Cement makers in for another wave of strong demand: Crisil

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Crisil’s market research and analytics unit. “As much as 70-75 mt of the capacity addition is expected to be commissioned next fiscal (year), with 50-55% concentrated in the eastern and central regions," the research firm said in a report on Tuesday.

“Large players will account for 50-55% of the planned capacity addition." The cement industry currently has a capacity for manufacturing 595 mtpa; of which about 119 mtpa were added in the previous five fiscal years. Robust demand in the previous two fiscal years “bolstered the balance sheets of large (cement) players and some mid-sized ones with strong market presence, prompting them to expand capacity on the back of healthy cash accrual and credit profile," Crisil said.

The research firm expects demand for cement in this fiscal year to grow at 10-12% on the back of the government’s push for affordable housing and pre-election spending on infrastructure. But incremental supply and heightened competition will limit growth in prices to 0-1%, with cement prices remaining at ₹390-395 for a bag of 50 kg, Crisil said.

“Cement prices slipped marginally, by 1%, during April-December 2023, marking a trend reversal after four years of growth between fiscal 2020 and fiscal 2023 at a compound annual growth rate of 4%," said Miren Lodha, director-research, at Crisil Market Intelligence and Analytics. “With cement makers adding 35-40 mtpa of capacity this fiscal (year), the highest in more than a decade, and acquired capacities being ramped up, a significant increase in supply would test market discipline and restrict the increase in prices to only 0-1%," he said.