According to one of the top industry ratings companies in India, CareEdge Ratings, cement volumes in the country are predicted to rise 8–9% in FY23 to 380–385 million tonnes (MT), led by housing demand, both rural and urban, and the infrastructure sector.
It stated that the combined effects of rising infrastructure spending, the real estate upcycle, low per capita consumption, and the predicted increase in private sector capex nicely support cement demand growth in FY24–FY25.
CareEdge anticipates that cement sales volume will increase to 440–450 MT by the end of FY25, with demand increasing in the central and eastern areas.
Since that demand is projected to stay strong in the future years, cement companies have announced extra capacity to keep up with the growth rate, according to the report.
The Union Budget for FY24 is the government’s third consecutive year of increasing budget allocation for major infrastructure sectors, demonstrating its commitment to infrastructure-led growth.
In the run-up to the 2024 general election in India, government spending on infrastructure plus housing demand offers a positive picture of cement consumption.
Notwithstanding imminent cost concerns, such as rising fuel prices, cement companies are expanding and are forecast to add 85–100 MT by FY25. The sector is expected to add 30-32 MT by the end of this fiscal year, up from 25 MT in FY22. The total installed capacity is estimated to be 595 MT.
In FY24-25, incremental demand is estimated to be 55-60 MT, with 60-70 MT of capacity added over the next two years, resulting in industry capacity utilization staying range-bound at 66-68%.
Players’ aggressive capacity addition plans for FY23–FY25 are resulting in new capacity that is 1-1.1x the estimated incremental demand of 90 MT over the same period. This is expected to keep industry capacity utilisation under control, and it is unlikely that it would rise above 67–69% despite a brighter demand outlook. But, any fluctuation in demand drivers as a result of the impending capacity growth will be a major monitorable in the future, it said.
The top ten industry participants control more than 68% of installed capacity. Going forward, capacity expansion during FY23–FY25 is predicted to be primarily done by top companies, implying that the industry will remain consolidated.
According to Ravleen Sethi, assistant director at CareEdge, this industry may see the purchase of mid- or smaller-sized businesses by the sector’s top players as a result of the sector’s ongoing margin pressure. This would lead to greater consolidation in the market and better pricing discipline among the remaining companies.
