Cement demand seen up 10-12% in FY24 aided by infra spending – ET Infra

MUMBAI: India’s cement demand will grow 10-12% on-year to 440 million tonnes in fiscal 2024, driven by strong offtake from the infrastructure segment, as per report by ratings and research agency CRISIL.

The demand for cement will be driven by government infrastructure spending, which comprises around 30% of annual cement sales. This fiscal year, the Union Budget‘s allocation for core infrastructure sectors increased 38% year-on-year, with real spending being significantly front-loaded. Up until July 2023, spending for this fiscal was a sizable 40% of the budget, the report further read.

Combined with stable cement prices and softening power and fuel costs, operating profit of manufacturers is expected to recover Rs 200 per tonne from a multi-year low of Rs 770 per tonne last fiscal.

“Power and fuel costs, which constitute 30-35% of the total production cost, will follow the trend of falling petcoke and coal prices with a lag effect. For this fiscal, power and fuel costs are likely to be lower by Rs 200-250 per tonne on-year. This will improve per-tonne profitability4 to Rs 950-975 this fiscal, after the eight-year low of Rs 770 seen last fiscal.” said Naveen Vaidyanathan, Director of CRISIL Ratings Limited.

Due to significant growth in rural housing and urban real estate operation, the housing segment, which makes up around 55% of cement demand, will likely see consistent expansion. Demand will also be supported by the government’s continued emphasis on affordable housing through the Pradhan Mantri Awas Yojana.

“Demand growth may moderate to 7-9 per cent in the second half of this fiscal given the high base and as the central government capital expenditure could witness some slowdown with the general elections approaching,” said Koustav Mazumdar, Associate Director, Research, CRISIL Market Intelligence and Analytics.

  • Published On Sep 22, 2023 at 03:16 PM IST

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