Cement demand is expected to increase by 5% this fiscal against 1.2% last year, largely driven by a revival in demand from the infrastructure segment, mostly road and irrigation projects, and the housing segment.
Domestic cement production fell by 1.2% year-on-year to 279.8 million tonnes last fiscal for the first time in the last decade. In fact, sales volume were down 9% between November 2016 and March due to the demonetisation impact. However, since April, it has recovered to register a growth of 17%. With rising demand, cement prices have also increased across most markets on the back of a better supply-demand scenario and support prices, with operational cost rising.
Sabyasachi Majumdar, Senior VP, ICRA Ratings, said that while cement plants in the northern region are likely to pass on the rising sosts of power, fuel and freight, the profitability of cement plants in other regions may depend on the sustainability of higher prices.
The slowdown in the pace of new capacity addition may boost capacity utilisation and cement prices going forward, he added.