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Cement production expected to be up 12% this fiscal: Report

India’s cement production in the past five months has jumped 44 percent on a year-on-year basis and two percent as compared to the pre-pandemic April-September 2019 period, to 142 Million Tonnes (MT), according to a report by rating agency ICRA. The agency expects the pan-India cement production to be up by around 12 percent to 332 MT in the current financial year and 358 MT in 2022-23.

This will be supported by the pent-up demand, rural housing demand and the pick-up in infrastructure activity, said ICRA in its report on the cement industry.

“Based on the trends so far, ICRA expects the all-India cement production to report an increase by around 12 percent to 332 million MT in 2021-22, which will be supported by the pent-up demand, rural housing demand and the pick-up in infrastructure activity.

“In FY2023, the production is expected to grow eight percent to around 358 million tonnes,” said ICRA.

However, it also expects the industry utilisation levels to remain at moderate levels of 62-64 percent during 2021-22 and 2022-23, due to the capacity additions.

Overall, in the first half of 2021-22, the cement prices were higher by four percent y-o-y.

“This is primarily driven by the increase in input costs – power & fuel and freight expenses over the past few months,” it said.

The agency added that “the coal prices were higher by 103 percent, pet coke prices by 87 percent and diesel prices by 20 percent on Y-o-Y basis in H1 FY2022.”

The total revenue of ICRA’s sample, which consists of 12 listed cement companies, is expected to increase by 13 percent in FY2022.

This would be largely supported by volumetric growth and elevated input costs are likely to exert pressure on operating margins resulting in a margin contraction by around 200-230 basis points (bps), it added.

ICRA Assistant Vice-President and Sector Head (Corporate Ratings) Anupama Reddy said, “Capacity additions are expected to increase to around 18-20 MTPA (million tonnes per annum) in FY2022 and 27-30 MTPA in FY2023 from around 15 MTPA in FY2021.”

The eastern region is expected to lead the expansion and may add around 17 MTPA, followed by the central region at around 13 MTPA during 2022-23.

“With the expected increase in demand in FY2022 and FY2023, the utilisation is likely to improve to around 62-64 percent from 57 percent in FY2021. However, the same remains at moderate levels on an expanded base,” she added.

Source: ET Realty, Delhi/NCR

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