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Cement demand likely to register modest growth in FY18: ICRA

01 Feb 2018 Evaluate

Domestic credit rating agency, ICRA in its latest report has said that domestic cement demand continued to remain weak in the ongoing financial year so far and is likely to register a modest growth of around 2 percent in the fiscal year 2017-18, because of factors such as weak real estate activity, sand shortage and Goods and services tax (GST) implementation issues. Besides, it indicated that the cement off-take continued to be weak in November 2017 and showed only a marginal increase of 0.5% month-on-month basis at 24.1 million metric tonne (MMT).

Though, the rating agency highlighted that cement demand registered year-on-year growth of 17.3 percent in November 2017, largely due to the base effect arising out of low production of 20.5 MMT in November 2016, the month in which demonetisation was announced. It also showed that during April-November, cement production witnessed a marginal growth of 0.6 percent at 190.0 MMT as compared to 188.8 MMT in the corresponding period. It noted that production declined 3.3 percent in June quarter and by 0.4 percent in September quarter year-on-year. It added that during the first quarter, demand was adversely impacted due to various local issues across regions.

According to the report, cement demand in the North, especially in Uttar Pradesh and Punjab was affected due to sand shortage and labour unavailability, while in the west, the implementation of the Real Estate Regulatory Authority (RERA) Bill resulted in slowing down of the construction activity. Besides, it mentioned that in south, Tamil Nadu and Kerala were worst hit as demand was affected due to sand shortage, drought (impacting rural offtake) and weak housing activity. The report stated that a pick-up in the housing segment - mainly affordable and rural housing, and infrastructure segment, mostly road and irrigation projects, is likely to help improve the cement demand growth to 4-5 percent in 2018-19.

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