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India’s cement demand likely to decline by 10-15% in Q2FY21: Ind-Ra
Sep-22-2020

India Ratings and Research (Ind-Ra) in its latest report has said that cement demand is expected to decline by 10 to 15 percent year-on-year in the Q2 (July-September) of FY21. It also said rural demand will continue to outperform urban demand and companies having higher individual home builder exposure will remain better placed. However, it said that an increase in incidences of Covid-19 in eastern and central regions, and the recurrent state lockdowns can impact the demand recovery. It also said floods in the eastern and central regions in the seasonally weak Q2 will also weigh on the demand. It added that the western region remains the worst hit due to higher dependence on urban demand and a severe Covid-19 impact.

As per the report, cement demand recovered quickly to 79 percent of last year's volumes in May and 93 percent in June led by a strong rural demand aided by three consecutive good monsoons, adequate availability of local labor, and lower spread of Covid-19 than in urban areas. However, it said the recovery has slowed down since mid-July with lockdowns imposed by several states and fading of pent-up demand resulting in a 13.5 percent year-on-year decline in the month. It stated that the capacity utilisations of listed entities fell sharply to 51 percent in Q1 due to the lockdown impacting demand. With the expected decline of 10 to 15 percent in Q2, the capacity utilization is likely to remain below 60 percent.

The report further said most of the ongoing capital expenditure (capex) is witnessing delays of three to six months due to labor shortage and cash conservation which may get prolonged for another such period. However, it expects around 65 percent of the announced capex for FY21 to come onstream (around 20 million tonnes expected in FY21), given that much of this is in advanced stages.

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