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New UserCement demand to rise 6 per cent in FY17 on infra push,rains: Icra
28 Jul 2016
Cement demand is likely to increase 6 per cent this fiscal from 5 per cent in 2015
16 on the back of better monsoons and government focus on developing infrastructure,
rating agency Icra said today.
"Cement demand growth, which was relatively muted at 5 per cent in fiscal 201516 and 3.4
per cent in AprilMay 2016, is expected to be 6 per cent this fiscal on the back of better
monsoons and a pickup in the infrastructure segment," Icra Ratings Senior VicePresident Sabyasachi Majumdar said.
The expansion is also likely to lead to better prices, especially in the northern and eastern states, which are seeing a good offtake of the
key building material, he said.
"The pickup in the infrastructure segment will be primarily in sectors like roads and housing during the next one year. This apart, there is a
likelihood of a recovery in the rural demand from the second half of fiscal 201617, given the expectations of a better monsoon.
"With the pace of new capacity addition slowing down, we expect capacity utilisation and the supplydemand scenario to show an
improvement, especially in fiscal 201718, which should support cement prices and profitability indicators for cement manufacturers,"
Majumdar said.
According Icra, demand growth during AprilMay 2016 at 3.4 per cent was substantially lower than 913.5 per cent reported during
JanuaryMarch 2016.
"The AprilMay decline in demand growth was primarily due to the continued weak rural demand (especially in Maharashtra, which was
impacted by a drought in calendar year 2015) and a slowdown in the pace of infra execution, partly due to the unavailability of water,"
Majumdar said.
Demand in south India also moderated during AprilMay 2016 when compared to fourth quarter of 201516. However, demand in north and
east India picked up on the back of higher infrastructure and housing demand, the rating outfit said.
In the north, a demand uptick and better pricing discipline resulted in the rebound of cement prices to Rs 305 335 per bag (50kg) in AprilJune
2016 from a low of Rs 225240 per bag in the first three months of 2016.
In the west, cement prices stayed subdued during first quarter of this fiscal, in the range of Rs 260265 per bag.
In the east, AprilJune prices stood at around Rs 315 per bag.
"Improvement in the capacity utilisation in the north, west and east is likely to support the cement prices in these regions in the near term,"
Majumdar added.
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