ICRA: Cement demand growth to recover to 4-5% in FY18

Cement demand, which was negatively impacted following demonetisation exercise, rebounded in March

Cement demand growth is expected to recover to around four to five per cent during 2017-2018, driven by a pick-up in the housing and infrastructure segments, according to ratings agency ICRA.

Cement demand, which was negatively impacted following the demonetisation exercise, rebounded in March, the agency in a report.

"ICRA expects cement demand growth to recover to around four to five per cent during the current financial year, driven by a pick-up in the housing and infrastructure segments — mostly road and irrigation," said Sabyasachi Majumdar, senior vice-president and group head, ICRA Ratings.

"While in the short term, demonetisation has negatively impacted real estate and construction activities, and the cement off-take, the situation is likely to normalise from the first quarter of this financial year," he explained.

In March this year, cement volume growth witnessed a recovery and reported a growth of 17.5 per cent on a month-on-month basis to 25.2 million tonnes (mt), the report noted.

Following demonetisation, cement demand has been adversely impacted, with the month of November witnessing a decline in cement demand by 15.4 per cent on a month-on-month basis.

While there had been some improvement in volume growth during December and January, the volumes remained at around 22 to 22.5 mt, lower when compared to the pre-note-ban volumes, the report noted.

During February, volume growth reported a decline of 4.6 per cent month-on-month.

During the current financial year, the report noted that cement demand would be supported by the increased budgetary allocation for the infrastructure sector. 

Higher rural credit and increased allocation for rural, agricultural and allied sectors, which are likely to boost rural demand, including the demand for rural housing, are significant contributors to the overall cement demand mix, Majumdar noted.

During the previous financial year, cement production reported a marginal decline of one per cent to 279.8 mt from 283.2 million mt in 2015-2016.