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Cement industry to witness improved demand from July 2021

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CARE Rating states that a double-digit cement volume growth seems unlikely at present for FY22, considering the uncertainty for the constantly evolving Covid situation in the country. However, it also states that the profitability for cement players expects to remain healthy during FY22, considering the factors such as expected higher volumes and continuing pricing power enjoyed by cement companies which are likely to balance the cost pressures considerably. In terms of debt, most of the cement companies will be seen to continue their focus on strengthening their balance sheet during FY22. Moreover, report says that profits for FY22 will remain moderate due to increasing input costs for pet coke, diesel, coal, and packing materials, etc.

Today, the economic conditions of our country remain volatile. Considering this into account, the unlocking process that was earlier predicted for May 2021, has now been pushed to July 2021. This has affected the overall demand for cement for Q1FY22. The second wave came with a lot of uncertainties and shattered the overall demand during the last quarter of FY21. On the one hand, we see that the supply constraints are low because of the reopening of operations for the cement manufacturing companies; however, with a higher rate of infection in the rural areas, the demand for cement from rural got weaker.

CARE Ratings expects that for FY22, the domestic cement production may grow by around 4 to 7 per cent y-o-y after two consecutive years of de-growth against the initial estimate of 11-14 per cent. Demand for cement will directly depend on factors like the government?? push and spending towards infrastructure creation and development, pent-up urban demand, and continuing rural demand. However, the severity of ongoing pandemic will have direct impact on the timelines for demand revival for the cement industry.

Looking at Q1FY21, which was severely hit by the pandemic, the industry witnessed a swift recovery wherein domestic cement production reached 88 per cent of pre-Covid levels (i.e., 88 per cent of Q2FY20, states CARE Rating report. It further reports that during Q2FY21 and for Q3FY21, production was 96 per cent of the corresponding period the previous year. Monthly domestic cement reached pre-Covid levels during March 2021 and was approximating to March 2019 levels. Overall, the domestic cement production has fallen by 12 per cent during FY21 vis-?-vis FY20 as against the initial estimate of de-growth of 25-30 per cent made in April 2020.

For FY22, CARE Ratings estimates its entire portfolio of investment-grade cement companies will report stable performance with the aggregate rated debt of around Rs 23,964 crore. Most cement companies will be focusing on strengthening their balance sheets. However, it also states that the profitability for cement players is expected to remain moderate during FY22, due to increasing input costs especially for pet coke, diesel, coal, and packing materials, etc. Furthermore, CARE Rating also states that the liquidity for a majority of the CARE-rated investment grade portfolio is likely to remain strong or adequate in FY 2022.

Some of the key drivers identified by CARE Rating are:

Positives:

  • Increased capital outlay towards infrastructure creation by 26 per cent to Rs 5.54 lakh crore

  • Enhanced outlay of Rs 1,18,101 crore for MoRTH of which Rs 1,08,230 crore is for capital.

  • Central counterpart funding to various metros aggregating to Rs 88,059 crore

  • Proposals to further incentivise and boost affordable housing.

  • Pent up urban demand and continuing rural demand.

Negatives:

  • Slow pick up of demand with ongoing Covid II

  • Increase in input costs

  • Excess capacities

Way ahead

For FY22, CARE Ratings estimates its entire portfolio of investment grade cement companies with aggregate rated debt of around Rs 23,964 crore to report stable performance. Although the profitability for cement players is expected to moderate during FY22 owing to increasing input costs especially for pet coke, diesel, coal and packing materials, etc, the impact of the same on cash accruals is envisaged to be less, backed by higher volumes and stable prices. In terms of debt, most of the cement companies are envisaged to continue their focus on strengthening their balance sheet during FY22. Furthermore, liquidity for majority of the CARE-rated investment grade portfolio is likely to remain strong or adequate for FY22 supported by high cash balances, un-utilised or minimally utilised working capital funding lines and healthy cash flows.

Courtesy: CARE Ratings

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Concrete

Indian Railways Plans Green Fly Ash Transport Network

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Specialised rail logistics will move fly ash from power plants to infrastructure industries.

New Delhi

Indian Railways is planning a large-scale green logistics initiative to transport fly ash from thermal power plants to industries where it can be reused in infrastructure and construction activities.

The initiative was discussed during a review meeting chaired by Union Minister for Railways Ashwini Vaishnaw. Union Ministers of State for Railways V Somanna and Ravneet Singh Bittu were also present.

India generates nearly 340 million tonnes of fly ash every year from thermal power plants. The proposed initiative aims to create an efficient rail-based transport system using specialised containers and dedicated logistics arrangements to move fly ash safely from power plants to end-use industries.

Fly ash is widely used in road construction, cement manufacturing, brick production, concrete, blocks and boards. By improving its movement through the railway network, the initiative is expected to support better utilisation of this industrial by-product while reducing environmental concerns linked to storage and disposal.

The move also aligns with India’s circular economy goals by converting waste from thermal power generation into a useful raw material for the construction and infrastructure sectors. Wider availability of fly ash can help reduce material costs in areas such as bricks and cement, supporting more affordable infrastructure and housing development.

Through this initiative, Indian Railways aims to provide a cleaner, safer and more organised transport solution for fly ash, turning an environmental challenge into an infrastructure resource.

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ACC To Expand Cement Capacity Amid Strong Infrastructure Demand

Chairman signals calibrated growth and sustainability focus

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ACC will continue to expand its cement capacity in a calibrated manner, deepen its ready-mix concrete (RMC) footprint and accelerate the adoption of low-carbon technologies, the company chairman conveyed in the latest annual report. The note emphasised a balanced and disciplined approach as the business pursues growth while maintaining environmental safeguards.

He argued that the long-term growth outlook for the Indian economy remains strong but that demand conditions in the near term were likely to stay moderate, necessitating cautious expansion. He pointed to India’s relatively low per capita cement consumption compared with global averages as an indicator of significant long-term potential and highlighted the rise in public capital expenditure to Rs 12 trillion (Rs 12 tn), which he said accounted for about four point four per cent of the GDP.

Against this backdrop, ACC and the wider Adani Cement business are positioning themselves as integrated building materials solution providers rather than traditional commodity suppliers, prioritising capability creation over consolidation. The chairman framed cement as the ingredient and concrete as the performance and said that infrastructure and real estate development increasingly demand engineered solutions delivered at site.

He described how deeper integration across energy, logistics and digital systems is intended to improve responsiveness and efficiency across manufacturing, transport and market operations. The company intends to strengthen technical engagement, mix optimisation and application support to improve project timelines, reduce wastage and enhance structural durability while embedding data analytics and predictive systems.

On sustainability, ACC affirmed its commitment to reducing its environmental footprint through greater use of blended cement, renewable energy, alternative fuels and improved thermal efficiency, presenting industrial growth and environmental responsibility as parallel objectives. The message positioned the group to supply engineered concrete solutions at the point of application as it scales capacity and service offerings.

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Ambuja Sees Cement Demand Easing To Around Five Per Cent In FY27

Company Cites Housing, Infrastructure And Government Capex

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Ambuja Cements has said in its latest annual report that cement demand in India is likely to moderate to around five per cent in fiscal year twenty seven, marking a slowdown from the estimated six point five to seven point five per cent growth anticipated for fiscal year twenty six. The company described this as a transition to a more measured pace of expansion after several years of strong momentum in the sector.

It said that underlying demand drivers such as housing, infrastructure development, urbanisation and government capital expenditure remain intact and are expected to sustain cement consumption across regions. The report noted that global geopolitical uncertainties and weather risks, including forecasts of a below normal monsoon, could influence near term demand, while emphasising that the longer term infrastructure story for India continues to provide a solid foundation for the sector.

Industry observers have said that the sector may move towards mid single digit growth rates in fiscal year twenty seven after stronger performances in recent years. The company outlined a calibrated expansion strategy with capacity additions phased to match project pipelines, regional demand patterns and market absorption, seeking to avoid oversupply and pressure on pricing.

Ambuja has crossed the 100 million tonnes per annum capacity milestone (100 mn t per annum) following acquisitions and organic expansion, strengthening its position in the competitive market. The outlook in the report broadly aligns with other market assessments that placed demand at around five per cent in fiscal year twenty five, a recovery to six point five to seven point five per cent in fiscal year twenty six and an easing in fiscal year twenty seven as capacity increases. Executives remain focused on long term demand fundamentals driven by infrastructure and housing.

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