or adequate in FY 2022. Some of the key drivers identified by CARE Rating are- Positives Increased capital outlay towards infrastructure creation by 26% to Rs 5.54 lakh cr. Enhanced outlay of Rs118,101 crore for MoRTH of which Rs 108,230 cr is for capital. Central Counterpart Funding to various metros aggregating to Rs 88,059 cr. Proposals to further incentivise and boost affordable housing. Pent up urban demand and continuing rural demand. Negatives Slow pick up of demand with ongoing Covid II Increase in input costs Excess capacities

Next Story
Infrastructure Urban

India To Invest $37 Billion To Boost Petrochemical Capacity

India is set to become a major global player in the petrochemicals industry, driven by a planned capital expenditure of $37 billion (Rs 3.1 trillion) aimed at reducing import dependency and enhancing self-sufficiency, according to S&P Global Ratings.In its latest report titled “First China, Now India: Self-Sufficiency Goals Will Add To Petrochemicals Supply”, S&P said India’s large-scale capacity expansion—mirroring China’s earlier push—will likely intensify oversupply pressures in Asia’s petrochemical markets.Currently the world’s third-largest petrochemical consumer a..

Next Story
Infrastructure Transport

Indian Railways Expands Global Exports Of Rail Equipment

Indian Railways has announced that it is rapidly emerging as a global exporter of railway equipment, including bogies, coaches, locomotives, and propulsion systems, under the government’s ‘Make in India, Make for the World’ initiative.According to an official statement, India’s railway products are now reaching over 16 international markets, reflecting the country’s growing capacity to design, develop, and deliver world-class rail solutions.Metro coaches have been exported to Australia and Canada; bogies to the United Kingdom, Saudi Arabia, France, and Australia; propulsion systems t..

Next Story
Infrastructure Transport

RailTel Awards Rs 163 Million Contract To RTNS Technology

RailTel Corporation of India Limited (RailTel), a Mini Ratna Public Sector Undertaking, has awarded a domestic work order worth Rs 163 million to RTNS Technology Private Limited.The contract, issued on 30 September 2025, involves the supply and installation of equipment and related services for one of RailTel’s key customers. The project underscores RailTel’s commitment to advancing technology and communication infrastructure through collaboration with domestic system integrators.RTNS Technology Private Limited, an ISO-certified system integrator, provides comprehensive solutions for perim..

Advertisement

Subscribe to Our Newsletter

Get daily newsletters around different themes from Construction world.

STAY CONNECTED

Advertisement

Advertisement

Advertisement

Talk to us?