Elections, festivities, and pollution weigh on India's cement demand

India’s cement demand has consistently shown double-digit growth over the past few quarters, primarily driven by infrastructure spending. However, dealers and industry executives note that state elections, festival season, and, in some markets, weddings and pollution may temporarily disrupt this demand story.

While the festival season typically sees a slowdown in construction activity, some dealers anticipate this lull extending throughout the entire month as multiple states enter election mode.

In India, the October-November festival season witnesses a large number of construction labourers returning to their hometowns, temporarily interrupting construction activity speed.

“During Diwali, labourers go back to celebrate, slowing down demand; currently, that is playing out,” observed a dealer from Himachal Pradesh.

Ajay Kapur, chief executive officer of Adani Cement, the country’s second-largest cement maker, informed analysts earlier this month that the East India market is currently affected by the post-Puja, Diwali period.

“I expect that after November and December, the East should return to its normal 8-10 per cent demand growth,” he said, although this will still be lower than the earlier 15-16 per cent growth rate.

For markets like the National Capital Region, a ban on construction activities due to air pollution concerns has resulted in demand plummeting to almost nil, according to a second dealer in this market.

Dealers in certain markets of Rajasthan anticipate a delayed return of demand due to elections and the wedding season.

“October was average compared to September, but better than last year. November is currently experiencing the Diwali season crunch and will continue to be challenging due to elections and a busy wedding season,” said a cement dealer from Rajasthan, who remains optimistic about long-term demand.

Currently, a model code of conduct is in force for upcoming state elections in Chhattisgarh, Madhya Pradesh, Mizoram, Rajasthan, and Telangana.

Another cement dealer and a cement supply chain executive confirmed that demand weakness, primarily due to cash availability issues, is evident in most states.

Miren Lodha, director-research at CRISIL Market Intelligence & Analytics, expects demand growth in the second half of 2023-24 to moderate for similar reasons.

“As seen in previous elections, government capital expenditure slows down ahead of general elections as well as state elections due to the code of conduct,” he said, adding, “During elections and the period leading to the new Budget (state or central), there is a lower fund release by governments, likely impacting liquidity in the market.”