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Rural housing, infra to boost cement demand by 6% in FY19

PTI:  July 25, 2018

Mumbai: Cement demand is likely to grow by around six per cent in 2018-19, on the back of a pick-up in the affordable and rural housing segments and infrastructure, primarily in road and irrigation projects, according to a report.

Production remained in the range of 2628.5 million tonne during the December 2017May 2018 period, clocking the highest at 28.5 million tonne in March 2018, Icra said in a report.

The production was supported by the demand in Andhra Pradesh and Telangana (driven by irrigation, low cost housing and infrastructure projects), the eastern region (by low cost housing and infrastructure demand) and the western markets (by execution of infrastructure projects), it said.

Sand unavailability continued to impact demand in Rajasthan, it added.

"While the demand momentum is healthy, rising supplies have not resulted in a significant increase in the cement prices, which remained flat in Q1 FY19. However, they declined by around 5-6 per cent on a pan-India level in Q1 FY19.

Further, in April 2017, cement prices were hiked post-demonetisation in most markets, resulting in higher cement prices in Q1 FY18," Icra senior vice-president and group head Sabyasachi Majumdar said.

Also, he said, the prices are likely to remain under pressure in Q2 FY19 due to the monsoons.

"Higher power and fuel (increase in coal and pet coke prices) and freight costs (increase in diesel prices) in the near term are likely to continue to put pressure on the profitability margins and debt metrics of the cement companies," he added.

In Q1 FY19, cement prices declined in most markets like Delhi, Chandigarh, Kolkata and Hyderabad.

However, prices in Ahmedabad have been higher by 2.8 per cent. In Delhi and Hyderabad, they have been lower by Rs 40 per bag, around 12-13 per cent, and in Chandigarh by Rs 20 per bag (5.7 per cent).

On the input cost front, coal and pet coke prices in Q1 FY19 are higher by 21 per cent and 30 per cent, resulting in higher power and fuel costs.

Diesel prices have also been higher by 21 per cent, causing higher freight costs, Icra added

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