Cement demand in India to improve in medium term, says ICRA

Cement demand in the country will improve gradually in the medium term in line with recovery in infrastructure, the investment cycle and the overall economy, rating agency ICRA said today.
"The presence of a stable pro-growth government at the Centre has improved sentiment, but the results of policy initiatives taken by the new government will take time to materialise," it said in a statement.
While ICRA expects demand to grow 6.8-7 per cent in 2015-16, the pace of recovery in cement industry is likely to mirror the trend in economic recovery, it added.
Given the capacity overhang, the utilisation is likely to remain moderate at 72 per cent this fiscal, but it's expected to improve to 77 per cent in 2016-17 on both pick-up in demand and slowdown in new capacity addition.

Cement demand has remained sluggish post-monsoon, with all-India cement production increasing a mere 1.8 per cent in October 2014-March 2015 as against 9.7 per cent in April-September 2014, ICRA said.
While pre-election spending and a delayed monsoon had supported growth in cement demand in the first half of 2014-15, the growth slowed in the second half once the election cycle was over. The demand has continued to remain subdued in April-June of 2015-16.

Cement demand was also impacted by a reduction in government spending in January-March of 2014-15, muted demand from real estate and construction projects and slow recovery in infrastructure spending, it added.

Furthermore, a decline in kharif crop production owing to poor monsoons affected agricultural income and post-monsoon rural demand for cement for housing and other purposes.
Regional factors such as extension of monsoon in South, extremely cold weather in North India and unseasonal rains in North in Q4 of 2014-15 also affected construction activities and consequently cement demand in some areas, ICRA said.
The situation persists in Q1 of 2015-16, it added.