Concrete

Cement demand bounces back

Published

4 years ago

February 1, 2022

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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.

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Lokesh Lays Stone For Rs 31 Billion Cement Unit In Kadapa

Line-2 expansion to make Kadapa a major cement hub

Published

5 days ago

July 20, 2026

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Andhra Pradesh Education and IT Minister Nara Lokesh on Wednesday laid the foundation stone for the Line-2 expansion of Dalmia Bharat Cement at Chinnakomerla village in Mylavaram Mandal in Kadapa district. The project carries an investment of Rs 31 billion (bn) and is slated for completion by the third quarter of the financial year 2028. The expansion is intended to boost industrial growth and employment generation across the Rayalaseema region.

Once commissioned, the Kadapa facility will become Dalmia Bharat’s largest integrated cement manufacturing ecosystem in southern India, creating over 1,000 direct and indirect jobs and opening new business avenues for regional micro, small and medium enterprises and transport operators. Lokesh said the expansion signalled growing corporate confidence in the state and reflected the practical ease of doing business that secured repeat investment.

He placed the project within the government’s wider economic targets and recalled the Yuvagalam padayatra commitment to generate two million (mn) jobs within five years, noting that the state would cultivate talent while industry created opportunities. Lokesh highlighted Andhra Pradesh’s competitive pursuit of major manufacturing accounts, mentioning past successes and a personal initiative to engage global investors when persuading them to anchor expansion in the state.

The plant will leverage Kadapa’s abundant limestone reserves to scale production and sustainability. Clinker capacity is planned to rise from two point five million tonnes per annum (mn tpa) to six point one mn tpa, while overall cement output will increase from three point six mn tpa to nine point six mn tpa. The unit is designed to operate on over eighty per cent renewable energy and deploy waste heat recovery, zero liquid discharge, water recycling and advanced AI systems to optimise efficiency. Industries Minister TG Bharat, BC Welfare Minister S. Savitha and Jammalamadugu MLA C. Adinarayana Reddy attended the ceremony.

Concrete

Cement Prices to Stay Flat in Q2 FY27 as Costs Squeeze Margins

HDFC Securities warns monsoon slowdown and higher fuel costs

Published

1 week ago

July 17, 2026

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HDFC Securities has said the cement industry is unlikely to register a sequential increase in prices in Q2 FY27 as monsoon-related demand moderation coincides with rising fuel and packaging costs that will squeeze margins. The brokerage observed that price gains remained modest, with increases of two to three per cent quarter-on-quarter across regions, and noted subdued offtake in May with improvement in June as a delayed monsoon supported construction activity. The brokerage added that modest pricing gains so far have been insufficient to offset the input cost escalation.

The report stated that input cost pressures intensified in Q1 FY27 owing to the West Asia conflict, which pushed up coal and pet coke prices and is expected to keep fuel costs elevated, with a likely peak in Q2 FY27. It assessed that total variable costs, including packing, could rise by around Rs 150 per t quarter-on-quarter and that lower offtake and seasonal operating deleverage could further raise operating expenditure by about Rs 50 per t quarter-on-quarter.

Overall, cement prices were estimated to remain flat in Q2 FY27 as monsoon-led demand weakness offsets limited upside in realisation, and rising fuel costs alongside seasonal deleverage were expected to compress industry margins by over Rs 100 per t quarter-on-quarter to below Rs 880 per t. The brokerage indicated that the combined impact of energy inflation and higher packing expenditure would be the principal drivers of margin contraction in the near term. HDFC Securities projected a recovery in margins in H2 FY27 should the West Asia turmoil subside and energy and packing costs cool off.

The brokerage expressed optimism on long-term demand fundamentals and said improving realisation together with an anticipated cost cool-off should support a margin rebound from H2 FY27 onward, underpinning favourable industry prospects over the medium term. Its outlook rests on monsoon normalisation and a decline in imported fuel prices in the second half of the fiscal year.

Concrete

Dalmia Bharat Begins Rs 31 Bn Green Cement Unit in Kadapa

New Andhra Pradesh plant to add 9.6 MTPA cement capacity by FY28

Published

1 week ago

July 16, 2026

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Dalmia Bharat Limited recently laid the foundation stone for its second manufacturing unit at Kadapa in Andhra Pradesh. The company will invest Rs 31 billion in developing the next-generation integrated cement manufacturing facility.

The foundation-laying ceremony was attended by Nara Lokesh, Andhra Pradesh Minister for Information Technology, Electronics and Communications, Real-Time Governance and Human Resources Development, along with Puneet Dalmia, Managing Director and Chief Executive Officer, Dalmia Bharat, senior government officials and company representatives.

Scheduled to be commissioned by the third quarter of FY28, the Kadapa unit will become Dalmia Bharat’s largest integrated manufacturing facility in southern India. It will have a clinker production capacity of 6.1 million tonnes per annum and a cement manufacturing capacity of 9.6 million tonnes per annum.

The facility is designed to produce what the company describes as one of the world’s greenest cements. It is also expected to generate approximately 1,000 direct and indirect employment opportunities while supporting local MSMEs, transporters, contractors and service providers.

Lokesh said the investment reflected Dalmia Bharat’s confidence in Andhra Pradesh and aligned with the state’s objective of promoting sustainable industrialisation, job creation and technology-led economic growth.

Puneet Dalmia said the project represented the company’s long-term vision of developing low-carbon cement manufacturing assets. He added that the facility would establish new benchmarks in operational efficiency and sustainability while supporting India’s infrastructure and environmental goals.

Dalmia Bharat will also expand its regional community development programmes in education, healthcare, skill development and welfare through its DIKSHa and Gram Parivartan initiatives.

The company currently has an installed cement manufacturing capacity of 54.7 million tonnes across 19 manufacturing units in 12 states. It is also the first cement company globally to commit to the RE100, EP100 and EV100 initiatives.