Cement industry to add 70-75 million MT capacity in two years amid slowdown in construction

India's cement industry is set to undergo a significant capacity expansion, with an expected increase of 70-75 million metric tonnes (MT) over the next two years, according to ICRA. Approximately 33-37 million MT will be derived from clinker capacity, while the remaining expansion will come from grinding capacity. The industry is projected to add 33-35 million MT in FY25 (FY24: 32 million MT) and 37-39 million MT in FY26. Most of this growth will occur in the eastern and southern regions, which are expected to contribute 38-40 million MT combined in FY25 and FY26. Despite this capacity increase, ICRA forecasts moderate utilisation rates, with the cement sector's capacity utilisation improving slightly to 71% in FY25, compared to 70% in FY24, due to higher production volumes.

However, ICRA has revised its growth forecast for cement volumes in FY25, reducing the expected YoY growth to 4-5%, equating to 445-450 million MT, down from the previous estimate of 7-8%. This adjustment comes as construction activity, particularly housing and infrastructure, slowed post-general Elections. In the second half of FY25, ICRA expects rural demand for cement to rise due to improved farm incomes from a strong monsoon, good kharif crop output, and steady urban housing demand. Despite these factors, cement companies' operating profit per tonne (OPBITDA/MT) is projected to decline by 12-15% YoY to US$ 9.71–10.07 (Rs. 820-850) per MT in FY25. Although government infrastructure spending is likely to drive growth in H2 FY25, overall profitability in the cement industry is expected to remain under pressure.

Disclaimer: This information has been collected through secondary research and IBEF is not responsible for any errors in the same.