Connect with us

Economy & Market

Cement: Weakened Demand to Impact Capacity Expansion, Profitability

Published

on

The sharp decline in demand in FY2021 will delay capacity addition and impact profitability in the cement sector in the medium-term, warns a CRISIL report.

The economic woes caused by the ongoing COVID-19 pandemic are likely to result in a marked decline in demand for cement in the current financial year, a report has warned.

The report, Cement Cracks, by CRISIL has warned of a 10-15 decline in the demand for cement in 2020-21 fiscal owing to the rollout of the nationwide lockdown and other social distancing measures. Demand is likely to slowly start picking up traction from 2H2021.

"On a quarterly basis, cement demand would be a washout in the first quarter of this fiscal, given lockdown measures across India that would hurt construction. Demand will pick up only from the second half of this fiscal," Isha Chaudhary and Koustav Mazumdar said in their April 8 report.

The analysts further added that complete recovery would take longer due to lower Capex by government, given diversion of funds towards health and public welfare, weakened demand for real estate and private individual houses and buildings (IHB) and a lower spend under Pradhan Mantri Awas Yojana (PMAY-Urban) given the impact on incomes. Presently, government-backed projects account for 35-40 per cent of the demand for the commodity.

However, projects in rural housing, PMAY (Rural), Pradhan Mantri Gram Sadak Yojana (PMGSY), and spend on key infrastructure projects will start to provide some relief to the sector from the second half of the year.

"Washout in the first quarter, followed by continued mildness through the seasonally weak second quarter, will weigh on the sector’s growth, leading to a first-ever demand contraction of this proportion for it this fiscal," the report stated.

"Contracting demand growth will push the sector’s utilisation level down further to 56-58 per cent, adding to the pain from the weakening seen in fiscal 2020, when incremental supply exceeded demand by 27 million tonnes (MT)," it added.

CAPACITY EXPANSION, PROFITABILITY TO BE IMPACTED
The demand shock owing to the disruption caused by COVID-19 pandemic and the ongoing nationwide efforts towards its containment is expected to affect the capacity addition plans of the industry, and stall or delay projects in the medium-term.

Despite weak demand, the cement industry had registered a decent price increase of Rs 25 per bag in FY2020 owing largely to consolidation in the regional markets by bigger players. This and lower commodity prices are likely to drive margins at cement companies to a seven-year high during the fiscal.

However, the study anticipates the price increase to reverse as players struggle on the demand front. The decline would be limited to 1-2 per cent (or Rs 5-10 per bag) as players exhibit pricing discipline, with realisations declining 2-3 per cent as the share of non-trade is likely to increase.

"Profitability, on its part, is expected to be under pressure after some expansion last fiscal. The impact of demand freefall, though, will be limited by lower input prices, the report said.

Because of directions on social distancing issued by the centre and state governments to prevent infections, leading cement manufacturers like ACC, India Cements, Ramco Cement, Ultra Tech Cement and Dalmia Cement (Bharat) temporarily suspended cement production across their plants in late March.

Manish Pant

Continue Reading
Click to comment

Leave a Reply

Your email address will not be published.

Concrete

KEC International bags orders worth Rs. 12.33 billion

Published

on

By

Secures an order to build India’s first 765 kV Digital Substation

KEC International, an RPG Group Company, has secured new orders of Rs. 12.33 billion across its various businesses:

The business has secured orders for T&D projects in India, Middle East and Americas: 765 kV Digital GIS Substation order in India, from Power Grid Corporation of India (PGCIL), supply of towers in Middle East, secured by subsidiary in UAE, supply of towers, hardware and poles in Americas, secured by the company’s subsidiary, SAE Towers.

The business has secured orders for infra works in the paints and metals & mining segments; laying of cross-country pipeline and associated works and various types of cables in India and overseas.

Mr. Vimal Kejriwal, MD & CEO, KEC International commented, “We are pleased with the new order wins, especially the prestigious order from PGCIL, to build India’s first 765 kV Digital substation. Our Civil business continues to strengthen and diversify its presence in the industrial segment with the addition of a very reputed client. We are also encouraged by the order in the Oil and Gas Pipelines, which further enhances the business’ order book.”

Continue Reading

Economy & Market

KEC International wins New Orders of Rs. 1,233 crores

Published

on

By

Secures an order to build India’s first 765 kV Digital Substation.

KEC International, an RPG Group Company, has secured new orders of Rs. 12.33 billionacross its various businesses:

The business has secured orders for T&D projects in India, Middle East and Americas: 765 kV Digital GIS Substation order in India, from Power Grid Corporation of India (PGCIL), supply of towers in Middle East, secured by subsidiary in UAE, supply of towers, hardware and poles in Americas, secured by the company’s subsidiary, SAE Towers.

The business has secured orders for infra works in the paints and metals & mining segments; laying of cross-country pipeline and associated works and various types of cables in India and overseas.

Mr. Vimal Kejriwal, MD & CEO, KEC International commented, “We are pleased with the new order wins, especially the prestigious order from PGCIL, to build India’s first 765 kV Digital substation. Our Civil business continues to strengthen and diversify its presence in the industrial segment with the addition of a very reputed client. We are also encouraged by the order in the Oil and Gas Pipelines, which further enhances the business’ order book.”

Continue Reading

Concrete

Carbon8 bags £5m funding

Published

on

By

Carbon8 has secured a £5 million investment, led by EDF and Vicat, to accelerate the deployment of its carbon capture, utilisation and storage (CCUS) technology applied to industrial residues in heavy industry. At Vivatech (Paris), Carbon8 announced the closure of the funding round.

Vicat, the international cement group, EDF Group and its corporate venture capital arm, EDF Pulse Ventures, have co-invested £4 million in the company.
Carbon8 has developed and commercialised a technology to help hard-to-abate industrial sectors decarbonise, and shift these industries to a more circular operation by converting their residues into assets for commercial use. Carbon8’s CCUS solution can help industries like cement, energy from waste, steel and paper, achieve their net zero targets; these industries are currently responsible for over 20 per cent of global greenhouse gas emissions.

Continue Reading

Trending News

© COPYRIGHT 2021 ASAPP Info Global Services Pvt. Ltd. All Right Reserved.