Concrete

Cement demand bounces back

Published

4 years ago

February 1, 2022

admin

With the onset of the final quarter of FY22, CareEdge expects cement prices to trend higher due to pick up in the overall construction activities giving a boost to cement demand. CareEdge (CARE Group) is a knowledge-based analytical group and is one of the leading credit rating agencies in India.

After gaining pace in October 2021, the demand offtake fell unexpectedly in November 2021 owing to construction bans in the Delhi NCR region, late and unseasonal rains in the South, availability issues of sand mining in the East and Uttar Pradesh and labour unavailability. Major slump was witnessed in the Eastern and Southern regions. Later, the demand picked up during December 2021 and has been firming up further during January 2022. Demand rebound in Q4 should bolster cost pass-through for the industry. This, coupled with the fact that the key cost-side elements (coal/pet coke/diesel) have softened from the higher levels have alleviated concerns of a further increase in the operating costs for the industry.

Though higher input costs will continue to impact the players in Q4FY22 due to the build-up of high-cost inventories, this should, thereafter, subside more in Q1FY23 assuming current trends in input costs. Therefore, margins of cement players are expected to bottom out in Q3FY22 and improve thereafter at the back of potential price hikes and waning cost pressures. Further to the earlier report dated October 28, 2021 (Cement Sector: Battling the cost wave), CareEdge reiterates that the macros of the cement industry continue to remain positive and the industry is expected to witness a robust mid-teen growth in overall cement demand in FY22 and thereafter 6%-7% Yo-Y in FY23. The demand is mainly driven by recovery of activity in the urban housing sectors, upcoming general elections in 2024, infrastructure projects as well as rural demand and renewed real estate demand. However, any potential halt on the construction activities amidst upsurge of infections pertaining to the third wave of Covid-19 shall remain a key monitorable for the growth in the coming months.

Demand momentum continues

The cement industry is expected to be benefitted by high volume growth, majorly driven by revival in demand from the urban housing sectors, upcoming infrastructure projects such as construction of roads, railways, highways as well as generous rural demand. The long-term drivers of demand such as National Infrastructure Protection Plan, Bharatmala projects, mission ‘Housing for All’, rapid urbanisation, rising rural incomes remain strong with increased government impetus on infrastructure projects amid the upcoming elections in 2024. While a decent demand and volume expansion was witnessed in the first seven months of FY22, the months of November and December saw muted growth mainly due to factors, including construction ban in the NCR, heavy rainfall in the South and few Northern states and issues related to availability of sand in the Eastern region and UP.

Production of cement fell by 3.3% in November 2021 year-on-year; however, the cumulative cement production index increased by around 29% during April to November 2021 over the corresponding period of the previous year. Nevertheless, some recovery has thereafter taken place in the second half of December month,which is a significant month for the sector, as it marks the onset of peak construction period. Furthermore, historically, cement demand in January has been 4% higher than December.

With the strong demand momentum to sustain, the credit outlook for the cement sector is expected to remain positive. However, any potential halt on the construction activities amidst upsurge of infections pertaining to the third wave of Covid-19 shall remain a key monitorable for the growth in the coming months. With healthy growth in volumes coupled with stronger balance sheets, many cement players have planned capacity additions to maintain their market shares. CareEdge expects capacity additions of about 100-110 MT between FY22 and FY25. The third wave of Covid-19 may put some temporary breaks on the expansion plans of players. Nevertheless, the pace of expansion and demand matching up with the same shall be a key monitorable for the sector.

Input Costs

The average fuel cost for the industry has increased by Rs 250-300 per tonne in H2FY22. There has been a decline in imported coal, pet coke and diesel prices in the last two months from their earlier peak levels, alleviating concerns of any further steep increase in the operating costs for the players. Although the fuel cost for the industry is believed to have peaked in Q3FY22, it would remain at slightly elevated levels for the players due to high-cost inventories in Q4FY22. Full benefits of fall in fuel prices are expected to start accruing from Q1FY23.

• Australian coal prices have fallen to USD 162-169 per tonne as in January 2022 from its peak of USD 224 per tonne in October 2021.

• Pet coke prices which move in tandem with crude oil prices fell to USD 150 per tonne in January 2022 from its peak of USD 200-220 per tonne in November 2021. The prices of domestic pet coke have increased from Rs 9,135/MT in December 2020 to Rs 20,781/MT in November 2021, and they declined in December 2021 with average price of Rs15,680/MT which is still 72% higher Y-o-Y.

Realisations: Expected to stay strong

The previous attempt by the cement players to hike the prices in October 2021 could not last long and these hikes were rolled back due to lack of demand in November 2021. With expected volume growth going forward, the industry is again poised to take price hikes. The price hikes are required to pass on the increased cost pressures as imported coal/pet coke and diesel prices, though lowered from previous high, remain elevated.

The month of October 2021 saw Rs 20-30/bag price hikes across regions, but these were partially rolled back in November-December 2021. Pan India prices seem up around 1% in Q3FY22 Q-o-Q led primarily by price rise in Northern, Central and Western regions but partially offset by Q-o-Q fall in prices in the Eastern and Southern regions. In FY22 on a Y-o-Y basis, pan India prices are likely to remain up around 4%-5%. With pickup in demand, companies are expected to announce price hikes in the range of Rs.10-25 per bag across regions for the month of January 2022.

Demand momentum should keep pace for the price hikes to sustain, and any potential halt on the construction activities amidst upsurge of infections pertaining to a possible third wave of Covid-19 affecting cement demand shall be key.

Due to the cost upsurge until November 2021 coupled with the roll back of the price hikes (earlier announced in October 2021) in the cement prices in Q3FY22, the EBITDA margins for the quarter ending December 2021 is likely to bottom out, though margins are expected to recover partially in Q4FY22 with the likely price hikes to be taken by players.

In the present circumstances where the sector is grappling with the higher input cost, a sustained increase of prices along with demand stand critical for the operational performance of the players in the near term. Going forward, CareEdge expects cement prices to trend higher in Q4FY22 due to a pickup in the overall construction activities, leading to a higher cement demand.

Up Next

Technology can definitely make cement plants safer

Don't Miss

Mining in India: Moving Towards a Sustainable Future

Concrete

Dalmia Acquires Five Point Two MnTPA Cement Assets in Central Region

Acquisition adds capacity, power and rail access

Published

19 hours ago

May 26, 2026

admin

Dalmia Cement (Bharat) Limited (DCBL) executed a business transfer agreement on 21 May 2026 to acquire a cement undertaking from Jaiprakash Associates Limited (JAL) and Adani Infra (India) Limited. The assets include plants at Rewa in Madhya Pradesh and Churk, Chunar and Sadwa in Uttar Pradesh with five point two million tonnes per annum (mn tpa) cement capacity and three point three mn tpa clinker capacity, plus 99 megawatt (MW) thermal power and railway sidings. The transaction carries an enterprise value of Rs 28.5 billion (bn).

DCBL, a wholly owned subsidiary of Dalmia Bharat Limited (DBL), will see cement capacity rise to 54.7 mn tpa on completion. Ongoing expansions at Belgaum, Pune and Kadapa are expected to raise capacity to 66.7 mn tpa by the second to third quarter of fiscal 2028. The company said the transaction would be consummated within two weeks.

The deal follows a framework signed in December 2022 to settle long running disputes with JAL, including a long term clinker supply arrangement. Completion was delayed when JAL entered insolvency and the earlier sale did not finalise. Following approval of a resolution plan under the Insolvency and Bankruptcy Code, DCBL executed a fresh business transfer agreement to resolve pending legal and arbitral matters.

Company statements described the acquisition as strategic, accelerating access to central markets compared with a greenfield route and offering scope for expansion through debottlenecking and brownfield investment. Proximity to the company’s captive mines and established vendor relationships should support faster ramp up. The assets should augment EBITDA delivery and enhance returns by enabling entry into newer markets with relatively better prices.

Senior executives said the addition aligned with a long term plan to build a pan India presence and would provide a head start in central markets. They noted that familiarity with the plants under earlier tolling arrangements offers operational insight and strengthens channel relationships, supporting quicker market entry. Management expressed confidence that the assets’ expansion potential would generate value for stakeholders.

Concrete

Ramco Cements Reports FY26 Revenue Growth And Higher Profit

Net debt reduced as exceptional items boost FY26 earnings

Published

19 hours ago

May 26, 2026

admin

Ramco Cements reported standalone audited results for FY26 with net revenue of Rs 90,560 million (mn) and profit after tax of Rs 6,940 mn. EBIDTA rose to Rs 14,820 mn and blended EBIDTA per tonne was Rs 788 on a two per cent volume rise to 18.81 million (mn) tonne (t). Cement revenue increased by five per cent and construction chemicals revenue rose by 66 per cent.

Raw material cost per tonne rose to Rs 1,023 from Rs 956 mainly due to a mineral bearing land tax of Rs 160 per t in Tamil Nadu, adding about Rs 86 per t. Power and fuel cost per tonne fell to Rs 1,098 from Rs 1,123 with petcoke mix down to 47 per cent and green power up to 40 per cent.

Profit before tax after exceptional items was Rs 8,790 mn. Net exceptional items were Rs 5,530 mn, including Rs 5,740 mn from sale of surplus land and Rs 200 mn of past service cost. The company monetised Rs 10,980 mn from non core asset sales over the past two years and recorded capex of Rs 9,970 mn, with guidance of Rs 8,000 mn for FY27.

Net debt fell by Rs 8,170 mn to Rs 36,640 mn at 31 March 2026 and cost of debt eased to 7.29 per cent, reducing net debt to EBIDTA to 2.47 times. Management indicated the full impact of higher fuel costs is expected from Q2 FY27, while packing and diesel cost increases will be visible in Q1 FY27. The board has proposed a dividend of Rs two point five zero per equity share and the company flagged risks from elevated fuel and logistics costs, commodity volatility and competitive pricing.

Concrete

Dalmia Cement to Acquire 5.2 MnTPA Capacity

Deal covers cement assets in Madhya Pradesh and Uttar Pradesh

Published

19 hours ago

May 26, 2026

admin

Dalmia Cement (Bharat), a wholly owned subsidiary of Dalmia Bharat, has executed a Business Transfer Agreement with Jaiprakash Associates and Adani Infra (India) to acquire cement assets with 5.2 MnTPA capacity in the Central region.

The acquisition covers cement plants located at Rewa in Madhya Pradesh, and Churk, Chunar and Sadwa in Uttar Pradesh. The assets include 5.2 MnTPA cement capacity, 3.3 MnTPA clinker capacity, 99 MW thermal power capacity, railway sidings at Rewa and Chunar, and a common railway siding at Churk. The enterprise value of the transaction is Rs 28.5 billion.

Following completion of the transaction, Dalmia Bharat’s cement capacity will increase to 54.7 MnTPA. Its ongoing expansion projects at Belgaum, Pune and Kadapa are expected to further raise capacity to 66.7 MnTPA by the second or third quarter of FY28. The transaction is expected to be completed within two weeks.

Dalmia Cement had entered into a framework agreement with Jaiprakash Associates in December 2022 for the sale of business assets and related agreements, including a business transfer agreement and cement sale purchase agreement. The agreements were intended to settle disputes between the parties, including those under the long-term clinker supply agreement. However, the transaction could not be completed after Jaiprakash Associates was admitted to insolvency.

Following approval of the Adani Group’s resolution plan for Jaiprakash Associates under the Insolvency and Bankruptcy Code, Dalmia Cement requested that the earlier agreement be considered to settle pending disputes. The company has now executed a fresh Business Transfer Agreement with Jaiprakash Associates and Adani Infra (India) for the cement undertaking.

The acquisition supports Dalmia Bharat’s strategy to become a pan-India cement player and provides faster access to Central markets compared to a greenfield project. The assets also offer expansion potential through debottlenecking and brownfield development.

Puneet Dalmia, Managing Director and CEO, Dalmia Bharat, said the assets are a strong strategic fit and will help the company serve high-potential markets in the Central region. He added that the expansion potential of the assets and their proximity to Dalmia’s captive mines could help create a future capacity hub.