The maxim ‘after rain, comes shine’ holds true of the Indian cement industry as it witnesses speedy corrections in demand. The fall in demand, lower realisations and considerable increase in operating costs led to a rather dismal year ending. The third quarter of 2022 had to bear the brunt of a sharp decline in demand, pushing the fourth quarter into the aftermath. The New Year brings with it renewed optimism as we see recovery in prices and drop in fuel costs. The price hike has neither been uniform nor steady as demand kept fluctuating. But thanks to the Government of India’s endeavours in infrastructure, there has been a spurt in prices as well as margin improvement, towards the end of the fourth quarter, making January 2023 a month of recovery for the industry. This revival is reverberated in the stock market, too, as shares of UltraTech, Dalmia Bharat and JK Cement climb steadily upwards. As we progress further into the new year, demand from the infrastructure sector is likely to be supported by real estate developers, too.
With the Union Budget 2023-24 round the corner, trade pundits are banking on infrastructure to boost cement demand. Analysts foresee 30 per cent more fund allocation towards infrastructure growth in the Union Budget, with a majority of these funds finding their way towards the building of highways.
This development will translate into sustainable growth for the cement players, both big and small, and offer them an opportunity to consolidate their expansion plans. Capacity expansion is high on the cards for cement companies with 33 MT likely to be added in FY23. Given the history of political impact, construction speeds up in a pre-election year as the government increases its spendings. This will definitely make 2023 a profitable year for the cement industry. This opportunity has to be supported with strategic expansion, stable cash flow, alternative fuels and a strong performance in the stock market.
We wish all stakeholders of the Indian cement industry a New Year of sustainable growth and improved margins.