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Cement firms’ capacity utilisation may remain moderate

FE Bureau

The domestic cement capacity utilisation is expected to remain moderate at around 70% in FY20 despite an estimated demand growth of 7-8% in FY20 due to capacity overhang. This is likely to continue in pricing pressures in the industry, leading to pressure on margins.
Cement production for the seven months of FY19 registered a healthy growth of 15% over last year. The overall cement demand growth is expected at 7% in FY19 and around 8% in FY20, driven by housing, primarily rural housing and affordable housing and improved focus on infrastructure segments like roads, metro and irrigation projects, said an Icra note on Monday.

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As for the prices, at the pan-India level, the prices in most markets are on the lower side in eight months of FY19, by around 3%-8%. These, along with higher input costs, have put pressure on the profitability of the cement companies in H1 FY19. Rising demand resulted in an increase in cement prices in the Ahmedabad and the Hyderabad markets in April-May 2018 on a month-over-month basis. In June-July 2018, the prices largely remained similar to that of the previous month in most markets. The prices remained under pressure in August 2018 due to monsoons.