‘Cement prices may rebound with supply-demand boost’

Cement volume growth has witnessed recovery since March 2017.

Cement volume growth has witnessed recovery since March 2017.  

Demonetisation impact wearing off since Q1 of FY18: ICRA

Rating agency ICRA on Thursday said that it expected cement demand growth to recover to about 5% during 2017-18 as against a decline of 1.2% in 2016-17, driven by a pick-up in the infrastructure segment, mostly road and irrigation projects and the housing segment.

Cement prices recovered from February 2017 and reached pre-demonetisation levels in most markets by April 2017.

While improvement in the supply-demand scenario in FY18 is expected to support the cement prices going forward, sustenance of the same is critical, given the rising costs.

“While in the short term, demonetisation has had a negative impact on real estate and construction activities and hence on the cement off-take, the impact has started to subside from Q1 FY18, driven by a pick-up in the infrastructure segment,” said Sabyasachi Majumdar, senior vice-president & group head, ICRA Ratings.

Further, the increased budgetary allocation for the infrastructure sector, which includes roads, railways, metro, irrigation and housing, during FY18 will directly and indirectly support cement demand.

Also, higher rural credit and increased allocation for rural, agricultural and allied sectors, including the demand for rural housing, are significant contributors to the overall cement demand mix, he added.

Drop in production

All-India cement production dwindled by 1.2% YoY to 279.8 million MT in FY17 for the first-time over the last decade. Cement volumes declined between November 2016 and March 2017 by 9% when compared to the corresponding previous, following demonetisation.

However, cement volume growth has witnessed recovery since March 2017 and reported a growth of 17.5% on MoM basis to 25.2 million MT. Prices too have seen improvement across markets, especially since April 2017.

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